Blackstone, COPT Complete Second Close of Data Center JV

Corporate Office Properties Trust has completed the second and final close of its new joint venture with funds affiliated with Blackstone Real Estate

In the venture, the Blackstone funds acquired a 90% interest in six data center shell properties, totaling 979,000 square feet and valued at $203 million. For its 40% interest, COPT received approximately $84 million of equity value from the transaction. The remaining equity value was distributed to a prior investor who held a 50% interest in these assets.

The venture was announced last month. “We believe data centers will continue to benefit from strong secular tailwinds, including immense demand growth as internet traffic and the use of cloud services continue to rise,” Tyler Henritze, Head of Acquisitions Americas for Blackstone Real Estate, said in a prepared statement at that time. “These transactions are attractive opportunities to invest in high-quality powered shell warehouses in the premier market globally. We have an excellent partner in COPT and look forward to continuing to build our relationship over the long-term.”

This transaction’s completion follows the Blackstone Funds’ earlier acquisition of a 90% interest in two of COPT’s wholly owned data shell properties valued at $90 million.

In June 2019, the two companies formed a joint venture for Blackstone to acquire seven of COPT’s single-tenant data center shell properties, which also contained 1.2 million square feet of warehouse space, for $265 million. The joint venture will be owned 90% by BREIT and 10% by COPT, which received $238.5 million in proceeds from the deal. 

At the time, COPT CEO Stephen E. Budorick said the transaction “demonstrates the strength of demand for strategically located data center shell properties leased to high credit tenants.”

Blackrock isn’t the only behemoth increasing its exposure to the data center space. 

In October, the Goldman Sachs Merchant Banking Division partnered with long-time data center industry executive Scott Peterson to launch Global Compute Infrastructure. It initially committed to fund up to $500 million of equity capital to enable $1.5 billion in near-term investments deployed across North America, Europe, Asia Pacific and Latin America. 

The data center market has remained resilient throughout the first half of 2020 due mainly to the critical role in business continuity.

In late summer, CBRE Group recently issued a report noting that the data center vacancy rate in the primary US markets dropped 70 basis points year-over-year to 10.3 percent, even though there was a 5-percent growth in inventory during the first half of the year.