SANTA CLARA — A string of data centers has been grabbed by a Bay Area investor in a deal that tops $100 million, another sign that Silicon Valley commercial properties remain a hot ticket amid COVID-linked uncertainties.
In Santa Clara County, Menlo Equities bought four South Bay data centers, paying a combined $108.8 million for the big commercial sites, documents filed on Sept. 20 with county officials show.
Two of the South Bay centers are in Santa Clara, one is in Sunnyvale and one is in San Jose, according to documents filed with the County Recorder’s Office.
The Bay Area purchases were part of an overall acquisition of nine data centers in three major regions of the United States, including the four in the South Bay bought by affiliates led by Menlo Equities and a U.S.-based pension fund.
Data centers have become increasingly more viable because of the heightened demand for information processing by millions of people working remotely in the wake of coronavirus-linked business shutdowns and health concerns.
“It is absolutely the case that demand is growing for data,” said Christopher Chang, a partner with Menlo Equities. “We don’t see demand slowing down for data usage and data needs.”
The seller was Digitial Realty, a developer who focuses on data center development and leasing. The buyer, Menlo Equities, has primarily focused on developing and buying office parks in tech hubs like Silicon Valley.
The Menlo Park-based real estate company began investing in data centers with a Palo Alto purchase in 2000. Menlo Equities also develops and buys research and industrial buildings.
“We like the portfolio because many of the assets are fully leased,” Chang said. “But we also see the potential for upside opportunities because leases in some buildings are coming up for renewal.”
At the same time as the property purchases, Wells Fargo Bank provided affiliates controlled by Menlo Equities with a loan of $210.3 million, the county records show.
In the South Bay, Menlo Equities paid for the four data centers through separate transactions:
— $35.8 million for 4650 Old Ironsides Drive in Santa Clara, a building that totals 124,400 square feet.
— $28 million, 4700 Old Ironsides Drive in Santa Clara, a 90,100 square foot building.
— $25.6 million, 444 Toyama Drive in Sunnyvale, a building of 42,100 square feet.
— $19.4 million for 2950 Zanker Road in San Jose, at 69,700 square feet.
Specific details weren’t immediately available for the purchases that occurred outside of the Bay Area.
Coronavirus-linked health and safety concerns have forced millions of workers out of their offices and into remote workplaces such as their residences. That, in turn, has intensified the need for more data — and facilities to process and store the information, Michael Rechtin, a partner and head of the data services group with law firm Seyfarth Shaw, wrote in a blog post in 2020.
“The sudden and unforeseen COVID-19 crisis revealed what was becoming obvious: Technology has infiltrated almost all aspects of our lives and created more and more data that needs to be processed and stored, optimally in a data center,” Rechtin wrote in a post for the Area Development web site.
