DuPont Fabros Signs 16-Megawatt Lease in Santa Clara

The cloud builders continue to lease massive chunks of data space, boosting the fortune of major data center developers. In the latest megadeal, DuPont Fabros Technology said this week that it has pre-leased 16 megawatts of space at its data center campus in Santa Clara, Calif., allowing the company to begin construction on the next phase of the massive project.

DuPont Fabros Technology (DFT), which specializes in selling wholesale “plug-n-play” data center suites to large users, also announced several large leases in Chicago and said it has acquired land in Hillsboro, Oregon for a potential expansion. The announcements boosted shares of DuPont Fabros by about 3 percent.

The deals continued a spectacular leasing run for DuPont Fabros, which had red-hot leasing in its home Northern Virginia market in late 2015. The company has leased 59 megawatts of space over the past two quarters.

The 16 megawatt lease in Santa Clara is one of the largest wholesale deals in the history of the data center industry, and illustrates the incredible pace of expansion for the largest hyperscale users. DFT said it expects to spend between $164 million and $170 million to build the expansion space.

Action Picks Up in Santa Clara

The deal continues the recent surge in leasing activity in Santa Clara, the leading data center market in Silicon Valley, following several years of moderate activity. Last month CoreSite reported that it had leased the entire 80,000 square foot second phase of its SV7 data center to a single tenant, while Vantage Data Centers recently cited leasing successes as prompting an expansion of its Santa Clara campus.

So who is the mystery customer? DuPont Fabros did not identify the tenant, but said it was an “existing super wholesale customer,” a category which includes Microsoft, Facebook, Rackspace and Apple. It’s unlikely to be Facebook, which has migrated capacity out of Silicon Valley in recent years. Microsoft and Apple are believed to be existing tenants in earlier phases of the Santa Clara campus. The company expects the customer will begin using the space in the third quarter of 2017.

“DFT had an outstanding fourth quarter in 2015 with the leasing of 32 MW of critical load,” said Chris Eldredge, President and CEO of DuPont Fabros Technology. “This momentum has carried over into Q1 2016 where we now see combined leasing for these two quarters of almost 60 MW of critical load; further validating our wholesale-focused strategy that enables the cloud to achieve its astronomical growth of late.”

Progress in Chicago

The Santa Clara lease was the largest in a flurry of deals DFT has signed in 2016. These include:

• One pre-lease for a portion of CH2 Phase III, comprised of 7.1 MW and 44,628 rentable square feet. This lease is expected to commence in the third quarter of 2016 when CH2 Phase III is placed into service.
• One pre-lease of a portion of CH2 Phase II, comprised of 2.8 MW and 17,830 square feet, which will commence in the second quarter of 2016 when CH2 Phase II is placed into service.
• Expansions of available critical load of an existing lease at CH2 Phase I and an existing pre-lease at CH2 Phase II. These expansions totaled 1.16 MW of critical load.
• DFT has also extended the term of one of the two leases scheduled to expire in 2016. A lease is for 0.54 MW of available critical load has been extended by five years.

With these announcements, DuPont Fabros has now leased 100 percent of the capacity in SC1 Phase III, 77 percent of Chicago CH2 Phase II , and 63 percent of Chicago CH2 Phase II.

Expansion in Oregon

DuPont Fabros also continues it geographic expansion. On March 2, DFT entered into an agreement to acquire a 46.7 acre parcel of land in Hillsboro, Oregon for a purchase price of $11.2 million. The company has been scouting potential sites for a number of years in Oregon, which has emerged as an attractive market for both hyperscale players and service providers. Hillsboro is the hub of the Portland area’s “Silicon Forest,” hosuing a large Intel manufacturing plant. Hillsboro is also home to existing data centers operated by Digital Realty, INFOMART, ViaWest and T5 Data Centers.

DFT has been working to refine its geographic focus. In January it announced its intent to sell its NJ1 data center in Piscataway, N.J., where leasing has been slow.  The company also began planning a new data center near Toronto, and said it was contemplating expansion in the Phoenix and Portland markets. ith the land deal in Hillsboro, it would appear DFT will focus on Portland next.

The company also said it plans to sell 6.62 million shares of common stock, which should raise about $250 million to fund data center development and manage debt.