Digital Realty (NYSE: DLR), the largest global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, announced today definitive agreements with Brookfield Infrastructure Partners L.P. and its institutional partners (“Brookfield”), Cyxtera Technologies (“Cyxtera”) and Digital Core REIT that successfully resolves the relationships with Cyxtera. These agreements were completed in conjunction with Brookfield’s announced agreement to acquire Cyxtera, pursuant to its Plan of Reorganization under its Chapter 11 proceedings and remain subject to bankruptcy court and regulatory approval, and include:
- Brookfield to acquire Digital Realty’s interest in four data centers for approximately $275 million.
- Digital Realty to redeploy $55 million to buy out Cyxtera’s leases in three colocation data centers in Singapore and Frankfurt.
- Digital Realty to use $220 million of remaining net proceeds to repay debt and fund development.
- Brookfield to assume the leases on three facilities previously leased to Cyxtera and amend the leases on three additional data centers in New Jersey and Los Angeles, accelerating the expiration date to September 2024.
- Brookfield has granted Digital Realty a purchase option to acquire a colocation data center outside of London, in the Slough Trading Estate.
In aggregate, these agreements are expected to result in approximately $0.02 per share of annualized Core Funds from Operations (CFFO) dilution in the year following the transaction close, with upside anticipated in year two and beyond. The transactions are anticipated to close simultaneously in early 2024.
“We are pleased to have worked with Digital Core REIT and Brookfield to successfully resolve our relationship with Cyxtera. This agreement mitigates the financial impact related to their bankruptcy, while also enhancing our financial position, and demonstrating our commitment to and sponsorship of Digital Core REIT,” said Digital Realty Chief Investment Officer Greg Wright. “Digital Realty will benefit from an improved overall customer credit profile, additional capital to fund new investment, and be better positioned to deliver sustainable value to all of our stakeholders.”
Separately, Digital Core REIT today announced entry into agreements that, among other things, will generate $160 million of proceeds.
“By partnering with our sponsor, Digital Core REIT realized a comprehensive resolution to our relationship with our second-largest customer,” said Digital Core REIT CEO John Stewart. “In the process, we were able to remain insulated against a broader financial impact, while improving our customer credit quality with approximately 85% of our annualized rent coming from investment grade customers and positioning our balance sheet to execute on our strategy, through $160 million of asset sales at attractive valuations.”
Weil, Gotshal & Manges LLP served as legal advisor, while Evercore served as financial advisor to Digital Realty on the transaction.
