Digital Realty, Behringer Team Up in Santa Clara

Digital Realty Trust will team with real estate firm Behringer Harvard on a joint venture to develop a data center facility at the Santa Clara Tech Center in Santa Clara, Calif. The effort is the latest in a flurry of acquisitions and redevelopment projects undertaken by Digital Realty (DLR) to boost its inventory of data center space in Silicon Valley.

Digital Realty has acquired a 50 percent equity interest in the Santa Clara Tech Center, Behringer Harvard's three-building development on Central Expressway in Santa Clara, adjacent to Digital Realty's flagship Santa Clara campus. The property includes two buildings with 300,000 square feet of office space that are fully leased to a major storage company, and a 150,000 square foot highly improved shell building at 800 Central Expressway that will be developed as Turn-Key Datacenter space.

Buying Up Santa Clara Space

Digital Realty has been actively acquiring space in Santa Clara, buying both fully-leased data centers and properties that can be redeveloped into Turn-Key Datacenters, which are finished "plug-n-play" data center rooms that can be leased in increments of about 1.1 megawatts of critical power load. Santa Clara is the data center capital of Silicon Valley because the local power company, Silicon Valley Power, offers slightly lower rates than those available from PG&E in surrounding towns.

In early May, the company purchased 1725 Comstock Street and subsequently leased the entire building an Internet company. About two weeks later, Digital Realty acquired 3105 & 3115 Alfred Street in Santa Clara, which it plans to convert into six plug-n-play data centers.

"We continue to add inventory in this key market to meet the demand for high-quality datacenter space," said Scott Peterson, Senior Vice President of Acquisitions for Digital Realty Trust. "By acquiring properties attractive for redevelopment, we are able to build out and deliver a new Turn-Key Datacenter product quickly and cost-effectively."

Completed PODs by Early 2011

"Digital Realty Trust will be responsible for the datacenter redevelopment, leasing and management of 800 Central Expressway and Behringer Harvard will continue to operate the two office buildings," said David Caron, Senior Vice President of Portfolio Management for Digital Realty Trust. "Construction is already underway on base building improvements and two Turn-Key Datacenter PODs that are expected to be completed in the first quarter of 2011. The 150,000-square-foot facility can support the development of six PODs totaling approximately 80,000 square feet of raised floor."

Behringer Harvard, a Dallas-based real estate investment firm, bought the property in 2007 for $20 million.

"With their proven reputation and operational expertise in the data center market, we are confident that Digital Realty Trust will make important contributions to our success as we execute our strategy to enhance the value of Santa Clara Tech Center," said Samuel Gillespie, Chief Operating Officer of Behringer Harvard Opportunity REIT I, Inc.

This isn't the first time Digital Realty has used a joint venture to develop data center space in Santa Clara. In 2007 the company bought a 50 percent interest in 1500 Space Park Drive, partnering with developer Pelio & Associates. The property was subsequently developed as a LEED Gold data center.