How Layer 9 Data Centers aims to win big in Latin America

Founded in 2020, Latin America-focused Layer 9 Data Centers was developed by a group of industry executives, headed by Alejandro Cantu, Michael Ortiz and Joseph Ryan, with experience in the hyperscale business, coming from companies such as DuPont Fabros Technology, Microsoft, and Digital Realty.

The company is backed by different groups of investors, including players from the Ashburn technology corridor in Virginia, US, deemed the cradle of the global hyperscale business.

In June, Layer 9 also closed a series A round, for a non-disclosed sum, led by a consortium of industry executives, including LBS Power, based in Mexico City. 

Proceeds will be used to ramp up entry in the regional datacenter market, starting with a project comprising two Mexican sites with combined 64MW capacity in what is planned to become a 5-building datacenter campus in the surroundings of Querétaro city.

BNamericas spoke to Michael Ortiz, CEO and co-founder of Layer 9, to gain more insight into this particular project and the company’s investment plans for Latin America.

BNamericas: Layer 9 announced one of the biggest datacenter projects in Mexico, and among the biggest in Latin America. How did you decide on that?

Ortiz: For us, the opportunity to develop something in Latin America was really simple. We were acquired in 2017 by Digital Realty and none of us had non-compete clauses and many of us wanted to get back into the business.

We said to ourselves: ‘If we are going to do this again, we have to reboot Dupont Fabros 2.0’. And then we realized no one has done this on this scale [in the region]. There were things in portions, segments, but no one had done a project that would be scaled.

And I’ll tell you that this 100MW project is the start, not the finish, of what we’ll be doing in Latin America.

BNamericas: The Mexico project comprises two buildings with a combined 64MW capacity. Is 100MW the total committed including new sites? What is the total capacity after all due phases?

Ortiz: The true capacity of that project is north of 80 acres of development, which can support well north of 115MW.

BNamericas: So you’ll be building a campus of datacenters.

Ortiz: That’s right. Multiple buildings. Some of them can figure for single-use, some for multi-tenant use. 

I can’t name any of our potential prospects due to NDAs [non-disclosure agreements], but, for example, we are speaking to one group that wants a dedicated building. No neighbors. They want the building delivered to themselves and they finish it up. 

In other instances, we have cloud providers that have said: ‘that’s not our business model, we want truly all the way to the PDU [power distribution units] level, the white space, and we load in our servers, racks…’

And they won’t necessarily occupy the entire building. They may occupy 20%, 30% of that building and cohabitate with other cloud providers.

We also have other end-users telling us: ‘we’ll be deploying in the cloud, we’re a financial institution, a major Fortune 1,000 company with operations in Latin America and headquarters in Mexico City, and we’ll have half of our premise built in the cloud and half of it will be on-premises.’ Hybrid. But in either case, wishing not to manage that operation, but rather have us manage it.

So we have these three distinctive customers. Cloud providers who want dedicated on-premise building, dedicated to them in regions, cloud regions; we have multi-tenant datacenter offerings, where customers can move in for a complete turnkey experience, and we handle everything, from service to power, utility, maintenance, and they simply load in the racks; and then we have customers who’ll be coming in looking for very managed services, for which we look to partner with retail colocation providers. 

We do not wish to enter this market providing all these services all by ourselves. We don’t. We intend to have several retail partnerships in the provision of managed services.

BNamericas: How many buildings are we talking about?

Ortiz: Potentially up to five. All interconnected via one campus, via one fiber ring. The campus will be contiguous, all 80 acres are contiguous.

We have both market exclusivity in land and power with a defined radius. 

I'd rather not get into details about these deals, but we’ll have a ‘biosphere’ protection, enabling access to fiber, power and infrastructure. I’d say we are probably the first in Latin America that ever achieved that. 

Our energy provider cannot sell to anyone else in the datacenter business for more than five years. And our land protection [exclusivity] is for at least three years. 

BNamericas: Did you rely on real estate and site selection experts for the process?

Ortiz: We did not. In many ways, we wanted to keep our project under close watch and therefore, because we know some of these [real estate infrastructure] players are heavily connected, we wanted to keep it under our watch. 

We did this very discretely, we negotiated it quietly.

BNamericas: Who did you sign the power supply agreement with?

Ortiz: What I can say is that the power is backstopped by Cenace CFE. Cenace CFE ultimately backstops it and there is a third-party provider in between distributing it.

We are not yet at liberty to say who that is.

BNamericas: And the supply agreement is termed five years?

Ortiz: The exclusivity deal with that provider is for a minimum of five years and can be extended depending on the amount of power we take out. Eventually, we can extend that exclusivity for up to 15 years.

BNamericas: How did you find power when other players are struggling to?

Ortiz: We applied a very different site selection process to enter the market. Typically, most site selection projects start with trying to find power near ‘epicenters’: cities, hospitals, etc. Why? Because those grids are primary grids, and they get put back online if they go offline.

However, Querétaro is a 400+-year-old city. The city has dilapidated infrastructure, which means distributing power is very difficult because you’re not just going down a pole to get it. And bringing power three miles away could really result in some 15 miles of lines.

We thought this was a little crazy and wondered why so many companies wanted to be in there. 

This is the same syndrome that we saw in Ashburn [Virgina’s cloud and datacenter hub] 12 years ago when everyone wanted to be in the epicenter of that city. Within years, not many years, there was no more power in that area. People had to go out. 

We had a relationship with one of the utility providers and we had a strong relationship in Mexico with Cenace CFE, the national utility provider. 

That relationship enabled us to understand where the power distribution was being put into place and where it was coming from. And the reality is that power was outside of Querétaro city, 25 miles outside of Querétaro. 

BNamericas: Where?

Ortiz: We found the power nestled in between all the infrastructure that had already been built for the auto manufacturing plants, and the aerospace industry. All these groups use a massive amount of power. 

Cenace CFE was already servicing those people in those outer regions, 25 miles outside the city. Not very far. I can actually see the city from our site.

So we found power at a distributed source and triangulated multiple points of power from multiple substations. Then we moved to find land there.

We connected to and built a relationship with one of the most reputable industrial developers in Mexico. They’ve worked on over 20 projects, they specifically work with automakers. We earned their trust, earned the trust of the utility provider. 

Essentially, I’d say, what made possible this exclusivity is deep relationships and trust in what we are going to do in the market.

BNamericas: What’s the actual status of the datacenter campus?

Ortiz: We are in design right now to complete our first two buildings, each with 32MW. They are almost identical in design. 

It is a well thought and structured project. That market has 400MW of power demand hitting that marketplace, and we are tracking over 100MW with immediate leasing demand, through a variety of CSPs, enterprise and cloud providers.

We have strong interest from several groups, several cloud providers, who have seen our path to delivery. When you say you got 100MW, that grabs the interest of a lot of people. And so these companies can go gradually increasing capacity from 10, to 15, to 20MW…

I’d say we are amongst the first in all of Latin America to be able to provide a path for CSPs to reach 100MW. 

The greater region of Querétaro, because of its immense connectivity back to Monterrey, back to Texas, back to Mexico City, is a natural place to have what I say is a density alley. 

It is absolutely clear, no question, that Querétaro is the Ashburn of Mexico.

These two buildings have around US$775mn in spent. Both buildings combined will generate over US$2bn in economic contribution to the economy.

BNamericas: How did you get to that figure?

Ortiz: It includes direct jobs, such as site construction workers; indirect jobs, or the ecosystem of partners, such as HP, Cisco and others, that will have to put people in the market servicing the cloud; and the induced benefits, or all that added tax revenues and extra spending from those people.

In sum, our estimate is that with a US$775mn direct investment, we are going to generate US$2bn in economic output over the next 15 years.

BNamericas: This US$775mn is just for the first two buildings, right?

Ortiz: That’s right. The project in its total has the capability of reaching north of US$1.7bn.

BNamericas: When is the whole of it due?

Ortiz: We are going to be in construction [of the first site] in late fall. We will break ground in December. 

We’ll deliver our 32MW power base shell building in late summer [end of Q3] of 2023. And then begin delivering white space beginning in spring 2024, with no less than 4MW in commitments by our cloud providers. Each 32MW building will have four 8MW rooms.

BNamericas: How about building number 2?

Ortiz: Building 2 is really depending on the leasing and velocity of building 1. Typically, we begin construction when we have reached 50% leasing velocity.

My anticipation is that by the end of 2023 we’ll probably have 20%-25% of the building pre-leased.

BNamericas: How resource-efficient will the project be? Which PUE (power usage efficiency) target you are aiming at, for example?

Ortiz: This is a key concern we have. All of our datacenters will be built waterless. This is a clear requirement from the CSPs. All of our designs are based on waterless solutions. 

And on power, our design is targeting a PUE of 1.35 or better.

BNamericas: Are you looking beyond Mexico in Latin America? What are Layer 9's plans?

Ortiz: Brazil will ultimately be a stop for us, but Brazil is its own economy. We have to take into account different practices, models, approaches, cultural aspects. We have to learn all that first, to start developing those relationships now, to launch Brazil in 2026. Brazil 2026 is the target for us.

But along the way, we may go to Chile, Colombia and Costa Rica. We also have plans potentially for Europe, specifically Portugal, Spain.

And as much as we like to say hyperscale has just begun, so has edge computing. 

One thing we are actually considering is looking at potential edge computing partnerships, to take edge to Santa Fe, Mexico City, Guadalajara, all these big metro regions in Mexico. But we’ll be very selective about who we partner with.