Putting Data Center Deals Together with Jim Kerrigan, SIOR

Jim Kerrigan 00:24

Justin, appreciate the opportunity. I've heard some of your podcasts before and I'm excited to be part of another Friday edition.

Jim Kerrigan 00:57

Yeah, I mean the importance of data centers is funny because you you ask somebody where the cloud's at and of course they look up in the sky, right? But everything that we do every single day is going through a data center whether we're an Uber ride or if we're just checking out Netflix. A client of mine is Comcast and I had the opportunity to roll out their smaller colo sites and they're called Edge data centers. That happened about 12, 13 years ago. And what that was, it was a whole different type of data center. it's interesting, but a lot of the foundations of data centers really come back to the late 90s with the telecommunication companies building up the fiber and then they're therefore building up their data centers themselves for co-location and how much things changed really with the crash of the telcos back in the late 90s and the early 2000s. then we kind of go to Facebook and think about 2004. is when, you know, February of 2004 is when Mark Zuckerberg created Facebook. And that created a whole new, new type of business for all those companies. So early on it was, you know, Yahoo, Facebook, Microsoft were the three larger tenants. So yeah, it's been interesting, but everything that we do every single day, I always say that when you hear about these, you know, local municipalities protesting it, they mostly go out of Facebook to figure out where the meeting's at. The irony, right?

Jim Kerrigan 02:25

Yeah, Rene.

Jim Kerrigan 03:30

Well, that's a lot of questions in one there. Justin, appreciate it. yeah, think about moratoriums right now. I think Maine has officially put a moratorium on data centers, and Ohio has some under review. And there's other, you know, either jurisdictions that may have concerns with them, and there are some that are concerned with the create legislation which would deter data centers from going there. So maybe the Senate should think of. Georgia in particular right now, it's a red blue thing that they vote on their incentives on a fairly regular basis. I don't know if it's every year about this time, but around now they come up with it. So supply wise, what's interesting is that historically there are maybe 10 or 12 cities that were really dominant for data center speculation. And that's really how data center started. They were speculative sort of in nature that a lot of the early data centers came from the old telco buildings and companies that went bankrupt. And so it was just as easy for the developers to come in take those properties. And maybe it was one of my clients back in the day, Nextel or Nextlink or somebody that had gone bankrupt, Williams, and repurpose those for data centers. it's interesting, so supply then, it really tended to be, you think about, the mediums then would be the printing press, right? A lot of the original data centers went to buildings that were, you know, Chicago Sun Times, the New York Times, wherever it was, Kansas City Star, that was more recent. But throughout the country, there's all these buildings that have been repurposed and a lot of those buildings had heavy floor loading, which was great for the printing presses, but also great for all the equipment involved in the data centers.

Jim Kerrigan 05:26

Right exactly and then but then the other thing is what's the right clear height so that goes back to your world right so is you know well is 12 enough is 14 enough is is 22 much and then the question is well it depends and then what's your column spacing well we're 11 on center 11 on center that's that's way too tight but those have those buildings that have heavier floor loads might have been built nearly the 20s or the 30s and that's kind of what the, you know, they had these massive columns. And so how do you work around there? How does your racks configuration fit in there? So supply demand, I think I alluded that question. We are constantly seeing new supply coming up, but a lot of it is really contingent upon whether utility is actually going to deliver the power there, how much power they're going to get there, and then how well is that either customer or developer planning on power for that particular site. So why do some sites warrant a gigawatt, where other sites are only 50 megawatts? And if you have a large site, what does a utility need for a substation on your site? And then what do need for a substation on your site? How many acres? Well, historically, it's all over the board today, Justin. But historically, was always Ashburn, Virginia's

Jim Kerrigan 06:52

by far the biggest data center market in the world. And pretty much, I feel like almost the rest of the United States inventory would, you know, culminate or add up to what it would be for Virginia. then either Chicago or Dallas were usually two or three, depending on the year. Phoenix, as we were talking about one point time earlier, that that was another big markets kind of emerged. In Oregon, there's a market there that emerged. A lot of it was driven on state incentives or personal property tax and servers. The crucial element was at one point in time was what's the cost per kilowatt hour. And so Wenatchee, Washington and Quincy, Washington were hydro powers, so it two and a half cents. Where like Southern California, it might be 14 cents or 15 cents. And so then where do you find an alternative to that? then.

Jim Kerrigan 07:49

You know, we saw Nevada pop up, but then there's other states we haven't really seen anything in that now are creeping up because of AI and some of the abilities for AI just to have a data center in a place that doesn't have the same need to work with, with users. It's, the AI platform, you know, exists in itself, but then we have newer data centers that have called inference data centers. And those are kind of more driven toward urban areas. They don't require nearly as much power as some of these AI ones, but it's still significant compared to what you do every day, Justin.

Jim Kerrigan 08:34

So most of the inference data centers have something local that they're trying to work with. So think of driverless cars. They need to be in an urban area because that's where you have a lot of these driverless cars or other things related to that. a lot of what we do in general comes down to latency and the speed of things. And that's why data centers are kind of where they're located at traditionally. And inference is a perfect example for urban areas now.

Jim Kerrigan 09:03

Whereas the AI might be able to exist in the middle of nowhere provided that there's power and they have enough people to operate those and build it and everything else and the community accepts it.

Jim Kerrigan 09:35

That's the first thing that I look at at any site. It's often that, you know, other SRRs or people like yourself, Justin will call me and say, Hey, I got the best site in the whole world. You know, this is, and I'm like, well, you're the 13th guy that called me to this half hour. Why do you think it's the greatest site in the world? And then you'll say, well, it's, it's got these amazing high voltage lines going through the site. It's got a substation next to it. And you know, Amazon's right down the street. was like, awesome. And

Jim Kerrigan 10:03

I said, when you take the train to the office, do you get on anywhere you want to get on? Or do have to go to the train station? Well, what do mean? I'm like, well, you just can't jump on that transmission line and have you talk to the utility. What kind of power can get there? Well, I don't know, but it's a lot. it's a lot. Well, you're an industrial broker. So what does a lot mean to you? well, we've got these volts, and it's crazy amount. And I'm like, OK. How many megawatts? Well, I don't know.

Jim Kerrigan 10:31

Let me get back to you and then we'll talk to the utility and we'll find out how. Yeah, so it's always a question of how much that utility can get there, how quickly I can get there, and then how much is it going to cost. And then I still have pushback on different folks when I say, OK, well, can you send me an aerial of that site? And I'll say, well, OK. Justin, hey, this one has a railroad track going through it.

Jim Kerrigan 11:01

And then, you know, back in the late 90s, that was an attribute because that was where all the fiber ran. And then today I say to Justin, say, hey, Justin, you know, what happens if that $1,000 or $1,200 square foot data center is knocked out by a train that derails? What's your backup solution there? That might not be the best site for us. But I like your area. I like the utility. Is there something you might have three blocks away?

Jim Kerrigan 11:29

No, no, no, I own this one, Jim. This is the one I want to sell, not the one three blocks away. I'm not programmed that way. I'm not commissioned that way, whatever that is. I can't sell that one. So those are some of the pushbacks. We always have pushbacks by somebody, the municipalities, the utilities, whatever that is. And with some utilities, they will only take certain type of land that they'll build their substation on. So they want to

Jim Kerrigan 11:58

and one utility I work with, want the land that they acquire from you to build their substation on your site has to pass the environmental for a phase one environmental that would be equivalent to residential. Even though they're putting transformers on that site, it makes no sense to me, Justin. I don't get it. just, yeah. So it changes, it changes. But yeah, utilities are a big part of my life and everyday life and

Jim Kerrigan 12:28

I try not to intimidate them by exactly what I really need there, but try to ease into what they can help me get. And then the other thing with utilities, Justin, is that now we're seeing more more gas coming to play. So if you've got gas through your site, then I'll say, hey, what do you think about, you know, we're thinking natural gas, of course. And I'll say, what size is your pipe? And then you'll say, it's a three inch pipe. It's a six inch pipe.

Jim Kerrigan 12:55

The larger the pipe, the more likely we're going to get excited about your site. And then that also can provide us an interim, we call it behind the meter power while we're waiting for the power to come in. So maybe I can get something there, but a lot of that's going to be regulated as well by emissions. And so there are certain states and certain jurisdictions that you can't have these type of gas turbines creating this electricity for you. And that's another thing we think about, but then There's other companies that that's trying to capitalize on it. And there's transformer timing issues. So the cast transmission turbines, because of this demand from the data centers, they might be running three or four years. And similarly, utilities, the 345 transformers has been on a five year delay for five years at least. So it's not catching up with the demand of what the data centers are causing them to need.

Jim Kerrigan 14:02

Yeah, absolutely. Is that a question? So, well, I mean, right now it's more to get the power there quicker is why you're looking at gas. But in general, there's been a lot of, I think the data center industry is probably one of the worst industries related to PR and what they're trying to explain to what the community is getting. So I referred to you earlier in the conversation about

Jim Kerrigan 14:45

the where they're going to organize the protest for the data centers and why are they protesting data centers. And there's a lot of confusion by it. You know, it's, my gosh, what happens when this business goes away? Because we all know it's going away, right? It's not going to be for forever, is it? Because everything goes away and we don't have these big ugly buildings.

Jim Kerrigan 15:08

Yeah. So you get that, you get, my gosh, this is going to cause my utility bill to go up. perception is that the reality is that most of that will actually help you help utility. The upgrades that are being done for your load will help the customers locally. And then there's a lot of benefits, tax benefits or economic benefits to the citizens when the community where they're going to be benefiting it.

Jim Kerrigan 15:37

private, their schools aren't going to be taxed by all these workers, right? Because the data center has a limited number of workers. They're all pretty well paid. But even while you're building a data center, right now there's a gigantic data center. I'm not sure what gigantic word I think it is. In Abilene, Texas, right? And it's so, yeah, Stargate exactly with Oracle. So what's going on with Crusoe is the builder, I believe. And what they're doing is they have to almost create a town for all the workers that are there, right?

Jim Kerrigan 16:06

Yeah, it's a great, I it's a pretty decent sized town, but when you add that many workers coming in and, okay, do we have enough restaurants for these people, hotels, everything else? And then after it's filled, that one happens. Does it all go away? Well, no, it doesn't go away. And oftentimes the data centers like Virginia, once you have one data center in town, everyone else wants to be there as well. So it's actually been a pretty good, it's been a big economic,

Jim Kerrigan 16:36

boom for some groups, but there's a lot of counties throughout the country, even Virginia. We've talked about Virginia, the demand there, as I talked about earlier, it comes down to Loudoun County, which is right near Dulles Airport. And there's land there going for four million an acre or more. And now it's question of how vertically you go. then in Fakir County and in Prince William County, which are neighboring counties, There's no interest in Fakir. They want their horse farms, that's all they want. Prince William had a big vote this week that they actually one group, Compass walked away from a big transaction there and they've been working on this for five years. And so the challenge really is where do we go next? And as soon as there's a pushback in one municipality, they're just gonna say, hey, it's no big deal. Every week I get 50 or 60 different, not me personally, but the...

Jim Kerrigan 17:32

The developers are going to tell you that 50 to 80 new flyers a week from a real estate broker touting why they should be in Montana or Washington state or Michigan or wherever that's at.

Jim Kerrigan 17:49

I have. haven't paid attention to it. Like everything, Justin, you try to stay in your own lane. I'm kind of like everybody else. Everyone's either worse or favoritism. Yeah. It's just like, I'm talking about the space in my backyard. I'm not trying to figure out the outer space. But yeah, there's all sorts of things. But I never thought the Edge Data Center was going to be what it was. But then it was. then

Jim Kerrigan 18:18

It didn't really go beyond that. But you just don't know. we didn't see, I don't think we anticipated the AI. We talked about AI for 10 years. But then when it started happening, we had no idea how much it was going to change. So I'll just give you some quick examples of what I alluded to earlier. said, so your typical Fortune 500 company, minus any sort of public cloud element of it, might use 5 to 7 kilowatts per cabinet. And then when. The public cloud came around, call it 2012, 2013, those were 20 kilowatts of cabinet. And then if you think of a cabinet, think about four feet by four feet by eight or nine feet, 10 feet. So then when AI came around, that was probably initially introduced at 50 to 60 cabinet growing to 120. And then if you listen to the Nvidia CEO, Jensen Ng, then he would say it's closer to 500 cabinet. Who knows? And that's these numbers, these chips are driving things up and then that changes the load and what they need and how they're configuring things.

Jim Kerrigan 19:43

very cool. It's very fun listening to all this stuff. obviously all these Neo clouds are pretty cool too. And I think you probably, I mean, one of the bigger ones that you may have seen in the last couple of years or last, when public last March was Coreweave, but there's Nebius. There's a bunch of different groups that are out there. And so it's hard to keep track of it. And the other interesting market that has emerged is the speculative data center, either brokers or developers or whatever they are. Too often I find myself in a room with someone that says, oh, and they'll be at a data center conference and I'll say, oh, what are you doing in this space? like, oh, I'm a data center developer and I'm like, where are you developing at? And they'll say Napa Valley. Oh, right next to the vineyards. Okay, that makes a lot of sense.

Jim Kerrigan 20:35

And it's just a lot of, there's a lot of brand new players that you don't know if they're well capitalized or not. And you're trying to figure out how realistic they are. If you just it as a seller of real estate is trying to figure out you have three different buyers, how do you pick the right one? then do they know what they're doing? Do they know how to perform? Do they have the customer that they'll be able to deliver to the utility once they're their whole process or application process gets completed.

Jim Kerrigan 21:13

It is very much so, but it's a lot of what I do is try to figure that out on a regular basis. Okay, what is going on here? Is this, is this a real deal or are you a real buyer? And if you don't ask me about my railroad track, then that makes me a little skeptical of you as a buyer and what your concerns are with it, right? Cause I might have a listing and then if you don't ask me about it, go, do I really want you to tie me up for nine months to tell me about my railroad track nine months from now?

Jim Kerrigan 21:42

I don't want to do that deal. It's too close to the railroad track. Well, it was still there when you put it under contract,

Jim Kerrigan 21:54

Oh, different. know, it's I mean, the main thing is, okay, I need X amount of power to get to my site before I'll close. I need I need

Jim Kerrigan 22:09

I won't buy your land until I have a tenant that's completed their lease with me. Well, can't they just negotiate your lease so that you, why is this deal contingent upon you getting leased signed? Is that my issue or is that a business issue? Is that a material adverse issue? I don't think so. That might be a business issue, but do I have environmental in my land that is going to prevent you from closing? Getting local jurisdiction approval, a town hall approval, right? You have to have that. If I don't allow my contract to be subject to what we call a NIMBYism issue, not my backyard, then that's my fault because I'm not helping this guy as a buyer come to the table. I mean, a lot of what I'm doing all the time is if I'm going to a site, I won't take on a site without at least assessing the risk. by driving it. It doesn't hurt, Jim. You're in Chicago and I'm in Kentucky. You don't need to fly and see it. I'm like, yeah, I do. I actually have to see the site. I have to understand what it looks like, whether that person next to you is going to fight this, whether you're more of an industrial part of town. You might have a farming town, but if I find a little bit of a tractor supply or something like that more industrial nearby, it's a lot easier for me to stand up. five 200,000 square foot properties adjacent to it. And that pushback that I might get from the farmer who's got a whole 2000 acres that has no interest in that.

Jim Kerrigan 24:12

Yeah, I saw something, I it was the New York Times maybe a month or two ago, and it said there are more farmers that are over 75 than under 35. And what I would say, similar to that, I've had more meetings in the last three years at kitchen tables than I have at boardrooms. And a lot of these farmers, they're 60, 65, 70s, or 80.

Jim Kerrigan 24:41

Correct. And their kids are, you know, their kids are in their fifties and they've long left the farm and that they have tenants that are farming it for them, but they're trying to monetize it, but they don't know if they want to monetize it. They'll have, they'll have a sign in front of their houses and no data centers. And then I'll pull up and say, we want to hire you. But my goal, kind of scared me with that sign outside. I thought you were going to shoot me, but no, they have to, you know, they have to tell their neighbors that they're kind of aligned with them without doing the thing.

Jim Kerrigan 25:13

Yeah, it's it is, right? Yeah, so it really depends on the customer. if we kind of look at this whole, I would say that, I'm not sure if I would say there's six or seven major customers and we all know who those were from the Microsoft to, know, right. Or Apple, all those groups. But now that's kind of changed a little bit in the last few years with AI and who those groups are. But

Jim Kerrigan 26:09

My point is that there's certain groups like a do apps AWS is primarily what we call a powered shell and say they What they structure releases are based on what the cost of land is and what the cost of the building is and on the inside There's usually not much there, but what the developer has to bring the table is usually the power component and then you know likely the fiber and then they'll do the outfit usually on their own inside and that will change the value of it. It also, in my opinion, changes the value of the land too because if they're not going to be building a $1,300 square foot data center like you knew to do for Microsoft or Google, there's not as much room for you to move that market, right? And so within the leases, all the leases are based on the cost. The rental rate is all based on the pullout that's allocated. So think of like the first time I did a lease, let's say that was I did leases in guess in the late 90s, like 98 was the first lease I did. But when a couple of the developers came up with a standard sort of metric and back in the late, guess it was early 2000s, maybe 2000, no it wasn't that early. Let's say 2007 was the introduction of a multi-tenant data center, which is a little bit different than co-location. And at co-location they might have 500 customers in 50,000 square feet, where the multi-tenant data centers were buildings that were maybe, let's say one of the deals I did was about 500,000 square feet, of which 250,000 square feet was a rentable number, and the other 250 was support for the other 250. And out of that 250, those were broken down into rooms. And let's say the rooms were 10,000 square feet or 20,000 square feet, and it was 10,000 square feet. in Chicago, in Dallas it would be 1.3 megs, where in maybe in Silicon Valley and in Virginia, 10 or 11,000 square feet might be two megs. So those were more dense areas because of the customers. Silicon Valley or in Virginia had denser customer base. And so all of the rental rates that I learned as an office broker kind of went out the door, right? wasn't like, hey,

Jim Kerrigan 28:33

50 50 50 people just and how many how many square feet is that for office? 10,000 square feet right? So this was a little bit new metric and try to understand that and then trying to convert that to understand okay, what's the cost per square foot? What's the cost per kilowatt? And how do I negotiate renewals and all that when you're in the wild wild west and those pieces as you're asking there are all pretty much 10 to 15 year leases and then what was the renewal rate?

Jim Kerrigan 29:02

Well, the renewal rate was based on market. Well, what's market based on? There's only one data center building this whole market. How do I do it on market? OK. And then 10 years later, when you get to the renewal, go, god. Why did I negotiate that? Why did I allow the greater the market or the then escalated rate? What happens if it goes down? And how does it go down? There's no competition now.

Jim Kerrigan 29:32

And can I move these guys? Well, they're kind of sticky. How long does it take to move them? Well, it might take a couple of years. But whose sticker is the Facebook sticker or is this co-location guy who's got 150 customers and 50,000 square feet? And you start writing things you didn't know about 20 years earlier. Like, boy. And it was no book, right? There was no AI that I could go, what do we do then? How do we figure out what the renewal rate should be?

Jim Kerrigan 30:06

Yeah. There has been, there's been a couple of good companies that have come about that were former real estate brokers that created companies that they're doing a nice job of it. And most of the groups that are paying for that really are the developers or the end users. And so that's one little bit difference. If this, if your podcast is really, if you're listening today, I should say, and you're a broker and you want to get some insight on this. it's really challenging to work with the end users. A lot of the end users like the Microsoft's in the world or, you know, um, Amazon's all those guys for the most part have their in-house teams and they don't rely on outside brokers. And so, um, a lot of the contracts don't even contemplate that. Um, meaning that they don't say, okay, if an outside broker comes in, wants to do a deal, we'll pay them a fee. Well, most of time, I'm doing the deals, it's direct because I know who the buyers are. I know who the sellers are. If I'm representing the seller, then I know, okay, I'm going to call, you know, XYZ developer, or I'm going to call it, know, ABC end user. And then I also will, when I, you know, target those groups, I also will say, okay, here's what I like about my site. Here's what you're going to like about my site. Here's you as a developer want to be close to the AZ. And what's the AZ? That's the availability zone of that customer. And they have to be a certain number of miles from the AZ. And so if I'm able to tell them that this property meets the AZ requirement for Microsoft, then they'll say, OK, well, which group within Microsoft? And I'll say, well, it's Office 365. OK. That's likely to be latency sensitive, and that won't go to a corporate campus. And then you're able to show, OK, now we know the demand factor. And then you say, OK. What about local legislation? Well, I like this area. It's kind of industrial. We haven't seen that much pushback from the community on it. utility buys into this area as well. I think we're probably pretty good here. Or you know what? Justin, you're probably better off calling CBRE. They're probably gonna be better for you than this on this job because you really have to decide which, which job is going to take and which ones are not because Reality is it's harder to represent more than one site in any one market Because I have to be convinced that that's the best site in the market Before I take it on and then I also have to go. Okay, I would if I was a developer if I was a tenant I'd be happy being here, right? I'm willing to pay a premium. I'm willing to pay double the price of the land next to me Well, why would I do that? That's crazy. I mean that doesn't make any sense. Well Justin what happened there was that you

Jim Kerrigan 33:08

as a broker that wasn't really doing this every day, you went to the utility and asked for a third of the power that I asked for. And then the utility said, okay, I'm gonna get the power for you, Jim. And then I went to the developer and he said, hey, hey Kerrigan, how much power can I get to that site? And I tell him, oh, I get a gigawatt there. Well, that's too much power. That site's only 200 acres. Well, it is, but would you go vertical? Well, I don't know. Why would I go vertical? Well, they paying that much for the land. Why wouldn't you go vertical? OK. Did you allocate for acreage for the substation? Yes, I did. Well, what is the utility for acreage? Well, this state here, this utility wants 30 acres. Over there, it's 10 acres. The other state. OK, that's fine. And then what does a customer want for the customer on substation? I got to think that too. Wait a second.

Jim Kerrigan 34:05

Now, this is crazy.

Jim Kerrigan 34:10

But if you don't have all those questions to answer for them, then you don't make it to call number two, right? And so usually I spent a lot of time with the municipality. I had a time trying to figure out tips, other incentives that might be available there for this type of use. And then, you know, utility tax, like if we look at different municipalities, they're going to have a different utility tax. So within your own sub market, let's say you're in Phoenix and you look at a good year and you're looking at somewhere else in Phoenix and they'll go, okay.

Jim Kerrigan 34:40

they have a higher utility tax than I do. Well, what does that matter? Well, that doesn't matter much if it's only your house, right? But if you have a gigawatt of power with utility, full load all the time, that quarter of a cent or eighth of a cent is going to be a big factor in the overall equation. So that's the other thing. Our spreadsheets have to kind of reflect that, right? So all the spreadsheets that I do versus what you do are a lot more complicated because I'm factoring in this. And then you asked me earlier about how the

Jim Kerrigan 35:10

leases are different. I have some PUE, which is power usage effectiveness, right? I can't speak to it because I'm not an engineer, but if I were to gander on it, I know that's kind like an operating expense. And so I have to make sure that that is applied to the utility costs of not with utility costs today, but what the hike will be in the utility based on all the utilities going up so much. And then that is a direct pass through to the tenant.

Jim Kerrigan 35:39

It's not a commissionable event, but it does reflect in the overall rent. And by the other way, didn't tell you, Justin, how, you know, I COVID was a good example this. The amount of rent that you pay is per the allocation of the power from the landlord, not the consumption from the customer. So thinking about it this way, if you have 10,000 square feet and during COVID, you had 50 employees pre-COVID, and then you went down to work. in the space, you're still paying for the 10,000 square feet, right? So similarly with data centers, if, you know, back in the day, the 500,000 square feet example that I gave you, it may have been a 36 megawatt data center. And that would be the allocation at 10,000 square feet might be 1.3 megawatts. But if you don't have any customers in your space, because you're, you know, service provider that is a data center service provider.

Jim Kerrigan 36:39

then you're paying for that whole freight despite not having the load. what happened oftentimes those days, and I actually, back to your earlier comment about NVIDIA and Jensen, I think you just referred to this recently, last week or two, that he wants to take some of the load that's being allocated but not being used. A lot of these data centers have been historically tremendously underutilized, so they're only doing maybe 70 % of the load that they're allocated.

Jim Kerrigan 37:09

what he's been saying, I want that 30 % allocated to me. And it's true. It's absolutely true and it's real right now.

Jim Kerrigan 37:23

I mean it's funny because you always wonder you know is Nvidia the customer or is in their case is it CoreWeave because they do lot of with CoreWeave but they also do a lot of with you know Oracle or Microsoft and everybody else so yeah they get it some way they get it one way or the other Justin depends on where they're putting their money at right

Jim Kerrigan 38:25

Yeah, I mean, you asked a thousand questions in one question, you don't even know it there. And so it's changed a lot, right? So it wasn't, you know, more than 20 years ago that I couldn't find anyone who would be, you know, I think 2007 to 2008, right? When this whole thing started booming, but no one knew it was booming yet, right? And then you got the, you know, the great financial crisis and you're like, okay, who's gonna, who's gonna do this? And I remember

Jim Kerrigan 38:54

It was McCreary coming out of Australia and they were one of the early investors in this. But then, you know, I remember looking at trying to sell some Amazon data centers and they were pricing them, capital markets were pricing them on a higher cap rate for a data center than they were for an Amazon warehouse.

Jim Kerrigan 39:21

And this is during like 1920, 21, right? During the whole COVID era. And I'm like, well, wait a second. If Amazon blows out of the distribution center, then what you have is pretty much a, you know, $8 or $9 a square foot, you know, warehouse, right? And you're just going to leave that to someone else. But if AWS blows out of a $1,200 a square foot, fill it out data center, then that landlord is going to get $150, $200. They probably want the tenant to blow out because They get industrial rates and they've fitted out themselves. But the problem was that it wasn't being priced that way. There just wasn't enough product. Just in the last week or so, I saw something that Blackstone has now come out with a special REIT, which they're buying data centers just for the data center purposes. That's literally the last five or six days that I saw that. And that will be interesting to see but what they're doing is buying stabilized properties Which is fine, but those cap rates like I said when at the time one of these things were trading mine were trading higher when they should have been trading lower and then I was lucky enough that we were able to flip the market at the same point in time and that was just by sure demand and then people started realizing what I was saying which is hey these data centers are actually worth more than the warehouses And then the cap rates came down, therefore the prices went up.

Jim Kerrigan 41:45

Yeah, I love that. It's similar to you. I figured out which REITs will be potential buyers of land. So if it is Farmer Brown, he wants to monetize it, but he doesn't want all that money going directly to his ears. He can get B REITs shares as an example, and then he can figure out how to dole it out that way instead. So I can't really speak to it since I'm not really a tax advisor, but I know

Jim Kerrigan 42:15

If the seller wants to do that, it's a good way to monetize without having to be exposed to it or having a huge capital issue, tax issue when you're 80 years old, you know.

Jim Kerrigan 42:35

For sure. I like the stock market play and how, but I also know a lot more than your average investor related to which stocks I play. So I'm more likely to play, instead of playing a REIT, I might play the equipment supplier or something like that, or one of the neoclubs that I have confidence in. I've had a chance to deal with a lot of these groups. yeah, I'd be, whole, if you look at the new Blackstone REIT, it's interesting.

Jim Kerrigan 43:19

But I don't know. are usually pretty on. Those are coupon clippers. And I'm probably more aggressive with what I would do with my cash.

Jim Kerrigan 43:37

Yeah, there's a pretty cool one called Vertiv that they were Emerson Electric back in the day. And their stock was nothing when they went public. And there's companies like that that it's the same way to play it, just a different way to play because of the supplier.

Jim Kerrigan 44:08

Yeah, I don't know. mean, it's all pretty exciting. It's just when you do it day to day for as long as I've done it, it starts to become a grind, you know. I feel the worst part about data centers these days is the PR aspect of it. I think they've done a terrible job, or we have, I'm not sure if it's they or we, but we have done a terrible job messaging the benefits to an area and to what the ultimate customer is, right? There's everyone who's

Jim Kerrigan 44:37

probably 10 years old and older, uses a data center every day. They don't realize it's in their pocket, right? It's got a thousand apps on it and they don't even realize that when they're calling an Uber or Lyft or whatever it is, one of those two are in, they're both in data centers and one of them is in AWS, the other one's with another provider. But it's pretty amazing, right? That there's so much we do these days that involves a data center but we didn't realize that's where it was happening.

Jim Kerrigan 45:13

So that does, at one point in time, I was really pushing hard to pursue data centers in Canada. And this has to be, I think I gave up the push about 11, 12 years ago, so call it 13, 14 years ago. And there were definitely certain data centers that were not interested in being in the US, and the US didn't want them. And I could think of Chinese data centers and such. then also, ironically, at one point in time, the Canadian pension funds, were using AWS, which meant that their equivalent of social securities were being saved somewhere in Virginia, not in Quebec. So yes, those are issues.

Jim Kerrigan 45:59

Thanks so much for your time. appreciate it. not ever her and some of your podcast in the past and I'm glad that now I'm a follower. So thank you for your time today. Appreciate it. a great day.

Jim Kerrigan 46:16

Happens a lot. Happy to do so. Thanks a lot. Have a great day. Have a good weekend. Appreciate it. Bye bye.