Digital Realty Cements Control of US Northwest’s Primary Network Hub

Seattle real estate developer Clise Properties has agreed to sell an additional 49 percent stake in the Westin Building Exchange to Digital Realty Trust. Clise sold another 49 percent stake in the downtown property to Digital in 2006, and once this latest deal is closed will retain ownership of only 2 percent.

Digital executives declined to disclose terms of the transaction, but the property is highly strategic for the San Francisco-based data center giant. The 40-year-old building is the biggest telecommunications hub in the Pacific Northwest.

Being a tenant in the Westin Building Exchange means having network access to more than 150 carriers (including all major Canadian network operators), a multitude of existing and upcoming intercontinental submarine cables that land on the West Coast, and all the big cloud and content companies – all exchanging traffic in the building’s meet-me rooms.

The 34-story tower is home to the Seattle Internet Exchange and Pacific NW Giga POP, a point of presence on the network used by researchers and academics throughout the Pacific Rim. The building is adjacent to Amazon's enormous headquarters campus, which uses some of the heat generated by servers in the Westin data centers (up to 5MW) for comfort heating.

Related:Digital Realty Charts Course to Becoming a ‘Platform Company’

Digital Realty is already the world’s largest wholesale data center provider, but in recent years the company has been spending aggressively to grow its retail colocation and interconnection business. It’s a business where control of key interconnection hubs like the Westin Building is a prerequisite for success. Equinix, the largest colocation and interconnection player, controls access to such hubs in most of the top data center markets.

Data center assets, especially highly strategic ones like the Seattle carrier hotel, have been changing hands rapidly in recent years, commanding high premiums. Acquiring a controlling stake in the property now ensures that a competitor – such as Equinix – won’t swoop in and take it over. (Equinix operates a colocation facility nearby.)

But Greg Wright, Digital Realty’s chief investment officer, said he and his team didn’t strike the deal because they were “worried about Equinix.” The asset was simply a good fit for their business strategy, he told DCK.

“Regardless of who else could be a potential buyer, it’s an asset we like,” Wright said. “We’d rather own more of it than less.”

Since Digital has owned a big stake in the building for many years, the latest deal won’t make a huge difference for its existing customers, who have had access to all the networks there anyway. But it will over time make for a more consistent customer experience, since Digital will be taking over management of the facility from Clise, Wright said.

Related:Equinix CEO: Digital Realty’s Interxion Deal ‘Doesn’t Close the Gap’

Leveraging the fact that it has both retail colocation/interconnection assets and a massive wholesale data center portfolio – a lot of it leased by hyperscale cloud providers – Digital has devised a “connected campus” strategy, interconnecting the wholesale and retail assets in each region with a dedicated network, forming a single virtual data center of sorts, where any customer in a region can connect to any other customer in the same region as if they were both in a single facility.

In the Pacific Northwest, customers in Digital’s wholesale facilities in Hillsboro, Oregon (not far from Portland), get network access to all the networks in the Westin Building.

The latest deal with Clise is “highly complementary to what we’re doing in Hillsboro today,” Wright said.

Expanding in Osaka

Digital also announced some news on the other side of the Pacific Ocean, in Asia, where many of the submarine cables accessible through the Westin Building lead. The company’s joint venture with Mitsubishi has officially launched its third data center in Japan.

Digital Osaka 2, a retail colocation facility, is the MC Digital Realty JV’s second data center in Osaka. The facility’s first tenant is Xtreme-D, a Tokyo-based startup that provides high-performance computing infrastructure as a cloud service.

In addition to the Osaka operations, MC Digital Realty operates a data center in Mitaka, part of the Tokyo metro. It’s been buying more land in the Tokyo market, but has yet to announce concrete plans for new construction in the Japanese capital.