American Real Estate Partners Has Data Center Ambitions in Ashburn

For the past five years, American Real Estate Partners has been the steward of a piece of Northern Virginia’s data center history. The developer is now looking to own a bigger part of Ashburn’s cloud-powered future.

American Real Estate Partners (AREP) owns Quantum Park, the former UUNet site that was a key connectivity hub dating to the early days of the Internet. In January, the company acquired a property near the center of “Data Center Alley” where it plans to build a new data center. It’s the first step in a strategic expansion into the data center market in Loudoun County and beyond.

“We believe the data center market is still in its early growth stages, and there’s a long trend for the development of data centers,” said Doug Fleit, the CEO and co-founder of American Real Estate Partners.

AREP teamed with investment firm Harrison Street Partners to acquire a 10-acre property at the intersection of Beaumeade Circle and Loudoun County Parkway in Ashburn, where they plan to build a 265,000 square foot data center. Harrison Street has stepped up its focus on the data center sector, and Fleit is excited about the possibilities.

“They have a deep background in data centers,” said Fleit. “We see this as a deep and long-term partnership for data center development.”

The initiative brings another player onto the red-hot data center scene in Northern Virginia, which is the world’s largest market for cloud computing. with more than 100 data centers and more than 10 million square feet of data center space.

Refining Quantum Park

AREP was founded in 2003 and focuses on development in the Mid-Atlantic region, with a concentration of office and mixed-use properties around Washington, D.C. It has acquired more than 17 million square feet of real estate totaling more than $4 billion in value.

Doug Fleit, the CEO of American Real Estate Partners. (Image: AREP)

In 2015 the company became a significant player in the Ashburn real estate market when it acquired the 1.8 million square foot Verizon office campus. It was initially the home of UUNet Communications, a pioneer in the early Internet that helped create MAE East, the primary Internet exchange point on the East Coast of the U.S. The presence of a major MAE-East node helped establish Ashburn as the nexus of network connectivity, and a magnet for data centers – laying the groundwork for the current cloud computing building boom.

“What we saw was a property we could refine,” Fleit said of the Verizon site, which was renamed Quantum Park. Verizon continued as a major tenant, and AREP leased part of the campus as a 445,000 square foot headquarters for the US. Customs and Border Patrol Agency.

There is an existing Verizon data center at Quantum Park, but AREP also saw the potential to use the undeveloped portion of the property to support additional data center capacity. That required significant upgrades of the power and fiber capacity for the property, which Fleit called a “massive undertaking.”

The result: A 26-acre area of Quantum Park is now a campus for Aligned, which is completing its second data center at the site.

Expanding Into Data Centers

In the process of creating the Aligned opportunity, AREP began building an in-house team with data center expertise, including Senior VP of Construction and Project Management Reg Arnold (a veteran of HITT Contracting) and Greg Rowles, Managing Director of Development and Construction, a key member of the AOL data center team.

“Over the course of 2019, we started looking at data center opportunities, and made a number of offers on other properties,” said Fleit. “We’ve done a lot of homework.”

An illustration of a new data center being built in Ashburn, Virginia by American Real Estate Partners. (Image: AREP)

That led to the $21.5 million purchase of 21445 Beaumeade Circle, which is adjacent to a strategic cluster of data center buildings operated by Equinix, which specializes in making the physical connections that tie the Internet together. AREP plans to build a two-story, 265,000 square foot “powered shell” data center, with construction scheduled to begin later this year.

“It has everything you could ask for in a data center building,” said Fleit. “It’s on the main Ashburn fiber ring and right next to the transmission lines of Dominion Energy. It has access to power, robust fiber and clean water. We’re thrilled to be the owners and developers of that site.”

A Partner With Experience and Capital

In a period of active investor interest in digital infrastructure, AREP has found a capital partner in Harrison Street, which focuses on alternative real estate assets, including life sciences and medical facilities, and housing for seniors and students. The company has $32 billion in assets under management.

“AREP with its successful track record and deep local connections is an ideal partner for Harrison Street and we look forward to working with AREP to capitalize on the significant data center demand in Ashburn.” said Michael Hochanadel, Head of Digital Real Estate at Harrison Street.

Harrison Street has become more active in the data center sector in the past several years, working with 1547 Critical Systems Realty to acquire carrier hotel facilities in Milwaukee, Portland and Chicago, as well as a purpose-built data center in San Francisco.

Fleit said AREP and Harrison Street “have already worked together to look over other opportunities, both here and in other markets,” and believe demand for mission-critical space will continue for some time to come.

“We’re all producing so much data,” said Fleit. “It’s developed critical mass and is continuing to accelerate.”

That importance of data center real estate has been underscored by the COVID-19 pandemic. “We took 100 years to evolve office space, and turned everything on its head in three weeks,” said Fleit. “We’re part of delivering what the community and society needs. People are recognizing the need to do data centers at scale.”