Companies pay premium to hedge against storms

On the third floor of the New World tower in downtown Miami, generators large enough to power a small city serve as backup in case of the devastating hurricanes and storm surges some climate scientists predict in South Florida’s near future.

With the National Oceanic and Atmospheric Administration expecting “above normal” activity this Atlantic hurricane season, companies are paying a premium to lease space for servers at New World as a hedge against the risk of natural disaster.

New Tower’s tenants, both physical and virtual — including telecom giants Verizon and Global Crossing, the company that declared bankruptcy in 2002 and merged with Omaha, Neb.-based Level 3 in 2011 — can rely on a pair of fire-engine red generators to see them through a week without Florida Power and Light Service, according to Jeff Krinsky, president of Panther Management Services, which manages the New World tower.

Powered with the rough equivalent of 16 car batteries, the Kohler generators, constantly infused with warm water, crank to life in four seconds, guzzling 65 gallons of diesel per hour as they produce 1,500 kilowatts of electricity.

Virtually all of Latin America’s Internet traffic goes through South Florida carrier networks, many of which are based in downtown Miami, meaning that a power outage here could effect hundreds of millions of customers overseas.

“Tenants are getting smart about it,” Krinsky told The Real Deal, following a recent tour of the generator room. “The brains can evacuate and the servers are protected and can be accessed off-site.”

A physical tenant at New World pays roughly $85 per square foot for a space, usually three to four square feet, in the tower’s data center, including broadband, electricity and back-up power from the generators. Larger, “co-location” tenants pay as much as $800 per month to house their servers in a cabinet at the facility.

In 2005, Hurricane Wilma knocked out power in downtown Miami for three hours, hindering operations at dozens of companies.

While local governments in South Florida have long invested in powerful generators as backup for hospitals and police stations, companies with stock that trades in nanoseconds on public exchanges have also begun treating hurricane preparedness as a vital expense.