Development Update: T5, Stack, Flexential, Vantage, Iron Mountain

Data center developers continue to deploy more capacity, as the digital economy races to keep pace with demand for more capacity due to pandemic-driven societal shifts. Other providers are taking steps to reduce their cost of capital and make room on their balance sheets to fund more development. There have been so many announcements this week that it’s been hard to keep up, so here’s a quick roundup.

Silicon Valley

T5 Data Centers said this week that it has acquired an enterprise-owned data center located in Newark, California, which will become the T5@Silicon Valley campus. The site features an existing 128,000 SF building, 17 MW building that will continue to be occupied by the enterprise tenant, while T5 will develop an additional 32 MW, 180,000 SF building to bring the total available power capacity for the campus to 49 MW to meet the growing needs of hyperscale customers.

“We’re excited to bring T5’s lifecycle solutions to one of the top data center markets in the country,” said Pete Marin, T5’s President and CEO. “Not only will our new facility showcase our best-in-class development solutions, but this facility also gives T5 a solid position in one of the most supply-constrained data center markets in the U.S.”

Located in the East Bay suburb of Newark, CA, T5@Silicon Valley takes advantage of the PG&E Direct Access program that provides customers with power rates comparable to Silicon Valley Power and high reliability.

T5 also has construction projects underway in Chicago, Portland and Atlanta and existing facilities in LA, Minneapolis, Cleveland and Cincinnati. “With the addition of Silicon Valley, T5 is better positioned to provide best-in-class data center lifecycle solutions to our growing portfolio of customers across the country,” said David Horowitz, Executive Vice President of Sales for T5.

Hillsboro, Oregon

Two new projects broke ground this week in Hillsboro, a suburb of Portland that has become the focal point for hyperscale development in the Pacific Northwest. STACK Infrastructure began construction at its new POR03 project, a 28-acre campus at 4735 NE Starr Blvd in Hillsboro that will feature an initial 24 megawatt building ready in Q3 of 2021, with adjacent property available to handle a total campus capacity of 84 MW. The site is less than a quarter-mile from a new 34.5kV substation, with power supplied by Portland General Electric, and is located on the Wave Business Hillsboro Data Center Ring, which offers fiber access to Trans-Pacific subsea cable routes.

“Hillsboro continues to be an enduring, popular destination for clients, with its access to plentiful power, low-cost carbon-free supply options like wind, solar and hydro, and excellent connectivity to the major West Coast availability zones and international markets,” said Matt VanderZanden, Chief Strategy Officer of STACK. “Cloud and content providers and enterprises want to be there, and therefore, we want to be there. It’s our mission to support these companies with flexibility and scale as they innovate and grow.”

Just days earlier, Flexential broke ground on its Hillsboro 3 data center, which will be the company’s largest facility yet at 358,000 square feet and a capacity of 36 MW. Flexential’s Portland-Hillsboro 3’s unique high-density capabilities make it an ideal environment for power intensive applications such as AI and machine learning. The data center will feature four 60,000 square foot, 9 MW data halls and 24-foot ceilings.

Vantage Financing

The low cost of capital continues to be a tailwind for data center developers. This has been a particular strength for Vantage Data Centers, which this week raised $1.3 billion in securitized notes. The company, which specializes in wholesale data centers, will use the money to refinance outstanding debt, reducing its overall cost of capital by approximately 30 percent on average across its capital structure and extend debt maturities. The financing will also provide cash for further investment in Vantage’s North American data center operations.

In a securitization financing, data center developers can issue debt notes backed by cash flow from operational data centers, which are leased by some of the world’s largest and most credit-worthy companies. That tenant credit quality enables the issuer to pay lower interest rates on its debt, which reduces its costs as it seeks to compete and build additional facilities.

“The current market environment proved extremely advantageous for Vantage and our investors to lower our capital costs, extend maturities and provide funding for growth opportunities,” said Sharif Metwalli, Vantage’s CFO. “Having access to capital at today’s attractive market rates gives us the ability to redeploy the realized savings with additional investments to grow the business across key regions throughout North America where our customers’ data center requirements continue to increase.”

Iron Mountain Joint Venture

While some providers are raising securitized debt, others are using joint ventures with financial partners to streamline their development costs and balance sheets. This week Iron Mountain announced the formation of a 300 million+ Euro joint venture with an affiliate of AGC Equity Partners, a London-based global alternative asset manager to design and develop a 27 megawatt, hyperscale data center currently under development in Frankfurt, Germany, which is 100% pre-leased to a U.S.-based Fortune 100 customer with a 10-year lease agreement. Full build-out of the 27-megawatt data center is expected in the second quarter of 2022. Iron Mountain will be responsible for managing the design and development of the data center as well as administering the lease.

Joint ventures with investors are becoming an important tool for data center companies to fund growth, and provide a vehicle for investors to gain a foothold in the data center industry as it emerges as an important new asset class. These deals provide cash for data center operators, which they can use for additional development, as well as a continuing interest in the facility.

“We are pleased to partner on the Frankfurt Data Center with AGC, a premier real estate and private equity investor with a strong global data center platform, to support this exciting data center growth opportunity and to continue to build-out our global platform,” said Mark Kidd, Executive Vice President and General Manager of Data Centers at Iron Mountain. “This partnership represents an important strategic step towards our goal of identifying alternative sources of capital to fund accelerating growth, as proceeds from the Venture will be redeployed into higher return development opportunities.”