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AT&T data center sale/leaseback was top lease

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AT&T's data center in Miramar was the top lease of 2013. Photo courtesy of CoStar

The Daily Transcript real estate editor's choice for the most significant lease of the year in 2013 was the $134.5 million sale/leaseback of the 499,402-square-foot AT&T (NYSE:T) San Diego Data Center at 7337 Trade St. in the Miramar area last month.

The buyer was DC-7337 Trade Street LLC, with Carter/Validus Operating Partnership LP as its sole member. Carter/Validus Mission Critical REIT Inc., with John E. Carter as CEO, is the general partner of Carter/Validus Operating.

The seller of the property was Pacific Bell Telephone Co.

The leaseback part of the transaction is what is particularly notable here. The first year's rent is approximately $10 million, and escalates at approximately 3 percent a year for 10 years.

"AT&T will be responsible for all taxes, operating expenses, insurance and maintenance, including capital repairs and replacements, affording the new owner ease of management with no landlord-obligations and no near-term capital exposure," a brochure states.

The five-story Miramar data center was constructed in 1983 on a 16.86-acre lot. The property has 750 parking spaces.

Louay Alsadek and Evan August of the CBRE's San Diego office (NYSE: CBG); and Kevin Shannon and Todd Tydlaska, of CBRE's El Segundo office, represented the seller. The buyer represented itself.

When asked about the transaction and the property, Alsadek said he was barred from discussing the sale and leaseback due to a non-disclosure agreement with AT&T.

Carter, who noted in a statement that his Tampa, Fla., firm acquired about $588 million in data centers across the country in 2013, said by any measure, it was a very good year for his firm.

“We’re delighted with the significant progress we made in 2013,” said Carter. “As we approach $1 billion in portfolio assets, we believe we are well positioned to continue to deliver value to our shareholders over time.”

While it is unclear how much Carter/Validus or AT&T might invest in the property going forward, a CBRE brochure showed that approximately $13 million has been spent on the building's infrastructure since 2009 -- a fact the brochure says should limit Carter/Validus' capital exposure.

Included among these improvements were the replacement of the cooling towers, chilled water pumps, chillers, addition of four new 2.5-megawatt generators and new uninterruptable power supply systems among other improvements to dramatically extend the useful life of the facility.

Not that Carter/Validus had any doubts it was getting a major credit tenant in AT&T, but the brochure did mention the huge telecom company has a $190 billion market capitalization and revenue that exceeded $127 billion in 2012.

For the nine months ended Sept. 30, Carter/Validus posted consolidated net income of $8.15 million on $46.67 million in revenue -- compared with a consolidated net loss of $2.74 million on $17.5 million in revenue for the like period in 2012.

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