While many carrier hotels are challenged to find space to expand, Dallas Infomart is currently planning to spend as much as $500 million to fund its evolving master plan for the property.
What more can be said about an iconic 1.6 million square foot building complete with a 7-story atrium, originally designed as an homage to London's Crystal Palace, site of the first World's Fair? Actually, quite a bit, since there is no building within hundreds of miles with similar carrier and network density, and existing tenant ecosystems.
The Dallas Infomart, crown jewel of Infomart Data Centers.
Each Tier 1 market has one or more data centers located at the aggregation point of fiber networks which help to form the backbone of the Internet. Tenants are willing to pay a premium for the low-latency and secure access to the vibrant ecosystems. However, many urban carrier hotels are already busting at the seams, with former elevator shafts maxed out as chases for mazes of conduits. Landlords are renting out every nook and cranny including basement space in some markets to meet demand.
This is where Infomart Data Center's eponymous Dallas landmark is a bit of a different animal, according to CEO John Sheputis, who believes "no other Tier 1 market has a carrier hotel with the on-site expansion potential of the Infomart."
Image - Infomart Data Centers
The Master Plan
Sheputis recently met with Data Center Knowledge at Data Center World in Los Angeles where among other topics, we discussed progress in Dallas. We were also allowed a glimpse at a preliminary master plan which at completion could require an investment of $500 million.
One of the unique features of this carrier hotel property is acres of grade level parking. This is an artifact from the original 1985 property design concept. Legendary developer Trammell Crow had originally envisioned this massive building as a trade center for the IT industry. The ample parking area provides some flexibility when it comes to planning a purpose-built carrier hotel annex to maximize the value of the property.
The company has previously announced a plan to add as much as 500,000 square-feet of data center space and more than 30 MW of additional capacity to the property during the next decade. However, the master plan for Dallas Infomart is not yet set in stone. Sheputis is currently working with his design team and the city to formalize the plan.
Dallas Infomart: Projects Underway
Dallas Infomart still has about half of its space devoted to conventional office uses. The current plan includes the continued evolution of the existing building into additional data center space – the highest and best use for any carrier hotel site.
In 2014, Fortune Data Centers and the ABS Real Estate Fund (which had purchased the Dallas Infomart in 2006) combined, creating Infomart Data Centers. Since that time, activity has picked up at the Infomart with over $50 million in upgrade and expansion projects completed, or currently underway including:
- Commissioning of a 2.9 MW multi-tenant data hall operated by Infomart.
- Construction of the landlord Building-Meet-Me-Room (currently a dozen carriers including Level 3, Verizon, DE-CIX, InnerCity FiberNet, and UPN), with no landlord charge for cross-connects.
- Phase I and II of security upgrades: new SOC, access controls, perimeter fencing, security system, surveillance, increased staffing, new security/delivery station with queuing lanes, addition of secured storage area, etc.
- Build-out of shared conference rooms as a tenant amenity.
- Installation of a new freight elevator.
- Commissioning of a 500 kW private data hall.
- Demo of first floor areas which will soon be converted to data center and office space.
While most of the spend is devoted to building amenities that benefit all of the tenants, the landlord is also building its own data center suites to accelerate leasing.
Sheputis explained to Data Center Knowledge that the former cafeteria and commercial kitchen area on the first floor is being demolished to make way for a new data center hall.
The upper floors of the building have 14-foot clearance and can support a 150 pound per sf load without any column reinforcement. However, this first-floor space is unique because it has 20-foot clear ceiling height and a thickened slab on grade that would be suitable for a high-density deployment for major network node, or "Super PoP," according to Sheputis.
Infomart is bringing in two new circuits from existing substations with a 13 MW gross capacity to provide power for the new suites that are under construction, and additional projects which have been identified. Notably, of the 100 MW of capacity serving the Infomart today, only 30 MW are directly operated by the landlord.
Equinix, the largest tenant in the building, has its own power capacity reserved with electric utility Oncor, to support its expansion plans at the Infomart. There are over 75 network, cloud and colocation tenants in the building which can sub-lease colocation space to retail tenants including ViaWest, Cologix and NTT America. These wholesale tenants continue to invest tens of millions of capex dollars each year to fund their own expansions.
A Big Payday?
Infomart Data Centers is owned by Washington, D.C.-based ASB Allegiance Real Estate Fund, a $7.2 billion real estate investment trust (REIT), which manages institutional capital. As of Dec. 31, 2016, ASB owned 168 commercial real estate assets, totaling 12.3 million square-feet, located in 15 US metropolitan markets.
A little back-of-the-envelope math indicates that the 1.56 million square foot Dallas Infomart property must be the crown jewel of the entire portfolio. While another $500 million of investment would be a big bite of the apple for any organization, there is a big upside. In a follow-up discussion with Sheputis for this article, he shared "our ambition was to double or triple the income of the Infomart" with these investments.
Sheputis had previously told Data Center Knowledge "that looking to 2018 and beyond, Infomart could be coming up on a strategic crossroads. Decisions will be made regarding expansions into other markets, growth by acquisition, or other strategic alternatives for Infomart."
Essentially, ASB and the Infomart management team will have to decide whether to expand and stay the course, merge privately, or look toward Wall Street for other alternatives.