DuPont Fabros: New CEO Chris Eldredge - 'Is Solidly In Charge'

On March 2, DuPont Fabros Technology DFT new CEO Chris Eldredge was introduced by former CEO and current Vice-Chairman Hossein Fateh at the Citi Global Property Conference -- who shared unequivocally that his new CEO is "solidly in charge." DuPont Fabros owns and operates immense, "sleep well at night," N2 data center facilities, primarily leased on a mega-wholesale and wholesale basis to large enterprise customers. The top four DuPont Fabros tenants are household names with excellent credit: Microsoft, Facebook, Yahoo and Rackspace. • http://www.benzinga.com/trading-ideas/long-ideas/14/12/5059352/the-holy-grail-for-reit-investors Tale Of The Tape However, DFT shares have struggled since its Q4 2014 earnings call -- losing 15 percent in the past month -- after 2015 guidance was lowered; due in part to DFT's seventh largest tenant, Net Data Centers (NDC), failure to pay January 2015 base rent. • http://www.benzinga.com/news/earnings/15/02/5220359/a-new-ceo-and-2015-guidance-are-knocking-this-data-center-reit-down While DuPont Fabros was willing to work with this tenant, another data center landlord was the catalyst for the NDC subsequent bankruptcy filing in late February. 3 Slides - DFT Business At A Glance 5 Key Takeaways - Citi Conference 1. CEO Chris Eldredge - Background: 20 years of experience in data centers, managed services, cloud and global network infrastructure.  Former Position - EVP Data Services & Global Network Solutions for Nippon Telegraph and Telephone Corporation NTT.  Global Scale - NTT is the third largest global communications company with ~$112 billion of annual revenue and over 225,000 employees.  Deal Experience - Over $15 billion of M&A transactions, on both the buy-side and sell-side. 2. DFT Competitive Advantages:  Low Cost Provider - DFT builds very large wholesale data centers such as ACC-7, which will be 41.6 MW, upon full build-out. DFT estimated operating expenses of $20/kW, compared with ~$60/kW for a hypothetical 6 MW enterprise data center.  Triple-Net Model - customers pay operating expenses, taxes, insurance, as well as the majority of cap-ex.  Existing Relationships - the vast majority of DFT's logos are investment grade and lease at multiple locations. 3. 2015 Development Pipeline: there are currently three projects under active development. Upon completion these three projects will represent ~11 DFT percent portfolio growth Y/Y. 4. Evolving Business Model: DuPont Fabros currently has "a very modest" sales and marketing staff. Eldredge shared this initial plan:  Sales Force - four new sales heads are currently budgeted.  Marketing - to be augmented with two additional hires.  Product Development - Eldredge can see a "need for new products," and plans to create a product development team.  Interview Customers - Eldredge plans to meet with the DFT customer base to get input and evaluate potential new markets.  Report Findings - Eldredge currently intends to present a strategic plan for DFT board approval potentially late Q3, but no later than by Q4 2015. 5. New DFT "Mini-Wholesale" Strategy: Eldredge sees this previously announced initiative as a potential game changer and positive development.  Wider Sales Funnel - previously, DFT was not addressing the market for customers in the 100kW to 500 kW range. Mini-WH will be a "cage product" with multiple customers in a data hall; however DFT has no intention of scaling down to "single cabinet" requirements.  Immediate Acceptance - DFT already signed up its first mini-WH customer in January.  Accelerate New Jersey Leasing - since 2010, space absorption at DFT's 188,000 SF NJ1 Phase 1 has been disappointing. Eldredge pointed out that the Financial and Big Pharma companies that make up a large percentage of the New Jersey market should be attracted to this size offering.  Incubation - the "next Facebook," or the "next Twitter" could grow out of this marketing effort.