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Iron Mountain Incorporated IRM has joined forces with an affiliate of AGC Equity Partners (AGC), a London-based global alternative asset manager, for the creation of a 300 million+ Euro joint venture in order to develop and manage the 27 megawatt, hyperscale data center in Frankfurt.
AGC will hold an 80% equity interest, while Iron Mountain will own a 20% equity stake in the venture, per the terms of the agreement. Notably, AGC had contributed cash for the buyout of this 80% stake in the venture. Moreover, debt financing for the venture will likely close in fourth-quarter 2020, with the proceeds funding part of development and construction costs.
The move is a strategic fit for Iron Mountain as it brings in the cash required for this project. Moreover, Iron Mountain will be in charge for managing the design and development of the data center in addition to administering the lease. The company will earn several fees, including property management and construction and development fees for services offered to the venture, according to the venture agreement terms.
Notably, this 280,000-square-foot Frankfurt data center, presently under construction, is 100% pre-leased to a U.S.-based Fortune 100 customer, subject to a 10-year lease agreement. This preleasing with a U.S.-based Fortune 100 customer reflects the decent demand for the company’s data-center space.
The data center is being developed in three phases, each phase offering 9 megawatts of power capacity. The first phase will likely conclude in second-quarter 2021 and the full build-out is expected in the June-end period of 2022.
Further, Frankfurt is a top global data-center market and has emerged as the second largest in the European FLAP region. Also, one of the world's largest internet exchanges, DE-CIX, is present in this market. This peering exchange has hundreds of large networks available for customers. Amid this, Iron Mountain’s focus on ground-up developments in Frankfurt seems a strategic fit.
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 boom market in Frankfurt as well as 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 heightening reliance on technology in wake of the coronavirus pandemic. As such, data-center landlords, including Iron Mountain, Digital Realty DLR, Equinix, Inc. EQIX and CoreSite Realty Corporation COR, will keep witnessing significant demand.
Iron Mountain’s shares have gained 4.5%, over the past six months, compared with the industry’s increase of 9%.
Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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