The exterior of the Stream data center near San Antonio, Texas, which was recently sold to a Fortune 100 company.

Stream Data Centers has completed the sale of its San Antonio data center to a Fortune 100 corporation, the company said today. The 150,000 square foot facility is located on 33 acres in Westover Hills, a suburb of San Antonio that is also home to major data center for Microsoft and several other enterprise companies.

The buyer conducted a national search and considered multiple locations in the southwestern U.S. before selecting Stream’s RTF (Ready To Fit) “powered shell” facility in San Antonio. Terms of the transaction are not being disclosed.

The Stream facility features 8-inch-thick concrete walls and a concrete roof system designed to withstand 175 mph winds. The building is served by two, 30-megawatt electric feeds from two, 300-megawatt substations. The entitlement and zoning is complete and all city approvals for all essential data center elements are in place.

Strengths of San Antonio Market Cited

“This sale is an example of the strong corporate demand for data centers and a testament to the strengths of the San Antonio market,” said Paul Moser, co-managing director of Stream Data Centers. “San Antonio has emerged as one of the most active enterprise data center markets in the country over the last five years.”

The power and water infrastructure within San Antonio make it a desirable location for data center operations. Affordable land is plentiful, and the city has a favorable profile for natural disasters. The city also owns the local power and gas utility, and makes 14 cents on every dollar spent on power by large users.

Recycled Water a Factor

The San Antonio Water System has been offering recycled water to its industrial customers since 1996. Recycled “grey” water isn’t fresh or drinkable but is not contaminated by any toxic substances or toilet wastes, and is considered environmentally friendly because it reduces demands for fresh water

Stream Data Centers has been providing space for large, enterprise data center users for more than 12 years, with a client list including Apple, AT&T, The Home Depot, Nokia and others. During that time Stream has acquired or developed more than 1.2 million square feet of data center space in Texas, California and Colorado.

Intermedia Opens First UK Data Center. Microsoft Exchange hosting provider Intermedia announced that it has opened its first data center in the UK.  Located in Slough, UK this facility will support Exchange hosting customers in the UK, is ISO27001 certified and has completed a SAS70 audit. In 2009 Intermedia tripled its UK customer base with services like hosted Exchange, Office Communications Server 2007, SharePoint and support for BlackBerry, iPhone, Droid and other smartphones.  “By opening this datacenter, we are able to deliver in-country hosted communications that save companies up to 90 percent versus the cost of operating the same services internally,” said Jonathan McCormick, COO of Intermedia.  Like its North American data centers, the UK facility will have redundant Tier-1 connectivity and hardware from Cisco, Dell and EMC.

Stream Achieves LEED Silver. Stream Data Centers announced that they have been awarded LEED Silver certification for its Ready-to-Fit data center facility in San Antonio, Texas. “Stream Realty Partners has been at the forefront of the sustainability movement as an Energy Star Partner and Board Director for the US Green Building Council North Texas Chapter,” said Bill Moebius, Stream’s Director of Energy and Sustainable Operations. “We are excited to continue this commitment through Stream Data Centers’ development projects.”  The 150,000 square foot facility sits on a 33 acre site in Westover Hills, Texas.

Phoenix NAP adds TW Telecom. Phoenix NAP announced that tw telecom (TWTC) has established connectivity within the Phoenix NAP facility, and is offering its industry-leading Business Ethernet services directly to clients of the data center for their enterprise networking needs. “We are pleased to connect customers to this and other datacenters throughout the Phoenix metro and the country to help deliver greater storage efficiencies to our customers,” said Ron Martin, Vice President and General Manager for tw telecom in Phoenix. Phoenix NAP also recently announced that Cox Business has expanded their fiber infrastructure in Arizona and that the two companies were strengthening their alliance to provide expanded security, redundancy and data center accessibility options for small and medium sized businesses. In January 2010 Cox announced plans for a $70 million Phoenix data center.

A look at the Microsoft Corp. data center in the San Antonio suburb of Westover Hills. Local officials made aggressive use of economic incentives to land the $550 million project. (Credit: Aero Photo).

Economic development officials in San Antonio have been touting the city as a data center destination for years. The game-changing moment arrived in 2006, when Microsoft was scouting locations for a $550 million data center project. Local officials retooled their incentives, hoping to present Microsoft with an offer it couldn’t refuse.

“We were very aggressive,” recalls Mario Hernandez, who heads the San Antonio Economic Development Foundation. “We knew we had to be more aggressive because we needed a data center anchor, and we saw Microsoft as that anchor.”

Building A Data Center Cluster
The city won the project, and has used the Microsoft win to attract other data center projects, including projects from Stream Realty and Power Loft on nearby tracts in the Westover Hills section of the city. Frost Bank, Valero, Lowe’s and Christus Health Systems also operate data centers in the city, which is also home to a major cloud computing player in Rackspace (RAX).  

San Antonio offers one of the best examples of an economic development official’s data center dream scenario: one major project prompts other companies to follow, opening the floodgates for an influx of investment.

There are key differences between San Antonio’s assets and approach, which won’t work for every region. But the city’s approach offers insights for other areas seeking to attract data center projects.

San Antonio offered Microsoft a 10-year property tax abatement, making an exception to rules that limited abatements to six years unless the project created 500 jobs. Although Microsoft would need just 75 workers to staff the data center, the 10-year abatement was approved – along with a recommendation that city-owned utility CPS Energy foot the bill for $5.2 million in power transformers for the Microsoft data center.

Goal: A ‘Must See’ for Site Location
“It was a very unusual move,” said Hernandez. “But we knew that project would put us on the map, and it has. It has sent a very clear message. When Microsoft makes a decision for you, it gets attention. It has provided us the leads for most major data centers that can operate in this part of the country. We have become a ‘must see’ for most data center projects.”

San Antonio is the seventh-largest city in the U.S. with more than 1.3 million residents, according to the latest data from the U.S. Census Bureau. Affordable land is plentiful, and the city has a favorable profile for natural disasters, with no history of earthquakes and an average of one tornado a year. San Antonio is about 120 miles inland, blunting the potential impact of all but the most powerful hurricanes. 

Power Usage Benefits City 
The city also owns the local power and gas utility, and makes 14 cents on every dollar spent on power by large users. ”We’ve always been an attractive community for power-intensive operations,” said Hernandez. “We have an added incentive to attract data centers because of the unique ownership structure, which justifies targeting data centers. You can see the impact that it has on the financing of government.”

A key factor for Microsoft was the availability of recycled water for use in its cooling towers. The San Antonio Water System has been offering recycled water to its industrial customers since 1996. Recycled “grey” water isn’t fresh or drinkable but is not contaminated by any toxic substances or toilet wastes, and is considered environmentally friendly because it reduces demands for fresh water.

Water Availability During Drought
Hernandez says recycled water is also more available then fresh water in a crisis. “It saves money on price, but it also guaranteed a supply in the event of a drought,” he said. “You’ve got to be able to provide that predictability.”

While the long-term economic benefit remains unclear for some states that have used incentives to attract large data center projects, Hernandez says the strategy has been a  winner for San Antonio.

“We’re convinced that if you want to have part of the ‘home of the Internet’ in your community, you have to make sure that you’re a player,” he said.

While the San Antonio suburb of Westover Hills has developed into a booming hub for single-tenant corporate data centers, CityNAP sought to build a network access point (NAP) in downtown San Antonio to provide interconnection services to telecom providers. CityNAP operates a 10,000 square foot carrier neutral data center at 415 North Main Street and has 18 customers, according to the San Antonio BizJournal, which said the company owes at least $230,000 to its landlord, Pecan Paragon Ltd.

CityNAP was founded by Frank Robles, a telecom industry veteran who was an early employee of pioneering ISP NetCom and later founded metro network provider Yipes Communications. Graham Weston, the executive chairman of San Antonio-based managed hosting firm Rackspace (RAX), reportedly encouraged Robles to establish a NAP in the city.

Last year CityNAP touted its status as a “green” data center by signing a new contract with CPS Energy to purchase all of its power from renewable wind-generated electric sources. In January 2008 CityNAP signed a management agreement with Neopolitan Networks, another San Antonio company founded and headed by Robles. Neopolitan, which specializes in metropolitan area networks connectivity, agreed to assume full management of CityNAP.

The facility will have eight-inch thick concrete walls and a 24-inch thick concrete roof system designed to withstand 175 mph winds, and can be expanded to 350,000 square feet while maintaining a 200-foot setback. Stream says the data center will have two 10 megawatt utility feeds, each expandable to 30 megawatts each. The primary feed will come from the recently announced 200 megawatt Westover Hills substation located immediately adjacent to the site, with the second feed available from a 200 megawatt substation located 1.5 miles from the site. Power in San Antonio is available at approximately 5 cents per kilowatt hour, the company said.

The Stream Realty site is adjacent to where Microsoft is building a $500 million data center to support its Office Live services. Microsoft’s commitment was announced in January, 2007 and has been followed by the announcements of multiple data center projects in Westover Hills, which will soon be home to mission-critical facilities for Lowe’s, Christus Health Systems, Valero Energy, Frost Bank and Power Loft.

Stream Realty describes the Westover Hills data center as “LEED directed” with access to gray (recycled) water and multiple fiber optic providers. The project is scheduled for completion in February 2009.

Stream Realty has been an investor and developer of data centers for more than 10 years, and has bought, sold or developed more than 1 million square feet of data center space in Texas and California. Stream also leases or manages more than 45 million square feet of commercial buildings in Houston, Austin, Dallas, San Antonio, and Fort Worth.

“It’s massive. It looks like a small town being built here,” said Bexar County Judge Nelson Wolff. The project is scheduled to be completed in Juy 2008, and is expected to create 75 jobs. The San Antonio center is the second major facility being built in the U.S. to support the expansion of Microsoft’s Live line of online services, following the construction of a similar data center in Quincy, Washington. Microsoft’s commitment was announced in January, and has been followed by the announcements of data center projects by the National Security Agency, Stream Realty and Christus Health Systems.

Microsoft’s decision to locate its $550 million data center in Westover Hills has been followed by announcements of data center projects by the National Security Agency and Stream Realty. As was the case in those projects, Microsoft’s decision to build in San Antonio (which followed a national search) was cited as a factor in the data center site location for Christus.

Mario Hernandez, president of the San Antonio Economic Development Foundation, told the San Antonio Express-News that he expects that at least two other local companies will announce similar data center projects this year. Hernandez and a group of local officials recently visited Silicon Valley to scout data center prospects.

Christus will house confidential patient and hospital records and company information in the data center. The hospital system needs more storage space, as existing data centers in San Antonio and Houston are almost full.

Officials in San Antonio, Texas are living the dream, as Microsoft’s decision to locate a $550 million data center in the Westover Hills area has been followed by announcements of data center projects by the NSA and Stream Realty. The San Antonio Economic Development Foundation said it is working with five other companies looking at San Antonio for new data center sites, including some speculative projects.

San Antonio provides an example of data center clustering, in which a regional market becomes an aggregation point for many mission-critical facilities. This trend has usually been focused on major Internet markets (NYC, Washington, Silicon Valley) but is now providing opportunties for smaller markets (the industry phrase used to be second-tier markets) amid shifting criteria for data center site location.

Many cities are touting their attractivness for data center development, marketing their power rates, fiber infrastrucutre and available land. The challenge for secondary markets pursuing data center business is getting the first one, which creates a comfort level for other prospects. San Antonio officials have leveraged the attention generated by Microsoft’s choice.

Earlier this year, Bexar County Judge Nelson Wolff Wolff and other San Antonio officials visited with NSA officials at the agency’s headquarters to pitch the data center project. “We told them we were going to get Microsoft, and that really opened up their eyes,” Wolff told the San Antonio Express-News. “This has gotten a lot of people’s attention around the world,” added Charles Wender, Westover Hills developer.

A similar phenomenon occurred in Quincy, Washington, where Microsoft’s decision to build was quickly followed by data center announcements by Yahoo, Sabey Corp., Ask.com and Intuit.

It’s not yet clear whether Google’s site location decisions will have the same kind of coattails, given Google’s penchant for secrecy and reported focus on locking up power capacity. But officials in towns that will be future homes to Googleplex data centers – towns like Lenoir, N.C.; Goose Creek, S.C.; Pryor, Oklahoma and perhaps Council Bluffs, Iowa – are certainly hoping to see the cluster effect benefit their economies as well.

Westover Hills is already home to Microsoft’s 470,000-square-foot data center and a $60 million Lowe’s data center. San Antonio will apparently also get an NSA data center in a former Sony plant. The San Antonio Economic Development Foundation said it is working with five other companies looking at San Antonio for new data-center sites, including some speculators.

Dallas-based Stream Realty is a veteran of the data center real estate market. In recent years, the company has been buying and selling data center properties in California, including a Sprint facility in Santa Clara that sold for $95 million in 2005 and the former WorldCom data center that Stream Realty sold to Apple Computer in early 2006.

Stream Realty may be selling in California, but it’s building in Texas. The company’s plans for San Antonio could eventually include as much as 350,000 square feet of data center space. Stream Realty has a similar building under construction in Plano, a suburb of Dallas.

The facility will be the third major data center for San Antonio, joining a $126 million Lowe’s data center and a planned $550 million Microsoft facility. San Antonio is gaining traction in data center site location searches because it has the cheapest electricity in Texas, which is a favored region for data centers because the state has its own power grid and is less vulnerable to rippling outages on the national power grid.

The NSA’s need for additional data space may be related to infrastructure challenges at its facilities at Fort Meade, Md. where the NSA has maxed out the available power from the local utility company.

The exact size of the planned NSA data center was not detailed. The former Sony plant consists of two connected buildings with office and research and development space totaling 470,000 square feet. The NSA leased the site from Corporate Office Properties Trust (COPT) in 2005, with plans to locate as many as 6,000 employees at the site. More recently they have scaled back those plans, citing funding issues. The new data center is part of revived interest in the site, as landlord COPT is now planning an adjacent business park to hosue contractors.

Mario Hernandez, president of the San Antonio Economic Development Foundation, told the San Antonio Express-News that the number of NSA employees in San Antonio is expected to double to more than 4,000 in coming years, including a “very large data center presence.”

Robert Peche, the city’s economic development department director, said the NSA was “looking at several sites around the country for a data storage facility. The fact they chose to come here is good news. We hope there is more to come.”