Digital Realty and Mitsubishi Corp. have formed a joint venture to support the development of two data centers in the Dallas metro area, which are 100% pre-leased to an S&P 100 investment-grade customer on a long-term basis.
Mitsubishi has acquired a 65% equity interest in the venture for an initial contribution of approximately $200 million. In comparison, Digital Realty maintains a 35% interest and will manage the development and day-to-day operations of the joint venture, for which it will receive customary fees.
Each partner will fund its pro rata share of the remaining $100 million estimated development cost for the project's first phase, which is slated to be completed in late 2024.
Construction on the two data centers began in the fourth quarter of 2022, with the first phase slated to deliver 16 megawatts (MW) of initial data center capacity. The budget for the first phase of these yield-on-cost developments is approximately $400 million.
According to Digital Realty and Mitsubishi Corporation, the customer can 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.
"This development joint venture leverages the success of our established Japanese partnership into the United States while supporting our customers' data center requirements with a like-minded, long-term investor,” said Digital Realty Chief Investment Officer Greg Wright. “The transaction enhances Digital Realty's balance sheet, providing incremental capital to prudently support our stakeholders' longer-term capacity requirements."
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