Data Centers Key to Lehman Sale to Barclays

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What assets remain solid when the value of nearly all other financial assets are called into question? Data centers.

Lehman Brothers’ real estate, including two data centers, proved central to a deal yesterday in which Barclays agreed to pay $1.75 billion to acquire most of Lehman’s North American operations. The data centers and Lehman’s headquarters building accounted for $1.5 billion of the deal’s value, with the British bankĀ  paying just $250 million in cash for Lehman’s North American investment banking and capital markets businesses.

The Lehman sale provides echoes of the March deal in which JPMorgan bought the assets of Bear Stearns, in which Bear’s two data centers and headquarters building accounted for much of the value of the $270 million sale price.

Lehman’s primary data center is located in 140,000 square feet of space in a 40-story tower in Jersey City, New Jersey, across the Hudson from Manhattan. The Jersey City data center became the hub of the company’s network after its primary data center in World Trade Center Tower One was destroyed in the Sept. 11 terrorist attacks. In November 2001, Network World highlighted the company’s extraordinary efforts to rebuild its IT operations in the Jersey City site.

The transition left Lehman in need of a backup facility for disaster recovery purposes. In December, 2001 Lehman Brothers signed a 15-year lease with Level 3 for 65,000 square feet of space in one of its New York data centers.

Not all of Lehman Brothers’ real estate investments turned out as well as its data center projects. The New York Times reports that the company’s investments in apartment buildings and warehouses were a significant issue in the firm’s downfall.

About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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13 Comments

  1. I think you need to do your homework a little further on which of the data centers were acquired and how much they actually cost.

  2. the difficult thing is the headquarters itself is in Manhattan -- those holdings could be worth a billion and change as such

  3. info tech guy

    Hmmm. Interesting that Bear Stearns & Lehman actually elicited buyer interest, in part, because that had NOT outsourced their datacenters. If they'd followed the model advocated by many on Wall Street to outsource (usually offshore) all possible work, they wouldn't have datacenters . Ironic isn't it?

  4. I'd be interested to know how they actually valued the data centers - if it is (partially) based on what is in the asset register - they're going to be a *long* way out. Our experience is that the asset register for large data centers can miss 10-50% of the actual assets (hardware and software). Strikes me as a great business case for understanding what you have in your data center!