Oct. 11, 2002 -- You're a landlord, and a large tenant has filed Chapter 11 and decided to reject its lease with you for a 480,000 square feet building.
It's a disaster, right?
For the Sabey Corporation, it was an opportunity. The tenant, Exodus Communications, invested $120 million in its site in Sabey's Intergate.Seattle technology park, more than doubling the building size and installing a 120,000 square foot, state-of-the-art Internet data center.
Sabey, which owns 3.2 million square feet of space in the Seattle market, decided to buy the building back through the bankruptcy court, and operate its own data center.
That decision was validated recently when Washington Mutual signed a lease for 30,000 square feet, with an option to take an additional 30,000 square feet.
"We're in a unique position," said Eric Blohm, the Director of Technology Real Estate for Sabey. "There are not a lot of landlords who are also operating this kind of center."
The Seattle company's lengthy experience developing technology-centric buildings gave it the confidence to operate the data center, with a key role for its Sabey Critical Environment Group.
The Sabey Data Center sits in a six-building campus Sabey developed in 1986 for Boeing, which used it to manufacture the A6 bomber. Sabey bought it back from Boeing in 1999 to expand its adjacent International Gateway technology park, located 10 miles south of Seattle in Tukwila.
Exodus leased a 200,000 square foot, one-story facility and had Sabey add two additional stories to provide 480,000 square feet, and complete a data center on the first floor.
That center was lightly leased when Exodus filed for bankruptcy in September of last year. Sabey decided to purchase the site, and began marketing it in late May. Blohm says Sabey's position allows it to offer competitive lease rates.
"We're leveraging our position as owner as well as operator," said Blohm. "Our cost basis allows us to do that. The tenants paid for all the improvements."
Sabey targeted enterprise companies with its marketing efforts, and quickly found a significant tenant in Washington Mutual, a national financial services company with assets of $260 billion and 2,500 offices throughout the nation.
Sabey is working closely with the real estate brokerage community to find additional enterprise tenants. Blohm says that even with the current slowdown in IT spending, the rationales for outsourcing in-house operations are compelling.
"If you can show a significant cost savings in addition to a significant performance improvement, you have to look at that," he said. "By moving from an in-house operation to our data center, you're going to get a performance enhancement."