Weekend Interview: Lee Kestler On The Evolving Data Center Landscape

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

EdgeCore Digital Infrastructure CEO Lee Kestler discovered the data center industry after his professional soccer ambitions fizzled.

Kestler played college soccer for the University of Maryland Baltimore County and then pursued a professional career in the 1980s and 1990s for a variety of U.S. teams, including the Kalamazoo Kangaroos, Hershey Impact and the Washington Diplomats — teams that dotted the American soccer landscape before Major League Soccer launched in 1996.

In the late 1990s, after failing to catch on with a professional club, Kestler landed in a sales role at Exodus Communications, an early colocation provider. Amid the dot-com boom, third-party data centers were just emerging as their own niche within commercial real estate as businesses scrambled to establish the infrastructure needed for an online presence. 

It was the start of a 25-year career that has largely paralleled the growth and evolution — and growing prominence — of data centers as an asset class. 

In 2007, Kestler became senior vice president for sales and leasing at data Center REIT DuPont Fabros, a role he held until 2015 prior to the firm’s acquisition by Digital Realty. He then served as chief commercial officer at DigitalBridge-backed Vantage Data Centers between 2018 and 2021. Kestler has also held advisory and leadership roles at NextEra and Grid Cure, firms focused on the intersection of energy and digital infrastructure.

Last month, Kestler was named CEO of Denver-based EdgeCore, which over the past three months has emerged as a growing force in the data center development landscape.

EdgeCore operates in what industry insiders call the wholesale data center space, developing large campuses and leasing entire facilities to single tenants, almost always cloud providers or social media giants like Meta, Google, Amazon Web Services and Microsoft. 

Although EdgeCore was launched in 2018 by a group of former CoreSite executives, it was the firm’s acquisition by private equity firm Partners Group in November — a deal that included more than $1.5B in targeted development funding — that has kick-started a steady drumbeat of new projects. 

In addition to the six campuses EdgeCore already operates across the U.S., the company broke ground on a new campus in Santa Clara, California, that will eventually support 72 megawatts of data center capacity. In February, EdgeCore bought a former Meta development site in Mesa, Arizona, adding to the company’s existing footprint in the market. In late March, EdgeCore announced plans to develop 7.6 acres in Virginia’s Loudoun County, supporting 36 megawatts of capacity through a partnership with D.C.-based developer Penzance. 

After just over 30 days at the helm, Kestler spoke with Bisnow about the challenges of stepping back into a leadership role, EdgeCore’s development plans, and what lies ahead for a data center sector facing growing development and sustainability concerns. 

The following has been edited for length and clarity.

Bisnow: You’ve been working in the data center space since the late '90s, when the data center space basically was coming into existence. But I know you had very different career aspirations initially — you had an impressive soccer career and were pursuing that professionally. How did you go from pro sports to data centers?

Kestler: As far as the pro athlete thing goes, I just wasn’t good enough, so I had to get a real job. I ended up initially in sales in the wireless industry, and I was in that for four and a half years. And I met [future PREP founding partner] Michael Shaw, who was working for Exodus Communications. He told me about Exodus and really about the internet. I decided I was going to take a look at that, and I’m very fortunate that I did. 

Exodus itself was a flash in the pan, but I was able to be one of the top sales reps in the world. From there, I continue to stay in the industry as really a student of the game, so to speak. That led me to DuPont Fabros. They gave me the role of helping build the company’s revenue stream. Then the wholesale industry took off, and we all know the rest of that story. 

Bisnow: There’s so much interest in data centers right now, but this can be a pretty difficult industry to understand, and I think that extends to how the industry has changed since you started your career. You’ve been part of that transformation, what do you see as the most significant evolution over the course of your career? 

Kestler: Data centers have evolved from retail colocation — a “get me on the internet” series of infrastructures — to large commercial real estate transactions masquerading as technology sales. Data centers are now purpose-built facilities. Like snowflakes, no two are alike. 

It’s a dynamic commercial real estate folks can't get unless they’re really immersed into this industry. There are more important things than just the tenant’s name. It’s what happens inside the building, whether it’s the type of electrical infrastructure, the way it’s deployed or the watts per square foot. 

As the industry has become this enormous real estate portfolio satisfying the needs for what we all do on our devices at any given point in time, the range of what data centers can look like has made it very challenging for CRE people to wrap their heads around individual pieces of real estate, because they’re all a little different. 

Bisnow: Let’s talk about EdgeCore, where you took over as CEO in March. You’ve been in the industry for quite some time but haven’t been in this kind of corporate leadership role for a while. What has been your biggest challenge since taking the helm?

Kestler: The biggest challenge has been hitting the ground running. I was coming from more of a consulting board background — I was basically not doing too much. And so, getting back into the pace of the game was a little tough at first. I have a launch plan that I wrote for myself, and my commitment was to dive in right away and get into the weeds of each of the departments, so I was not going to be what slowed the company down. So that was a little hard over this last 30 days, but I think we've accomplished what I set out to do.

Bisnow: So, EdgeCore is a wholesale data center developer, which means you’re building data centers for single users, primarily hyperscale cloud providers. There’s a bunch of companies doing this, some of which have been around a lot longer than EdgeCore. What makes EdgeCore different?  

Kestler: That's a fair question, and unfortunately, I don't have a really strong answer right now. One thing that has helped me to be successful in the past is helping folks understand that good enough is good enough. You don't have to have some innovative technology to service our customer base. 

I've been around this customer base now for 15 years. Understanding their problem, solving it today and becoming one of their trusted vendors is more about tactical work than coming up with some new innovative technology that makes you a differentiator. These companies have some of the best engineers in the world. EdgeCore or any other wholesale data center operator won’t have the research and development capabilities. That's not our core business.

Our core business is construction, delivering on time to meet customer requirements where these cloud operators need to be when they can't build it themselves. 

Bisnow: You guys are pretty new players in the space, but your leadership is all longtime industry veterans, whether that’s you or the guys from CoreSite. It seems like you’ve been able to leverage existing relationships and trust built with tenants, even if the brand is newer.

As this industry matures, I’m wondering if we’re going to see more companies like EdgeCore emerge, where trusted industry figures stake out on their own, get private equity backing like you guys got from Partners, and can go from zero to hero very quickly, so to speak. 

Kestler: I do believe there will be new entrants into the market, but just having an investor who wants to put capital to work isn't enough. You just can't say you’re going to put money together and hire one or two people. Had EdgeCore been a startup and Partners had come in and said: Lee, can you hire one or two guys and see if we can get some traction and buy some land? My answer would have been no. 

You need the combination of assets, platform and team ready to go. EdgeCore has assets in key markets. Their ability to use their experience to procure land was exceptional. The platform is the ability to construct wholesale buildings. And then it's the team, which goes back to the experience you mentioned.  

Bisnow: In just the past four months, you guys have launched a second project in Loudoun County, begun construction in Silicon Valley and purchased additional land in the Phoenix area. What should we expect in the coming months?

Kestler: Here’s what you're going to see us do that should get everyone's attention: We're going to have inventory. We're not like some of these other folks that we just talked about where you have the money, but they want you to get a customer before they get real capital deployed. 

Partners Group is a conservative investor, but they’re ready to lean in. We’re building out the rest of the first building in Mesa, we’re going to start construction on the first building of 36 megawatts in Santa Clara, and we’re already deploying the first 12 megawatts. Our continuous construction there will make it a much more attractive project from a real estate perspective. I believe we’ll lease it before we have a certificate of occupancy.

Bisnow: So, you guys are willing to build on spec, as long as it’s in markets like Silicon Valley and Northern Virginia where developable land is increasingly hard to come by due to power constraints and other factors? 

Kestler: That's a fair characterization of who we are. Although I would add that everything we’ll be doing over the next two years is, in a couple of words, deliberate and intentional. We are going to lean in in markets where we're comfortable, and we're going to spec build. And so, we're doing that deliberately. It’s intentional in that we want the customers who we have relationships with and those we would like to have relationships with to understand that we are building products to service their needs.

If we were talking about a market that was off the radar, if I said I was going to do this in Lafayette, Louisiana, you'd look at me like I was crazy because I would be. But we are in the biggest key markets right now. 

Bisnow: At EdgeCore, you’re focused pretty exclusively on established digital infrastructure hubs like Northern Virginia or Silicon Valley, or markets that directly service them like Reno. But in a more macro sense, there’s a growing consensus that we’re going to be seeing more data centers in more places. This is partially due to power constraints in these traditional hubs, but also a host of other factors. Are CRE professionals in markets where data centers aren’t really a thing right now going to have to start paying attention to this sector? 

Kestler: You are going to see more markets develop just because of the proliferation of digital applications expanding way beyond just the network interconnect locations where the major markets started. 

Where are the new markets going? They're going to go places where power is a little bit more attainable, and there will be a growing population center close by. They’re laying new network cables all the time, so we’ll see the growth you’re describing. 

In terms of the power issues we’re seeing, power in itself is one piece where a lot of people don’t have a great understanding. I spent a year at [renewable energy developer] NextEra, and that was an intentional move on my part to really understand what’s happening in the renewable energy space and try to help them figure this out around digital infrastructure. 

Bisnow: You bring up renewable energy, and your work at NextEra. How is your work there, and what you learned in the renewable energy space, carrying over to your work at EdgeCore?  

Kestler: The people I worked with at NextEra really understood that the development of renewable energy is going to be a major player for end users with ESG targets who can actually pay in advance for this energy source to materialize. So, my job there was to help them figure out if they could take some of their land parcels and convert them into data center campuses where there was going to be renewables.

I learned a lot about batteries. I learned a lot about utility storage and even hydrogen. So, I think I have a pretty good perspective, now that I'm back on this side of the table, to understand what it's going to take to make those things come together. And I think you'll see EdgeCore leaning in a little bit more than most because of that exposure. But I won't tip my hand and give away that playbook.

Bisnow: What’s your bold prediction for the rest of the year?

Kestler: Talking about utilities and renewables, I think my prediction for the rest of the year is that we're going to be pleasantly surprised that the contributions data centers make in enabling utility companies to lean in on new energy generation plans is going to continue to be like the shining star for us. 

We get a lot of criticism for being high energy consumers. But it's our consumption that the utility needs to enable them to build those wind farms and solar farms where the intermittency is more of a problem than it is a solution. I think you'll see more recognition for the data center space as part of the solution and not the problem.

Bisnow: Ending on a personal note here: What's your weekend routine or a favorite weekend activity?

Kestler: I enjoy doing things outdoors. I like bass fishing. I have a house at Lake Anna, by the big nuclear plant in Virginia that Dominion owns. I like riding bikes. And I like to spend time with my kids. We have four adult kids, a few of them are actually in this industry, and I’m proud of that. I have two grandchildren and I enjoy doing things with them. But for the most part, it’s getting on the bike, fishing, spending time outdoors at Lake Anna, and just enjoying the world that we have. I really do enjoy being outside.

UPDATE, APRIL 15, 11:45 A.M. ET: This story has been updated with additional information on Kestler's soccer career.