Nick Psyllos and Ryan Gallagher; Kevin Shannon, Scott Schumacher, Ken White, Brad Black and Rob Merkin.
HFF LP; CBRE
Lightwave Corporate Center, 9305 Lightwave Avenue, San Diego
166,892 square feet
Total Consideration: $52.5 million
About the property:
Datacenters are a niche product type in commercial real estate and each one is different depending on many factors, which influence the datacenter's desirability and potential as an investment opportunity. The surrounding infrastructure, which supports a datacenter (power and fiber providers) are also central when understanding a certain datacenter's strength and viability. As such, many more metrics need to be understood by investors when underwriting a datacenter. The financial strength, building improvements and underlying lease structure are all important determinates of value in a datacenter property. With so much variability when compared to a more generic office or industrial building, the comparable leases and sales for this property trade were almost irrelevant. Also, San Diego is not considered a top tier datacenter market due to its high cost of energy and seismic risk, which creates an additional challenge when comparing this building to more desired datacenter markets such as Los Angeles or Silicon Valley.
Closing the deal:
The team was fortunate that the supply of datacenters available for sale is very limited and there is aggressive capital in the market. Also, the physical attributes of the property — including the base building mechanical and datacenter related improvements — are very good. Additionally, the site has above-standard parking, flexible open office space on the second floor and the potential to add additional building area. Financially, having an investment-grade tenant in SDG&E provided additional stability to the rent roll.
The team exceeded the client's expectations on the execution of this sale. They were able to recognize and capitalize on the aggressive new capital in the market that is seeking data center facilities as a core part of their acquisition goals.