Terremark May Expand in Virginia, Santa Clara

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An aerial view of the NAP of the Capital Region, showing two of the three completed data center buildings at the Terremark campus.

As it continues to see growth in its colocation and cloud computing operations, Terremark Worldwide is preparing to expand its data center space in four key markets, and may tap the debt markets to fund construction. Revenue was up 22 percent at $84.9 million, with 67 new customers and $37.7 million in bookings, and Terremark increased its fiscal year guidance for revenues to range from $350 million to $353 million.

Terremark's strong earnings and outlook drove a 13 percent jump in the company's stocks Tuesday, as shares gained $1.27 to $11.03. In Monday's quarterly earnings conference call, Terremark chairman and CEO Manuel Medina said the demand for its services will support additional data center space. The company leased 48,000 square feet of space in the last quarter.

More Growth for Culpeper NAP
Medina said Terremark is preparing plans for a fourth data center at its NAP of the Capital Region (NCR) in Culpeper, Virginia. The new pod will be 50,000 square feet, and Terremark expects it will cost about $45 million to build.

"Approximately 80 percent of the campus data center space is currently contracted and we have a very robust pipeline with a number of large potential colocation opportunities," said Medina. "We're carefully monitoring both demand and capacity of the NAP Capital Region, and we will break ground on the construction of the fourth data center, Pod D when necessary. As we did with Pod C we expected to deliver space to customers within six months of launching construction."

Terremark is also making plans to begin the next phase of construction at its data center complex in Santa Clara, California. The company expects to break ground on the 20,000 square foot expansion in the first three months of 2011 and complete construction by the end of the year. The Santa Clara expansion is expected to require about $25 million in investment.

"In California we continue to see strong demand and we have considerably advanced the planning and permitting process of the third phase expansion of our NAP West data center," said Medina. "Sticking to our blueprint for strategic growth, we have a very robust sales pipeline in Santa Clara and expect to have executed contracts in place before launching the latest phase of our expansion."

Busy Market in Santa Clara
Santa Clara is already seeing active data center development, with new projects from Digital Realty Trust, DuPont Fabros Technology, CoreSite and Vantage Data Centers bringing new space online in the next year. Terremark say that most of this space is positioned as wholesale data center space rather than colocation,

Terremark is also planning a $15 million expansion of the NAP do Brasil, which will add 15,000 square feet of data center space to the facility in Sao Paulo. The company may also build out additional data center space on the fourth floor of its flagship Miami building, the NAP of the Americas.

Company Eyes Options for Borrowing
To fund the additional expansion, Terremark is weighing its borrowing options. Chief financial officer Jose Segrera outlined the options being considered.

"Our first option is a $9 million commitment at an annual interest rate of approximately 6 percent that we recently received from the overseas private investment corporation OPIC, an agency of the US government that helps US businesses invest overseas," said Segrera. "Given that OPIC recently increased their funding of global internet infrastructure projects we are very excited about the potential to expand this relationship.

"A second option is the utilization of our $75 million second lien basket under our existing indenture. We now have an established reputation in the fixed income market and given the premium at which our senior notes trade, we can access these second lien notes at very attractive rates. Lastly, much like the cellular tower operators, we are also exploring ways to leverage the cash flows from our customer base of very strong credit worthy Federal and enterprise customers. This alternative would significantly lower our cost of capital while increasing our balance sheet flexibility."