Iron Mountain has entered a $178 million sale-leaseback deal for a number of UK facilities.

The US Real Estate Investment company this week announced it has sold a portfolio of five facilities in the greater London area to Intermediate Capital Group (ICG).

The transaction totals 550,000 square feet (51,100 sq m) and will see Iron Mountain remain in these facilities under an initial twelve-year lease term, with options to renew up to an additional 20 years.

Is capital recycling greener?

While it didn’t detail which facilities are part of the deal, the company has a number of record, document, and tape storage facilities, as well as offices for its own staff.

Iron Mountain said the transaction is part of its "ongoing capital recycling program" and will use the proceeds to "reinvest in higher growth areas of its business," including data centers.

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“With our strong development pipeline together with highly attractive market valuations for industrial assets, we are pleased to continue our capital recycling program,” said Barry Hytinen, EVP and CFO at Iron Mountain. “The sale-leaseback of these assets allows us to generate significant investable proceeds while essentially maintaining long-term control of the facilities.

“On a leverage neutral basis, we estimate this transaction will generate nearly $140 million of capital, which we intend to invest in higher-growth areas, including our data center business.”

Chad Brown, Director at ICG added that this deal was a “prime example of the mission-critical real estate that ICG’s Sale and Leaseback fund is seeking to invest in.”

ICG manages $56.2 billion of assets and said it has around £500 million ($695 million) of equity to deploy across the UK and Europe. Recent transactions include the €100 million ($119.5 million) sale & leaseback of Syngenta’s global Seeds research & development facility in the Netherlands in March 2021, and the forward funding of a Jaguar Land Rover facility at Mercia Park in January 2021 for £330 million ($458 million).

Iron Mountain currently has one data center in Slough, outside London. A former Credit Suisse Data Center, the 183,000 sq ft (17,000 sqm), 8.75 MW LON-1 facility sits on a 5.5-acre campus.

The company recently announced a second London data center. The three-story LON-2 facility, on the Slough Trading Estate, will have 270,000 sq ft (25,000 sq m) of space, 27MW of capacity at full build, and run on renewable energy via power purchase agreements.