Lincoln Rackhouse and Principal Real Estate Investors have acquired a one million-square-foot data center portfolio in Dallas, Phoenix, and Kansas City, MO, from a Fortune 500 financial institution, which has partially leased back the Tier III+ space in two of the three markets.
"This acquisition doubles our portfolio and allows us to offer cloud, colocation and managed services providers attractive expansion or new entry options into these key data center markets," says Ryan Sullivan, managing director of Dallas-based Lincoln Rackhouse. The transaction has launched the West and Midwest regions of the country for Lincoln Property Co.'s data center division. "We were able to acquire this portfolio because we were patient, flexible and have a proven track record of performance with the seller."
The newly acquired properties are:
▪ 1000 Coit Rd. in Plano in near north Dallas' Telecom Corridor, a two-story data center, totaling 454,421 sq ft on 23.8 acres
▪ 11155 NW Airworld Dr. in Kansas City, a two-building campus, totaling 259,111 sq ft, on nearly 17 acres just west of the international airport
▪ 2500 W. Fry Rd. in southeast Phoenix's Chandler technology corridor, a 191,061-sq-ft data center and dedicated on-site substation on 24.4 acres
The portfolio offers available turnkey multi-tenant space in the Dallas region, one of the top three Tier I data center markets in the nation, and Kansas City, a Tier II edge market.
"We can facilitate a new customer installation next week. That's extremely rare in today's white-hot Dallas market," says Ryan Crabtree, Lincoln Rackhouse's new vice president of asset management and property operations, who joined the team earlier this summer. "As for Kansas City, we now own the largest block of data center space currently available in the market, which historically, has seen more data center development directly by the enterprise, due to a lack of large-scale wholesale data center offerings."
In terms of turnkey power capacity, the Plano data center has 8MW immediately available to lease, which can be expanded to 16MW. The availability includes 60,000 sq ft of raised-floor space and an expansion capability of 125,000 sq ft. The Kansas City facility has 10MW of power capacity and 100,000 sq ft of raised-floor space ready to occupy.
In tandem with the portfolio acquisition, the Lincoln-Principal joint venture has signed a master lease with INAP, a leading cloud and colocation provider, which encompasses Phoenix's entire 10MW of power capacity and substation with redundant 21.6MW utility transformers.
"This acquisition and new joint venture relationship with Lincoln Rackhouse allows us to expand on our successful track record in the data center sector," says Ben Wobschall, director of acquisitions for Principal Real Estate Investors. "We like the fundaments of the sector, and investments in these specialized product types allow us to generate attractive incremental returns for our investors in today’s yield constrained market."
Portfolio-wide, the data centers underwent $200 million of upgrades in recent years by the seller, who was represented by CBRE. The buyers are planning to put additional funds into upgrading and retrofitting the facilities for multi-tenant use. All properties are surrounded by a K4-rated security fence, which is considered the most secure for military bases, federal/state government facilities and data centers.
With a portfolio of nearly two million sf across the USA, Lincoln Rackhouse can facilitate large multi-market transactions for data center users. The team is continually searching for quality, well-maintained second generation facilities with existing cash flows and the ability to grow returns to further expand the portfolio.