JDM Buys State Farm's Phoenix Data Center in Sale-Leaseback Transaction

Phoenix-based real estate investment company JDM Partners has acquired two commercial properties, including a Phoenix data center, from State Farm Insurance for $38 million. State Farm will continue occupying properties, sitting on over 25 acres of land on the Phoenix-Tempe border, as a tenant.

JDM is one of the largest owners of entitled land in the Phoenix metro. Former Phoenix Suns and Arizona Diamondbacks owner Jerry Colangelo is a principal.

The company invests heavily in Arizona because of its growth potential. Population in the state is expected to double in the next 30 years to 9 million people with solid job growth, according to the company.

The sale-leaseback transaction gives JDM a sizable data center fully leased to a single tenant. Sale-leaseback data center transactions are popular with real estate investors, as they provide long-term recurring revenue without having to look for tenants.

Griffin Capital recently made a similar sale-leaseback transaction with an American Express data center in the market.

The Phoenix data center is over 250,000 square feet, Rose Law Group reported. State Farm Mutual Automobile Insurance in Bloomington, Illinois, was the seller and will continue to occupy. The single-level building was developed in 1998 and occupies two-thirds of the site.

JDM has acquired several properties from State Farm over the years, including an 11-state operations-center portfolio consisting of over 3.4 million square feet in 2014 and five buildings in a Tempe, Arizona, corporate park in 2013 for $73 million.

Other data centers in the market include an eBay data center, a data center under construction by Apple, and a massive project from colocation provider CyrusOne in nearby Mesa. Microsoft is reportedly eyeing a data center build in the area. Other colocation providers in the market include IO, Digital Realty, CenturyLink, and Telx.

A 2014 report by the commercial real estate services firm CBRE attributed growth in the Phoenix market primarily to low cost of power (in comparison to the other hubs), as well as recently passed data center tax breaks.