Transitioning from one of the oldest processes to one of the newest, the former Pine Bluff Commercial building is being prepped to become a cryptocurrency mining operation that could attract a $10 million to $15 million investment and employ up to 75 people, company officials said.
Currently, the building, which has been mostly vacant since September 2020, is being cleaned out and brought up to code, according to Joe Delmendo, owner of Commonwealth Real Estate of El Segundo, Calif., which bought the building in November at auction for $619,500.
Delmendo, who has experience in managing single- and multi-family housing units, said he has not made his business endeavor in Pine Bluff public because of the infrastructure work that needs to be done before he can start the work of mining.
“I didn’t want to waste anyone’s time,” he said Friday from his phone as he drove away from the almost 18,000-square-foot building at 300 S. Beech St. that he has dubbed “The Starbase.”
“I know there is a lot that needs to be done to the building, and I want to bring all the eggs together and get them rolling,” Delmendo said.
Cryptocurrency mining uses computers, known as nodes, to verify blockchain transactions of cryptocurrency by way of solving computational problems. The process virtually guarantees the validity of the transaction, and for solving the problems, the operator of the nodes receives a certain amount of cryptocoin. The computing power needed to verify the transactions requires an enormous amount of electricity, which is one reason the company became interested in the Pine Bluff property.
Austin Joyner, who handles public relations and business development for the company, said he came across a for-sale listing for the old newspaper building in August or September and learned that it was going to be sold at auction. Joyner said he had been thinking about cryptocurrency mining and learned that the building was supplied with a megawatt of electrical power, which was necessary to run the press.
“We immediately thought that this was a great fit, what with the high electrical output,” Joyner said. “The air system in the building was designed to regulate the temperature of the printing press so that also was something we saw as an asset.”
Joyner said his company has invested some $1.5 million so far in the project, which includes the sale price of the building. He said that in 60 to 90 days, the mining process should begin, depending on how quickly the building upgrades take. Within a year, he said, between 30 and 75 people could be employed at the site with pay ranging from $25,000 to $30,000 for entry level workers to $50,000 to $80,000 for skilled employees who are computer savvy.
“There are a lot of unknowns for us,” he said. “It’s a wide open tech environment.”
Joyner said the company is talking with Entergy in an effort to increase the amount of electricity coming to the building. The one megawatt of electricity that is now supplied will operate 340 computers, and Joyner said the company eventually wants to have 15 megawatts of power enabling it to operate more than 5,000 units.
Because the newspaper building once housed a press and held numerous rolls of newsprint, there are large areas that can easily be converted to spaces that hold the computers, Joyner said, but even with those demands, there should be enough space to accommodate other business operations.
“We would like to see other manufacturing operations as part of the business model for the building,” he said. “It’s zoned commercial so we could have several different operations going on.”
Asked how such an industry is taxed, he said it was “a very interesting question.”
“We’re still looking at that angle,” he said. “There are a lot of new regulations being considered. Right now, we’re setting aside 30%, but we’re talking to lawyers and forensic accountants, the whole nine yards. We just have to move forward with the best intentions and learn as we go.”
Joyner said the learning curve has been significant.
“When we first started, we didn’t know what we were doing at all,” he said. “There’s not a step-by-step manual. There’s not a green light or a red light — just a yellow light. NFTs [non-fungible tokens] and crypto, you have to step with caution because it is the wild west out there, and the rules are being made up as you go.”
Most crypto-mining that is going on today, he said, has to do with bitcoin, which is a specific kind of cryptocurrency. The main reason for that is because bitcoin continues to attract the most interest across the world as a non-centralized, non-regulated currency. Another reason is that, from a speculative standpoint, bitcoin has outpaced its numerous competitors. In 2010, one bitcoin was worth 8 cents. Today, a single bitcoin is worth close to $40,000. Put another way, a $1,000 investment in bitcoin 22 years ago would be worth some $287 million.
Still, Joyner said the cryptocurrency itself and crypto-mining is not for the faint of heart or pocketbook.
“There are so many variables,” he said. “You’ve got to have your feet fully in. You’d better have all your T’s crossed and your I’s dotted because it’s scary at times.”
Joyner said the crypto market resembles the dot-com bubble that peaked in 2000, a time when tech start-ups came and went at a dizzying pace.
“We believe in crypto, but we understand the risks. We don’t suggest that someone dump their life’s savings into this. There are just too many risks.”
Drake Seal, wearing a sleeveless T-shirt and sporting a funky haircut, has been on the ground with two other employees, getting the building cleaned out and up to code since mid-March. He is the operations manager, meaning he has to transform the old newspaper space into what will be needed for the mining operation.
Most of the large spaces have been cleared out, although the old newsroom still has desks and chairs and on the walls there are still plaques for journalism awards.
“This has been an interesting process,” he said. “Right now, none of the electricity along that whole wall works. And those boxes of old computers and monitors and printers, I’m not sure what I’m going to do with that e-waste.”
Seal stood in a large room that used to hold the original press but more recently housed scores of large rolls of newsprint.
“This room is 110 feet by 30 feet,” he said. “That will be plenty large enough to house the computers, and they will be stacked about 14 feet high.”
Seals called the operation “our pilot project.”
“We want to prove that this concept works,” he said.
All three company officials said it was the hope of the new company to work with Pine Bluff.
“We know that Pine Bluff has been losing population, and we want to work with the city to help bring Pine Bluff back,” Seal said. “We want to reach out to the community.”
Said Joyner: “We want to build relationships in the community. When you can do that, it helps both sides. We want to include community development programs in the overall process. The owner’s goal is to give back.”
Commonwealth Real Estate already does business in Oklahoma, Texas, Alabama and Tennessee, but this is the first scaled-up cryptocurrency mining operation for Delmendo, he said.
“I started mining in 2019 on a small scale, but this is the first larger-scale operation we have attempted,” he said.
Asked how a real estate professional can pivot to the complex world of cryptocurrency mining, Delmendo said he sees this effort as part of a “well-diversified portfolio,” adding that he would like to expand elsewhere in Arkansas “as long as we can get local government on the same page and not be shunned. It’s a matter of trust.”
As for using the name Starbase, which is a location along Texas’ Gulf Coast where Elon Musk’s rocket prototypes are created, Delmendo said there are similarities in the way he and Musk operate.
“Elon Musk and I use the same business models,” Delmendo said, referencing classes he has taught on the subject of acquisitions, asset management and private funding. “We bring together the necessary investments, and then let the professionals do their thing.”
Asked about the price he paid for the building, Delmendo said the auction took the sale price much higher than he wanted to spend but that he was determined to win.
“I don’t know what it was,” he said. “I don’t know why I did that. I almost tripled my maximum bid. I’ve never done that in my life. It spoke to me, to say the least.”