🔒How a $1B data-center project landed in New Britain

Data centers are seen as powerful economic drivers that allow cities, regions and states to generate jobs and tax revenue.

However, Connecticut has largely missed out on opportunities to land such high-tech facilities.

Generally, burdensome property taxes and highest-in-the-nation electricity prices are major hurdles. Another challenge is that, unlike in dominant data-center states like Virginia, government incentives for such facilities aren’t a lock.

Mark Wick and his partners have found ways to overcome all those hurdles, and are now poised to build, at a vacant historic manufacturing site in New Britain, Connecticut’s largest-ever data center.

The $1-billion, 44-megawatt facility may also turn out to be the largest data center in New England.

“We feel it’s imperative that we are very competitive on price,” said Wick, who is a partner with developer EIP LLC. “Our development process was to put in place all of those things that would make this site competitive with other places.”

The massive 465,000-square-foot data-center project in New Britain — called the Energy & Innovation Park — isn’t necessarily a sign that these high-tech facilities will be flocking to the state.

It required major subsidies to make the project happen.

The first step was the state assigning it a long-term contract to sell electricity from 20 megawatts of on-site fuel cells to utilities at an above-market price. (EIP hopes to install another 44 megawatts at the site in the future).

The icing on the cake came in July, when Connecticut Innovations approved a $55.2 million sales-tax exemption for the project.

The ultimate operator of the data center, and/or its customers, will not have to pay sales tax on hundreds of millions of dollars worth of computer equipment purchased for the facility.

Vital asset

A data center is a secure, high-tech facility that centralizes processing and networking equipment and handles increasingly massive amounts of data on behalf of large companies or other institutions.

The EIP site will likely operate as a “colocation” data center, rented out by multiple companies, rather than an in-house data center with just one user.

Colocation centers, according to networking giant Cisco, rent space, cooling, bandwidth and security. Tenants typically provide their own equipment, such as servers.

The facility could be of use to data-hungry industry sectors that are vital to Connecticut’s economy, such as health care, financial services and advanced manufacturing.

UConn economist Fred Carstensen said the data-center market holds plenty of potential that Connecticut has largely missed out on so far.

“The challenge for Connecticut, because we have done so little in the past, is getting up and rolling and becoming a visible, credible location,” said Carstensen.

Major data-center markets currently include northern Virginia, Silicon Valley, Atlanta, Chicago, Dallas/Ft. Worth and Phoenix, according to commercial real estate broker CBRE.

Carstensen said he hopes the New Britain data center will start to change Connecticut’s competitive position in the Northeast, help draw new businesses, and perhaps even bolster college programs in data science.

“Because it is so fundamental to what so many businesses now do, the New Britain center is the basis of what could be a state marketing campaign,” Carstensen said.

And it’s not that Connecticut has no desirable attributes for data centers. It’s proximity to major employer markets like New York and Boston, and available fiber networks, are all positives.

Wick said his group is in discussions with four data-center providers and hopes to have a lease agreement by the end of this year.

EIP LLC is the entity formed to represent the development group and its financial partners.

The latter include two New York investment managers, Pleasant Lake Partners (PLP) and Arena Holdings.

PLP’s Jonathan Lennon wrote in EIP’s fuel-cell contract application that his firm is helping arrange financing for the data center and that it’s “a significant equity partner” in the project.

“Our group has been a major investor in the digital media and technology field and has long-term relationships with some of the leading owners, developers and operators of data centers,” Lennon wrote.

Arena Holdings CEO Feroz Dewan has been a board member at Kraft Heinz since 2016. A former partner at Tiger Global Management, Dewan earned $200 million in 2014, according to a Forbes ranking of hedge-fund manager earnings.

A long time coming

The Stanley Works campus, which borders Myrtle, Curtis and Burritt streets, is a 53-acre section of New Britain’s urban core that’s still owned by Stanley Black & Decker.

Stanley operated several divisions at the site for much of the 20th century, but abandoned it over the years up until its move to its current headquarters, in the northern section of the city, closer to the Farmington border.

EIP has a long-term lease in place for half of the historic site.

Wick said there were limited options in terms of identifying a suitable reuse for the property.

Given its location and other factors, building out a large new Class A office complex didn’t seem like a good bet.

“You’re not going to turn that into prime office space because you’re just not going to have the draw or the people or companies to occupy it,” said Wick, a longtime management and energy consultant who resides in Redding.

What the property has, he said, is accessible industrial infrastructure such as natural gas, hydro electricity and fiber. In addition, the buildings are built to withstand a bomb blast. The floors in some of the now unused buildings can bear loads four to five times a typical building.

“You put all those elements together and sift through them, and what comes up is a data center,” said Wick.

Read more

CT’s biggest corporate incentive you’ve never heard of