Mitsubishi-Digital Realty JV Investing Up to $800M in Pair of Dallas Data Centres

Mitsubishi Corporation will take its partnership with Digital Realty beyond Japanese shores, with the companies announcing a fresh joint venture to support development of two data centres in northern Texas at an investment cost that could reach $800 million.

The Tokyo-based trading firm and the US data centre giant will own the two facilities in the Dallas metro area under a 65:35 JV, Digital Realty said Monday in a release. The partners will commit a respective $265 million and $135 million to the projects’ 16-megawatt first phase.

The data centres began construction in the fourth quarter of 2022 and are fully pre-leased to an S&P 100 investment-grade client on a long-term basis, with the first phase due for completion in late 2024. The client has the option to expand the projects to 48MW of total IT load during the initial lease term, which could increase the combined budget to $800 million.

“We are delighted to expand our partnership with Mitsubishi,” said Digital Realty chief investment officer Greg Wright. “This development joint venture leverages the success of our established Japanese partnership into the United States, while supporting our customer’s data centre requirements with a like-minded, long-term investor.”

Trans-Pacific Partners

Mitsubishi Corporation and Digital Realty previously hooked up on a 50:50 Japan data centre JV that owns a four-building Osaka campus with over 70MW of IT capacity.

The two Dallas-area facilities represent Mitsubishi Corporation’s first overseas venture in the data centre business, according to a separate statement issued by the Japanese firm on Monday. Digital Realty will manage the development and day-to-day operations of the data centres, for which it will receive the customary fees.

“Both of the data centres that MC has acquired are located in Texas, a state leading much of the economic growth that is currently taking place in the US,” Mitsubishi Corporation said. “Furthermore, MC has a strong business history in the state, having engaged in real estate projects there for more than three decades through our Dallas office.”

Nikkei Asia reported in 2021 that a sister company, Mitsubishi Estate, aimed to build seven data centres in the Washington DC area by the end of the decade at an estimated cost of JPY 200 billion ($1.8 billion).

$7B Blackstone Deal

NYSE-listed Digital Realty operates as a REIT and has more than 300 facilities in 27 countries. The Texas-based company had $44.1 billion in assets at the end of December 2023, according to unaudited results.

The global data centre trust sought to enlarge its footprint in December when it struck a deal with private equity giant Blackstone to develop four hyperscale data centre campuses across three metro areas on two continents.

The campuses in Frankfurt, Paris and Northern Virginia have a total estimated development cost of $7 billion and are expected to support construction of 10 data centres with 500MW of potential IT capacity.

Manhattan-based Blackstone acquired an 80 percent interest in the joint venture with an initial capital contribution of $700 million, with Digital Realty holding the remaining 20 percent. The parties will fund their pro rata share of the remaining development costs.

“Partnering with Blackstone marks the culmination of a record year of capital recycling and aptly reflects the shift in our funding strategy, to diversify our sources of capital and bolster our balance sheet in order to capitalise on the significant opportunity that lies ahead,” Wright said at the time.