TPG Real Estate acquires 80% stake in $1.5 billion Portfolio
Digital Realty, the largest global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, and TPG Real Estate, the real estate investment platform of alternative asset management firm TPG, announced that they have established a joint venture in which TPG will acquire a majority stake in three stabilized hyperscale data centers in Northern Virginia (the “Portfolio”). Digital Realty will maintain a minority interest in the portfolio while continuing to manage the day-to-day operations of the assets, providing a seamless customer experience.
“We welcome this partnership with TPG, a highly distinguished investment partner,” said Digital Realty Chief Investment Officer Greg Wright. “The completion of this stabilized hyperscale data center joint venture bolsters and diversifies Digital Realty’s capital sources with an experienced partner and further enhances the efficiency of our balance sheet. We remain focused on positioning Digital Realty to prudently support our stakeholders’ longer term capacity requirements and look forward to executing on the remaining elements of our capital plan for 2023.”
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“Demand for data centers continues to grow rapidly due to data proliferation and the mass adoption of cloud computing. These are long-term trends that we expect will only be accelerated by recent advancements in AI,” said Ty Newell, Business Unit Partner with TPG Real Estate. “Located in the largest and most densely connected data center hub in the world, the Portfolio is well-positioned to address this demand. We are excited by the outlook for the Ashburn market and look forward to working alongside a world-class partner in Digital Realty.”
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The three hyperscale data centers were contributed to the joint venture at an aggregate value of $1.5 billion. The assets contain approximately 104 megawatts of IT capacity and are primarily leased by investment grade customers. Based on annualized in-place cash NOI at June 30, 2023, net of signed leases and known move-outs, the transaction values the three facilities at approximately a 6.0% cap rate. Digital Realty will receive approximately $1.3 billion of gross proceeds related to the joint venture and the associated financing, which will be used to pay down debt, for transaction related expenses, and general corporate purposes.
TPG is investing in the Portfolio through TPG Real Estate Partners, TPG Real Estate’s dedicated opportunistic real estate fund series.
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