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JPMorgan Eyeing Data Center Location in Totowa, Sources Say

Banking Giant Also Building Data Facility in Rockland
March 2, 2018
JPMorgan Chase & Co. is pursuing a large data center facility planned for Totowa, NJ, the second such center that the U.S. bank will be building in the New York metro region, according to several sources.

JPMorgan is the force behind a local developer’s plans to purchase the roughly 140-acre former site of the Northern Jersey Developmental Center at 169 Minnisink Rd. in Totowa, sources familiar with the situation said. The state of New Jersey has agreed to sell the government-owned parcel for $5 million.

Many large banks and financial services providers have been expanding their networks and financial technology (FinTech) systems over the past several years as more bank customers turn to online and mobile banking services to process millions of withdrawls, deposits and transfers.

The borough of Totowa recently approved plans by developer Bill Colgan of Community Healthcare Associates LLC in Bloomfield, NJ, to redevelop the property and build a 257,000-square-foot data center, which will have an electric substation as well as parking on part of the site. Later phases of the redevelopment on Minnisink Road include several smaller data center facilities, a medical office building, a research-and-development building and an assisted living facility.

Colgan hasn’t publicly disclosed a tenant or eventual owner of the new data center in Totowa, and could not be reached for comment. Borough Mayor John Coiro and JPMorgan spokeswoman Jessica Francisco declined to comment on who will ultimately occupy and own the data center.

But multiple sources said that JPMorgan plans to buy the property and construct the data center itself to its own strict specifications, becoming its sole occupant.

Colgan and his firm filed the redevelopment application for the former state developmental property under the corporate name NJDC Urban Renewal LLC. Last year Colgan won approval from the Totowa Planning Board to subdivide the site into four pieces, which would pave the way for the sale of any one of those parcels of land to a potential buyer.

JPMorgan already has a number of data centers in North Jersey, including leased space in the Meadowlands. It also has plans to construct a data center just over the border from New Jersey in Rockland County, NY, which has become an area data-center hub. Having the new North Jersey and New York facilities in close proximity to each other will help ensure safety and redundancy for the huge bank’s data, one source said.

Experts said that despite the higher costs of operating data centers in the Tri-State region, banking institutions such as JPMorgan prefer to keep multiple facilities of this type physically close to their New York City headquarters, to back-up data and transaction records and reduce latency, or how much time it takes for a packet of data to get from one designated point to another.

In a scenario very similar to what is happening in Totowa, JPMorgan had purchased a 60-acre tract in Orangeburg, NY, a hamlet of Orangetown, NY, to build a data center in an area that is just over the border from North Jersey.

In both Totowa and Orangeburg, the data-center-site property was government owned. In Totowa’s case, the state of New Jersey had owned the former site of a facility for the developmentally disabled that closed in 2014. JPMorgan’s data center is planned for 140 Old Orangeburg Rd., part of a 550-acre site that was formerly home to the Rockland Psychiatric Center. Orangetown owns that property.

In Rockland County, the name of the company that was purchasing the property wasn’t publicly disclosed initially. But last summer, then-Orangetown Supervisor Andy Stewart revealed that JPMorgan was the buyer and developer. The town closed on the deal to sell its acreage for $7.5 million to JPMorgan last October.

JPMorgan will spend $40 million to remediate the Orangeburg site and in its first phase, build a 130,000-square-foot data center, according to Jeffrey Bencik, Orangetown’s finance director. There is room on the property to construct a second, 130,000-square-foot data center, and, "That decision on whether to build or not will be made by JP Morgan Chase at some point in the future depending on demand, market conditions, etc.," Bencik said in an email.

Some remediation is also required at the Totowa site and is being factored into the land’s purchase price. In Totowa, the state estimated it would cost $10 million to remove asbestos and oil tanks, as well as to raze old developmental center buildings, Mayor Coiro said.

The land was appraised for $14.5 million, and, deducting the $10 million for remediation, set a minimum sale price of $4.449 million. The developer bid $5 million, which was accepted, Coiro said. The large data center will take up about one-third of the 144-acre site, according to the mayor.

As a state-owned property, the former North Jersey Developmental Center parcel has been off the borough’s tax rolls for decades. But once the new large data center is built, which will take three to four years, it will be paying about $540,000 in annual local taxes to the borough, "which for us is significant," Coiro said.

Rockland County has aggressively wooed data centers with tax breaks. Bloomberg LP built one there, and there is another one called and Fifteenfortyseven (1547) Critical System Realty.

"We have this cluster of data centers growing in Orangeburg," said Steve Porath, executive director of the Rockland Industrial Development Agency (IDA), describing the facilities as "big projects" and "great ratables."

JPMorgan will be getting a $35.5 million exemption from sales tax on a capital investment of $423.9 million over a 20-year span for its Orangeburg facility from the IDA, Porath said. The estimated total cost for JPMorgan’s data center is $450 million, according to Porath.

Orangetown’s newly-elected supervisor, Chris Day, said that the town is actively trying to attract additional data centers within its borders.

"We are recruiting more as we speak," he said.

Like many Manhattan-based financial-services firms, JPMorgan Chase already has data centers strewn across the Tri-State region. Before Superstorm Sandy in 2012, North Jersey was considered one of the top markets for data centers. There was a strong demand as financial firms, such as the New York Stock Exchange, which located a center in Mahwah, NJ, wanted facilities located near their New York City operations.

"For companies that needed to trade on those platforms, there was a technological advantage to being physically close to them network-wise, because you had less latency on the fiber optic network from where you were actually calling for the trades to where the trade was actually being executed," said Rick Drescher, managing director of the critical facilities group at Savills Studley Inc.

However, demand for data center space in the region cooled after Sandy, when some data centers were temporarily put out of commission by flooding and electrical outages. And the New York metro area’s high energy costs proved a turn-off for other companies, leading to the ascent of Northern Virginia, Chicago and Dallas as data-center meccas, according to Drescher.

But for some financial firms and exchanges, having data centers located near their New York City operations - and physically near each other within the region - is still critical for computer network-connectivity issues, according to Drescher.

"When you’re talking about financial services, they’re probably still one of the more likely to actually build and operate their own data centers," he said.

Speaking in general, Drescher said there are good reasons for banks and financial services firms that have time-sensitive information to have data centers in close proximity to their offices and to each other.

"The closer you are, the less moving parts there are in between you and the exchange, and it actually over certain distances will increase reliability," he said.

Another reason is data replication, according to Drescher.

"If you have to real-time replicate data between two physical locations, there are, depending on what kind of replication technology you’re using, there is a maximum amount of latency that can be in-between the two sites on the network in order for the data to stay completely in-sync," he said. "The farther you go on fiber, the farther you have to go away from synchronous replication to asynchronous replication, and then your data isn’t always in sync."



Linda Moss, Northern New Jersey Market Reporter  CoStar Group   
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