U.S. data center owner DataBank has secured a $725 million loan to finance its development pipeline to help meet demand from cloud providers and companies seeking more powerful real estate facilities with the growing use of artificial intelligence.
The company has been "very active," recently in the debt and equity financing markets, DataBank Chief Financial Officer and President Kevin Ooley told CoStar News. The new credit facility offering a development-specific construction runway to build and lease U.S. data centers, Ooley said, and is far larger than the initial target of $400 million that Dallas-based DataBank originally anticipated raising from lenders.
"This is our first development financing that we have put in place," Ooley said in an interview. "This new credit facility will allow us to meet that demand more quickly by shortening financing and construction time lines across all our campuses, but especially as we ramp up activity in the new ones we've announced in Northern Virginia and Atlanta."
New and emerging artificial intelligence applications have created "unprecedented demand," for data center capacity, he said. That demand played a key role in DataBank increasing its credit facility limit with lenders, he said. Analysts have said the increasing technological advances are requiring more digital hubs from a variety of providers and an increasing amount of power, stoking competition.
"This gives us the dry powder to be more flexible and allows us to have some deep-pocketed lenders alongside us," Ooley said.
In the past, DataBank would need to get a construction loan tied to a specific project to finance a new data center development. With this new credit facility, supported by a group of 14 banks, the capital will fund the expansion of existing U.S. properties including campuses in New York, Denver, Minneapolis, Salt Lake City and Dallas.
Funding New Development
The financing led by TD Securities gives DataBank access to capital for its long-term growth plans and a source of funding to back the company's accelerated demand for capacity, Databank said.
Ooley said the company can look to increase the credit facility, if needed, directly with these lenders through the loan.
Once the data centers are fully developed and leased, the hubs would move from the credit facility to another financing arm, thus creating "a conveyor belt," of funding to keep projects in the pipeline to meet demand, Ooley said. DataBank plans $1.25 billion in capital expenditures this year, an increase from about $700 million last year.
The artificial intelligence "demand was a key driver of that dramatic growth, which caused us to find new financing like this facility," Ooley told CoStar News.
The projects in DataBank's development pipeline have 18-month to 24-month lead times, allowing the company to deploy capital today to fund projects years into the future. This year, the company plans to deliver 86 megawatts of power to would-be users. Next year, DataBank plans to add 51 megawatts, with another 143 megawatts planned for completion in 2026.
As rapidly as DataBank can develop megawatts, tenants are leasing the space, he said.
This is DataBank's second green round of financing, following a credit facility it secured in February. To qualify as a green loan, the facilities financed must meet specific sustainability criteria for water conservation and carbon emissions reduction. The properties in the company's portfolio, totaling more than 65 facilities in 27 U.S. metropolitan areas, are contributing to its goal of being carbon neutral by 2030.
For the Record
TD Securities was the administrative agent, joint lead arranger and joint bookrunner on the deal. The other joint lead arrangers and joint bookrunners were Citizens Bank, CoBank, Deustche Bank, First Citizens, and Société Générale. JP Morgan, Nomura Securities, RBC Capital Markets and Regions Bank were also joint lead arrangers. Bank of America and Goldman Sachs were co-documentation agents. Cadence Bank and Preferred Bank also supported the deal. Jones Day was DataBank's legal adviser.