Cambay Group Sells San Francisco Lot Entitled for Data Center for $42MM

By Vladimir Bosanac

Walnut Creek-based Cambay Group, a wholly-owned subsidiary of the British Isles-based  Somerston Holdings Limited, sold a property in San Francisco located at 400 Paul Avenue to New Jersey-based fifteenfortyseven Critical Systems Realty (1547). The nearly 8-acre property is entitled for a data center, but at the moment it only houses older builidings on the lot. The sale was for $42 million, and the transaction closed in August of 2017, according to public records.

According to Cambay’s website, 400 Paul was the first new data center project to be constructed in San Francisco in 14 years. It was designed with state-of-the-art electrical and mechanical systems in two renovated classic 1930’s era buildings.

The company is also associated with San Francisco-based Digital Realty. In late 2004, Cambay participated in the IPO of Digital Realty Trust, according to the company’s website, contributing its data center assets into Digital Realty in exchange for trust units. Today, Cambay retains a substantial holding in Digital Realty.

1547 is a leading developer and operator of custom-designed data centers with over 500,000 square feet of data center space under development in Orangeburg, NY, Chicago, IL, Cheyenne, WY and Kapolei, HI, according to its website. The additional 144,000 square feet in San Francisco would add a considerable portion of space to its portfolio, as well as open the market to one of the most technologically advanced geographies in the world.

The data center market has been a relatively focused and growing market over the last decade. According to a recent U.S. Data Center Trends Report by global brokerage firm CBRE, investment in data center real estate reached a fever pitch in the first half of 2017. Proximity and access to cloud services and latency-sensitive interconnection nodes to existing networks are still the strongest drivers of retail/colocation requirements for enterprise users, according to the report. The San Francisco data center market is especially interesting for any investor looking to capitalize on the growing technology sector in the city by the Bay. According to the report, the region is not the largest data center market in the country, however vacancy is second lowest in the country, trailing only the market in Chicago, while the rental rates for data centers are the second highest in the country behind only Boston.

Market activity in Silicon Valley remains relatively handcuffed by a limited number of available wholesale options and scant opportunities for the addition of new supply, stated the report. The vacancy rate remained near its historical low at midyear, inching up to 5.3 percent from 4.5 percent in Q4 2016 and representing only 9 mega-watts of existing available wholesale capacity. More than 50 percent of this vacant capacity is available in second-generation facilities that are more than five years old and often viewed as technologically obsolescent.

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