niche investment strategies - eli shaashua
TRANSCRIPT
DATA CENTER SECTOR vs. DJIA 2 YR.
DATA CENTER SECTOR PERFORMANCE 1Q11
DATA CENTER SECTOR PERFORMANCE 2010
JIM CRAMER’S CRACKED CRYSTAL BALL
THE ECONOMICS - DATA CENTER DEALS/EXITS
Grubb & Ellis National Data Center Practice
NEWSLETTER December 2010
Announced Buyer Seller Transaction
Value ($mm)
TV/EBITDA
Nov-10 Windstream Hosted Solutions $310.0 12.4x
Aug-10 Welsh Carson Peak 10 $410.0 12.5x
Jun-10 Digital Realty Trust 365 Main $725.0 9.5x
May-10 Savvis FusePoint $124.5 10.4x
May-10 Cincinnati Bell CyrusOne $525.0 11.8x
Apr-10 Oak Hill ViaWest $420.0 10.0x
Mar-10 TDS Telecom VISI $17.8 6.1x
Dec-09 Digital Realty Trust Sentinel $375.0 10.0x
Dec-09 Dada Group Poundhost $11.3 10.0x
Oct-09 Equinix Switch & Data $867.2 11.6x
Sep-09 Carpathia Hosting ServerVault $35.0 7.0x
May-09 HostMySite Hosting.com $50.0 7.0x
Aug-08 ABRY Partners Q9 $361.0 14.1x
Jun-08 Deluxe Hostopia $123.9 17.6x
Why Invest?
� 20 percent annual revenue growth and recurring revenue.
� Annuities, sticky customers and significant relocation costs
(servers can cost up to $8,000 per server to relocate) are just
some of the benefits of the data center sector.
� Much of the recent investment transaction activity in data
center space has been based on 10 to 12x EBITDA.
� There are only f ive national wholesale data center
developers. They are currently operating in 18 states.
� Strategic mergers and acquisitions, regional consolidations
and IPOs (including REITs) will continue to provide exit
alternatives for merchant developers.
� Debt is still limited to providers with a proven track record.
� The vast majority of tenants in multi-tenant properties double their space size during the term of the lease.
� The specialized REITs (Digital Realty Trust, DuPont Fabros,
and Terremark), as well as other REITs (Carter Validus,
Corporate Office Properties Trust, Allied and CoreSite) will also provide logical exit strategies.
By The Numbers
� Average number of racks that can fit into a 10,000-square-foot POD is 320. Operators can generate as much as $39
million over 10 years in one POD or $3,900 per square foot.
� Average cost to build a speculative data center is $600 per
square foot to $1,000 per square foot.
� Average cost to build a speculative Tier III data center is $3 million per megawatt.
Jim Kerrigan David Horowitz
Director, National Data Center Practice Associate Vice President, National Data Center Practice 312.224.3240 | [email protected] 312.224.3241| [email protected]
To see past newsletters, click on the following link: http://www.grubb-ellis.com/PracticeGroups/Brochures.aspx?id=4
Historical
� Since 2008, the largest data center leases that have been
signed are technology-related companies such as
Google, Yahoo, Microsoft, Apple and Facebook.
� Facebook has absorbed more wholesale data center space than any other company during the last two years.
However, colocation and cloud companies are not far
behind.
� During the last two years, companies have shifted their
focus from building their own data centers to leasing from
third-party operators.
� Some of the reasoning behind this is to reallocate capital
to core operations, as well as the availability of wholesale
space and competency of the operators.
� According to Gartner, 50 percent of data centers that were
built prior to 2006 are obsolete due to power and cooling
constraints.
� There have been in excess of $3.5 billion of investment
banking transactions within the data center space during
the past 12 months.
� Data centers are one of the only types of real estate to
have experienced any appreciation during the last three
years.
� Despite more than 5.5 million square feet of stand-alone
third-party data centers constructed in the last three years,
overall vacancy rates have remained around 10 percent.
Future
� There has been significant pent-up demand, led by
telecommunications firms, digital television, social
networking and financial firms, looking for space in 2011.
� Healthcare will provide an uptick in regional leasing
activity in 2012 as companies determine their electronic
medical records solution in compliance with HIPAA
regulations.
� The state of data center space is vastly different than that
of the late 90s, and most experts believe that it would take
more than $5 billion of investment to over-saturate the
market. That is unlikely to occur during the next 10 years.
� The larger wholesale data center developers are
increasingly doing smaller typical “colocation deals,”
further blurring the lines between wholesale and
colocation data centers.
DATA CENTERS US METRO GEOGRAPHICAL CONCENTRATION
Dusseldorf
Mannheim
Strasbourg
Phoenix
Las Vegas
Dallas
Denver
HoustonTampa
BaltimoreWashington DC
Sainte-Foy
Miami
San Diego
Los Angeles
Seattle
San Francisco
TruroMoncton
Edmundston
Boston
New York
Stamford
Albany
Newark
ToAshburn
To Toronto& Montreal
To Chicago
White PlainsTo
Halifax
300 Boulevard EastWeehawken
165 Halsey StreetNewark
60 Hudson Street
25 Broadway
75 Broad Street
32 Avenue of the Americas
111 8th Avenue
1400 Federal BoulevardCarteret
755 Secaucus RoadSecaucus
275 Hartz WaySecaucus
5851 West Side AvenueNorth Bergen
MAJOR DATA CENTERS/COLOCATION CENTERS IN MANHATTAN
EURO-NA NYC METRO MAJOR HOSTING HOTELS
SOHO COLO, LLC
CONFIDENTIAL DESCRIPTIVE MEMORANDUM
MARCH 2011
PREPARED BY: FRANKLIN COURT PARTNERS, LLC
121 VARICK STREET
• Constructed in 1928
• 12-story 132,000 square foot
• Open industrial floor with 12-14 foot ceiling heights
capable of 225-275 lbs. per square foot load
• Two passenger elevators, two freight elevators, and two
stair towers.
• High basement ceilings.
NYC METRO FIBER NETWORK
MANHATTAN METRO FIBER NETWORK
121 VARICK STREET – DATA CENTER COLOCATION FACILITY
121 VARICK STREET – DATA CENTER COLOCATION
PROJECT PROGRESSION PLAN
PROJECTED FINANCIALS
NEWSLETTER | New York Metro May 2011
Grubb & Ellis National Data Center Practice
Since Google’s acquisition of 111 Eighth Ave., all available spacein the building has been taken off the market. The most recentdata center transaction in the building was Digital Realty Trust’ssublease of 53,000 square-feet to Telx shortly before theb ildi ’ l
Spotlight: New York
building’s sale.
Sabey and local developer Young Woo are under contract topurchase 375 Pearl St., a 1-million-square-foot former Verizonswitching building, for an estimated $100 per square-foot fromM&T Bank. The building is well-suited for data center use, withvery heavy floor loads, high ceiling heights, limited windows, andabundant shaft space. Verizon will maintain a three-floor condointerest in the building.
60 Hudson St., a major carrier hotel, has a 240,000-square-footblock of space available for lease that has attracted attention fromboth data center and office users.
XO Communications has leased the entire eighth floor at 32Avenue of the Americas. The 49,000-square-foot deal marks thefirst major data center deal in the building since Coresite leasedthe seventh floor. Meanwhile, Verizon is marketing the entire 10th
floor of the building for sublease bringing approximately 45 000
Sentinel Data Centers has delivered and commissioned itsfirst 10,000-square-foot data center pod to Pfizer. Thecompany has also announced the closing of a $90 millionloan led by M&T bank to complete its New Jersey facilityand a commitment from Kelso & Company to fund up tofloor of the building for sublease, bringing approximately 45,000
square feet with 2 MW of power to market.
Telehouse leased Lehman Brothers’ 60,000-square-foot formerdata center at 85 Tenth Ave., for 15 years. The lease includes allof the equipment and infrastructure left in place by LehmanBrothers and former tenant Level 3 Communications.
SoHo CoLo has begun marketing a new data center project at121 Varick St., a 155,000-square-foot facility with six floors of
and a commitment from Kelso & Company to fund up to$300 million of equity capital for further expansion.
DuPont Fabros has delivered Phase 1 of its NJ facility. Thefirst of two phases is 18.2 MW of which approximately 4MW has been leased to three different tenants.
Colocation providers in New Jersey continue to pursueopportunities. Recent announcements include Telx adding anadditional 15 000 square feet of raised floor space in Clifton13,250 square feet each, available for data center use. SoHo
CoLo will be installing the first 10 MW of a 15 MW powercommitment this spring. The building’s location along the HudsonStreet/Ninth Avenue corridor allows for low latency connection toNYC’s major carrier hotels and networks.
additional 15,000 square feet of raised floor space in Clifton,QTS expanding its Jersey City facility to 50,000 square feettotal and Net Access Corporation opening a new 50,000-square-foot facility in Parsippany. Equinix is expected to openits newest location in Secaucus in early 2012.
Development projects in New Jersey also continue to moveforward. Russo Development has announced a data centerdevelopment on 71 acres in Somerset. Mountain
Spotlight: New Jerseyi/o Data Centers has leased the 830 000-square-foot former
Development Corporation has filed plans to construct a213,000-square-foot building next to its existing facility inClifton (Telx is expected to be the single tenant of thebuilding), Blue Vista Properties is moving forward with plansto redevelop a 270,000-square-foot former industrialbuilding in Edison, and DCI Technology has begun a $4million renovation of its existing 55,000-square-foot datacenter facility in Teaneck, which it is marketing for lease.
i/o Data Centers has leased the 830,000 square foot formerNew York Times printing facility in Edison, with plans to rolloutthe first wholesale data center property dedicated to its ownmodular data center container solution. The property is next to amajor PSE&G switching station and a wealth of fiber locatedalong the NJ Turnpike.Digital Realty Trust leased half of its available powered shell spaceat 365 South Randolphville Road in Piscataway to Savvis, leaving56 000 square feet of powered shell space and 11 000 square feet
Jim Kerrigan Michael MandelDirector, National Data Center Practice National Data Center Practice 312.224.3240 | [email protected] 212.326.4955 | [email protected]
To see past newsletters, click on the following link: http://datacenterpractice.com/?cat=57
56,000 square feet of powered shell space and 11,000 square feetof turnkey data center space available for lease.