Experienced development teams continue to line up capital to develop new data center capacity at scale. Next Tier Connect will seek to acquire data centers and mixed-use mission critical real estate properties across the United States. It’s the newest in a series of platform companies targeting opportunities in the data center sector, and is distinctive for its interest in mixed-use properties.
The new venture’s first acquisition reflects its focus on redeveloping underused properties in regional markets. Next Tier Connect has acquired a 505,000 square foot mixed-use campus near Pittsburgh, which once served as Westinghouse Nuclear headquarters and houses several mission-critical tenants.
The new initiative features two parties with extensive experience in data center development:
- The capital partner is RedBird Capital Partners, a private equity firm which is an investor in Compass Datacenters and TierPoint, two companies that have focused on data center development in regional “second-tier” markets.
- The operating partner in Next Tier HD, which is led by industry veterans James Coakley, Kevin Reardon and David Spiewak, who bring a combination of expertise in development, brokerage and client services.
“Next Tier Connect is a significant evolution of our relationship with RedBird and creates a unique investment platform to acquire, optimize and manage a diversified national portfolio of select real estate and mission critical properties,” said Spiewak, Next Tier’s Managing Principal. “We look forward to working with the RedBird team to pursue select opportunities that line-up well with the strategic investment objectives of both institutions and develop a portfolio of exceptional properties.”
Seeking Redevelopment Sites With Upside
Next Tier says it looks for transactions that “have hair on them” – real estate jargon for properties that are less than ideal for most investors, but offer superior returns with the right redevelopment expertise. That includes properties that may not be actively marketed – a skill that is increasingly important for companies seeking to retrofit and reposition properties for data center use.
“We have always been impressed with David and his team’s ability to identify and optimize off-market assets within the data center and mission-critical real estate sectors,” said Tyler Alexander, Principal at RedBird. “Next Tier brings an impressive track record as a hands-on operator who truly understands the underlying tenant and customer needs. RedBird is excited to formalize our partnership and create a scale platform, consistent with our investment model across communications infrastructure.”
An interesting wrinkle is Next Tier Connect’s focus on mixed-use properties, which combine different types of tenants, which could include office, retail and business continuity space. There are several reasons why data center investors and developers prefer other models:
- Many data center tenants prefer dedicated space and limited access to buildings, which is harder to accomplish in shared facilities.
- Operators tend to focus on a particular type of data center model, making it easier for investors to value, and simplifies an exit when the company is prepared to sell.
- This is one reason why capital providers may maintain separate platforms for “retail” colocation and wholesale data centers, for example.
One example of Next Tier’s work in mixed-use development is its work with DataBank to develop a high performance computing center within the Coda development in Atlanta’s Technology Square, which includes office and retail space. The 94,000 square foot DataBank facility went live this week. Watch DCF for more news on this project.
A Pittsburgh Project With Potential
Next Tier Connect’s first project is located at 4350 Northern Pike in Monroeville, Pa., and will be repositioned and re-branded as “Next Tier Connect – Pittsburgh East.” Current tenants include “several recognizable Fortune 500 companies” using a combination of office, call center, business continuity, and data center space. The campus features two four-story towers with a shared entrance, and has more than 200,000 square feet of available space to work with.
The property also features more than 2,000 parking spaces, as well as 138 acres of land, suggesting the potential for additional site development in the future.
“This is a world-class mixed-use mission critical campus, which we look forward to restoring to its prior iconic state,” said David Spiewak, Next Tier’s Managing Principal. “The acquisition represents the type of high-quality campuses the Next Tier Connect platform endeavors to own, operate and grow.”
Next Tier Connect says that several new leases have been signed since it acquired the site last November, with local media reporting the purchase price as about $18 million.
The Pittsburgh market features a mix of data center providers, including EdgeConneX, DataBank, vXchange and Expedient, as well as the underground data center operations of Iron Mountain in Boyers, Pa.
