Transcript Start

Andrew Greiner: And finally, Mark Cote joins us to zoom out to the industries of the future. And what corporate leaders need to understand about where growth, energy, and technology are converging next. Hello and welcome to the Area Development Podcast. I'm Andrew Greiner, editor and your host. Let's get into it.

Andrew Greiner: They've teamed up with infra partners, a manufacturer of prefabricated AI data centers. Here's how they describe what they do.

Matt Landek: For the data center mission, critical space, project management, facilities management, commissioning, really focused on the built environment.

Michalis Grigoratos: Run the data centers for 20 years. I've got a background in engineering, so I build and constructed data centers for pretty much all of the big players over the last 20 years, all over the world. So look, quite clearly there's a lot of demand for AI compute. Every single headline is talking about. There's not enough compute out there, right?

Michalis Grigoratos: So we need to build faster. We need to be bigger. And this is exactly what the partnership between Infra Partners and JLL is trying to achieve is to improve the time to first token. Nothing else matters, right? Those GP need to be deployed quickly and then you can start to earn revenue.

Andrew Greiner: Traditional data center projects move in sequence design, site prep, build commission.

Michalis Grigoratos: Revenue. We were able to remove the que sequential phase from a traditional project while we are manufacturing the asset in a factory.

Michalis Grigoratos: And then we simply decide we can take away basically anywhere between 13 and 22 months on typical hyperscale development. So in pure numbers, that's about 48% a accelerations. It's

Matt Landek: really that rinse and repeat approach that just first project will shave X amount of months and that'll just go exponentially as we move along.

Andrew Greiner: Speed only matters if you can secure power. AI workloads are pushing operators into regions they never would've considered a decade ago. Energy rich corridors, remote geography, secondary markets strategy is shifting. Instead of bringing power to the data center, you bring the data center to the power.

Michalis Grigoratos: We were unable to do it to a certain extent. During the cloud days, right. AI and especially the training side of AI, allows us to go to the power.

Matt Landek: When you think about some of the areas that we're going to, I don't think any of us would've predicted how deep we would be in areas like West Texas, right? In the end, it's the chase for land and power, and then the industry is trying to build the ecosystem around the, I think the overarching point is failure to act is probably the biggest problem here, because if you wanna try and go.

Andrew Greiner: Capital is still flowing into AI infrastructure, but planning mistakes are getting more expensive. In a market where capacity is often pre-leased before it's built, failure to act early can mean losing access entirely.

Michalis Grigoratos: Just to give you a snippet is every single data center that we've built over the last 20 years needs to be twice.

Michalis Grigoratos: The amount of that needs to be operational over the next five years. The scaling require is massive. Land is not an issue. Power is not an issue. We just gonna have to look better and harder and be willing to pay a little bit more, right? And overcome things like labor in remote locations, which we are fixing all of these things.

Andrew Greiner: And then there's the longer term question. What happens when AI hardware evolves faster than traditional real estate cycles? Five years can now represent a generational leap in chip performance that changes how assets depreciate, how projects are financed, and how risk is managed. But

Michalis Grigoratos: By the time the first round of leasing will finish, which is like typically five years for ai, those H one hundreds, they're gonna be so old, will be the equivalent of 20-year-old service from the cloud world. So in five years, you have a 20 year technology change, right? A typical a hundred meg AI data center is about a billion, two a billion, three worth of real estate asset investment.

Michalis Grigoratos: So whether he operates them for five years or 20 years, it doesn't really matter. He is still gonna have his people. That is a challenge. And then I think the second biggest challenge will be to.

Michalis Grigoratos: Find resources and allocate resources in a collaborative way

Matt Landek: is very difficult for organizations right now is trying to figure out, back to the point around capacity planning and everything, it is. Just trying to figure that out. But I think for me, coming from a service pro service provider point of view, it's going to be around people.

Matt Landek: So how do we upskill? And retrain the next generation of workers is going to be, it's my biggest challenge.

Andrew Greiner: Okay. Very good guys. This is a wonderful conversation. Thank you both for joining us today on the Air Development Podcast. This has been like really insightful. Appreciate your time so much.

Matt Landek: Thanks for having us, Amy.

Andrew Greiner: Yeah,

Michalis Grigoratos: thanks for your time, Andy, as well. Great questions.

Andrew Greiner: Okay, so land may be solvable. Power may be so. Capital remains available, but the real test for the industry may be whether it can adapt to a technology curve that refuses to slow down. AI infrastructure is no longer niche. It's becoming a utility layer of modern society and those who can build it faster and smarter will shape what comes next.

Matt Landek: Congrats on your move, Cedar Park and that a creation of 164 jobs in $15 million investment. What were the top three factors that tipped the scale

Andrew Greiner: in selecting Cedar Park for your new HQ and manufacturing facility?

Justin McAfee: We are a hardware manufacturing company. We make fans in a variety of different industries from CPU cooling or artificial intelligence data centers, all the way to HVAC systems and larger propulsion systems that can be used in aviation as well.

Justin McAfee: So that was the bottleneck that we were facing as a company, and I was living in Bridgeport, Connecticut, not having a facility, not having a way for me to be able to start that facility. I started looking elsewhere. We looked at 50 different cities. I sent out 150 emails. I had more conversations with mayors than I did with the actual mayor of Bridgeport in 12 months.

Justin McAfee: Within 72 hours, I moved forward in terms of getting a proposal within 14 to 21 days from 15 different cities. It came down to a competitive match between Covington, Kentucky and Cedar Park, Texas for their hq. The first metric we were looking at was execution. The second metric was, are you able to align with us in terms of our company and where we need to be within 12 months?

Justin McAfee: They brought in a VC connect. Tide in Cedar Park through advanced manufacturing. It was a complete alignment from day one. We hadn't even talked about the incentive package. That was inspiring for me having these conversations with Cedar Park. The third thing was the timing. We needed to move fast. I mean, it's, it's definitely my fault that I actually waited 12 months before I moved outta Cedar Park.

Justin McAfee: The conversations I'd been having with customers saying, we need to have a manufacturing facility, a footprint local in Cedar Park. Being able to execute on the timing and make it quick really pushed that forward.

Andrew Greiner: Okay.

Justin McAfee: We were able to actually get that agreement by the end of October, which was 45 days later.

Andrew Greiner: Wow. That's fast.

Justin McAfee: Yeah.

Justin McAfee: I haven't had any permitting problems. A warehouse that we have selected that's on BMC Drive. It's right down the road from plug and play in Cedar Park.

Andrew Greiner: So attention and execution were top of mind. And when you got down to incentives, was there competition there?

Andrew Greiner: What kind of incentives got thrown at you?

Justin McAfee: In terms of the incentives process, it wasn't about the dollar amount. It was getting the support from the community that was top of mind. Having the intention and execution aligned with the incentives was most necessary for me, for my business is a startup.

Justin McAfee: That's where we step in. We're moving the system from a preventative maintenance system where you're land filling perfectly good fans, recycling them, and sticking them back into the system, and we can do that four times. After that, we're moving to a predictive maintenance system. Instead of replacing 20 to 30% of your fans every single year because you're too scared that they're gonna fail, we're actually gonna tell you exactly when they're going to fail.

Justin McAfee: And that was the the biggest thing for us to convey to Cedar Park. The reason for the execution and the detail was saying it wasn't about the money, it was making sure that we were aligned because no one else is doing this.

Andrew Greiner: So from a facility perspective, like we, we thought that was pretty cool about your company, that it, it, that it is fostering diverse industries, right?

Andrew Greiner: It's neat that you're going from computer cooling and aviation, like drone propulsion. Is that right?

Justin McAfee: Correct.

Justin McAfee: Yes, it was one of the key conversations that we had at the very beginning.

Justin McAfee: The that I had with Cedar Park actually was, these are the people I'm looking for. How does this play out in terms of locations for Cedar Park? I looked across the United States. They were offering incentive deals, but in terms of actually getting the workforce there, whether I hired them here throughout the nation or they were there at the location, it was difficult.

Justin McAfee: We had to look at cities. People wanted to move to. Cedar Park had more of a draw just because of the local area than other cities I looked at across the nation. The other thing that was really enticing, just in terms of workforce development is a lot of what Leander ISD is doing and accomplishing, being able to provide an associate's degree for high school students even before they graduate.

Justin McAfee: We take this stator, pull off the PCB, and then we sauter on an additional PCB. Okay. That takes a degree of skill. Is the soldering aspect. That's exactly what we were looking for in terms of the community that could support that. And we found it in Cedar Park.

Andrew Greiner: So soldering is not exactly an advanced manufacturing skill, but needs some training.

Andrew Greiner: We've been hearing about that. When your press release came in, I was in Texas at Lockheed, they were talking about the, the same kind of stuff was training people outta high school and internships and that, that sort of stuff. So that seems to really matter in Texas. Did you hear about that in other places as well?

Justin McAfee: I didn't want to be the Guinea pig. I wanted to be the person that actually just stepped into a system that was already executing and in place.

Andrew Greiner: Are you expansion minded?

Justin McAfee: Yeah, the facility we're looking at in Cedar Park is 18,000 square feet. That was part of the incentive agreement, and there was definitely some questions in terms of would 164 people be able to actually fit into an 18,000 square foot facility?

Justin McAfee: It utilizes all the same components and what you're seeing. Right here

Andrew Greiner: in Texas where there's a large a aviation corridor, are you looking to become more integral into a supply chain there? How would that affect your location decisions? I know there's a lot of drone manufacturing than Ohio and North Carolina.

Andrew Greiner: Do you wanna be closer to them or are you happy being in Texas in shipping? Does that satisfy your recycling model?

Justin McAfee: That's a really good question and I, I don't think that I have a really firm answer from a statistics standpoint. All I can say is that if everything is local to the United States, it makes sense from a tariff standpoint in terms of being part of a community like automotive manufacturing, which is my history.

Justin McAfee: And so that's another reason why we're wanting to do the recycling here in the United States, especially as we're moving more towards complex systems like drones and aviation. So it's less about being part of the community as a manufacturer where we can just stick a sales office. And it's basically like a, I don't know, like a a, a storefront that's over there by PetSmart.

Justin McAfee: Right? Yes, we'd want to be a supplier. My history in the automotive industry taught me that being a supplier is the best way to interact with customers in a complex industry like aviation, we're not about actually making the entire car. I mean, everyone out there, there's 250 concepts that are out there creating these flying car concepts, these cargo drone concepts, these drone concepts that are out there.

Andrew Greiner: As someone in your position, right, uh, who's, who's got a growing company, you know, getting into manufacturing, what, what advice or best practices would you give to someone step behind you looking for the right place to start making their product and getting all that's in order?

Justin McAfee: Really, there's three things I suggest. First to put together a list of cities. You may think 25 is good enough. No, go. Go. Even, even further. Uh, for me, the initial list of cities didn't even include Cedar Park. My sister actually made a recommendation to me that I should check out Cedar Park, and I was like, oh, sure.

Justin McAfee: I'll just put it on the list. So that's the first suggestion is increase the list beyond what it is that you even are considering. If you need a great resource chat, PT really helps out well there. The second thing is, when you're actually starting a process, the initial conversations that you have, it's usually either with the mayor or it's economic development.

Justin McAfee: My expertise is in manufacturing, not economic development, working with economic development. Like what are the key words that you need to hear from me? I, I don't know. I, all I know is that these are the things that I need. Community support, engagement and activation, execution is key thing that I need to focus on.

Justin McAfee: And so if you're, if you don't say those key words and we don't get the alignment, then we're, we're talking two different languages and we can't work together.

Andrew Greiner: Wow. Thanks very much for this great chat. That was Justin McAfee talking about steering his company Right Once. Through a site selection process.

Mark Cote: I think the key is the federal follow, the federal money. Um, probably no surprise. It sounds easy, but it's actually hard.

Mark Cote: I am, um, mark Cody. I'm a vice chair at savis. That's how I define it. It's, um. What is getting support at a federal level? What's getting support at private capital? I think a lot of private capital is the same thing. We say that it's the intersection of K Street, wall Street and Main Street, and that's kind of the art of where, um, for the industries of future.

Mark Cote: Mm-hmm. But what it basically means is you have a company that may be, maybe they've raised 50 million and they have pilot production, but their scale ups gonna cost 500 million. Yeah. So the Office of Strategic Capital is making bets on. There's a lot of companies in that stage, and what they're trying to do is inform bet on their industries.

Mark Cote: Um, and then you're gonna get private capital. Come on. So that's, that's, that's a big one. Um, the Department of Energy, um, it's changed, but they're funding companies. Um, they're behind geothermal. They're behind, um, small modular nuclear. They're behind nuclear. Um, and companies are getting funded, and that's just starting.

Mark Cote: I, I think like the funding is, uh, you're seeing more locations do site readiness funding, um, and those, those type, um, fusion's a 10 year nuclear fusion's, a 10 year program. Um, the government's behind it. Um, so if the question is, is it a five year horizon or a 10 year horizon, that one's probably 10 years.

Mark Cote: Um, but. Others would be private, private defense. Um, sure. If you look at, you know, we're trying to find like the next, the next Andel and there's companies that are coming out, um, doing that, like the war in Ukraine has caused, um, in a good way for us national security, drone tech to go to the next level. Um.

Mark Cote: I think that's gonna be a big trend. It's to kind of keep up with, um. It's scarily like how to defend the country from drone attacks or other, other major defense problems like that. Um, and then, um, the energy evolution, I think it's important that we, um, small modular nuclear geothermal, um, because we need it, and that can't be understated in terms of at current rates.

Mark Cote: Um, um, a lot of critical minerals companies, but not at the mining side. At the r and d side, a few examples. Um, we have a company that is making, um, graphite flakes. Uh, 95% of the market is in China, and what they're doing is they're splitting, uh, natural gas into graphite flakes and hydrogen, um, coming outta Stanford.

Mark Cote: Um, so I think, look, um, I've always believed technology will advance. At its steady rate, regardless of, um, administrations or programs, um, I think we're gonna see these clean, um, mineral type of processes where there's a new way of producing iron or graphite. And this is to be competitive at a global stage to bring that inward to the us.

Mark Cote: Some of those old, those old processes may be the majority. Mm-hmm. But we may, we're gonna see those processes develop into the next stage of, of how to get iron without the same environmental impact or, or off take. Um, so that's. Right now we probably have three or four critical minerals types of companies, um, that are trying to do that, that next generation, um, process.

Mark Cote: Yep. Great

Andrew Greiner: minerals, energy defense. That's where the near future is headed if you follow the government and private money. And that's all the time we have this week for the Air Development Podcast. Don't forget to subscribe on your favorite platform. To hear more came to conversations and industry insights.

Andrew Greiner: As always, thank you for tuning in.