Lincoln Rackhouse continues to expand its data center network as it builds a national footprint. On Tuesday, it announced the acquisition of ByteGrid, which offers colocation and managed services in three markets. Lincoln Rackhouse partnered with Principal Real Estate Investors on the deal, just as it did in a 2018 transaction for three enterprise facilities.
The acquisition provides Lincoln Rackhouse with a presence in three cities – Chicago, Seattle and Suburban Maryland – along with three data centers totaling 320,000 square feet and 16 megawatts of capacity. That boosts the company’s total portfolio to 2.5 million square feet and more than 100 megawatts of capacity across 14 markets.
The deal was “complex” according to Ryan Sullivan, Managing Director of Lincoln Rackhouse, which will own the facilities but seek operating partners in each market to manage the ByteGrid colocation and managed hosting businesses. This structure allows Lincoln Rackhouse to own the buildings as landlord without competing directly with the service provider tenants in other buildings in its portfolio.
Lincoln Rackhouse has a history of refurbishing existing data centers and then leasing them to service providers like INAP and Evocative.
“Bytegrid’s existing business, recurring revenues and key market presence make this an attractive opportunity for us,” said Sullivan. “While our non-compete commitment to our current customers and operating partners remains, the Bytegrid acquisition is indeed all-encompassing, including the operational management and services business of three colocation sites.
“We do look forward to integrating these facilities into our nationwide portfolio and marketing those solutions to operators in the industry,” Sullivan added. “We’re excited to further explore the interest that has been shown in these assets thus far now that we’ve closed the rather complex acquisition.”
Teaming With Principal
Lincoln Rackhouse is a unit of Lincoln Property Company, a developer and real estate service provider that manages more than $60 billion in assets in 100 markets in the U.S. and Europe. The Rackhouse unit primarily serves as a real estate owner and property manager specializing in data centers. The acquisition of Bytegrid represents its first step into the data center and colocation operations sphere.
The company previously partnered with Principal on the 2018 purchase of three data centers from an enterprise tenant, all structured as sale-leaseback deals in which the seller stayed on as a tenant.
“We’re excited to expand our existing relationship and successful track record in the data center sector with Lincoln Rackhouse through this acquisition,” said Ben Wobschall, Director of Acquisitions for Principal Real Estate Investors. “Together with the team at Lincoln Rackhouse, we’ve created a proven model of strategically acquiring premium-quality data center assets and securing leases with cloud and colocation operating partners.”
ByteGrid also expanded through sale/leasebacks, and bought its very first data center in Maryland from the seller in the 2018 Lincoln Rackhouse expansion. The three data centers in the ByteGrid portfolio possess “industry-leading physical” security attributes as well as industry standards for HIPAA compliance and SOC 2 Type II certification, according to Lincoln Rackhouse.
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With this acquisition, Lincoln Rackhouse can immediately offer space to end users, cloud providers, managed and colocation service operators in three markets – Washington, D.C. (Silver Spring, Md.), Greater Chicago (Aurora, Ill. in Suburban Chicago) and Seattle (Lynwood, Wash., a northern suburb of Seattle).
“We have been working hard over the past two years to augment our platform and capabilities to better serve our clients across the U.S., adding several new end user and operator tenants to our roster and amping up our facilities, property management and sales teams,” said Martin Peck, Executive Vice President of Lincoln Rackhouse. “This acquisition further underscores our dedication to growth and delivery of top-tier service, allowing us to leverage greater space and power to seamlessly meet the needs of our clients.”
Lincoln Rackhouse says its plans to continue to acquire enterprise data center facilities to further expand its footprint.