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Lincoln Rackhouse Buys Atlanta Data Center in Sale-Leaseback Transaction

05/30/2017

Lincoln Rackhouse, the data center development arm of Lincoln Property Company, has announced the purchase of an 88,000 sf Atlanta data center for an undisclosed sum. The new facility, occupied by a Fortune 50 company, provides Lincoln with a solid asset in another major data center market. They currently own five other data centers located in Boston, Charlotte, New York, and Northern Virginia.

The Transaction
The 88,00 SF data center is located at 40 Perimeter City East, and while Lincoln did not reveal the seller, public records show the building to be previously owned by Coca Cola. The Tier III data center was built on 12.6 acres in the Perimeter Center East micro market of Atlanta, and will continue to be the home for the previous owner for the next two years. At the end of that period, the tenant will reduce their committed capacity and Lincoln can lease the remaining power and space to retail colocation data center operators or end users. The data center currently accommodates approximately 2.5 MW of commissioned power and 32,000 SF of data center space. In addition, Lincoln Rackhouse believes they can add an additional 3 MW of commissioned power to the facility as demand requires. The data center is fed by two (2), 20 kV feeds from Georgia Power from separate substations and is within close proximity to over ten fiber providers.

The Sale-Leaseback Strategy
The sale-leaseback transaction is a strategy corporate data center users are evaluating more frequently today. As companies that own and operate their own data centers refine their IT strategies, they often find colocation and cloud to be realistic solutions and a desire to dispose of owned data center infrastructure. “Most enterprise data center facilities are over-engineered and over-built, and we understand how to help these companies monetize their assets as they look to execute long term strategies,” said Martin Peck, Senior Managing Director of Lincoln Rackhouse. Other data center sale-leasebacks have occurred in 2017, including Ascent’s purchase of Blackberry’s Atlanta data center and QTS purchase of HSBC’s Fort Worth facility. Peck doesn’t see this trend ending anytime soon, as he added they will continue to look for corporate sale-leaseback opportunities in major data center markets in the future.

The Atlanta Lure
Atlanta is a growing data center region because of its favorable business climate, competitive colocation market, reasonable power cost, and geographic location. “We liked Atlanta because it’s the data center hub of the southeast,” said Ryan Sullivan, Managing Director of Lincoln Rackhouse. “Deal sizes are typically smaller in Atlanta than other markets like Northern Virginia or Silicon Valley, but the city is highly competitive and we’re excited to have a great asset here.” As of 1Q 2017, the Atlanta data center market was 155 MW of commissioned power with a 9.7% vacancy rate (source: datacenterHawk Insight). Atlanta is occupied by Fortune 500 and Fortune 1000 companies, creating consistent data center demand. Furthermore, Atlanta generates data center interest from companies located outside of the market as well, providing additional opportunities over time.

An Active 2017 for Atlanta
2017 has been an active year for the Atlanta Data Center Market. In addition to Lincoln and Ascent’s purchase of existing Atlanta data centers, Digital Realty and QTS are currently under construction with additional capacity at their respective facilities. Switch announced last week their intent to construct their fourth US data center campus, which is planned to accommodate over 1M SF of data center space over time. Other providers, like T5 Data Centers, are working to add additional services to their facilities. They announced a retail colocation offering in 1Q 2017 in efforts to further attract data center interest.
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