Global Switch Deal?

This week there are several stories in the British press about the possible sale of Global Switch, the European carrier hotel chain now owned by Chelsfield plc. They offer fresh data on the carrying cost and potential sale price of premium data center properties. A story in Property Week (free registration required) reports that Morley Fund Management is in talks to buy Global Switch for about $620 million (400 million pounds). According to another story in The Independent, the construction cost for the facilities was about $883 million (570 million pounds).

By that math, the sale price being negotiated works out to about 71 percent of what it cost Global Switch to build the sites. According to Property Week, it's about $336 per square foot, which it described as "considerably lower than the portfolio's 'replacement cost'." Indeed, the 2 million square foot footprint of the Global Switch centers, along with the $883 million construction cost, works out to better than $440 a square foot.

Does that make the sale price being negotiated a good deal for Morley? Property Week seems to think so in its analysis. Neither story offers data on how many customers are involved and the vacancy rates at the Global Switch properties.

But carrier hotels filled with customers command entirely different valuations than empty data centers, as we saw earlier this year in Global Innovation's purchase of high-profile properties in Miami and Dallas. By most accounts, Chelsfield and its initial partners, TrizecHahn and the Ruhan family, have taken their lumps on Global Switch. But the new deal appears to offer the prospect that Chelsfield could offload Global Switch for slightly more than its current carrying cost on their books.