Global Industrial Real Estate Leader Converts Illinois Warehouse into Turnkey Data Center

Rhea-AI Summary

Prologis (NYSE: PLD) has sold a data center development in Chicago to HMC Capital. The facility, developed in partnership with Skybox Datacenters, is a converted warehouse with 32 megawatts capacity. Prologis has secured 1.6 gigawatts of power globally, with an additional 1.4 GW in advanced procurement stages.

The company has 490 MW under construction and has completed 29 data center projects since 1999. Looking ahead, Prologis plans to develop approximately 20 data center opportunities with $7-8 billion in additional investment over the next four years. The project is part of the company's U.S. Logistics Fund (USLF), focusing on premier logistics real estate and higher-use conversions.

Positive

• Secured 1.6 GW of power globally with 1.4 GW in advanced procurement
• 490 MW of data centers under construction
• Planned $7-8 billion investment in ~20 data center opportunities over next 4 years
• Successfully converted warehouse to high-capacity data center, demonstrating asset optimization

Negative

• None.

Insights

Financial Analyst

This strategic sale and data center conversion represents a significant revenue diversification opportunity for Prologis. The company's ambitious plan to develop $7-8 billion in data center investments over four years could substantially boost returns. With 1.6 GW of secured power and another 1.4 GW in procurement, Prologis is positioning itself as a major player in the data center space. The conversion strategy is particularly clever as it leverages existing real estate assets to capture higher yields in the growing data center market. The company's extensive portfolio of 5,600 buildings and 12,400 acres provides significant runway for future conversions, while the partnership with Skybox adds important technical expertise.

Real Estate Investment Analyst

The warehouse-to-data-center conversion strategy demonstrates Prologis's ability to maximize asset value through higher and better use transformations. With 490 MW under construction, they're executing at scale in the data center space. The sale to HMC Capital, particularly for their DigiCo Infrastructure REIT, validates the quality and marketability of these converted assets. This approach allows Prologis to capitalize on both the robust logistics market and the rapidly growing data center sector, effectively diversifying their revenue streams while maintaining their core real estate expertise. The strategy is particularly timely given the surge in data center demand driven by AI and cloud computing growth.

Tech Industry Analyst

The focus on hyperscalers and AI companies as target customers positions Prologis well in the highest-growth segment of the data center market. The 32 MW capacity of the Illinois facility is substantial and meets the scale requirements of major cloud providers. Their track record of 29 projects since 1999 demonstrates long-term commitment to the sector. The strategic expansion of their in-house data center team with industry veterans signals serious long-term investment in this vertical. Power procurement capabilities are important in data center development and securing 3 GW total capacity shows they understand this critical success factor.

Prologis and Skybox Datacenters Sell High-Capacity Data Center

SAN FRANCISCO, Dec. 11, 2024 /PRNewswire/ -- Prologis, Inc. (NYSE: PLD), the global leader in logistics real estate, today announced it has sold a data center development in its Chicago market to HMC Capital (ASX: HMC). Prologis, in partnership with Skybox Datacenters, is converting one of its warehouses into a high-capacity, turnkey data center with a marketed capacity of 32 megawatts (MW).

Warehouse conversions and ground-up development are the keys to the company's data center strategy. This warehouse is held in the U.S. Logistics Fund (USLF), a Prologis co-investment vehicle focused on premier logistics real estate, including higher and better use conversions.

"We see great potential for warehouse conversions in key markets and properties in our portfolio," said Dan Letter, president of Prologis. "The end-to-end capabilities of our unique data center platform enables Prologis to capitalize on this compelling growth opportunity, while delivering outsized returns to our investors and meeting customer demand for digital infrastructure."

Prologis has been rapidly scaling its power procurement to support demand for new data center development. Today, the company has secured 1.6 gigawatts (GW) of power globally and has another 1.4 GW in advanced stages of procurement. Prologis has also been strategically expanding its in-house data center team, with industry veterans Chris Curtis and Laramie Dorris joining the company this year. With 490 MW under construction, Prologis is one of the leading data center developers in the industry.

"We are working with the largest hyperscalers and generative AI thought leaders to facilitate their growing data center needs," said Chris Curtis, global head of data centers for Prologis. "Because we have the world's largest portfolio of warehouses, our in-house expert team is identifying higher-value conversion opportunities across our approximately 5,600 buildings and 12,400 acres of land. We have delivered 29 projects dating back to 1999." 

HMC Capital CEO and Managing Director, David Di Pilla, said: "We are proud to be acquiring this world-class turnkey data center, which is located in a tier one market and underpinned by long-term contracted cash flows. This will be a marquee asset for our newly established DigiCo Infrastructure REIT, which will own a AUD$4.3 billion portfolio of data centers in Australia and the United States. The asset is well suited to DigiCo's investment mandate which will target high quality data center assets across the risk return spectrum."

Prologis' Partnership with Skybox
"The data center industry is at a pivotal moment, experiencing unprecedented growth fueled by the demands of today's evolving digital economy," said Rob Morris, CEO of Skybox Datacenters. "By leveraging proven development expertise, innovative design partnerships and deep utility relationships, Skybox and Prologis have delivered a world-class facility in Illinois. Skybox is dedicated to exceeding our customers' expectations as we continue to build our next generation of PowerCampus solutions for the world's largest companies."

Over the next four years, Prologis expects to develop approximately 20 data center opportunities and $7-8 billion in additional investment.

ABOUT PROLOGIS 
Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. At September 30, 2024, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.2 billion square feet (116 million square meters) in 20 countries. Prologis leases modern logistics facilities to a diverse base of approximately 6,700 customers principally across two major categories: business-to-business and retail/online fulfillment.

View original content to download multimedia:https://www.prnewswire.com/news-releases/global-industrial-real-estate-leader-converts-illinois-warehouse-into-turnkey-data-center-302328303.html

SOURCE Prologis, Inc.

FAQ

What is Prologis's (PLD) data center development strategy?

Prologis focuses on warehouse conversions and ground-up development, leveraging its existing portfolio of 5,600 buildings and 12,400 acres of land. The company has secured 1.6 GW of power globally and plans to invest $7-8 billion in approximately 20 data center opportunities over the next four years.

How much power capacity has Prologis (PLD) secured for its data center operations?

Prologis has secured 1.6 gigawatts (GW) of power globally and has an additional 1.4 GW in advanced stages of procurement.

What is the capacity of Prologis's (PLD) new Chicago data center?

The Chicago data center, converted from a warehouse and sold to HMC Capital, has a marketed capacity of 32 megawatts (MW).

How many data center projects has Prologis (PLD) completed since 1999?

Prologis has delivered 29 data center projects since 1999.

What is Prologis's (PLD) planned investment in data centers over the next four years?

Prologis plans to invest $7-8 billion in approximately 20 data center opportunities over the next four years.