Digital Realty Trust, Inc. has announced that it has entered into a definitive agreement to acquire a portfolio of eight high-quality, carrier-neutral data centers in Europe, five in London, two in Amsterdam, and one in Frankfurt, from Equinix. The total purchase price is approximately $874 million (before fees, closing costs and prorations), which represents a multiple of approximately 13 times the anticipated full-year 2016 portfolio EBITDA.
Digital Realty will acquire a fee interest in one data center in Amsterdam and will acquire leasehold interests in the other seven data centers, with a weighted-average remaining lease term of approximately 23 years, including the exercise of contractual extension options. In addition, several of the leased facilities are entitled to statutory rights that give the tenant the ability to renew upon lease expiration, subject to certain exceptions.
In connection with this transaction, Digital Realty has granted Equinix an option to acquire the company's facility at 114 rue Ambroise Croizat in Paris and its associated business, for a purchase price of approximately $215 million, before closing costs and prorations. The option remains subject to certain conditions, including confirmatory due diligence, any mandatory governmental or local authority approval, and any required employee consultation processes. Digital Realty cannot assure when, or if, the option will be exercised.
"The acquisition of this portfolio of eight highly attractive facilities will enhance Digital Realty's strong global presence and offer us even greater scale on the increasingly important European data center landscape," said A. William Stein, Digital Realty's Chief Executive Officer. "We have made several recent strategic investments in Europe, and this new portfolio – which is concentrated in three of the most strategically important data center and interconnection hubs in Europe – will immediately bring on board a large, diversified customer base and will also provide significant opportunities to grow and extend our footprint across the continent for years to come. I would like to thank Chris Kenney, Senior Vice President, Investments, along with the entire London-based acquisitions team, for their hard work and dedication which made this compelling transaction possible."
The portfolio of eight facilities contains approximately 213,000 net sellable square feet and 24.4 megawatts of IT load, serving a large base of over 650 blue-chip clients. These clients are predominantly concentrated in the network, cloud and IT services, content and digital media and financial services verticals, and are expected to be highly complementary to Digital Realty's target customer verticals. The properties are 72% utilized, based on available power.
The portfolio also provides substantial available capacity, with approximately 6.9 megawatts of fully-installed power and 62,700 net sellable square feet immediately available for lease, as of March 31, 2016. Entitled expansions in the London and Amsterdam facilities could add up to another 14.9 megawatts of power capacity and 88,900 net sellable square feet to support future growth.
The European portfolio acquisition is expected to close in the second half of 2016 and is subject to customary closing conditions, including approval by the European Commission, as well as completion of the works council consultation process in the Netherlands. Equinix's divesture of the eight assets is a condition of the European Commission's approval of Equinix's acquisition of Telecity, which closed in January 2016.
Greenhill & Co., LLC is serving as Digital Realty's financial advisor, and White & Case LLP is serving as Digital Realty's legal counsel in connection with the pending acquisition.
Additional details about the transaction will be provided on Digital Realty's second quarter 2016 earnings call scheduled for July 28, 2016.
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