Digital Realty Buys Bandwidth Exchange

Digital Realty Trust (DLR) today confirmed that it has bought the Bandwidth Exchange buildings, the leading Internet gateway facilities in St. Louis. Digital Realty paid $53 million to acquire the buildings at 900 Walnut Street and 210 Tucker Boulevard. The company said in a recent analyst call earlier this month that it had bought three St. Louis properties for $80.7 million. It was clear at the time that the Bandwidth Exchange buildings were two of the acquired properties. The third St. Louis property is the headquarters for a major managed hosting provider, with an apparent purchase price of $27 million. Digital Realty hasn't identified the seller yet, but the largest current tenant across its portfolio of properties is Savvis, a managed hosting provider with headquarters in St. Louis.

The Bandwidth Exchange properties have an interesting history. This is the second time that an ownership team led by Bob Guller has sold the buildings at a profit. Guller and partner Jerome Glick bought the two buildings in the mid-1990s and converted them to carrier hotels. In 2000 the buildings were sold for $56 million to Pinnacle Towers, a Florida company that specialized in wireless towers and was looking to expand into the colocation business.

Just two weeks after it bought St. Louis properties, Pinnacle announced that it would exit the colo business. When Pinnacle put 900 Walnut and 210 Tucker up for sale in a partnership headed by Guller bought them for $22 million. Six years later, the properties have now been sold to Digital Realty for $53 million. The buildings' history tracks the boom and bust of the data center industry, and few industry players have timed the peaks and valleys as fortuitously as Guller.

The seven-story, 110,000 square foot 900 Walnut building is 100 percent leased, with tenants including 25 local and long haul fiber carriers and ISPs. The 18-story 210 Tucker Boulevard building serves as a multi-tenant datacenter facility with 200,000 rentable square feet, including 62,000 square feet of redevelopment space.

"The addition of these buildings to our income producing portfolio represents a very attractive value-add investment opportunity for us. Both buildings were renovated in 1999 to serve as Internet gateway and corporate datacenter facilities," said Michael Foust, CEO of Digital Realty Trust. "Together these facilities have excess power and fiber available to meet the most demanding corporate IT applications in a market where utility power pricing is very attractive. We plan to make select improvements to each building in order to meet the current tenants' ongoing datacenter requirements and build out the redevelopment space at 210 Tucker Boulevard to attract new customers to the facility."

"Many of DLR's existing customers occupy space in both 900 Walnut and 210 Tucker," added Chris Crosby, SVP of Sales and Technical Services. "We look forward to the opportunity to expand our relationship with them as we upgrade the buildings and bring in new customers."

Digital Realty Trust now has 64 properties with approximately 11.7 million rentable square feet, including 1.7 million square feet of space held for redevelopment.