CyrusOne (NASDAQ: CONE) today announced that it has agreed to sell four existing data centers in the Houston, Texas metro area for total consideration of $670m, to DataBank Holdings, a retail colocation provider, which is 20%-owned by the balance sheet of DigitalBridge (NYSE: DBRG). Specifically, DataBank is acquiring CyrusOne’s Houston West I, II, & III, and Houston Galleria data centers.

Additionally, CyrusOne will lease back from DataBank, Houston West III’s powered shell to support a lease signed in Q4 2021 with Facebook (Meta), a hyperscale customer. Notably, CyrusOne’s Houston West III data center has a total of 209k gross sqft of powered shell available for future development.

As of Q3 2021, CyrusOne’s Houston data center portfolio generated annualized run-rate cash net operating income (NOI) of $34.8m, including the future contracted lease payments, in Year 1, that will be made by CyrusOne. In turn, this income stream implies a transaction cap rate of 5.19%.

Finally, the transaction is expected to close late in Q1 2022.

Houston Data Center Portfolio – CyrusOne Sells to DigitalBridge’s DataBank

CyrusOne’s four Houston, Texas data centers comprise 42.5 megawatts of installed critical IT load across 308k sqft of raised floor space. Additionally, these facilities can scale-up in capacity, as they have 61.0 megawatts of available critical load. Importantly for future development, CyrusOne’s four data centers are held freehold, giving DataBank 100% ownership of the underlying real estate.

Data CenterRentMW*sqftOccupancy
Houston West I$18.4m32112k48%
Houston West II$25.5m1280k66%
Houston West III$8.3m653k50%
Houston Galleria$9.3m1163k37%
*Available critical load capacity in megawatts

Per the table above, as of Q3 2021, CyrusOne’s four Houston, Texas data centers generate $61.6m of annualized rent. However, the portfolio’s top-line performance has been trending in a negative direction over the past year. Indeed, as of Q3 2020, CyrusOne’s same Houston facilities produced $68.5m of annualized rent, implying a 10% decline year-over-year.

Drivers of CyrusOne’s year-over-year underperformance in Houston have recently been attributable to:

  • Renewals: rental rates on like-for-like leases declining from legacy pricing, to current market rates
  • Churn: churn derives from customer renewal rates, footprint consolidations, and customer exits. For example, Houston has specifically experienced churn from oil & gas customers

Houston West Campus

CyrusOne’s Houston West I, II, & III are all located on the Westway Park Blvd Campus, 20 minutes west of Downtown Houston.

CyrusOne Houston West Campus Location Map

Collectively, this Houston West Campus is the metro’s primary interconnection point, with 30+ fiber networks, 3.5k cross connects, and public cloud on-ramps from Amazon Web Services (AWS) and Google Cloud. For example, carriers including Charter Communications, Cogent Communications, and Comcast are available on-site.

The Houston West Campus is located along a major fiber corridor in Houston. Additionally, the campus has access to significant and redundant utility power feeds.


DataBank is funding the equity for the CyrusOne Houston portfolio acquisition from a group of institutional investors led by DigitalBridge, DataBank’s controlling shareholder. As part of this equity financing, DigitalBridge is investing $80m from its balance sheet to maintain its 20% ownership position in DataBank. Additionally, DataBank is receiving underwritten debt financing from TD Securities and CIT (First Citizens Bank).

Transaction Rationale – CyrusOne and DataBank


Through the divestiture of its four data centers in Houston, CyrusOne is progressing towards its goal, as outlined at its Investor Day, to recycle/sell $1bn to $2bn in asset value, over the next 3 to 4 years. In turn, CyrusOne notes that proceeds from the sale can be redeployed “into accretive developments across core markets” to satisfy “hyperscale and enterprise demand in the U.S. and Europe”. To this end, CyrusOne recently announced that it would develop a new 63-megawatt data center in the Frankfurt, Germany market.

Additionally, CyrusOne itself is in the process of being acquired by KKR and Global Infrastructure Partners (GIP) for an enterprise value of $15bn. As noted in Dgtl Infra’s review of CyrusOne’s proxy statement / merger process, the KKR/GIP Consortium raised its bid for CyrusOne by 7.7%, to $90.50 in cash per share, only two days after making an offer of $84.00 in cash per share for the company.

As such, CyrusOne may have gained negotiating leverage with the KKR/GIP Consortium, in this broader whole-company sale process, from positive developments in its Houston portfolio sale, as well as forthcoming hyperscale leasing from Facebook in Q4 2021.


DataBank’s acquisition of CyrusOne’s four data centers in Houston, Texas initiates the company’s entry into the Houston market. Given the scale of CyrusOne’s Houston facilities, DataBank also gains the position as the largest data center provider in Houston, Texas. Elsewhere in Texas, DataBank currently has data centers in Dallas (DFW1 through DFW7), Austin (TX1), and Waco (TX2).

Upon completion of the CyrusOne transaction, DataBank’s total portfolio will grow to 65+ facilities and 2.0 million sqft of raised floor space. Through these facilities, DataBank will focus on providing retail colocation services to the enterprise data center segment, including interconnection and managed cloud services.

For DataBank, CyrusOne’s Houston portfolio represents an opportunity to lease-up underutilized facilities, which as of Q3 2021, were only 51% occupied. Indeed, the low utilization of the data centers currently hinders the overall operating margin of the portfolio.

Transaction Advisors – CyrusOne and DataBank

CyrusOne’s financial advisor was DH Capital. Additionally, CyrusOne’s legal advisor was DLA Piper.

DataBank’s legal advisor was Jones Day.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing. Mary has over 5 years of experience in research and writing for Data Centers.


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