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Mitsubishi Corp. has entered the U.S. data center market. The Japanese company formed a joint venture with Austin-based REIT Digital Realty to purchase a 65 percent equity share—for an initial $200 million—in two data centers that are under construction in the Dallas-Fort Worth metro. Wells Fargo Securities served as financial advisor for Digital Realty.
Each partner will fund the pro rata share on the remaining $100 million costs associated with the completion of the development’s first phase. This is slated to come online in late 2024 and provide an initial 16 megawatts of IT capacity.
Digital Realty will maintain the remaining 35 percent of interest and will handle the venture’s day-to-day operations, for which it will receive customary fees.
READ ALSO: AI Is Changing the Game for Data Centers: JLL
The developer broke ground on the two facilities in 2022, with a budget of $400 million for Phase One. Both upcoming data centers are pre-leased to an S&P 100 customer, which retains the possibility to expand capacity up to 48 megawatts through the lease term—bringing development costs up to $800 million.
According to CommercialEdge data, Digital Realty has two data centers under construction in the Metroplex, at 2501 Edmonds Lane in Lewisville and 1505 Ferris Road in Garland. The company registered both projects with the Texas Department of Licensing and Regulation in 2022 and each has an associated estimated cost of $54.9 million. The developments measure 182,969 and 181,200 square feet, respectively.
Commercial Property Executive reached out to the developer to find out if these are indeed the properties involved in the deal with Mitsubishi Corp. but did not receive an immediate response as of time of publishing.
A series of high-value ventures
Last year, Digital Realty entered several similar partnerships. Most notably, it formed a $7 billion venture with Blackstone for the development of four new data centers in Northern Virginia, Paris and Frankfurt. In August, it sold an 80 percent stake in three data centers to TPG Real Estate Partners for $1.5 billion.
In the fourth quarter of last year, the company had $1.4 billion in revenues, up 11 percent year-over-year but down 2 percent quarter-over-quarter, according to its latest financial report.
The REIT currently has 13 active data centers in the Metroplex area, amounting to more than 2.8 million square feet. The 168-acre Convergence campus in Lewisville is the largest, comprising 829,372 square feet across 10 buildings connected to a central utility plant.
Dallas-Fort Worth market still solid, but land is scarce
Dallas-Fort Worth had 331.9 megawatts under construction and an additional 2.2 gigawatts in the planning stages at the end of last year, according to a recent JLL report.
Demand in the Metroplex remained high through the second half of last year, but securing suitable space for development has become a serious hurdle, the same research shows. Dallas-Fort Worth recorded a total of 593 megawatts of absorption last year, as users were actively preleasing capacity.
Consequently, both land prices and deployment densities are rising in the market. This hasn’t stopped developers from starting projects, such as Skybox Datacenters’ 300-megawatt campus, which broke ground in November last year.
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