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REA
June 21, 2017  

Package of Net-Leased Data Centers for Sale

A national portfolio of data centers is on the block in a sale-leaseback offering pitched to core buyers, including foreign investors.

TierPoint is marketing 10 properties, totaling 744,000 square feet, as a package via Cushman & Wakefield. The information-technology company would sign a 15-year lease on all the space, with an absolute triple-net structure and annual rent bumps. The stability of the lease is expected to appeal to risk-averse investors, including foreign buyers interested in entering the U.S. data-center market.

Few comparable portfolios have traded, which makes valuation difficult. But market pros believe the package could trade for between $400 million and $450 million. At the higher end of that range, the initial annual yield would be 5.9%, based on first-year net operating income of $26.7 million.

The proposed lease would include 2.5% annual rent bumps and multiple extension options. St. Louis-based TierPoint would be responsible for all expenses, updates and repairs. The private company is rated B3/B/B+ by Moody’s, S&P and Fitch.

The properties range in size from 28,000 sf to 128,000 sf. Two are in Pennsylvania, in Bethlehem and Valley Forge. The others are in Baltimore, Dallas, Jacksonville, Kansas City, Little Rock, Omaha, Oklahoma City and St. Louis.

Fewer than a dozen large data-center portfolios have traded since 2001, according to the Real Estate Alert’s Deal Database. Many that have changed hands had shorter leases and were pitched to operators that could renovate and lease up the space.