Jeff Blau, Related Companies CEO, joins 'Squawk on the Street' to discuss the company's AI investment arm and plans to raise billions for data center development.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

New York-based real estate developer, Related Companies, has announced the launch of a new investment arm, Related Digital, aimed at expanding its data center infrastructure to support the growing demands of artificial intelligence. Jeff Blau, CEO of Related Companies, discussed their strategic move into this sector, highlighting the company's history of involvement in renewable energy and the increasing interest from major tech companies in purchasing power from their facilities. The company plans to raise billions to develop data centers, indicating a substantial investment in this area.

Related Digital's efforts are supported by a team of infrastructure and utility experts, including top industry professionals like Brent Behrman. This initiative comes in response to strong demand from major technology firms, known as hyperscalers, including notable investments from Microsoft and Alphabet in capital expenditure. Related Digital has already commenced construction on a data center in Toronto and has identified multiple power-ready sites across the United States.

The company emphasizes the importance of having long-term commitments from technology companies before moving forward with vertical construction projects. Related Digital claims a development pipeline of more than five gigawatts of near-term power, underscoring the critical role power supply plays in their competitive strategy. They aim to leverage existing utility connections and grid availability to meet demand over the next several years. 



Related Companies CEO launches AI investment arm

New York-based real estate developer Related is expanding further into data center investments. It has launched Related Digital, which will develop infrastructure to meet, of course, the demands of AI. Joining me now is Jeff Blau. He's Related Company CEO. Nice to have you here. Good to see you, David. Thanks for having me. This is a significant effort. There's a lot of questions right now, Jeff, about overcapacity, about whether we're expecting too much. What gives you the confidence that it's worth investing half a billion of your own in raising as much as another eight billion? Right. Well, maybe it'd be helpful to give you a little background of what we're doing. So you know us as a real estate development company, and we've been talking for years about some of the expansions in the spaces that we've been doing. We moved into renewable energy about five years ago. We've been building solar, wind, and transmission. That business, interestingly, we would sell power to utilities, state governments. And then about two, two and a half years ago, we started getting inbounds from all the big hyperscale tech companies looking to buy our power in large quantities. And so that's been great for our renewable business. We produce power. Our biggest customer today is Google in that business. But what we really saw was the demand for the data centers. And so we put together a team, our in-house kind of infrastructure development teams, grid power utility experts from our renewable business. We added to the team. We brought on Brent Behrman, formerly of Cyrus One, a couple other people from Compass and Prologis, and now I think have the best data center development team in the business and really are pursuing that demand that we see from the hyperscalers. We have one under construction in Toronto. We have six or seven power-ready sites to go across the United States and really seeing no abatement in demand. You're not. You're not seeing any abatement whatsoever. I mean, you mentioned those conversations, the inbounds you've gotten. Of course, power is typically the gating issue. Correct. But nothing gives you pause that there isn't going to be demand a year, two, three years from now. We spent a lot of time talking to the hyperscalers directly and trying to understand their demand. You've seen the announcements this year about CapEx spending. So Microsoft, $80 billion. Alphabet, $65 billion. Those are 40 percent year-over-year increases. And so we don't see any abatement in short to midterm. Right. Because you're not going to be expending all this capital in a very quick... I mean, this is going to take years. So you have to have confidence that you're going to have those tenants there signing, I would assume, or long-term leases two or three years from now as well. Right. So these are 15-year commitments by the hyperscalers, and we're certainly not building vertical construction until we have those leases in place. Right. I mean, in the press release, you mentioned the fact that, and this was your words, a development pipeline of more than five gigawatts of near-term power. Correct. Is that right? Five gigawatts? So what we did when I mentioned we first saw this demand a couple of years ago, we really believed that the key to this was going to be power. Right. And that's what's interesting about this space, different than most other real estate assets, where as soon as there's demand, developers overbuild. Here, you've got tremendous demand, but you have constrained supply because of power. And so we realized we could utilize kind of all the expertise we had, utility connections, power, and speak to the utilities directly and find pockets of power throughout the United States that were still available on the grid, and they won't be for long. And we tied up this portfolio of about five gigawatts across... So you have those commitments in place, essentially. We have those commitments in place. Correct. And so we really believe that's a competitive advantage. I don't think you could replicate this portfolio today. And as this demand continues, there's going to have to be alternate solutions. There's going to have to be behind-the-meter solutions. You're reading about nuclear plants being recommissioned, but that's not going to happen fast. And so if you think about the next five years, kind of utilizing what's on the grid, that's what we went after.

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Rise of AI