A valuable asset of City Utilities is up for sale and being marketed by a firm with an international reach as CU leaders try to part ways with its high-speed data management company.
Mike Finch, chief financial officer for City Utilities of Springfield, said the company has contracted with St. Louis-based real estate brokerage Cassidy Turley to sell the data-storage unit that supports its SpringNet broadband service at Springfield Underground.
On the market is CU’s physical server racks, cages and associated mechanical equipment, a lease with Springfield Underground and its client contracts. For the most part, the servers themselves are the property of SpringNet’s customers, and are not included.
CU officials have projected the data storage operation would require millions of dollars in investments in the coming years to ensure it has adequate storage space and backup capabilities for its more than 70 clients.
“We want to provide our customers with virtually 100 percent uptime. We want to make sure that we have the backup generators and (uninterrupted power supply) large enough to cover that electric load – and that is the infrastructure where we are reaching our capacity,” Finch said. “We have a hard limit out there now, and it would take additional monies to expand that electric and cooling capacity.”
Last month, CU General Manager Scott Miller discussed the sale potential in a live interview at Springfield Business Journal’s 12 People You Need to Know monthly breakfast series.
“It’ll put it in private hands, which I think is probably the appropriate place for it to be,” Miller said. “It has the potential of either bringing local money into the community or outside money into the community for expansion and maybe jobs.”
Finch said Cassidy Turley is currently shopping SpringNet Underground to potential bidders and has met with 12 interested parties so far. He said no hard deadline for bids has been set, though a late January soft deadline is approaching, and it should be months before a buyer is in place.
CU officials expect a multimillion-dollar purchase price, but declined to disclose a valuation. The data storage unit generated $3.4 million in revenue for CU in fiscal 2013, which ended Sept. 30.
At least a dozen companies are in the mix for purchasing City Utilities' SpringNet Underground data storage unit.
Birth of the SpringNetRoughly 25 years ago, CU constructed a fiber optic network across Springfield to communicate with its substations throughout the city. Finch said officials realized there was extra capacity and created SpringNet to sell broadband to local businesses.
About a dozen years ago, demand for storage services through SpringNet or other broadband providers was identified and served as the impetus to establish SpringNet Underground, Finch said. Local SpringNet Underground data-storage users have the option of securing broadband through SpringNet or other providers, Finch said, noting CU’s broadband service is not for sale.
Today, the Springfield Area Chamber of Commerce, Springfield Public Schools and CoxHealth are among its clients that lease individual racks or caged servers as a primary or backup data location.
Charges range from $300 to $750 per month for cabinet space, $25 per square foot for custom-designed space and 15 cents per kilowatt-hour for electrical/cooling backup.
While space is limited under current configurations, Finch said a private buyer could add an additional building at the Springfield Underground site in northwest Springfield, where equipment is highly protected and buried 100 feet under Ozarks limestone.
In December, Miller said the decision to sell SpringNet Underground was brought on by the rising costs of providing broadband services to commercial and industrial clients.
“The problem with it is we have a business that is expanding, and we don’t have the capital to go into it,” Miller said during the 12 People breakfast at Hilton Garden Inn. “The next expansion’s going to be somewhere north of $16 million, and the next expansion after that is going to be $60 million. We just don’t have the money for that.”
With the need for facility expansions made clear the last two years, Finch said discussions with City Council identified a sale was the preferred action. In mid-2013, CU selected Cassidy Turley to court buyers.
Cassidy Turley representative Sutton Roley, who is marketing SpringNet Underground, declined an interview, citing a confidentiality agreement the firm signed with CU.
Spring forwardCoxHealth Vice President and Chief Information Officer Bruce Robison said he isn’t too concerned about CU’s efforts to secure a new owner for the storage business where Cox holds roughly 700 square feet of storage space.
“I think the impact of CU attempting to sell the space should be virtually nil, as far as we’re concerned,” Robison said.
“I’m fairly sure other collocated entities in that space would have contracts similar that would preserve whatever relationship we have with that space and the business operating it through the terms of the contract.”
He said CoxHealth is midway through a 10-year agreement with SpringNet Underground, though it also contracts for storage services with a Kansas City company. CoxHealth utilizes SpringNet Underground to store electronic medical records for some 60-plus clinics within its system with the help of dozens of servers that act as virtual servers.
“We might have one server in the rack that literally runs 25 other servers. To all appearances outside, it would work like 25 servers,” Robison said.
“We would hope that it wouldn’t be purchased by someone who doesn’t really understand how to manage that kind of business; I guess that would be a concern. I guess we would cross that bridge when we get there.”
Finch said a late January soft deadline for bids is approaching, but that could be moved back if the broker is still fielding requests for information.
Web Editor Geoff Pickle contributed to this story.[[In-content Ad]]
