Harrison Street, a private equity firm, and American Real Estate Partners (AREP), a developer and operator of data centers, have committed $1bn to a joint venture to build powered shell data center campuses in Northern Virginia. To-date the joint venture has acquired two development sites in the Northern Virginia sub-market of Loudoun County, on which it will develop six buildings, spanning 2.1 million sqft.
Strategically, Harrison Street and AREP intend to deliver powered shells (i.e., space and power, but no interior fit-out) to cloud service providers such as Amazon Web Services (AWS).
Powered Shell Data Centers – Northern Virginia – Harrison Street and AREP
Harrison Street and AREP’s two new sites are located at 22070 Broderick Drive in Sterling, Virginia and on Arcola Boulevard in Sterling, Virginia.
Prior to forming today’s joint venture, in January 2021, Harrison Street and AREP acquired another development site at 21445 Beaumeade Circle in Ashburn, Virginia. As described below, both firms are in the process of demolishing the existing buildings at 21445 Beaumeade Circle to replace them with a newly constructed data center campus.
Overall, all three development sites (two new sites and 21445 Beaumeade Circle) will be completed within the next two to three years.
21445 Beaumeade Circle – Ashburn, Virginia – ABX-1
Harrison Street and AREP, via the entity AREP Beaumeade LLC, own a 10.3-acre site at 21445 Beaumeade Circle in Ashburn, Virginia. Specifically, this site is located east of Beaumeade Circle, north of Loudoun County Parkway, and west of the Washington and Old Dominion Trail, within Beaumeade Corporate Park.
Presently, a 79.0k sqft flex-industrial building, parking lot, and vacant land comprise the 10.3-acre property.
Development – AREP Beaumeade Data Center
Initially, Harrison Street and AREP plan to demolish the existing building and all related infrastructure and regrade the site to create a pad for a future data center building. Subsequently, utilizing a floor area ratio (FAR) of 0.6, the joint venture plans to construct a two-story, 265k sqft powered shell data center at the site.
Per Loudoun County, this application is known as the AREP Beaumeade Data Center. Additionally, Loudoun County application documents indicate a total estimated project investment of $200m, alongside the creation of 50 new jobs.
In January 2021, AREP Beaumeade LLC purchased the 21445 Beaumeade Circle property for $21.5m from Chirisa Capital Management’s entity Chirisa BCVA LLC. Indeed, this price is equivalent to valuing the land at $2.1m per acre.
22070 Broderick Drive – Sterling, Virginia
The 22070 Broderick Drive site represents the former AOL headquarters, currently operated by Yahoo, and is located on Pacific Boulevard, adjacent to Ashburn. Upon completion, this campus will be comprised of 4 build-to-suit powered shell data centers for hyperscale tenants and will deliver 300 megawatts of electrical power capacity.
Arcola Campus – Sterling, Virginia
Harrison Street and AREP’s Arcola Campus is located on Arcola Boulevard, directly across the street from Google’s new development, and near Dulles International Airport. Specifically, the Arcola development will include two powered shell build-to-suit data centers with ~100 to 125 megawatts of capacity.
Harrison Street and AREP – Sources of Capital
Both joint venture partners, Harrison Street and AREP, will be funding their commitments through distinct third-party capital vehicles:
- Harrison Street Real Estate Partners VIII: $2.5bn closed-end U.S. opportunistic real estate fund
- Harrison Street Social Infrastructure Fund: $1.0bn+ open-end infrastructure fund. For this strategy, individual transactions will be around $150m or less
- AREP Strategic Opportunity Fund III: regulatory filings show this fund has amassed at least $46m of equity as of October 2021
Harrison Street – Digital Infrastructure
Since 2018, Harrison Street has invested $2.4bn in digital infrastructure including powered shell data centers, carrier hotels, and dark fiber. Specifically, the firm’s investments include:
- Wells Building (MIWI1): 160k sqft carrier hotel and colocation data center in Milwaukee, Wisconsin
- Pittock Block (PTOR1): 302k sqft carrier hotel and colocation data center in Portland, Oregon
- CIM Group Portfolio: four data centers, located in the three U.S. markets of Chicago, Illinois; Orangeburg, New York; and Cheyenne, Wyoming
- SummitIG: 600+ route miles of metro (intra-city) and regional (inter-city) dark fiber throughout Virginia