Realty Income, Digital Realty form build-to-suit data center joint venture

Digital Realty (DLR) and Realty Income Corporation (O) announced that they have established a joint venture to support the development of two build-to-suit data centers in Northern Virginia. Realty Income invested approximately $200 million to acquire an 80% equity interest in the venture, while Digital Realty maintains a 20% interest. Each partner will fund its pro rata share of the remaining $150 million estimated development cost for the first phase of the project, which is slated for completion in mid-2024. The build-to-suit facilities were 100% pre-leased to an S&P 100 investment grade client prior to construction and are expected to generate a 6.9% initial cash lease yield upon lease commencement in mid-2024. “We are delighted to partner with Realty Income, a blue-chip net-lease REIT, in their first investment in the data center sector,” said Digital Realty President and Chief Executive Officer Andy Power. “The formation of this development joint venture supports our customer’s build-to-suit requirements with a like-minded, long-term investor as our partner. The transaction also further bolsters and diversifies Digital Realty’s capital sources, while enhancing our flexibility so that we can prudently support our stakeholders’ longer term capacity requirements.”