Tuesday, September 2, 2014

IO and Carter Validus Mission Critical REIT ink $125m Sale-leaseback

By: Paul Dionne | Vizzda

Friday saw the sale of two major data center assets in the Phoenix market, as IO—a modular data and co-location center manufacturer—unloaded IO Phoenix and IO Scottsdale in a sale-leaseback valuing the properties at $125m. Vizzda had previously reported on IO’s acquisition of IO Phoenix—then a vacant bottling facility for the defunct beverage maker Le-Nature—for $73m in April of last year. IO Phoenix was sold for $95m or nearly $180 per square foot, while the smaller IO Scottsdale facility sold for $30m or more than $300 per square foot. Both properties were leased back to IO under terms discussed below and IO monetized its new leasehold interest in the properties under a $250m line of credit with Wells Fargo. Validus Mission Critical REIT is a Kansas City, Missouri based real estate investment trust focused on purpose-built facilities in the tech and healthcare sectors of the economy.

IO Phoenix is a 530,856 ft2 data and co-location center located at the southeast corner of SR-143 and Loop 202. It is a 2-story building built in 2005 on 30.4 acres, zoned CP/GCP. There are twenty-two dock doors and four grade doors with a dedicated, on-site utility sub-station. DirectTV is a sub-lessee at the Phoenix location, though lease terms were not disclosed. IO Scottsdale is a 96,300 ft2 data center in the Perimeter Center west of the Loop 101 and Pima Road. It too is a two-story building comprised of 23,930 ft2 of office space, 28,740 ft2 of warehouse and 21,500 ft2 each for a clean room and mechanical use. The building was completed in 2000 on a 4.5 acre site, zoned I-1. Scottrade Inc. sub-leases space at the Scottsdale location through February 2019. Both facilities were leased back to IO following the sale for fifteen years with four five-year options to extend and a right of first refusal.

IO previously acquired the Scottsdale facility in 2006 for $13.5m or $140 per square foot. The property was subsequently encumbered under a $24.605m note with Merrill Lynch which was released more than a year prior to maturity. The property was refinanced through Mutual of Omaha to the tune of $25m in 2009, increased to $30m in 2010 and taken out by a $130m line of credit with Bank of America, subsequently increased to $260m. IO Phoenix was developed built-to-suit for Le-Nature by First Industrial Realty Trust and sold to CBRE in 2006 for $88.5m. CBRE sold it’s interest to 36 investors who, following the failure of Le-Nature—sold their interest back to CBRE for a total of $20m and assumption of the outstanding debt. IO had previously leased the space from CBRE with a purchase option through September 1st, 2014. IO exercised that option on April 30th, 2013 with the $72m purchase of the facility.

To Contact the Author:

Paul Dionne – pdionne@vizzda.com

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