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04/02/15 Five 9s Digital Knowledge

2015: CFOS – Is It Time to Sell Your Data Center?


Data Center Sale Leasebacks

Most corporations have a data center. And the perpetual conversation of what to do next to handle a company’s growing need for data storage, transfer, disaster recovery, and the ROI for new and more efficient data center infrastructure is, well, kinda like buying life insurance.

How much to spend and when does it end? The bad news: It does not end. The good news: There are a lot of good options today not seen 5 years ago. You can choose to go the hybrid model and augment your existing data center assets through the multitude of cloud offerings or you can continue down the path of upgrading your data center assets to create a more efficient use of space and reduced operating costs. All choices has a cost and all are lengthy and a somewhat arduous decision making process. CFOs often hold the keys after the budget gets busted by two or threefold, and then the new RFIs and proposed solution bargaining begins anew.

One solution that is gaining traction in the corporate sector is a sale-leaseback of company data center assets. Once considered an untouchable asset due to the mission critical nature of corporate data center, companies are more often considering this option as a way to unleash the capital tied up in a data center and utilize the proceeds to enhance the data center infrastructure. Additionally, the proceeds can be utilized for a company’s core business growth.

Highly qualified landlords specifically focused on the data center arena allow a company to have the confidence in not owning the asset and still maintain control of the operations for the long term.

Essentially, the sale-leaseback buyer serves as a capital partner with the owner of the data center in the transaction with both parties motivated to reach a mutually agreeable price vs. lease structure. Some buyers will offer additional proceeds to the data center owner to be applied to facility enhancement and efficiencies in an effort to create a long term good investment for both parties.

A number of successful data center sale-leaseback examples have occurred in the US market in the past year exceeding $700M in transactions. Some examples can be seen in the 2014.

As CFOs work to manage the ever growing IT Budget and needs, the Data Center Sale-Leaseback concept is a worthy consideration.

If your company would like to consider a sale-leaseback or would like some market comparables, please email or call us at 704.651.2210.