What’s the Deal: Metro Edge CEO Craig Huffman Pioneers Urban Data Solutions with Metro Edge’s IMD1 in Chicago

What's the Deal: Metro Edge CEO Craig Huffman Pioneers Urban  Data Solutions with Metro Edge’s IMD1 in Chicago

by Traded MediaShare

What is IMD1?
IMD1 is a new 5-story data center in the Illinois Medical District servicing local medical, and government customers. This state-of-the-art facility, located at 1951 West Hastings, is not just a testament to advanced technological infrastructure but also to sustainable and secure data management practices that cater to the future demands of businesses. The IMD1 data center spans five stories, covering an expansive area of 184,720 square feet, designed to deliver high- performance computing services. Its strategic location offers low latency connections to 350 E Cermak, situating it just 2 miles from the Central Business District and 15 miles from O’Hare Airport, providing both accessibility and efficiency.

What attracted you to the Illinois Medical District (IMD)?
The IMD was interesting because, being in a medical district, one of my board members is Christie Hefner, who is the daughter of Hugh Hefner, founder of Playboy. I got to know her years ago. She’s on the board of one of the hospitals that’s in the medical district. Prior to the business plan that we now have, we were actually trying to build a micro data center in a different part of town. It was unsuccessful because we ran into a lot of bureaucracy with the entity that we were trying to partner with. The IMD was a pivot from that original plan and Christie suggested that there may be an opportunity in this medical district since she was on the board of the hospital. I had previously looked at a couple of assets in the IMD, but it’s kind of a sleepy place. It’s roughly 560 acres near downtown Chicago and was created about 70 years ago with the idea that it would be a hub for large medical institutions and the ecosystem supporting them. You have four of the larger hospitals that are located in the medical district and a whole host of businesses that feed into it, almost like the small fish that follow whales. For example, doctors’ offices and other types of services that are ancillary plug into those larger hospital networks. Prior to this deal, I had not developed a data center but I had owned a small one in a building as well as a lot of real estate. So, like most entrepreneurs, I thought, “How hard could this be?”

What sets IMD1 apart?
IMD1 stands out due to its carrier-neutral infrastructure that includes partnerships with 11 On- Net carriers. This setup not only ensures low-latency communications but also provides diverse and redundant routes back to the major connectivity hub at 350 E Cermak. Additionally, the data center is enhanced by a software-defined network featuring services from Megaport and Packetfabric and an internet peering exchange, CH-IX. These features collectively ensure that tenants enjoy reliable and flexible connectivity options. In addition, security and privacy are paramount at IMD1, as evidenced by its comprehensive range of certifications, including ISO 27001, HIPAA, HITRUST, PCI, SOC1, and SOC2. These certifications demonstrate IMD1’s commitment to maintaining stringent data security and privacy standards, which is crucial for tenants handling sensitive information. IMD1 also offers competitive advantages through innovative financial structures, such as creative lease options that provide flexibility in cost management. The operations of IMD1 are not only award-winning in terms of uptime. Still, they are also cost-optimized through incentives like a Class 6(b) Property Tax Reduction and a 100% sales tax exemption on IT equipment and software purchases. These financial benefits make IMD1 a cost-effective solution for businesses looking to maximize their investment in data center operations.

What were unexpected challenges that you encountered with the deal?
This project was a lot tougher than I thought, in part because I joke and say that if commercial real estate and technology had a baby, it would be a data center. It’s really the nexus of the two. You have to have enough knowledge to understand entitlement zoning to get the building approved, but then you also have to have people who understand the technical side because, unlike conventional real estate, the asset is about the ecosystem. And so how you connect into the network, whereas conventional real estate, it’s a little more of a silo. You still want connectivity with fiber providers and other folks that come into your building, but not in the way you do with a data center. In addition, the City of Chicago is not the easiest place to do business. As a result, entitlements and the costs associated are always a major risk factor. We have mechanicals on the roof, required variances, and had to bring investors on board. When we started, a lot of people thought we were crazy, but fortunately, since I had success in my previous business the vision was compelling enough to bring this project to life.

Why is IMD1 closer to Chicago as opposed to a rural location?
There is a growing trend in data center development to prioritize proximity to customers, regardless of the end user. Proximity to users significantly reduces data travel time between the user and the data center, which is crucial for latency-sensitive applications. However, this shift presents challenges, particularly in finding suitable land, as closer proximity often means increased competition for prime locations. It’s hard to get the amount of acreage that you can in the suburbs, and that’s challenging. Typically you’re going to find it’s probably a little more expensive unless you go to underserved communities because cities have higher density, and subsequently prices are higher. So, the medical district was a unique opportunity. We found an opportunity that others were overlooking and if you go to our website, we see opportunity where others see complexity. That is who we are. If you look at an urban vertical data center, it’s more expensive. Because, when we started this journey, our site was worth less than a million dollars. It was unentitled and it had been vacant for 40 years, which is probably not an accident. And so, in the process of trying to sell a vision long before a building exists, what do you have? Well, simply all you have is that vision. At one point in time, the IMD was not supportive of data centers. However, I think that as the technology needs of medical facilities became outdated, they began to embrace them. And quite candidly, I think the larger players like Digital Realty Trust and others just overlooked it. And so our strategy was, let’s try it like many entrepreneurs, right? You don’t know if it’s going to work and you got to be crazy enough to see if you can make it work. As of today, according to JLL, it’s somewhere in the $14 million to $16 million range. And if I land an anchor customer, it probably goes up to about $30 million on just the value of the site.

How did you get started in real estate?
I come to Metro Edge with a pretty extensive career in commercial real estate. I founded a firm in 2006 that I successfully exited in 2020 that was focused on acquiring commercial real estate in
metropolitan Chicago. Asset types were residential, office, industrial, and retail, really being the major food groups that we were focused on but we got involved in digital infrastructure as a result of buying a flex office that was really industrial. When I say flex, I mean it was industrial and office. It also had a small data center in it, and this was probably in 2016 or 2017. This acquisition really opened my eyes. I thought, “Wow, these guys are one of the better tenants you can have.” They do a lot of their own build-out. They don’t call us much because we ran our own property management. We were vertically integrated. We raised two investment funds and we also had a property management and construction arm. So, we were more like a real estate developer that used private equity. A lot of people don’t realize, but real estate doesn’t trade like stocks. It’s a longer period of time, but you’re still trying to complete a trade. And time it so that you can hopefully get in at the right price and get out at a higher price. Case in point, there are a lot of people right now with interest rates having moved the way they have. They’re getting out at much lower prices than they would have when rates were much lower. Throughout your career you’re going to go through many cycles but learning how the macro environment interacts with commercial real estate is vital to success in this industry.

What advice would you give to a CRE pro starting in the industry?
Don’t make your first deal development deal a data center; start off a lot easier. Jensen Huang of Nvidia recently said that if you want to be an entrepreneur, you need to embrace pain and suffering. What’s your tolerance? You need to find out and increase your capacity for stress and problem-solving because if you don’t have any pain tolerance, don’t touch this journey. I would also say that when you’re young, you have an advantage in networking. Successful people often love talking about themselves. And the opportunity to learn from someone else starts with meeting someone and asking them questions about their career path. Everyone takes a different path and has a unique journey. I jumped into entrepreneurship almost 20 years ago and had to figure it out. If you succeed, we’ll declare you were the right person. If you fail, we’ll pretend we didn’t know you. And that’s kind of the journey. At some point, everyone has to have a commitment to say, I know enough. I mean, that’s the nature of life. Sending out resumes cold is not the best strategy. I have so many people pinging me on LinkedIn, but I don’t know any of them. Ask yourself, do I know someone that can introduce me? That’s a much better strategy than just cold out of the blue. Speaking from my perspective as a person who gets a lot of that, I think it’s best to be intentional and not have the fear of reaching out. I grew up with the idea that they put on their pants just like I do, so why should I be afraid to speak to them? Always deliver on your promises since your integrity matters, and you’re better off underpromising and over-delivering every single day of the week. Where people get caught up is not knowing what their limitations are, and they over promise and they under deliver. Be careful because that catches up to you over time.

Traded Student Ambassador Program

This interview was conducted through Traded’s Ambassador Program in collaboration with Thomas DeRuvo of Rutgers University.

Thomas DeRuvo’s LinkedIn

Published: May 17, 2024

To view the original article, please follow this link: https://traded.co/blog/what-s-the-deal-metro-edge-ceo-craig-huffman-pioneers-urban-data-solutions-with-metro-edge-s-imd1-in-chicago/

Scroll to Top