The Carrier Hotel Sector is Heating Up

Jan. 9, 2023
It's been a busy couple of months for the carrier hotel sector, with a flurry of acquisition and development news, reinforcing the strategic role of wired real estate in major cities.

It's been a busy couple of months for the carrier hotel sector, with a flurry of acquisition and development news, reinforcing the strategic role of wired real estate in major cities. 

Carrier hotels were the early cornerstones of the Internet economy, and some of the most successful properties in the colocation industry. A key piece of the business model is the meet-me room, a common area where providers can make connections between their networks. Interconnection facilities can be operated by building owners, non-profits or commercial service providers.

In recent years, carrier hotels have once again become the focus of investment, expanding interconnection ecosystems in urban centers. As recent activity demonstrates, it's not just a big city story any more, as secondary markets are seeing growing activity. Here's a look at the deals in November and December.

Netrality Continues its Expansion

On Dec. 13, carrier hotel specialist Netrality Data Centers said it has acquired Lifeline Data Centers’ 733 West Henry data center on the Indy Telcom campus. Netrality bought the Indy Telecom campus in 2021, and Lifeline continued to operate its own facility on the campus. 

Netrality will continue to provide colocation services within the 30,000 SF 733 West Henry facility and is expanding interconnection services in the facility to include seamless access to the meet me room in Netrality’s 701 West Henry data center, expanding the robust ecosystem of service providers available across Netrality’s Indianapolis campus. Notably, for customers in 701 West Henry, this acquisition enables connectivity to many new service providers, including Hurricane Electric, Midwest-IX, Consolidated Communications, Everstream, Frontier Communications, and others. 

Netrality employs a real estate strategy built atop the enduring power of the cross connect – the physical connection between networks that knits the Internet together. The company acquires carrier hotels and upgrades their interconnection infrastructure. Netrality operates carrier hotels in major cities like Chicago, Philadelphia and Houston, but also is a key player in the Midwest with carrier hotels in St. Louis, Kansas City and its Indianapolis presence. 

“We are thrilled to acquire Lifeline’s colocation assets within Indy Telcom Center,” said Gerald Marshall, Chief Executive Officer at Netrality Data Centers. “Netrality is committed to the long-term growth and enhancement of our campus. We will continue to invest and upgrade the facility to ensure that we meet the evolving needs of our clients.”

1547 and Harrison Street Add Another Building

On Dec. 12, developer fifteenfortyseven Critical Systems Realty (1547) and investor Harrison Street announced plans to acquire the Chase Tower in McAllen, Texas, which houses an Internet exchange that supports telecommunication traffic between Texas and Mexico. The deal was the seventh data center collaboration between is 1547 and Harrison Street since 2020.

With over 209,000 square feet in this 17-story building in McAllen, TX, the Chase Tower is the telecommunication hub and Internet gateway between Mexico and the United States and serves as the financial hub for the greater Rio Grande Valley. With 46 unique carrier networks established in this telecommunications ecosystem, Chase Tower is Southwest's premiere carrier hotel and data center destination. The property’s two-carrier neutral meet-me-rooms (“MMR”) provide customers access to short-haul, long-haul, and dark fiber providers.

With this strategic purchase, 1547 and Harrison Street also acquired CarrierCom, a single-location data center provider located in the Chase Tower. Through this acquisition, the joint venture will own and operate the international carrier-neutral colocation facility backed by 24x7x365 support services. 1547 will have immediate colocation and data center inventory in the building with additional availability of conditioned space and power coming online in 2024.

“Today’s acquisition of the Chase Tower is an important addition to our connectivity-focused data center platform that includes Pittock Block in Portland, OR, and the Wells Building in Milwaukee," said Michael Hochanadel, Managing Director and Head of Digital Assets at Harrison Street. "Located less than ten miles from the Mexican border, Chase Tower is designed to serve as a gateway for international data transmission and advance our strategy to create data center options in attractive carrier-dense markets. We look forward to continuing to identify strong data center investment opportunities growing our digital footprint to ensure connectivity partners have the capacity they need to serve their customers.”

“1547 continues to move forward on its mission to create an ecosystem of highly dense and interconnected data centers in key markets throughout the United States,” says CEO of 1547, J. Todd Raymond. “1547 is listening to our enterprise customers, digital content distributors, and hyperscale cloud providers who are seeking connectivity in these crucial edge markets. With the purchase of Chase Tower, we are creating the opportunity for our customers to have an access point to do business with Mexico and other Latin American countries via the expansive Texas-based fiber networks. Carrier-dense properties like Chase Tower create data gravity throughout the greater region, attracting a higher caliber of customers to add to our ecosystem.”

A Premier Property Explores A Sale

On Nov. 24, Allied Properties Real Estate Investment Trust confirmed that it is exploring the sale of its urban data center (UDC) portfolio in Toronto, which includes 151 Front Street, the city's largest carrier hotel. 

151 Front Street houses dozens of telecom networks and is home to data centers for Digital Realty, Equinix, Cologix and eStruxture, among others. Allied Properties acquired the 277,744 square foot building in 2009, Other data center properties in the portfolio include 250 Front Street West and 905 King Street. Scotiabank is acting as Allied’s financial advisor in connection with the sale exploration.

"Allied regularly reviews and evaluates strategic opportunities that management believes could be in the best interest of Allied and its stakeholders," the company said in a statement. "Allied has not entered into an agreement to effect any particular transaction related to its UDC portfolio, and there can be no assurance that the current exploration will result in a decision to enter into any transaction."

Local media report that the company values the properties at $1.3 billion. 

A Carrier Hotel Grows in Brooklyn

On Dec 15, Brooklyn carrier hotel operator DataVerge announced that industry veteran Hunter Newby has joined the company's board of directors. Newby has been a pioneer in the interconnection sector, as a key player at Telx, Netrality and Colo ATL. As an investor and advisor, Newby works closely with interconnection facilities in emerging markets, including NJFX, Fibre Centre and now DataVerge.

Located in Brooklyn's Industry City, DataVerge's flagship facility is a 50,000 square foot data center space with a rich ecosystem of over 30 carriers and network providers, and direct connection to networks providing access to all major cloud on-ramps.

"I am excited to join the DataVerge team in charting what's next in connectivity for the Brooklyn region, which has remained one of the most underserved network infrastructure markets," said Newby. "DataVerge offers the most unique combination of value for carriers and network providers - direct access to dark fiber, state-of-the-art Meet-Me Room and connections to hundreds of enterprise customers across Industry City."

"We are thrilled to welcome Hunter to our board - and are grateful for his recognition of the innovations DataVerge has brought to Brooklyn over the last 10 years," said Ray Sidler, CEO and co-founder of DataVerge. "With him on board, we look forward to making further forays into our growing network operations and accelerating our carrier-rich ecosystem."

A Carrier Hotel for Detroit 

Detroit’s largest real-estate developer Bedrock and infrastructure tech platform Raeden announced in November that they are partnering to bring the first independent carrier hotel to Downtown Detroit. 

Located within Bedrock’s 615 West Lafayette property, the Detroit carrier hotel will centralize internet connectivity and technology services while making efficient use of existing fiber assets.

“The introduction and added value of the carrier hotel is a significant milestone as we continue to position Detroit as one of the most connected and technologically advanced cities in the United States,” said Michael Osment, Chief Technology Officer at Bedrock. “This is the first in a series of steps by Bedrock to strategically activate local technology assets to bring a faster, more efficient and readily available networking platform to the Detroit market.”

Raeden and Bedrock will directly connect 615 West Lafayette with Bedrock’s Detroit portfolio, creating an environment where internet technology can be accessed more rapidly. Instead of each building requiring individual Internet and technology installations, centralization at 615 West Lafayette will enable access to varying services, significantly decreasing deployment timelines, and lowering costs. The result will enable Bedrock tenants the ability to access faster and more resilient internet-centric services while enabling expanded internet access throughout Detroit.

“We are thrilled to partner with Bedrock and view the Detroit carrier hotel as catalytic to our overall mission, which is to partner with real estate owners to optimize latent digital tenancy opportunities within their portfolios,” said Kari Schrader, Raeden’s Chief Executive Officer. "Through the development of the carrier hotel and future integration between Bedrock’s portfolio and Raeden’s services, we believe Detroit will become one of the most connected cities in the United States.” 

About the Author

Rich Miller

I write about the places where the Internet lives, telling the story of data centers and the people who build them. I founded Data Center Knowledge, the data center industry's leading news site. Now I'm exploring the future of cloud computing at Data Center Frontier.

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