Sabey Data Center Properties Buys Manhattan’s Verizon Building for $120M

Sabey Data Center Properties entered the data center-hungry metropolitan New York market with the closing of a $120 million acquisition of a 29-floor condominium interest in the 32-story Verizon Building, with plans to transform the space into a premier data center location.

August 5, 2011
By Barbra Murray, Contributing Editor

Sabey Data Center Properties made its first foray into the data center-hungry metropolitan New York market with the closing of a $120 million acquisition of a 29-floor condominium interest in the 32-story Verizon Building. Verizon will continue to occupy the top three floors of the 1.1 million-square-foot tower, while Sabey will transform the remaining space into a premier data center location that will be known as Intergate.Manhattan.

Sabey purchased the property from M&T Bank and Taconic Investment Partners. Taconic had owned the 29-floor condominium interest since 2007, when the real estate company bought the segment for $172 million. Commercial real estate services firm CB Richard Ellis Group Inc. represented Taconic in its disposition of the building, while Cushman & Wakefield Inc. stood in for Sabey. With the completion of the transaction, which Sabey financed through National Real Estate Advisors, Verizon retains ownership of the three floors it occupies. Youngwoo & Associates also has an interest in the property as Sabey’s local partner.

Sited at 375 Pearl St., the Verizon Building first opened its doors in 1975 as a telephone switching center for the communications company, which has recently utilized the space as a back-office facility. The property’s location near One Police Plaza places it in the middle of one of Manhattan’s most physically secure zones, an advantage that is high on the list of data center users. The first phase of Sabey’s repositioning endeavor will yield data center space on floors five through seven, 11 through 17 and 19 through 20. Floors two through four will house the mechanical equipment, and the 18th floor will be the site of the cooling map. “This will be the first special-purpose redevelopment of a building into a data center building in Manhattan–ever,” Sean Brady, a senior director & co-founder of the Data Center Advisory Group of Cushman & Wakefield, told CPE.

Keen on expanding to the East Coast, Seattle-based Sabey had been eager to find an entrée into the high-demand metropolitan New York data center market for some time. It was no simple feat. “There are not a lot of options for people to buy buildings like this,” Brady said. “You can’t just buy any building for a data center; you’ve got to buy a building that’s got good ceiling heights and heavy floor-load capacities, and you have to buy a building that has a fair amount of vacant space so you can put in all the mechanical equipment that’s needed to run a data center. The building at 375 Pearl is a telephone switch, so it’s got a great deal of fiber right there. It’s got quick access to a large amount of power. That’s another reason why you can’t just buy any building– because if those two components aren’t there, it costs a lot of money and it takes a lot of time to get them into the building.”

It is likely that Sabey won’t encounter much of a challenge when it comes to leasing Intergate.Manhattan upon its completion. It’s an issue of supply and demand. “I would say there’s not a lot of good-quality data center space,” Brady noted. “I think the demand for this building will probably come from within the city. The companies that are headquartered there that want to keep their data centers within walking distance or within close proximity to their headquarters facility are the prime prospects for this building.”

And the property’s target market is vast. The list of potential users includes businesses in the medical, healthcare and technology research industries, but one sector in particular will most likely be its main source for occupancy. “It’s the financial services industry. They can afford to upgrade their data centers because No. 1, it moves their trades quicker so they can retain more profit; it moves their money faster so they can retain more interest. No. 2, it allows them to be more competitive in the marketplace. They’ll be able to say, ‘This is what my system does, and it’s the strongest system around.’ They can then go out to their customers and say, ‘This is what we have and this is why you should use our service, because we’re so much more robust than our competitors.’ ”

Sabey expects to begin making data center space available at Intergate.Manhattan in 2012.