Strategic Capital Fund Management, an investment manager, through its newly formed data center developer and operator named Datasphere (Strategic Datasphere, LLC), today announced that it has completed the acquisition, from Legacy Investing, LLC, of a data center located in Alpharetta, Georgia, part of the Atlanta metropolitan area, for $80m. Specifically, this data center is primarily occupied by E*TRADE Financial Corporation, an online stock brokerage owned by Morgan Stanley (NYSE: MS).

E*TRADE Data Center – Alpharetta, Georgia – Strategic Capital’s Datasphere

E*TRADE’s “technology center” in Alpharetta, Georgia was constructed in 1999 to support the company’s systems, network services, trading, and customer service. Subsequently, the facility was renovated in 2008 and 2020.

Datasphere is purchasing the property located at 1650 Union Hill Road in Alpharetta, Georgia, which forms part of a data center corridor that serves enterprise users and colocation operators.

Overall, the data center is situated on 14.4 acres of land and comprises 165k sqft of built area. In terms of power, the facility offers 5.4 megawatts of 2N critical capacity, which can be expanded to 8.1 megawatts at N+1. Finally, the property is 100%-leased to two investment grade tenants, one being E*TRADE.

Development

Strategic Capital’s Datasphere views the E*TRADE Data Center in Alpharetta, Georgia as a value-add investment opportunity. Specifically, the facility has available land for another 140k sqft of future data center development. Therefore, if tenants seek to grow their presence beyond the existing building footprint, Datasphere can meet these requirements.

Debt Financing

Debt financing for Datasphere’s $80m acquisition of the E*TRADE Data Center in Alpharetta, Georgia was provided by Sunflower Bank, N.A., which is part of FirstSun Capital Bancorp.

History

In October 2014, E*TRADE executed a sale-and-leaseback transaction, for its data center and office property, with Carter Validus Mission Critical REIT for $56.7m. Subsequently, Carter Validus divested the property to Legacy Investing’s entity, Alpharetta DC, LLC, for $64.0m in June 2018.

At the time of Carter Validus’ sale to Legacy Investing, the property’s 165k total square footage consisted of 50.4k sqft of powered-shell enterprise data center space, 54.8k sqft of office and administration space, and 59.7k sqft of supporting infrastructure space.

Datasphere – Overview

Datasphere acquires, develops, and manages fully and partially stabilized data center facilities, including through sale-and-leaseback transactions. Geographically, Datasphere intends to deploy its capital in both North America and Europe.

In September 2021, Datasphere announced a target to deploy $1.5bn+ of debt and equity capital into the data center sector.

Management

Bryan Marsh, Chief Executive Officer at Datasphere, previously had responsibility for 8 million sqft of data center space across Digital Realty’s U.S. Central Region, in his role as Vice President. At Digital Realty, Marsh negotiated leasing deals with Microsoft, Rackspace, IBM, and LinkedIn, each with $100m+ in total contract value.

Private Placements – Equity Funding

Below we highlight two relevant companies affiliated with Strategic Capital and Datasphere which have recently raised equity capital through private placements. In aggregate, through these private placements, the following two entities have raised over $335m of equity through the beginning of 2022.

Strategic Datasphere REIT, LLC

Strategic Datasphere REIT, LLC is an entity affiliated with Strategic Capital Fund Management and PIMCO’s private funds group. In August 2021, the Strategic Datasphere REIT entity raised a total of $294m in equity.

Strategic Data Center Fund, LLC

Strategic Data Center Fund, LLC is an entity affiliated with both Bryan Marsh and Jim Condon (Managing Partner of Strategic Capital). As of January 2022, the Strategic Data Center Fund entity has raised a total of $41.9m in equity. Ultimately, this fund has indicated that its total offering amount could reach up to $200m.

Transaction Advisors – Legacy Investing

Legacy Investing’s overall financial advisor was CBRE Data Center Capital Markets.

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.

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