DataBank, a data-center operator sponsored by an affiliate of Colony Capital, is pursuing a debut securitization of its ownership and leasehold stakes in multi-company enterprise data centers it operates in six markets.
According to a Kroll Bond Rating agency report, DataBank Series 2021-1 is a transaction featuring $657.9 million in notes secured data center operations in 15 sites in or around Cleveland, Dallas, Pittsburgh, Atlanta, Minneapolis and Salt Lake City.
DataBank’s Salt Lake City operations represent the largest concentration of properties in the pool, in one of the fastest-growing markets for expanded or alternate data-site colocations for companies across the Western region.
The offered notes include a pair of senior-note tranches: a Class A-1 variable-funding note totaling $100 million and a $553.6 million Class A-2 tranche, each with preliminary A- ratings from Kroll. A Class B tranche (rated BBB) totals $44.54 million and a Class C tranche (BB-) is $59.75 million.
All of the notes have an anticipated repayment date of February 2026 except for the VFN with a February 2024 repayment date. However, the VFN's expected repayment date is subject to two one-year extension options, according to Kroll.
The notes are secured by fee-simple ownership interest in six centers located in Kansas City, Pittsburgh and Salt Lake, and leasehold interest in eight sites in each of the six markets represented in the deal.
All of the centers make up approximately 386,967 square feet and 48.7 megawatts of critical load power to 804 customers operating under nearly 3,000 individual contracts. Clients across various sectors – notably technology, financial services and telecommunications – tap the centers for web hosting, web servers and web routers. Some pay for interconnection and network services, as well as cloud operations, Kroll’s report stated.
Kroll’s adjusted base-case annual cash flow for the centers is $55.4 million, a 10.1% haircut from the issuer’s “no growth expenses” cash flow projection of $61.6 million.
More than 95% of the expected revenue is derived from eight of the buildings, with the remainder coming from newly built properties with limited or negative cash flow.
The five centers located in Salt Lake generate 38.5% of the net operating income of the portfolio through 329 customers with 829 contracts, “and this exposure is likely to increase” as occupancy grows at the most recently constructed location in that market. Salt Lake’s market is “increasingly national, or at least regional, in nature,” with demand rising from companies in Los Angeles, San Francisco and Seattle diversifying their alternative data-center needs.
DataBank, which launched in 2005, was acquired global investment firm Digital Bridge in 2016. Digital Bridge pursues investments in the communications infrastructure that includes fiber, data centers, cell towers and small cellular tower deployments and fiber. Digital Bridge is part of Digital Colony, the digital infrastructure investment business of $47 billion-asset Colony Capital (NYSE: CLNY).
Last year, Colony made a $185 million investment in DataBank, its first direct balance-sheet deal in digital real estate, according to Kroll.
The securitization of data-center revenue through stand-alone deals is a burgeoning esoteric market for ABS investors. Last August, Stack Infrastructure
