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COPT Forms $278M JV With Blackstone

Corporate Office Properties Trust said it formed joint ventures with Blackstone Real Estate and acquired five data centers valued at $278M.

Corporate Office Properties Trust, a Columbia-based firm that owns offices and data centers in the region, formed two joint ventures with Blackstone Real Estate that will net it $250M in proceeds.

The firms announced Thursday their joint ventures purchased a 90% interest in a portfolio of five single-tenant data centers valued at $278M. The deals were completed between mid-December and early January. 

A COPT spokesperson told Bisnow the properties are in Northern Virginia. The companies didn't reveal the locations of the properties, but the terms of the deal — COPT received $250M as part of the acquisition — indicates it sold stakes of data centers it owned to the joint venture. 

COPT said the deal provides equity to fund projects in its development pipeline and alleviates the need to raise additional equity capital this year. For Blackstone, the deals increase its investment in the data center space that has been highlighted by its $10B acquisition of data center REIT QTS Realty Trust in 2021. 

"Given the current volatility and uncertain state of the capital markets, the company decided to close on this joint venture ...  Our low-risk development projects are the pillar of our external growth strategy and having the capital to execute that pipeline is essential to our future growth," a COPT spokesperson said in a statement to Bisnow. "The venture was executed at very strong valuations from our JV partner and executing this deal was the prudent move to take any capital risk off the table."

While COPT has traditionally focused on office properties, it has amassed a large portfolio of data center properties in the Baltimore area and Northern Virginia. The company's website says it owns 6M SF of data centers that total 650 megawatts of power capacity. It landed a 122K SF lease with Amazon Web Services at 550 National Business Parkway near Baltimore Washington International Airport, according to a third quarter CBRE market report.

"Since our strategy, business model and tenant base is grounded in supporting priority missions of the U.S. government, it is relatively resilient to downturns in the macro-economic environment. Despite that resiliency, our common stock continues to trade at a discount to net asset value," the COPT spokesperson added. "Given this dynamic, joint venturing a portion of our data center shell portfolio at these valuations generates the equity capital required, at a very low cost, to fund our development pipeline." 

COPT has also emerged as a major office space provider in the Baltimore metro area. The firm owns various properties, including 250 West Pratt St., one of the most prominent buildings on the Baltimore skyline.  

Additionally, COPT has established a niche as a provider of office space in Columbia tailored to cybersecurity firms. 

Cybersecurity firms have gravitated toward COPT properties, like Columbia Gateway, primarily because of proximity to the National Security Agency headquarters and U.S. Cyber Command at Fort Meade.    

“We’re well positioned to capture the niche we’ve built out,” Krysta Herring, vice president of leasing and asset management at COPT, told Bisnow in December. 

COPT also recently reported it recorded the firm's highest annual vacancy leasing level in 12 years. More than half of those deals, the firm said, were made at office properties near Fort Meade.

The company leased 801K SF of office space last year. The weighted average lease term of those agreements topped seven years. Deals in the Baltimore Washington corridor near Fort Meade, according to the company, accounted for 54% of those leases. COPT said it leased 192K SF around “various defense locations” in Maryland and Virginia.

UPDATE, JAN. 13, 9:30 A.M. ET: This story has been updated with additional comments from COPT.