Q&A: I work for a data center operator and developer (Specialty REIT)
I felt like the Data Center space isn't mentioned a lot online. Felt like I can spread some good knowledge.
I work for a shop that does both management, development and construction of the portfolio.
Quite a bit of people coming out of IBD (usually LevFin) working for operators like Aligned, QTS, Equinix at a finance/strategy capacity.
2 months on the job coming out from a 500m Single Family Office (Allocations, VC, Mid size SaaS, RE Acquisitions, Philanthropy.
I'm also an Air Force Reservist working on cyber infrastructure having done work with NSA facilities.
Comp is nice for a regular 9-5 day job. Make a little less than what I made at a SFO (Had carry). I'm an analyst making 100k + 30% bonus. Partnership pay kicks in after making senior analyst.
Best way to break into REIT data as a non-target undergraduate? I have experience in data consulting (ML modeling), but no IB / CRE. I am a realtor, if that helps 🤷♂️😂
Also, best tools to know besides ARGUS enterprise? Is SQL / NoSLQ popular, C / C++ / Java?
I would also recommend a masters in electrical engineering and civil engineering. We are expected to design and plan these developments from scratch in the DC world.
Apply for REIT internships or anything Real Estate Related. Learn a gist of the how asset management works (very important) acquisition/development modeling and terminology. Coming from no experience is more of a numbers game and a trial by fire so more applications=higher rate of success/higher quality results. Be confident!
I'm in the southeast US. Over here we don't really give a shit about the schools you come from as long as you do well in interviews. I came from an Aerospace School in Florida (Can probably guess). Showed some conviction of my interests. I've done finance internships both in high school and college. Having a fair attitude helps (Don't be too nice and don't be a dick).
Thanks! Super interesting space and haven't seen much on it publicly. Appreciate the time.
What are the basic real estate KPIs?
What are the typical subtypes of data centers?
If you had a plain vanilla shell, what's the basic pricing to build out the tech? Is there a large TI component?
Can you give broad brushes on market lease terms?
Are there data center leasing brokers or who's selling the space? Do clients have geography constraints?
Sorry was carried away. Found some down time to answer your questions
What are the basic real estate KPIs?
We usually expect at least an 8% Yield on cost,15% IRR and currently 6% exit cap. This is dependent on your equity partner. Our current one is pension fund (50B aum) so pretty much cash strapped and conservative as far as management goes. Most LPs in this space are either big MFs (BX,KKR) or pension funds.
What are the typical subtypes of data centers?
3 main types
Colocation-basically retail or rental type centers.
Hyperscale- Scalable and customizable. Usually meant for large public companies (Meta, Apple, Etc.)
Enterprise- Smaller version of hyperscale. Usually private DCs for companies.
If you had a plain vanilla shell, what's the basic pricing to build out the tech? Is there a large TI component?
Dependent on your location due to taxes, how much MW, SF your building, who your tenant is. But lets just say in a city of pop 2.5 million+ (NYC,Chi, LA, Dallas) for a 30 MW build-to-suite. Prob looking at least 10mm/MW or 2k-2.5k/SF. Most leases run on Modified gross or NNN
Can you give broad brushes on market lease terms?
10 years + 2.5 rent escalation. The industry is very ambiguous as far as the lack of data and comps out there since leases are extremely high (can be 1B in leases)
Are there data center leasing brokers or who's selling the space? Do clients have geography constraints?
CBRE is pretty involved in the space for leasing and research. Some operators like QTS,Equinix,Cyrus have there own brokerage division. For collocated DCs 1 thing I see in common is that a lot like to build near airports for accessibility purposes. But if your talking about private hyperscale and enterprise users which are usually big public companies it doesn't really matter as long as the location have the resources such as fiber lines/power to support the development. DCs in the federal sector are another story.
This is so cool. Thank you for the thoughtful response!
Those… aren’t really KPIs. Those are return metrics. KPIs (for hotels, as an example), would be occupancy, ADR, RevPAR, % of revenue from food vs F&B, operating margin, etc. You’d want to know the management / flag and the remaining term on each, you’d want to review PACE reports, understand how room nights are divided between transient/group, know the major demand drivers in the area (conference center, hospital, offices, sporting events, etc).
Can you describe the same for data center deals?
For the people you see out of IB, is it more common to see Real Estate or Comms coverage groups? Is it more important to understand real estate concepts or data center concepts?
I see it more common for people coming out of groups such as LevFin but have also seen a handful coming from more anticipated groups like M&A, TMT, Retail and sometimes regional/MBB consulting. Depending how lean your team is. Finance in this space is not your usual FP&A/Reporting type deal. Most DC operators are looking for someone with some brain power and familiar with modeling + debt and equity.
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