5. NEWSLETTER December 2010
Announced Buyer Seller Transaction TV/EBITDA
Historical Value ($mm)
Since 2008, the largest data center leases that have been Nov-10 Windstream Hosted Solutions $310.0 12.4x
signed are technology-related companies such as Aug-10 Welsh Carson Peak 10 $410.0 12.5x
Google, Yahoo, Microsoft, Apple and Facebook. Jun-10 Digital Realty Trust 365 Main $725.0 9.5x
Facebook has absorbed more wholesale data center space May-10 Savvis FusePoint $124.5 10.4x
than any other company during the last two years. May-10 Cincinnati Bell CyrusOne $525.0 11.8x
However, colocation and cloud companies are not far Apr-10 Oak Hill ViaWest $420.0 10.0x
behind.
Mar-10 TDS Telecom VISI $17.8 6.1x
During the last two years, companies have shifted their Dec-09 Digital Realty Trust Sentinel $375.0 10.0x
focus from building their own data centers to leasing from Dec-09 Dada Group Poundhost $11.3 10.0x
third-party operators.
Oct-09 Equinix Switch & Data $867.2 11.6x
Some of the reasoning behind this is to reallocate capital Sep-09 Carpathia Hosting ServerVault $35.0 7.0x
to core operations, as well as the availability of wholesale May-09 HostMySite Hosting.com $50.0 7.0x
space and competency of the operators.
Aug-08 ABRY Partners Q9 $361.0 14.1x
According to Gartner, 50 percent of data centers that were Jun-08 Deluxe Hostopia $123.9 17.6x
built prior to 2006 are obsolete due to power and cooling
constraints. Why Invest?
There have been in excess of $3.5 billion of investment 20 percent annual revenue growth and recurring revenue.
banking transactions within the data center space during Annuities, sticky customers and significant relocation costs
the past 12 months. (servers can cost up to $8,000 per server to relocate) are just
Data centers are one of the only types of real estate to some of the benefits of the data center sector.
have experienced any appreciation during the last three Much of the recent investment transaction activity in data
years. center space has been based on 10 to 12x EBITDA.
Despite more than 5.5 million square feet of stand-alone There are only five national wholesale data center
third-party data centers constructed in the last three years, developers. They are currently operating in 18 states.
overall vacancy rates have remained around 10 percent. Strategic mergers and acquisitions, regional consolidations
and IPOs (including REITs) will continue to provide exit
Future alternatives for merchant developers.
There has been significant pent-up demand, led by Debt is still limited to providers with a proven track record.
telecommunications firms, digital television, social
The vast majority of tenants in multi-tenant properties double
networking and financial firms, looking for space in 2011. their space size during the term of the lease.
Healthcare will provide an uptick in regional leasing
The specialized REITs (Digital Realty Trust, DuPont Fabros,
activity in 2012 as companies determine their electronic
and Terremark), as well as other REITs (Carter Validus,
medical records solution in compliance with HIPAA
Corporate Office Properties Trust, Allied and CoreSite) will also
regulations.
provide logical exit strategies.
The state of data center space is vastly different than that
of the late 90s, and most experts believe that it would take
By The Numbers
more than $5 billion of investment to over-saturate the Average number of racks that can fit into a 10,000-square-
market. That is unlikely to occur during the next 10 years. foot POD is 320. Operators can generate as much as $39
million over 10 years in one POD or $3,900 per square foot.
The larger wholesale data center developers are
increasingly doing smaller typical “colocation deals,” Average cost to build a speculative data center is $600 per
further blurring the lines between wholesale and square foot to $1,000 per square foot.
colocation data centers. Average cost to build a speculative Tier III data center is $3
million per megawatt.
9. 300 Boulevard East
Weehawken
5851 West Side Avenue 111 8th Avenue
North Bergen
755 Secaucus Road
Secaucus
275 Hartz Way 32 Avenue of the Americas
Secaucus
60 Hudson Street
165 Halsey Street
Newark
75 Broad Street
25 Broadway
1400 Federal Boulevard
Carteret
Dusseldorf
Mannheim
Strasbourg
Edmundston
Seattle Moncton
Sainte-Foy Truro
Denver
San Francisco
Baltimore
Washington DC
Las Vegas
Los Angeles Phoenix
Dallas
San Diego
To Toronto Houston
& Montreal Tampa
To Chicago
Miami
Albany Boston
White Plains
To
Halifax
Stamford
To
Ashburn New York
Newark
12. 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.
15. 121 VARICK STREET – DATA CENTER COLOCATION
PROJECT PROGRESSION PLAN
PROJECTED FINANCIALS
16. Grubb & Ellis National Data Center Practice
NEWSLETTER | New York Metro May 2011
Spotlight: New York
Since Google’s acquisition of 111 Eighth Ave., all available space
in the building has been taken off the market. The most recent
data center transaction in the building was Digital Realty Trust’s
sublease of 53,000 square-feet to Telx shortly before the
building’s l
b ildi ’ sale.
Sabey and local developer Young Woo are under contract to
purchase 375 Pearl St., a 1-million-square-foot former Verizon
switching building, for an estimated $100 per square-foot from
M&T Bank. The building is well-suited for data center use, with
very heavy floor loads, high ceiling heights, limited windows, and
abundant shaft space. Verizon will maintain a three-floor condo
interest in the building.
60 Hudson St., a major carrier hotel, has a 240,000-square-foot
block of space available for lease that has attracted attention from
both data center and office users.
XO Communications has leased the entire eighth floor at 32 Sentinel Data Centers has delivered and commissioned its
Avenue of the Americas. The 49,000-square-foot deal marks the first 10,000-square-foot data center pod to Pfizer. The
first major data center deal in the building since Coresite leased company has also announced the closing of a $90 million
the seventh floor. Meanwhile, Verizon is marketing the entire 10th loan led by M&T bank to complete its New Jersey facility
floor of the building for sublease bringing approximately 45 000
sublease, 45,000 and a commitment from Kelso & Company to fund up to
square feet with 2 MW of power to market. $300 million of equity capital for further expansion.
Telehouse leased Lehman Brothers’ 60,000-square-foot former DuPont Fabros has delivered Phase 1 of its NJ facility. The
data center at 85 Tenth Ave., for 15 years. The lease includes all first of two phases is 18.2 MW of which approximately 4
of the equipment and infrastructure left in place by Lehman MW has been leased to three different tenants.
Brothers and former tenant Level 3 Communications.
Colocation providers in New Jersey continue to pursue
SoHo CoLo has begun marketing a new data center project at
opportunities. Recent announcements include Telx adding an
121 Varick St., a 155,000-square-foot facility with six floors of
additional 15 000 square feet of raised floor space in Clifton
15,000 Clifton,
13,250 square feet each, available for data center use. SoHo
QTS expanding its Jersey City facility to 50,000 square feet
CoLo will be installing the first 10 MW of a 15 MW power
total and Net Access Corporation opening a new 50,000-
commitment this spring. The building’s location along the Hudson
square-foot facility in Parsippany. Equinix is expected to open
Street/Ninth Avenue corridor allows for low latency connection to
its newest location in Secaucus in early 2012.
NYC’s major carrier hotels and networks.
Development projects in New Jersey also continue to move
Spotlight: New Jersey forward. Russo Development has announced a data center
i/o Data Centers has leased the 830 000-square-foot former
830,000 square foot development on 71 acres in Somerset. Mountain
New York Times printing facility in Edison, with plans to rollout Development Corporation has filed plans to construct a
the first wholesale data center property dedicated to its own 213,000-square-foot building next to its existing facility in
modular data center container solution. The property is next to a Clifton (Telx is expected to be the single tenant of the
major PSE&G switching station and a wealth of fiber located building), Blue Vista Properties is moving forward with plans
along the NJ Turnpike. to redevelop a 270,000-square-foot former industrial
building in Edison, and DCI Technology has begun a $4
Digital Realty Trust leased half of its available powered shell space million renovation of its existing 55,000-square-foot data
at 365 South Randolphville Road in Piscataway to Savvis, leaving center facility in Teaneck, which it is marketing for lease.
56,000
56 000 square feet of powered shell space and 11 000 square feet
11,000
of turnkey data center space available for lease.
Jim Kerrigan Michael Mandel
Director, National Data Center Practice National Data Center Practice
312.224.3240 | jim.kerrigan@grubb-ellis.com 212.326.4955 | michael.mandel@grubb-ellis.com
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