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Sunday, 22 October 2017 18:28

Data center operator Switch to pay $25 million for Pyramid campus south of Grand Rapids

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Former Steelcase pyramid building. Former Steelcase pyramid building. MiBiz file photo: Nick Manes

GAINES TOWNSHIP — Technology firm Switch Inc. plans to buy the 700,000-square-foot Pyramid campus that’s home to its data center in southern Kent County, MiBiz has learned. 

The Las Vegas-based Switch (NYSE: SWCH) detailed the acquisition plans in its Initial Public Offering (IPO) filings with federal regulators.

Through a spokesperson, Switch executives confirmed the company’s intent to buy the property but declined further comment.

The company, which does business with tech giants Google, Amazon and eBay, opened the West Michigan data center to serve clients on the East Coast.

According to the IPO filings, the company in late 2016 notified landlord Norman Pyramid LLC “of its intent to exercise the purchase option pursuant to the lease agreement.”

Switch will pay a purchase price of $25 million, less 65 percent of all rent payments to Norman Pyramid. The deal is expected to close on Jan. 1, 2018, according to the IPO documents. 

As of June 30, the company counted $23 million in “accrued Michigan building and land purchase” liabilities on its balance sheet.

Steelcase Inc. sold the pyramid building, formerly home a research center for the Grand Rapids-based office furniture manufacturer, to Norman Pyramid in 2015 for $4 million, according to public records. 

Switch first committed to open its Pyramid Campus in late 2015 after the state Legislature passed bills that gave tax abatements to the operators of data centers. 

The company promised $5 billion in new investment in Gaines Charter Township — much of it in the form of large servers that are exempt from personal property taxes under state law — and up to 1,000 new jobs over several phases. 

In July 2016 as part of its application for Renaissance Zone status, the company estimated about $151 million in total investment and the creation of 103 jobs over five years in the data center’s first phase of development, as MiBiz reported at the time.  

The Renaissance Zone status was approved, saving the company approximately $1.1 million annually in state and local taxes. However, Switch agreed to a payment in lieu of taxes (PILOT) agreement with Kent County and Gaines Township. 

According to the IPO documents, Switch first offered data center space in June 2016 at the Pyramid campus, which includes 220,000 gross square feet of space. The company plans to add two other data centers at the site with an additional 940,000 gross square feet of space.

“We expect to construct these facilities as necessary to meet customer demand and anticipate the first will become operational in 2019,” the company stated in the filing.

Switch raised about $531 million via its Oct. 5 IPO — the third largest among tech firms this year, according to Bloomberg.

Since the IPO, the company’s shares have traded above its offering price of $17 per share in the range of $18.51 to $24.90 per share. As of Friday, Switch had a market capitalization of more than $4.8 billion.

In its federal securities filings, Switch reported income of nearly $31.4 million on revenues of more than $318 million 2016. Through the first six months of this year, Switch generated revenues of $181.2 million and posted net income of $35.3 million, according to the filings. The company reported $49.7 million in cash on its balance sheet as of June 30.

 

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