head in the cloud

A private equity firm buys the US west coast’s most important data center for $437.5 million

July 18, 2013
July 18, 2013

An innocuous high rise in downtown Los Angeles, California, just sold for a record $437.5 million. That’s 2.5 times the price per square foot of comparable buildings in the area, which might seem surprising, given that there’s nothing special about the building itself. But there is something special about its tenants.

That’s because 624 S. Grand Ave—more commonly known as One Wilshire—is the biggest telecommunications hub on the US west coast, according to CBRE Group’s Kevin Shannon. In fact, the importance of this high-rise data center is only rivaled by two other data centers in the world, according to Shannon: 60 Hudson Street in New York City and Telehouse in London.

One Wilshire is home to telecoms like Verizon, Sirius XM Radio and China Telecom. It’s also home to colocation centers—data centers where different companies rent space to store servers—such as the one run by CoreSite. Not only that, it sits at one end of fiber optic cables that connect Asia and North America, with much of the low-latency traffic between the two continents coursing through its wires. It’s little surprise that stock brokerage Crowell, Weedon & Co. is also a tenant. Some companies that trade try to locate as close as possible to their servers to minimize the time required to transmit data.

One Wilshire’s new owner, GI Partners, made the acquisition through TechCore, a $1 billion fund they manage for the California Public Employees’ Retirement System (CalPERS). Since launching in 2012, GI Partners boasts that TechCore “has acquired 1.7 million square feet of mission critical data center and office properties.”

GI Partners isn’t the only financial firm in the data center game;  it was owned by the Carlyle Group before being sold to Hines Real Estate Trust in 2007. In 2011, data centers raised $6.9 billion dollars in debt financing and $400 million in equity financing. Boutique investment firms like DH Capital are even beginning to specialize in data center investments. The race is on to become one with the cloud.

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