Chris Crosby Says the Surge of New Investors Is Great for the Data Center Industry

While there have been concerns about the influx of new, eager institutional investors pushing data center business valuations to new heights, the type of investors now pouring capital into the industry are a good fit for the type of business data center providers are in.

That’s according to Chris Crosby, founder and CEO of Compass Datacenters, whose company is turning 10 years old this year. During its decade in existence, the company grew to become a data center operator in nine US and two Canadian markets, expanded its focus from only building mid-size facilities in secondary markets to also building massive server farms for hyperscale cloud platforms, and entered adjacent businesses, one developing software for managing remote infrastructure equipment, and the other building micro-data centers for edge computing deployments.

Compass is also now entering the EMEA market, Crosby told DCK.

A lot of the company ’s growth in recent years was fueled by just the type of investors that were unlikely to consider a data center business in the past. In 2017, Ontario Teachers’ Pension Plan teamed up with RedBird Capital Partners to buy a majority stake in Compass, enabling the company to go for larger deals and “scale by an order of magnitude,” Crosby told us at the time.

Related:The Hottest Colocation Markets are No Longer in the US and Western Europe

In 2019, an Israeli real estate developer and holding company, Azrieli Group, joined Ontario and RedBird in an additional, $3 billion capital commitment to fund Compass’s next stage of growth.

Large institutional investors, such as pension funds, sovereign funds, and infrastructure funds, have in recent years taken notice of the data center sector’s attractive characteristics for the type of investments they generally seek: long-term and low-risk. Data centers are no longer viewed as an esoteric real-estate subsector, and, as demonstrated by the ongoing pandemic, they are one of the most resilient sectors, even in the face of massive, global economic disruption.

Investors with a “build-to-last” rather than a “build-to-exit” mentality “are going to be the successful ones in that game,” Crosby said in a recent interview on  (click link to the left or scroll down to listen).

That’s the mentality of infrastructure investors, who have been pouring unprecedented amounts of capital into data center assets, realizing that data centers fit every definition of infrastructure.

“You’re going to think differently if you think about a long-term asset,” Crosby said. “You don’t build an airport to just get rid of the airport. You know the airport is going to be there for decades and decades and decades.”

Related:Investment Bankers Expect the Pandemic to Fuel a Long-Term Data Center Boom

“Having that long view is great for the [data center] industry, because you’re going to make better decisions.”

Private equity investors, traditionally the data center industry’s core source of capital, often look to exit sooner than an infrastructure fund does. In the public markets, the quarterly results reporting cadence doesn’t gel with data center operators’ need to invest hundreds of millions of dollars in construction projects that may not reach their full return potential for years.

While there are advantages to being public, and “if you’ve got the scale of a Digital Realty or an Equinix, you can live with some of those blips from time to time… I don’t miss it,” Crosby, one of Digital Realty’s earliest employees, said.

Listen to the latest episode of The Data Center Podcast for our full interview with Crosby, where we talk more about the current data center investment dynamics and how Compass has been navigating the pandemic, diversity in the data center talent market, and the rising customer interest in green data center solutions (listen on Spotify, Apple Podcasts, Google Podcasts, , or wherever you get your podcasts):

PODCAST EPISODE TRANSCRIPT

Yevgeniy Sverdlik, DCK:

Hey everybody, welcome to the Data Center podcast by Data Center Knowledge, I'm Yevgeniy Sverdlik, editor in chief at DCK. We have with us today, Chris Crosby, he's founder and CEO of Compass Datacenters. Chris, thank you for taking the time to talk to me today.

Chris Crosby, Compass Datacenters:

Thanks, Yevgeniy.

Yevgeniy Sverdlik, DCK:

Let's explain briefly what Compass is to those of our listeners who may not be familiar. Compass will be 10 years old this year, right?

Chris Crosby, Compass Datacenters:

That's right. That's right.

Yevgeniy Sverdlik, DCK:

Congratulations.

Chris Crosby, Compass Datacenters:

Thank you. Thank you. We're a pure play wholesale provider. We serve, really anything from the core, the very large data centers, 30 megawatt plus down to the edge, with a hundred kilowatt edge units. And we're currently in, North America and have just started to expand into EMEA as well.

Yevgeniy Sverdlik, DCK:

And tell us how many data centers do you operate today and where, and what sorts of customers lease your facilities?

Chris Crosby, Compass Datacenters:

Sure. So we serve predominantly cloud. We serve cloud, we serve enterprise and then we serve some co-location providers as well. But the bulk of our business is on the cloud side, we've got, let's see, geez, 18 different facilities. And then we just launched another three, on EMEA. So we're pretty busy right now. We've got three big campuses in the US in Phoenix, Dallas and Northern Virginia. And then we've got a couple of campuses in Toronto, as well as in Montreal as well.

Yevgeniy Sverdlik, DCK:

And where in EMEA did you guys launch?

Chris Crosby, Compass Datacenters:

We haven't announced yet, so.

Yevgeniy Sverdlik, DCK:

Oh, I see.

Chris Crosby, Compass Datacenters:

We have not announced, but we've break ground.

Yevgeniy Sverdlik, DCK:

Okay. Breaking news here on the Data Center podcast, Compass has entered EMEA. Okay. Let's start with the biggest story for everybody today, the pandemic. Looks like Compass has taken all the kind of standard measures in response to COVID, reducing onsite personnel, customer foot traffic, more cleaning, more onsite hygiene protocols, and so on. Can you kind of think back and recall the day it became clear to you that Compass will have to make these drastic operational changes, that the pandemic was serious and demanding a serious response?

Chris Crosby, Compass Datacenters:

Yeah. So back in December of 2019 was when we started first hearing about what was going on in Asia. And we actually implemented changes in our Montreal facility starting in January, early January. We activated our business continuity program and the team there and started initiating our protocol changes at that point in time. We continued to evolve it, but we were actually a little early on that front, just due to the client base that we have and we really also wanted to make sure that our employees were taken care of, were protected in light of not knowing what was coming. And there was still so much travel, so many things going on, with an outbreak a lot of different things could have happened.

Chris Crosby, Compass Datacenters:

So really proud of our BCP team. It didn't involve any of our executive leadership, it was, you're really activating our senior leadership in the company, and I'm really, really proud of that team. They did a phenomenal job. We were also able to keep all of our construction sites going. We had construction going on in six different markets, able to keep our trades safe, keep them operating and continue to evolve and lead on that front. Making sure that people could work, pay their bills, but still be safe because obviously it wasn't as scary times from that perspective.

Yevgeniy Sverdlik, DCK:

And you said, executive leadership was not involved in those decisions, how come?

Chris Crosby, Compass Datacenters:

You want to make sure during a time of crisis that you're balancing the needs between what the business needs and then what the people need. And we, while we were heavily involved from a executive leadership team, we'd have our briefing calls on a daily basis, we allowed the BCP team to make the decisions for the company to ensure that the people before the profits.

Yevgeniy Sverdlik, DCK:

So there must've been some new measures that had to be taken that weren't part of, kind of the regular business continuity planning, what were those things?

Chris Crosby, Compass Datacenters:

One of the biggest ones was around shift management and cross contamination of folks between sites. Early on before we knew everything that was going on, what you did with cleaning protocols how you we brought trailers onto sites to have quarantine zones, if there was something that happened at the site. There were a lot of things that we did early on that were maybe overdone, based upon as you learn about the disease as it went on. But now it's a very, very clean protocol and very straightforward when someone does get sick because there are people that can get sick and how you deal with it and how you notify and how you clean up, how you still protect people's privacy, but address the issues at hand. And so I think it's great. There definitely was additions on the BCP to the pandemic approach because this thing being as contagious as it was, was different than the way that we had thought about pandemics before from a BCP perspective.

Yevgeniy Sverdlik, DCK:

So the pandemic is still here, obviously, ebbs and flows in terms of infection rates, which of the measures are still in place today? In other words, are the facilities still operating in the same mode that they were operating maybe in March?

Chris Crosby, Compass Datacenters:

No, we do escalate the levels depending upon what goes on. We do have some ability now, we were in some skeleton crew type situations during the peak of the pandemic at various points in time. And the ability for folks to go to sites, management and when they can attend a site. So we have different think of it like DEFCON levels. There's different levels based upon the severity of things. And so all we've done is establish those protocols and if those things occur, then you just reactivate those protocols. It's very straightforward. We've taken the guesswork out of it for the people that are involved.

Yevgeniy Sverdlik, DCK:

And you have data centers in the US and Canada, and have the official guidelines been different in the two countries?

Chris Crosby, Compass Datacenters:

Completely.

Yevgeniy Sverdlik, DCK:

Completely different. Okay. So you've had to implement different procedures depending on where each facility is, or how did you manage that contrast?

Chris Crosby, Compass Datacenters:

So the biggest thing was to make sure that we're working closely with the local governments on the essential services aspect of the business and ensuring that our employees can do what they need to do, that they have safe ability to get to and from sites. We did a variety of things during different timeframes. Maybe you bring meals to the site, have it instead of everybody's getting individual meals or things along those lines, you're just trying to isolate, but then provide at the same time when it was very, very much at the skeleton type stage. But for us, Montreal versus Ontario or Toronto versus Dallas versus, I mean, it just depended based upon those AHJs, but we kept the same protocols in place, but you'd have to deal with the government differently in one location versus another.

Yevgeniy Sverdlik, DCK:

So most of the difference was in access basically, who was allowed to go to work or?

Chris Crosby, Compass Datacenters:

That's right. And then when you think about construction sites as well, if you had a supplier that was in lockdown, but you needed a doorframe but is that an essential service? Is that not an essential service? So there was some of those types of things from a supply chain perspective, as well.

Yevgeniy Sverdlik, DCK:

As have many others, you guys have had to pause some regular maintenance work, kind of things that people do into two different equipment in the facilities on a regular basis to make sure it doesn't break down.

Chris Crosby, Compass Datacenters:

We did early on, but that was much more during that two week lock down that kind of globally occurred. It kind of went on for a period of time, but in working closely with our clients, we're back to normal maintenance type of schedules and caught up on that front. We have not deferred, per se. There was a short timeframe, but we're back to caught up.

Yevgeniy Sverdlik, DCK:

So just for a couple of weeks, it was different.

Chris Crosby, Compass Datacenters:

Yeah, a few. Yeah, basically. You have to be careful about how you go about doing those types of maintenance events and how many people are there and have the right protocols. If there's a service provider is coming to do it, are you keeping social distancing? Are you doing those sorts of things? And so we made some adjustments procedurally, but have been able to adjust.

Yevgeniy Sverdlik, DCK:

A lot of people are still now are working remotely, that used to maybe go to the office or go to the facility. What sorts of remote monitoring management capabilities does your work from home staff have and are any of those capabilities new, were they added as a result of this new operating mode?

Chris Crosby, Compass Datacenters:

Yeah. I mean, we're very focused on making sure that we're not ... We try to do what we can do over cellular. We really try not to network the facilities together to prevent the risk from a cyber attack and that sort of thing. So it's either a push out type of play, but all it is, is, from an alarming perspective and monitoring type of perspective is view only type of play, but that was already in place. And so that was core to our business prior to the pandemic.

Yevgeniy Sverdlik, DCK:

So just alerting alarms and alerts, monitoring, there's no kind of management, remote management?

Chris Crosby, Compass Datacenters:

Correct. And that's by design from a Compass perspective from day one, we didn't want to have the ability to remotely control something at a site.

Yevgeniy Sverdlik, DCK:

Okay. So you don't want these communications going over the internet or someone could break in and-

Chris Crosby, Compass Datacenters:

Hack us.

Yevgeniy Sverdlik, DCK:

Vandalize, hack you and vandalize your cooling systems.

Chris Crosby, Compass Datacenters:

That's right.

Yevgeniy Sverdlik, DCK:

So which of the changes that you guys have made to the way the company operates during the pandemic, which do you think will stay in the longterm?

Chris Crosby, Compass Datacenters:

I think the way that you treat when people are sick. I look back at some of these things and when you have flu outbreaks or things like that, and you have a group of folks that would get sick. I love the fact that, that's now, we now have a very clear protocol around that. Knowing that someone was ill, making sure that we check on those people and that we separate them from the other folks. I think that'll be here forever. And I think that's great, whether it's a common cold that spreads through everybody or it's the flu or something, stomach bugs or whatever, I think that we've got a better approach to it just in general.

Yevgeniy Sverdlik, DCK:

Okay. So the protocols that you guys have now for people getting COVID, you're going to keep them for people getting the flu or something.

Chris Crosby, Compass Datacenters:

Yeah.

Yevgeniy Sverdlik, DCK:

Okay, let's shift gears. I have a list of trends, industry trends that I'm really curious to hear your thoughts on. And the first one is clean energy. There's a lot of focus on renewable energy for data centers lately, it feels like it's, there was always interest, but it feels like it's accelerated last year and especially the last year. And it appears to be driven primarily by data center customers wanting to clean up their carbon footprint. I think last year it also started being driven also by investor interests. How do you guys think about renewables at Compass? Are you investing in clean energy? Have you seen more interest from customers?

Chris Crosby, Compass Datacenters:

We focus really on trying to get, at least let's talk about our campuses. We try to get our own substations, so that we can take in high voltage and we have better options in terms of access to green energy at the locations that we're at. So it's been part of our selection process from a site selection perspective, going to one area with one power provider in a Metro versus another area, based upon what the renewable choices are, that has been core to us for, been quite some time now. So probably the last seven years, six, seven years.

Yevgeniy Sverdlik, DCK:

So if there isn't renewable energy available on the grid, you guys won't go to that local site?

Chris Crosby, Compass Datacenters:

No, there's obviously there are places where you might have a client that needs to be in a certain location. And some heavily regulated areas don't have as many options as unregulated areas where you may have more options. So you have to live with some of that from time to time, but it's definitely, as we look at where we site our campuses and things like that, it's definitely been a consideration for us. I mean, our Montreal facilities are obviously a hundred percent hydro power, as is most of the power in Montreal, but when you take a place like Phoenix or Dallas, you choose locations where you can definitely get the options that you need, even in Northern Virginia as well.

Yevgeniy Sverdlik, DCK:

And as a wholesale provider, what role do you play in power procurement? Do you guys actually strike the power contracts for your customers on their behalf or do you just build the buildings and let them handle the contracting for energy?

Chris Crosby, Compass Datacenters:

Yeah, we work collaboratively with them, but part of our control offering to the client is to allow them to take the meter if we're able to give them the meter, but you still have to do all the legwork on the front end to be able to give the options, so even if they do take the meter.

Yevgeniy Sverdlik, DCK:

How have your clients been addressing the intermittency issue with renewables? There's a lot of renewable energy credit decoupling that's happening, especially in the US in markets where it's difficult to get direct renewable energy, a lot of issues that are very complicated system. How have you seen your clients handle that?

Chris Crosby, Compass Datacenters:

So with some of the largest customers, they have obviously very sophisticated power procurement plays and how they do things in bulk, at scale on a grid level is different than let's say a one-off customer that's doing things. We predominantly deal with the larger clients in that regard. We don't deal a lot with the credits and all that, that world of buying things. We prefer to choose locations where we know we can get access to renewable energy, but you don't always have that choice. We really look at the green side in a holistic manner from a stewardship perspective. So everything from how we build the product, so the things we've done with CarbonCure to how we do our roofing to trying to get to zero waste or limited dumpsters on the job site to all the way through the, we've been no water from day one. We do view water as a pretty precious resource as well.

Chris Crosby, Compass Datacenters:

So I think we're very holistic in our thinking in the beginning, so it's not like, even if you don't have a renewable, a great in renewable mix, you may still do lots of other things in terms of your land use and how you go about building and not putting up wasted things, because the materials are ultimately very much a large part of the carbon footprint as well.

Yevgeniy Sverdlik, DCK:

So are there other aspects of sustainability than energy-

Chris Crosby, Compass Datacenters:

Absolutely.

Yevgeniy Sverdlik, DCK:

... in addition to energy, which sounds like you mostly let your clients handle? And when you were talking about large customers, you're talking about companies like of the scale of Microsoft or Google or Facebook that kind of have these very sophisticated energy procurement. Okay. Next thing is investment. There's been a wave of new institutional investors eager to invest in data centers in recent years. Compass is a beneficiary of that trend. You guys were acquired three years ago by a couple of such investors. You've got another 3 billion commitment in 2019. I'm curious about your view of the effects all this newly available capital has had on the industry. I've heard worries that there are too many inexperienced teams getting capital entering the market, complaints that the infrastructure funds or pension funds have pushed M&A valuations to crazy levels. What's your take here?

Chris Crosby, Compass Datacenters:

Here's the thing, I think data centers are infrastructure. So it makes sense to be in that category, how rapidly it occurred to go from being an anomaly in the real estate category to being a core real estate area of data centers to quickly shifting to infrastructure, that occurred very quickly. But if you look at it and this pandemic has shown that out. I mean, what is there if there's not Squadcast and Zooms, and these sorts of things, you can't do things without the data center and it is core. If you look at a data center, you look at what goes through from an entitlement perspective, the power, the fiber that goes to them, these are like ports, they don't move easily and the clusters don't move easily.

Chris Crosby, Compass Datacenters:

You can't just take data centers and put them wherever you feel like it, because you've got connections with the power, as well as with the fiber side of things. And so I think that data center locations are going to refresh over very long periods of time, but they'll always be data center locations. That's my personal view. And so I do view it as infrastructure. And I think that the folks that are thinking in that capacity versus the build to last versus build to exit, I think are going to be the successful ones in that game.

Yevgeniy Sverdlik, DCK:

Companies that invest in infrastructure for a long-term versus maybe some of private equity players that have traditionally funded this industry that are looking to exit fairly quickly, at least some of them, then infrastructure fund would ...

Chris Crosby, Compass Datacenters:

And I think the infrastructure folks having that long view is great for the industry because you're going to make better decisions over the quality of the building that you're going to build. How long it's ... You're going to think differently if you think about a long-term asset, it's, you don't build an airport to just get rid of the airport, you know the airport's going to be there for decades and decades and decades and data centers are very similar to that. And I think that mentality is very good for our industry. I don't view it as a negative, I think it's a great option. I think that the private funds are at, or below the cost of where the public funds are at. I mean, when you live in the infrastructure world, you're not living by the quarter, you're able to take a longer-term view. And I think that's very positive for the industry. It's positive from a, you'll make better stewardship decisions from a sustainability perspective, you're just going to make better, longer term decisions.

Yevgeniy Sverdlik, DCK:

It seems like a more comfortable arrangement for kind of the business models in the data center world than the publicly traded route where you may spend a few hundred million dollars to build a facility that will not provide any returns for a year. And even if those returns will be attractive, but then at the end of the quarter, you have to be in front of analysts and answer questions. One, why are you spending this money?

Chris Crosby, Compass Datacenters:

Yeah, look, I think there's advantages to being public. And if you've got the scale of a Digital Realty or an Equinox, you can live with some of those blips from time to time. I think there's challenges though, too, to being public. And I don't miss it, I'll tell you, I don't miss that lens. But all investors are expecting to get return on their investment in some semblance of a timely fashion. I think just as private groups, there's maybe a little more patient than the public guys have to deal with.

Yevgeniy Sverdlik, DCK:

And you said you don't miss it. And I want to fill in the listeners that maybe aren't familiar with your story. Chris used to work at Digital Realty. He was one of the earliest employees there. At some point, while 10 years ago deciding he would ... Well, why don't I let you tell that story, maybe briefly tell us about your decision to leave Digital and to start Compass.

Chris Crosby, Compass Datacenters:

It was, first off, great run at Digital Realty and had great colleagues and still very good friends of mine. And when I left, I really thought I was not going back into the business. And the genesis of Compass was really because I kept talking to people about what I thought was missing from a model perspective for the industry and in terms of giving users more control of where a single tendency type of environment versus the multi-tenancy type of environment and letting them have a lot more control over things. And we've evolved that Compass business into a kit of parts where we can offer a lot of different product types. And it's been a lot of fun to do, but if I wasn't leaving digital planning through Compass, it happened that I kept finding myself talking about the same thing that I thought was missing in the marketplace, and we've been blessed and successful to fill some of that wedge out there.

Yevgeniy Sverdlik, DCK:

And that was, so you guys started with these single-tenant kind of midsize data centers as opposed to kind of massive campuses that Digital was building.

Chris Crosby, Compass Datacenters:

Yeah. I mean, I didn't want to compete against my friends, my baby, so to speak. The thing that I was a big part of. And all of my colleagues and everything else. So you go where there was no one and we started in secondary markets and the business model has evolved our ability to deliver products of various sizes has evolved. And in our construction program picking really the world of manufacturing into the approach of how you do construction has evolved over the years. So a lot of blood, sweat and tears and investment and innovation. And I think we're one of the few groups with a chief innovation officer with Nancy, what we do in R&D and really trying to constantly push the envelope of how to do this better. And for the benefit of our clients, which reduces their costs, then increases their quality.

Yevgeniy Sverdlik, DCK:

Having a chief innovation officer and investing in R&D, it isn't part of a typical data center developer business model. So where do you guys concentrate of that R&D focus?

Chris Crosby, Compass Datacenters:

It's in a variety of different areas. Like some of the initiatives we announced last year, like CarbonCure was a great one, we do concrete structures and how can you reduce the cement content? And so we partnered with CarbonCure, and now we're able to reduce down the amount and actually take CO2 out of the atmosphere and put it into the building, which is really cool. Turn it into part, basically limestone. And so we've got innovations from stewardship perspective, we're working on some things there. Again, this year that hopefully we'll be able to announce a little later this year from a sustainability, we do a lot from a process perspective as well.

Chris Crosby, Compass Datacenters:

We did a streamlining of how submittals get done in the world of construction, which sounds really boring, but this is how you increase quality, decrease the timeframe that it takes to get things done, make sure that you have things done the right way. So it's everything from process to product on the innovation front. Nancy's done a great job. Some of the innovations we do around diversity, like we've been able to introduce so many women to the field of construction and it's such a great business lens for us because we see so much business value over how we're able to bring junior construction management into the business and what their lenses are, is a great lens, versus the all male jail job site lens, you don't get to see quite as much. So it really hits on a lot of different facets from our perspective in terms of innovation.

Yevgeniy Sverdlik, DCK:

So you guys had kind of a specific hiring goal to diversify your team, to hire more women?

Chris Crosby, Compass Datacenters:

A hundred percent, a hundred percent, that's across the company. I mean, just in general, if you have, going back to my roots at [inaudible 00:26:21] research Nortel, if you have a highly diverse group of folks aligned around a culture with a vision, you produce the best. And so we've believed that from day one in the company. And so it's a very intentional focus for us to not just background or gender, race or color or creed, but also personality testing. We want different personality types on teams. And so it's really a fun place to be when you have a lot of different types of people because every day is a great day. We don't make assumptions about each other or why people say certain comments or whatever, we're just a very curious team and aligned around a common vision.

Yevgeniy Sverdlik, DCK:

This issue of diversity, it's not just in construction, it's in the data center industry, it's especially acute and there's been a growing shortage of decent talent for companies to hire, the talent pool is aging and quite homogenous, primarily white dudes, 15 up, have you guys felt the effects of this, has a talent market been increasingly a rough for you?

Chris Crosby, Compass Datacenters:

It's been interesting. We've really leveraged the veteran community as well because the veteran communities coming in are highly diverse as well. We leverage that plus the investments that we've made into technology, some of the things that we've done, our electronic checklist, the way that we can ... We value the Japanese concept of pokey okey, which is the concept of inadvertent error prevention. And so how do we use systems to allow people to perform very well. Much like you can land a plane on the Hudson because you follow the checklist, the same types of concepts. How do we take those things from other industries and apply them into our industry, not just in how we build our product, but also how we operate the facilities, how we secure the facilities.

Chris Crosby, Compass Datacenters:

And so that's allowed us to neutralize things. We're not relying upon pokey okey, we're relying upon self discovery and the empowerment of the worker, as opposed to having to be relied upon training and years in service and things like that in order to perform a job well. So it's just a different mentality. It's part of how Toyota transformed the automotive industry, from the GM way, we apply the same principles and if you stay very disciplined around it you get the benefits because while I'm a middle-aged white guy, I don't want to have a whole company of middle-age white guys. There's nothing beneficial to that.

Yevgeniy Sverdlik, DCK:

Okay. So instead of looking for candidates that have the exact skillset that matches kind of the needs, the specific needs of the job, you can broaden your available pool by maybe hiring people that may not necessarily have the exact skillset, as long as you have a system in place to train people and to give them those skills?

Chris Crosby, Compass Datacenters:

That's right. That's right. If I turn a game of chess into a game of checkers, you broaden the universe of candidates that you can have.

Yevgeniy Sverdlik, DCK:

And I want to talk about those two edge acquisitions. I think it was one deal, but two companies, right?

Chris Crosby, Compass Datacenters:

Mm-hmm (affirmative)

Yevgeniy Sverdlik, DCK:

Compass acquired these two edge computing oriented companies couple of years back, micro data center builder and the software company specializing in managing remote age facilities. I haven't heard much about those companies since the acquisition was announced.

Chris Crosby, Compass Datacenters:

Sure.

Yevgeniy Sverdlik, DCK:

And you guys have kind of stayed pretty quiet press wise I think intentionally, what results have there been so far from that Edge deal?

Chris Crosby, Compass Datacenters:

So we're really, really happy. So Radix IoT, we rebranded the software company has Radix IoT, it's led by Fred Dirla is our CEO for that business, unreal company. The team there has, we've done a lot of different things. We recently brought in another acquisition into that group from called Mango, which is, we've just continued to enhance that business of how do you have management of thousands of devices very, very efficiently, API-ish, the next generation of things, the way that you would do it if you got to start over, versus the old school world of doing things from a BMS perspective, it's been very successful. We're very, very happy with that business.

Chris Crosby, Compass Datacenters:

I encourage anybody to take a look at Radix IoT. It's a really, really neat business. We use it both internally, as well as for the Compass products, but then we also use it, it sells its product externally on all types of different applications from quick serve retail, to managing solar farms, to solar panel farms, to monitoring edge data centers, cell towers, you name it, it's a really, really neat product to be able to do that cost effectively, integrate access controls and the like.

Yevgeniy Sverdlik, DCK:

So not just data centers.

Chris Crosby, Compass Datacenters:

No, not just data center, which is why we branded as its own company.

Yevgeniy Sverdlik, DCK:

And so what sorts of, can you give us maybe a few examples of the functionality that it provides?

Chris Crosby, Compass Datacenters:

Sure. So it does, so think of monitoring. So I want to get data from devices. Maybe it's a, if I use the data center as the analogy, the air conditioning unit, or the power, the breakers or this or that, if I'm thinking of maybe it's temperatures and lighting, or at a retail fast food place, maybe it's sensors from a cell tower maybe as an access control, and the air conditioning unit for the cell tower box. So there's a variety of different approaches there. We incorporate access controls as well, so we have the ability to do controls remotely. So that's one of the big challenges is how do you deal with both security as well as security access control, as well as monitoring.

Chris Crosby, Compass Datacenters:

We've got the ability to do a lot of de-SEM type of elements very quickly. So you can take and have different views. There's a gooey type of approach that gets utilized, but also more importantly, API based approach that goes into our client's Knox. And so just getting them and ingesting the data, think of it ultimately like I can take any sort of protocols in to me and I can, as I take those protocols in, I normalize it into a data layer and then I present that data back. So that's what Radix does in a nutshell. And it's a very, very powerful, very simple tool.

Yevgeniy Sverdlik, DCK:

How has the other company, I forget it's-

Chris Crosby, Compass Datacenters:

EdgePoint?

Yevgeniy Sverdlik, DCK:

EdgePoint, yeah. So they were two guys, the founders of that company, they worked for Google building huts, network huts for when Google was building out their wireless network. And they founded this micro data center company seeking to leverage that knowledge that they had accumulated while working for Google. What have you guys done with that acquisition?

Chris Crosby, Compass Datacenters:

So we've taken it and we've evolved it. So the EdgePoint product for us, we work in these hundred kilowatt increments and you can assemble them together, into various, basically miniature data centers. It looks and feels like a real data center, not, I think you saw the [ashtrei 00:34:08] notes about the dangers of the edge and how do you really put tens of millions of dollars of equipment into these data centers or these edge facilities that aren't designed for that. And we really designed it to be that, to be a true data center. And so we've continued to come through a couple of generations on that design. And we generally are talking only to two larger type of clients. We don't do a lot of one-off type of things there, it's really for where folks want to roll that out. And we offer it into a model that is on a monthly basis, much like a lease.

Chris Crosby, Compass Datacenters:

We can do that on an MSA and there are so many similarities to it that I think the big challenge that I think a lot of folks on the edge and edge roll-outs. One is what are the applications that are necessary. And as you know, I know you covered a lot, some of them are more talk than they are reality at this point. But two is how do you do it at scale? And the at scale part is difficult because you still go through the same things that you would do for any building. You have to get permitted and entitled and have those elements up. And so that plays very well into our land and land acquisition, land development team. So we provide a full service offering in that regard and while we don't announce a whole lot of things, we keep things kind of quiet on our end. We're very happy to have that as part of our portfolio, as far as anything from the core to the edge.

Yevgeniy Sverdlik, DCK:

Have you guys deployed any of those for customers or is this right now more of a table-stakes for future?

Chris Crosby, Compass Datacenters:

We have, but I will tell you it's not in terms of the hundreds of units type of play. So it's still at a nascent stage from the edge perspective. We will probably have some announcements that we're doing with a group a little later, hopefully here in the first half of this year, that's much more of a, something that does belong in the public domain in terms of knowledge and hopefully that'll show you some of those applications and things that are coming and getting real out there from the edge.

Yevgeniy Sverdlik, DCK:

And I want to talk about your kind of shift from that early model of mid-sized data centers in tier two markets to hyper-scale. Well, you didn't shift, you kind of added the hyper-scale element. You guys entered Northern Virginia and Phoenix, that was in 2019, right?

Chris Crosby, Compass Datacenters:

Mm-hmm (affirmative)

Yevgeniy Sverdlik, DCK:

And that followed the route acquisition in Canada, which was also a hyper-scale play. And that was all part of this kind of expended focus on the hyper-scale market. How are the rules different in the hyper-scale market from your experience?

Chris Crosby, Compass Datacenters:

The same principles apply in terms of how we started the business. I think what happened was we evolved the kit of parts, if you will, on how to build and assemble at a larger scales. But the same contractual philosophies, the same ways that we were able to give levels of control on those medium-sized data centers, of those smaller data centers, we just basically evolve that into the large scale market as well. And obviously our equity partners have been huge in terms of making that change that allowed us to do some of the things that we've done on the campuses that we have. Campuses take a long time to develop. It's a long time to put a substation in and a high-voltage substation and develop the land. And so that's been great.

Chris Crosby, Compass Datacenters:

We've had great partners on our investor side of things. And it's just allowed us to blossom into that business if you will. And it is really our core now, in terms of things. So the way that I like to think about it is to do something well at a small scale is very easy to do it well at a larger scale. It's very hard to take a large scale and try to do it on a small scale basis. So if we can really focus on the unit and we do that very, very well, we'll always do well on the larger scale. And so we still do both, that's why we still do smaller facilities as well. And keeping that discipline we think is very important in terms of that, how we can continue to put the okay in this business and make it easier and easier.

Yevgeniy Sverdlik, DCK:

What about from the sales perspective, engaging with customers. So hyper-scalers have these very sophisticated teams, site, selection teams, procurement teams. I imagine they're quite a bit more aggressive than your typical enterprise, when they're negotiating with data center developers, what's been your experience there?

Chris Crosby, Compass Datacenters:

It's been good. I mean, our sales team is predominantly focused on cloud. It is core to our business and I mean, we don't have a hard time meeting a lot of the requirements that these guys have. Are they aggressive? Sure. But they deserve to be aggressive. These are the largest companies in the world, and this is their business that runs in these facilities. So I don't have a big issue with it. Our team doesn't have a big issue with it. I mean, you're dealing with the best companies that are making incredible impact out there. And you be respectful of that, you know where your place is and we're a solution provider, not a no provider. That's the way that we look at it.

Yevgeniy Sverdlik, DCK:

And in Northern Virginia, there have been concerns of overbuilding and underpricing as there are every once in a while. Lots of developers entered the market. There's lots of construction by new and existing developers, companies building a lot and pricing quite aggressively. Has that affected your business in that market? Has that changed the calculation you had when you originally decided to enter Northern Virginia?

Chris Crosby, Compass Datacenters:

And maybe we're one of the bad guys. So no, I mean, I don't think it has. If you focus on how you do your business and I'll use the car analogy again. I mean, Toyota builds a very good car and they do it very well and they can do it at a low cost basis because they do it so well. And so if you have a low cost basis, why wouldn't you pass that on to your clients? And why wouldn't you give them the advantages that are associated with that? So maybe for someone else, that's a stretch, but for us, we just consider it continuous improvement.

Yevgeniy Sverdlik, DCK:

Okay, Chris, that's all I have. Thank you so much for taking the time to talk to me.

Chris Crosby, Compass Datacenters:

Thank you, Yevgeniy. Good to talk to you as always.