Data Realty ignites hopes

When Data Realty LLC announced it would soon begin construction of a data center located at Ignition Park, the excitement among the standing-room-only crowd was palpable.

Mayor Stephen J. Luecke

The announcement on Wednesday, Feb. 9, 2011, fulfilled weeks of buzz and speculation that “something big” was happening at Ignition Park.

More importantly, it was the culmination of a vision first articulated a few years ago when the notion of a state-certified dual-location tech park was proposed.

In the words of South Bend Mayor Stephen J. Luecke, the estimated $20-million investment was a clear sign of hope — a signal that South Bend “is very much alive and open for business.”

Bodes well for future

Rich Carlton, president and chief operating officer, Data Realty

“I am pleased to announce Data Realty’s excitement over being the first technology-based company to choose to locate in Ignition Park,” said Rich Carlton, Data Realty’s president and chief operating officer. “The roughly 50,000-square-foot facility will locate on a nearly five-acre site in South Bend’s Ignition Park. The site will also accommodate a future 40,000-square-foot addition.”

When fully developed, this next-generation data center will be designed to support organizations across a broad base of industry groups, including university research, financial, healthcare, legal, government, transportation, education and technology sectors that are required to transfer, protect and maintain significant amounts of mission-critical data.

The location of a major data center bodes well for the area’s ability to attract other major data centers, said Patrick McMahon, executive director of Project Future.

“Every time you build one, you become more attractive to other companies,” he said. “Once they become established, they will attract other players. When a large data center goes into a community, site consultants look at that favorable cost environment and decide to go check it out for themselves.”

Competitive advantages

If anything, the Data Realty announcement underscores how South Bend was able to take advantage of Indiana’s changed tax structure geared to attract new data centers and benefit existing ones.

Although Indiana offers several competitive advantages, such as superior communication infrastructure and affordable power, there was one significant obstacle that had to be overcome: Indiana’s personal property tax policy.

“Indiana’s previous structure taxed data center equipment as personal property. The high cost of data center equipment meant very high tax bills in Indiana, thereby negating the state’s power and connectivity cost advantages. In the past, this became a deal-killer,” McMahon said.

It took several years, but in the 2008 legislative session, regional economic development specialists persuaded Indiana lawmakers to exempt data center equipment from property taxes.

Successfully addressing the tax structure leveled the playing field, placing Indiana in general, and South Bend in particular, in a highly competitive position.

What makes a location attractive for a major data center?

In his remarks at the Data Realty announcement, Carlton elaborated on the reasons his company chose South Bend in general and Ignition Park specifically.

“When selecting a site for a data center, one of the biggest factors is the power cost and the power infrastructure,” Carlton said. “In Indiana we have lower costs per kilowatt-hour than surrounding states, so coming here was a natural choice. One of the things we were pleased to find at Ignition Park was a significant power infrastructure that can support a facility such as ours. It will be fed from redundant substations located both to the north and the south of Ignition Park. When we combine the availability and cost of power with the connectivity advantages due to Metronet, we have a significant technological advantage by locating here in South Bend.”

Carlton said Jeff Gibney, executive director of the Department of Community and Economic Development, and others on his team were instrumental in providing numerous options for the Data Realty team to evaluate.

“They helped us come to the conclusion that Ignition Park was the best place for us,” he said.

According to Mary Jan Hedman, executive director of St. Joe Valley Metronet, the unique business model of Metronet is a significant advantage in attracting data centers to the area. Metronet is a dark fiber optic network that provides unlimited bandwidth, with no capacity or mileage fees. Metronet’s existing infrastructure will provide Data Realty with immediate direct connection options to more than 20 regional and national carriers.

“The construction cost of a last-mile connection — the final leg of connectivity from a communications provider to a customer — is completely avoided in our community,” Hedman said. “This typically is the most expensive portion of enterprise connectivity, and it is time-consuming.”

‘Great things to come’

David Varner, vice president, South Bend Redevelopment Commission

In addition to the favorable infrastructure, another key ingredient in the Data Realty success story was the number of entities that pulled together in partnership to create a favorable environment for startup businesses.

“The South Bend Redevelopment Commission was pleased to engage with Graham Allen Partners, the private holding company that developed Data Realty,” said David Varner, vice president of the commission. “We appreciate their expertise in this area, beyond what the commission does, to look specifically at those entities, groups and companies that would either complement or perhaps be additional businesses for the area.”

The data center represents the fruition of many years of planning and paves the way for future success.

“This is a great success story of some entrepreneurs who have already started businesses in this community, have been very successful and are now moving on to a new phase,” Mayor Luecke said. “It speaks to the work we’ve done to put infrastructure in place, whether it’s great electrical power services, or the Metronet that really supports high-tech businesses and broadband requirements. It really is the proof of what we’ve been working on for so many years: the idea that we can have a two-site certified tech park where companies start and get their legs under them in one location.”

It also represents a significant first: Data Realty is the first company that started at Innovation Park and graduated to Ignition Park.

“It’s a very exciting day for us here at Innovation Park and for the community as a whole,” said Dave Brenner, Innovation Park’s president and CEO. “It’s the start of great things to come.”