October 2005

 

A number of European acquisitions over the past month have demonstrated Digital Realty’s interest in the European technology related real estate market.  Perhaps something of a new name in the local market, Digital Realty is a US listed REIT (Real Estate Investment Trust  - an investment fund that invests solely in properties that also attracts certain tax privileges.  REITs offer investors a liquid investment in commercial real estate and usually a steady dividend or income stream).  Digital Realty, ticker symbol DLR, came to the market a year ago raising $240m at $12 per share on the New York Stock Exchange with a portfolio of 22 US and 1 London properties of some 5.6m square feet.  A year on the shares have risen to $19, valuing the group at just over half a billion dollars and the portfolio has now grown to 38 properties and 8.2m sq feet with the group having also a further $270m through further stock and preference share offerings during 2005. 

 

Mike Foust, CEO of Digital Realty explained their interest in the European market: “we are the largest operator of mission critical real estate in the world with millions of square feet of technical space that we own and operate.  With many of our team members already experienced in the European market and many of our existing clients asking us to help over here it was an easy step for us to take”.  Foust pointed out that in contrast to the former US forays into the European colocation market the Digital Realty Trust approach is not “build and they will come” but rather to acquire buildings with existing tenants or those where tenants can be actively encouraged through better management or a more secure ownership structure.  According to Foust the group is “aggressively pursuing other European options”, so clearly this is likely to be the first wave of many deals to come in Europe for Digital Realty. 

 

To date DLR’s sole European asset has been the Level3 building on Brahm Street, in the City of London but a string of acquisitions over the past month has seen the group acquire two former PSI Net data centres in Amsterdam and Geneva and the massive IBM Technology Park complex in Mainz, Germany, such that DLR now own 4 properties in Europe with some 1.7m sq ft.  The PSI Net Amsterdam facility is located in the Amstel business park, to the south of the city centre and offers 6000sq m of raised floor space, with an adjacent office building.  About half the technical space is already pre-let to Global Voice, (who now run the pan-European network formerly owned by MFN).  In Geneva the 6000 sq m purpose built site is located about 6km north of the city centre and only about 10 minute’s from the city’s airport and remains fully let to PSI Net.  It is interesting to note that both these properties were acquired from former Global Switch founder and CEO Andy Ruhan, who kept the freeholds on the PSI Net data centres as part of the deal his investment vehicle Clear Blue made with Israel Corporation in July 2002 when ending their joint venture and giving full control to the Israelis.  Finally in Germany the IBM Technology Park comprises 11 buildings on an 80 acre campus and includes IBM Deutschland's data center, software development operations and support functions in 590,000 square feet.

 

Tim Anker

The Colocation Exchange

(This item has also appeared in the November edition of Data Centre News)