Many panelists foresee rough 12 months, followed by surging demand
By Rich Miller
CarrierHotels News Staff
NEW YORK, Feb. 13, 2001 — Carrier hotel projects can prosper over the long term, as developers and investors benefit from long-term trends driving bandwidth demand, according to speakers at this week’s IMN conference at the Marriott Marquis in New York.
But first, they have to survive the next 12 to 18 months. And it may be a harrowing ride.
“The whittling out of the industry will be very sharp, and most of it will happen this year,” predicted James Lavin, president of Switch & Data Facilities Corp., a Tampabased developer of colocation facilities.
“Anyone in this industry who isn’t seeing survival as a primary goal is probably painting too rosy a picture,” Lavin added. “We are hoping to acquire sites as people disappear.”
That consolidation is being driven by a funding drought that has many major players scaling back plans for network expansion, and some others scrambling just to survive, according to speakers at the Forum on Financing & Developing Carrier Hotels and Internet Data Centers, sponsored by the Information Management Network.
“It’s all about access to capital,” said Michael Liss, president and CEO of Fibernet Telecom. “The banks really have stopped lending.”
Liss was among those who believe the credit crunch is temporary.
“(Ultimately), the carrier hotel business will continue to prosper because of all the outsourcing going on,” said Liss, who called the demand for bandwidth “inexorable.”
But for the moment, Wall Street is wary of telecom infrastructure projects.
“Financing for telcos is a lot like the Loch Ness Monster,” said James Shaw, chief operating office of RPD Catalyst LLC. “A lot of people claim to have seen it, and there’s a lot of anecdotal evidence of it.” But first-hand experience is another matter, he said.
In the wake of high-profile failures in the dot-com and DLEC space, and the slump in telecom stock prices, developers and investors are seeking answers about the industry outlook.
The IMN event turned into a major venue for taking the market’s temperature. The conference was initially expected to draw about 200, but more than 575 were registered, with crowds overflowing conference rooms in several sessions.
Several panelists said tenants in carrier hotels are either short of cash or spending cautiously. Some have delayed construction work on their colocation space, creating a “ripple effect” squeeze on their carrier hotel and data center landlords.
“The market is waiting for colocation tenants to build out their space,” said Thomas Mulroy, chief executive officer of T-Rex, a Miami-based developer of carrier hotels. “Tenant access to capital has diminished considerably.”
“Most tenants are scrutinizing their spending decisions,” agreed Paul Pariser, a principal in Taconic Investment Partners LLC, which also develops carrier hotels. “A year or two years ago, $5 million decisions were made instantaneously. Today, people are scrutinizing their decisions.”