Digital Realty, a global provider of cloud- and carrier-neutral data center, colocation, and interconnection solutions, and Mitsubishi Corp. have formed a joint venture to develop two data centers in the Dallas area that are 100% pre-leased to an S&P 100 investment grade customer on a long-term basis.

Digital Realty is based in Austin and has an office in Dallas. 

“We’re delighted to expand our partnership with Mitsubishi,” Digital Realty Chief Investment Officer Greg Wright said in a statement. “This development joint venture leverages the success of our established Japanese partnership into the United States, while supporting our customer’s data center requirements with a like-minded, long-term investor. The transaction enhances Digital Realty’s balance sheet, providing incremental capital to prudently support our stakeholders’ longer term capacity requirements.”

Mitsubishi has acquired a 65% equity interest in the venture for an initial contribution of roughly $200 million, while Digital Realty is maintaining a 35% interest and will manage the development and day-to-day operations of the joint venture.

Mitsubishi will pay a further $65 million to fund its share of the first phase of the project, scheduled to launch in late 2024, and each partner will fund its pro rata share of the remaining $100 million estimated development cost, Digital Realty said.

The two data centers began construction in the fourth quarter of 2022, with the first phase slated to deliver 16 megawatts (MW) of initial data center capacity. The budget for the first phase of these yield-on-cost developments is roughly $400 million, Digital Realty said.

They said the customer maintains the option to expand the projects up to 48 MW of total IT load during the initial lease term, which could increase the combined budget up to $800 million, based on current development cost estimates.

Wells Fargo Securities served as financial adviser to Digital Realty, which has an office in Dallas, on the transaction.

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