The two companies will support the development of two data centres in the Dallas metro area, which Digital Realty confirmed were both fully pre-leased to S&P 100 companies on a long term basis.
The Financials
Mitsubishi has acquired a 65% equity interest in the venture for an initial capital contribution of around $200 million.
Digital Realty will own the remaining 35% and will manage the development and day-to-day operations of the joint venture, for which it will receive customary fees.
This model echoes Digital Realty’s much larger $7billion joint venture with BlackStone, announced last year, although in this instance Digital Realty will maintain a larger share.
More joint ventures were expected from Digital Realty following the BlackStone announcement.
“We are seeing opportunities to grow and we wanted to reduce our reliance on the capital markets for that growth,” Jordan Sadler, SVP public and private investor relations at Digital Realty told Capacity in an interview published earlier this year.
“We've got a lot of the heavy lifting out of the way around these joint ventures, but you'll see additional joint ventures for sure.”
The two data centres commenced construction in the fourth quarter of 2022, with the first phase slated to deliver 16 megawatts (MW) of initial data centre capacity.
The budget for the first phase of these yield-on-cost developments is approximately $400 million.
Each partner will fund its pro rata share of the remaining $100 million estimated development cost for the first phase of the project, which is slated for completion and commencement in late 2024.
Digital Realty said its customer maintains the option to expand the projects up to 48 MW of total IT load during the initial lease term, which could increase the combined budget up to $800 million, based on current development cost estimates.
"We are delighted to expand our partnership with Mitsubishi," said Digital Realty Chief Investment Officer Greg Wright.
"This development joint venture leverages the success of our established Japanese partnership into the United States, while supporting our customer's data centre requirements with a like-minded, long-term investor. The transaction enhances Digital Realty's balance sheet, providing incremental capital to prudently support our stakeholders' longer term capacity requirements."
“We spoke to a lot of people (last) year and the number potential investors who want to have access to investing in data centres is sizable,” Sadler said.
He also said that “Rather than one large partner, we may look for an expanded group of partners to work with this year,” indicating more joint ventures could be coming later in 2024.
