Vantage Data Centers has launched a £600 million data centre securitisation in the first of its kind in Europe.
The commercial-mortgage backed security, Vantage Data Centers Jersey Borrower SPV Limited, is backed by the leasehold and fee-simple interests in two data centres in Newport, Wales, owned and operated by Vantage. The company is also the issuer of the CMBS, according to the presale report prepared by Morningstar DBRS. The servicer is JLL and the structuring adviser is Barclays Bank.
The centres, CWL 11 and CWL 13, account for 111,828 kilowatts in total leased capacity as of 31 December 2023. CWL 11 was repurposed as a data centre in 2010 and CWL 13 was constructed in 2022 as a built-to-suit facility. DBRS valued the deal at £867.2 million, which reflects a loan to value of 69.2%. Knight Frank valued both properties at £1.1 billion in January 2024.
The £600 million class A-2 term notes pay an indicative fixed coupon of 6.7% on an in-operation basis during the initial five-year anticipated repayment date period. In addition, there is a class A-1 variable funding note of up to £100 million, which ranks senior to the class A-2 notes. The proceeds from the sale will be used to refinance £480 million of existing debt and fund upfront reserves of £54 million. The remaining £66 million will be used for closing costs and general corporate purposes.
DBRS views data centres as real estate as the properties are large warehouse-like facilities housing large servers and other technical infrastructure for a wide variety of tenants and users. However, unlike typical commercial property leases where tenants lease space by the square foot, data centre tenants lease power capacity from the operator. Power is typically measured in the form of kW or MW, with 1000 kW being 1 MW, enough to power approximately 650 homes.
In most cases, the landlord provides the space, the power distribution units, the utility power supply, cooling and backup power supply, according to DBRS. The tenant is generally responsible for their own servers, data storage, and other equipment that is housed in racks or access-controlled cages on the data centre floor. The value of the on-site server and storage equipment owned by the tenants can be many times the value of the landlord's building infrastructure.
Connectivity is key to keep the servers running. Valuers will look at power supply and backup generators. They will also pay close attention to the likelihood of natural disasters, such as flooding.
A valuation report by Knight Frank found that a small portion of the CWL 11 site is at high risk from surface water and small watercourse flooding. High risk means a yearly probability of 3.3%. The rating agent said it understands that there have not been any recorded flooding incidents so far. It reviewed the insurance documents and deemed the insurance policy to be sufficient.