Real property interests on 13 wholesale data centers will collateralize $337 million in securitized notes, which will be sold to investors through the Vantage Data Centers trust.
The asset pool is composed of 10 completed and operating U.S. data centers and three completed and operating data centers in Canada, and the transaction consists of two trusts, the Vantage Data Centers Issuer/Vantage Data Centers Canada, which will issue the debt to noteholders, according to analysts at S&P Global Ratings.
It is the 10th issuance from the Vantage master trust, and the current series will share collateral with outstanding notes from a list of series, starting at the 2024-1 and dating back to the 2019-1.
The series 2025-1 will issue through just one tranche, the A2 class rates A-, which have an anticipated maturity of five years, S&P said. Also, the deal has a legal final maturity date of 30 years.
Deutsche Bank Securities is the arranger on the deal, which is expected to close on September 8, according to S&P.
Among the deal's strengths, S&P describes the portfolio properties as turnkey. Under those arrangements, the landlords own the critical mechanical and electrical infrastructure. Unlike typical real estate assets, the data centers feature robust physical security, varied forms of fiber connectivity and backup power and cooling systems.
The pool does have a few potential credit weaknesses, S&P said. For one, the tenant roster is not well diversified. One tenant accounts for 59.7% of the leased capacity and 56.4% of annualized adjusted base rent (AABR). Also, the top five tenants account for 84.8% of the transaction's total AABR.
Another concern centers on the currency that the deal uses. The notes are denominated in U.S. dollars, so S&P analysts said, "the potential depreciation of the Canadian dollar could reduce the coverage for the transaction."
Also, if there is a disruptive event, such as a natural disaster, the liquidity reserves could be insufficient and render any of the data centers inoperable for an extended period.
But there are mitigating factors, particularly as it pertains to tenant credit quality. For instance, the largest tenant that accounts for most of the deal's AABR also is rated AAA.
