DataBank Raising $1B By Securitizing 3 U.S. Data Center Assets

Data center firm DataBank is looking to raise $1.067B in funding by securitizing three data centers in major U.S. markets, an increasingly common financing strategy in the fast-growing sector. 

The Dallas-based data center provider plans to issue asset-backed securities backed by a trio of separate, fully leased facilities in Northern Virginia, Atlanta and New York, according to a presale report from Moody's Ratings. 

The newly developed data centers, two of them single-tenant facilities leased to Big Tech hyperscalers, represent a combined 100 megawatts of capacity and 491K SF. 

The transaction is the latest in a growing number of asset-backed securitizations of data centers, which have steadily become more common over the past three years. DataBank’s latest offering is typical of these deals, backed by stabilized assets with strong long-term leases and offering investors low-risk access to the fast-growing data center sector. 

“They’re new data centers with very long useful lives,” Moody’s Ratings Assistant Vice President Terrence Donohue told Bisnow. “Combined with the fact that you have long leases from strong tenants, I think we would expect to see fairly strong performance out of that.”

Acquired by DigitalBridge in 2016, DataBank is one of the world’s largest data center operating platforms, with a portfolio of 73 data centers totaling 877 MW of inventory in more than 25 metro areas. DataBank has traditionally focused on multitenant colocation for a variety of enterprise and Big Tech customers, but the company also targets the hyperscale market, building and operating single-tenant facilities purpose-built for tech giants like Amazon, Microsoft and Google.

Two of the three assets backing DataBank's latest debt financing are single-tenant data centers.

The company’s 40 MW ATL4 data center, located 10 miles west of downtown Atlanta, was purpose-built in 2024 for a single end user to whom it remains 100% leased.  That lease runs through 2035, with a pair of 60-month renewal options. 

While the tenant's identity hasn't been disclosed — a common practice in the data center industry — the Moody’s report identifies the lessee as “investment grade,” suggesting it may be one of the Big Tech hyperscalers that have dominated data center leasing.

The single-tenant Virginia facility tied to the ABS transaction is part of DataBank’s 18-acre Ashburn campus that houses two other data centers. In the heart of Loudoun County’s “Data Center Alley,” the 40 MW data center is fully leased to the firm it was custom-built for in 2022. That tenant, also identified as investment grade, is inked through 2037 with a single 180-month renewal option. 

The third data center backing the transaction is a 20 MW, multitenant colocation facility in New York’s Hudson Valley, part of a two-building DataBank campus on 34 acres in the hamlet of Orangeburg. Developed in 2022, the building is fully leased to eight customers, with 80% of capacity leased to a non-investment-grade anchor tenant. 

This isn't DataBank’s first time utilizing asset-backed debt to raise funds. The firm has executed four other ABS transactions since 2021, for which it still owes $2.2B, according to Moody’s. DataBank isn’t just funding its expansion by issuing debt: The company also completed a $2B equity raise last October, led by Australian fund AustralianSuper. 

DataBank has grown rapidly over the past two years, announcing plans to develop three separate campuses in 2024 with a combined capacity of more than 800 MW. This year, DataBank has filed plans to build an additional two data centers on its campus in Red Oak, Texas, and has acquired a leased data center in New Jersey. 

DataBank is far from the only firm turning to ABS to raise funds. For the third consecutive year, asset-backed security loan activity is on the rise, according to JLL.  The first half of this year saw 14 ABS deals totaling $7.7B, up from 11 deals totaling $5.5B in the same period last year. 

In part, the growing volume of ABS deals is due to the rapid overall growth of the data center asset class and investors’ desire to invest in the sector. But for data center developers, ABS and other securitizations offer an alternative approach to accessing capital from newly stabilized data centers in an environment in which few data centers are being bought and sold. 

The rise in data center securitizations corresponds neatly with a decline in data center asset sales as firms like DataBank look to leverage fully leased but low-margin facilities into the capital they need to grow. 

“We see it as a kind of exit financing for them,” Moody’s Donohue said. “They have large construction costs, so once they’re stabilized, this is kind of that natural exit point.”