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COPT And Blackstone Ink $293M Data Center Joint Venture

Corporate Office Properties Trust is teaming up with Blackstone Real Estate in a nine-figure data center deal. 

On Monday, COPT announced a new joint initiative with funds affiliated with Blackstone Real Estate. The new ventures are buying up interests in eight single-tenant, data center shell properties totaling 1.3M SF and valued at $293M. 

In a related transaction, Blackstone acquired a 90% interest in two of COPT’s data center shell properties, which are valued at $90M. That deal just closed, COPT said. Blackstone will also acquire a 90% interest in six additional data center shell properties owned by COPT in a transaction due to close later this year.

Driven in part by the coronavirus pandemic, 2020 has seen rising investor interest in data centers.

“These transactions further confirm the value of our portfolio of strategically located data center shell properties and the value our development platform adds for shareholders," COPT CEO Stephen E. Budorick said.

COPT’s data center footprint includes 6M SF and 650 megawatts of power, according to its website. The new joint ventures amount to $165M in equity value to COPT. 

“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,” said Tyler Henritze, Blackstone Real Estate’s head of acquisitions for the Americas. “These transactions are attractive opportunities to invest in high-quality powered shell warehouses in the premier market globally.” 

Driven in part by the coronavirus pandemic, 2020 has seen rising investor interest in data centers. COPT, whose primary holdings are office buildings, has underperformed the market this year. On a recent shareholder call, COPT said that the pandemic had only a “minimal” impact on its operations in the third quarter, and reported that its core portfolio of 174 operating office and data center shell properties was 94% occupied and 94.6% leased.

COPT’s total revenues from real estate operations were $134.4M last quarter, representing a slight increase over the same period in 2019, when it reported $130.7M in real estate revenues. 

Budorick said that COPT’s operations were “largely unimpeded by restrictions, shutdowns or tenant credit issues related to the pandemic.” The $165M in proceeds from the Blackstone Real Estate deals will reduce its debt-to-EBITDA ratio, a measure of liquidity, by year’s end. The funds will reduce the company’s debt-to-EBITDA ratio to between 6.2x and 6.4x, Budorick said.