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Large-scale data center operator backs $325M notes offering

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A data center manager that offers build-to-suit “hyperscale” data is marketing its third series of asset-backed notes to refinance some of the early debt the company raised in its 2019 launch.

Stack Infrastructure, based in Denver, sold an upsized $325 million Series 2020-1 offering of Class A-2 notes backed by the ownership interest in seven data centers properties as well as tenant lease payments from firms it services.

The notes, which have anticipated maturities of five years, carry A- ratings from S&P Global Ratings.

Guggenheim Securities wass the sole structuring agent of the esoteric securitization.

Proceeds from the note sales will repay any outstanding balance of the original Class A-1 notes issued last year, as well as for general corporate purposes that includes further data center development. Approximately $142 million of the proceeds will be deposited into a prefunding account to fund additional center assets to be added to the Series 2020-1 pool.

Each of the centers is leased (most on a triple-net basis) on a hyperscale basis, for centers that require 500 kilowatt-or-more capacity to operate computer equipment and networks, including servers, network gear, electrical distribution and network wiring. The report did not name any tenants, but published news reports note Stack Infrastructure builds and manages data hubs leased by tech giants Amazon, Apple, Google and Microsoft.

“These tenants typically manage server fleets measured in the hundreds of racks,” an S&P report stated, “and they choose to house their infrastructure in hyperscale data centers like [Stack Infracture’s] in order to design and control their own network infrastructure and manage their costs without sharing allocated space with other customers.”

According to S&P, the contracts have average remaining terms of 7.1 years to the contracted tenants, of which almost half have investment-grade credit quality. The deal benefits from expected low tenant churn rates that are “supported in part by the high cost of tenant relocation,” a report from S&P noted.

S&P stated it has a stable outlook for the U.S. data center industry “over the next few years,” its report stated. “We believe increased information technology outsourcing, data growth, and increased application complexity will continue to support growth globally over the next several years.”

Last year Stack sponsored the issuance of asset-backed, secured note offerings totaling $1 billion. S&P applied it’s ‘A-‘ rating to the single Class-A tranches in those transactions, as well.

Stack is owned by IPI Partners LLC, a joint venture sponsored by ICONIQ Capital LLC and Iron Point Partners LLC, a real estate fund manager. S&P’s report states Stack has approximately $550 million of equity invested in the six operational multitenant wholesale data centers in the securitization portfolio.

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