DuPont Fabros Customer Subleases Former Yahoo Data Center in Ashburn

DuPont Fabros Technology execs revealed on the company's third-quarter earnings call Thursday that one of its existing customers subleased the entire 13 megawatts of capacity at its ACC4 data center in Ashburn, Virginia, that was recently vacated by Yahoo.

Since Yahoo's lease has not yet expired, the lease is a three-party agreement between the Internet company, the data center provider and the customer. The customer will also have a direct agreement with DuPont Fabros on a lease extension for 9 megawatts in the former Yahoo data center.

The customer, whose name was not disclosed, chose the Yahoo sublease space over brand new space in the recently built ACC7. Company officials did say that it was an existing "super-wholesale" customer with space in ACC5 and ACC6.

DuPont Fabros CEO Hossein Fateh explained that ACC7 didn’t have enough space for the customer's needs, however, which either means the customer is going through a stage of rapid growth or the data center space came at a deep discount. ACC4 was completed in 2007.

This is a sizable chunk of space that would have impacted the market at large had it not been taken. A big Internet company exiting a big data center to move into one of its own and subleasing it at a discount rate until its own lease with the provider expires has been a common theme in several high-profile data center markets.

If it went at a discount, the Yahoo data center sublease in Ashburn is likely to be welcome news for DuPont Fabros competitors in Northern Virginia, including RagingWire, CyrusOne, Digital Realty Trust and CoreSite. It's difficult to compete in a market where some inventory is available at below-market rates.

CEO succession plans on fast track

DuPont Fabros announced it was looking for a replacement for Fateh in 2013, but the previous plan was to appoint someone as president and then, over time, have them transition into the CEO role, at which point Fateh would step down. But now the plans have changed.

DuPont Fabros is now looking for a CEO and president who will be ready to take over immediately, and Fateh will step down as soon as that person is found. He will remain on the company's board.

"Finding the right person to lead DFT's next chapter of growth is such a serious undertaking," said Fateh. "It deserves careful time and attention, but frankly, our process has taken just too long. The board and I have committed to a new and re-prioritized approach."

The company reported $105.6 million in revenue for the quarter -- up 10 percent year over year. DuPont Fabros earnings per share were $0.60 -- up 18 percent year over year.