Digital Realty Trust, Inc.’s DLR unit — Interxion — has acquired the freehold to the land under its Hanauer Landstraße campus in Frankfurt. The move has resulted in Interxion owning the freehold to all 15 data centers on its Frankfurt campus.
Interxion has also reached a separate deal to acquire an expansion parcel for supporting a development of 180 megawatts of additional capacity. Previously known as the Neckermann property, this parcel totals 107,000 square meters and is located within roughly one kilometer of the Hanauer Landstraße campus. It will be fully connected to the present campus. This buyout is expected to close in two stages, with the final transfer of ownership slated for early 2021.
The latest acquisition of freehold to the existing campus, together with the deal for buyout of the site for further expansion, is a strategic fit as there is a solid demand for such facilities in Europe. The moves would enable the company to grow by capitalizing on customers need for large-scale digital transformations. Interxion Frankfurt has emerged as one of the leading cloud and connectivity hubs across the globe, offering direct access to several global cloud platforms and more than 700 carriers and internet service providers, per management.
The Hanauer Landstraße campus encompasses 43,000 square meters on 6.5 hectares of land. More than half of the campus is occupied by Interxion through its nine data centers, which were previously subject to leasehold agreements. The site also has the German headquarters office of Interxion.
Furthermore, 40% of the campus is leased to 21 customers, with a weighted-average remaining lease term of roughly four years. When the leases to third parties expire, Interxion has plans to redevelop those portions for building out additional data-center capacity.
With growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, data-center REITs are witnessing a booming market worldwide. Furthermore, the estimated growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to six years. Apart from these, data centers are poised to benefit from the increased use of technology amid the coronavirus crisis. As such data-center REITs, including Digital Realty, Equinix, Inc. EQIX, CyrusOne Inc. CONE and CoreSite Realty Corporation COR, will keep witnessing solid demand.
Amid this, Digital Realty is poised to bank on the healthy market fundamentals through accretive acquisitions, development and expansion efforts. The company completed the acquisition of Interxion, a European provider of carrier and cloud-neutral colocation data-center services, in the first quarter and carried out a number of developments worldwide.
Such encouraging factors have helped Digital Realty’s shares gain 19.2%, so far this year, as against the industry’s decline of 9.5%.
However, Digital Realty faces stiff competition from several data-center developers, owners and operators, many of which enjoy ownership of similar assets in locations same as the company. As the data-center market has the potential of further growth, these REITs remain under aggressive pricing pressure.
Currently, the company carries a Zacks Rank #4 (Sell).
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