The Infrastructure That Keeps The World Running Needs Land. This Firm Has The Financing Solution To Secure It

The growing demands placed on data centers by the rise of artificial intelligence and an increasingly digital world have led owners to search for alternative ways to power their facilities. 

Domestic energy usage by data centers is expected to double or even triple by 2028. As a result, data centers are turning to solar power for sustainable energy, with major tech firms like Amazon signing supply agreements with more than 100 solar and wind projects globally. 

While this high demand is great news for the data center and solar power industries, they both face two significant challenges: They require a lot of land to operate and are often in expensive areas. 

“Your average solar farm is going to be about 400 acres or 5-10 acres per megawatt of capacity,” said Brennan Potts, founder and CEO of infrastructure investment firm Accelerate. “Data centers require less land, but they're increasingly located just outside of urban areas, and so the land purchase price is going to be very expensive.” 

Accelerate specializes in a financing solution that works for owners and developers of data centers, solar farms, wind farms, battery storage facilities, telecom facilities, electric vehicle charging stations and other forms of critical infrastructure: sale-leasebacks. 

In this type of transaction, an owner of a data center facility, for example, will sell their real estate position to a firm like Accelerate as a form of financing, who will then lease it back to them. Sale-leaseback deals can be done for both real estate with an existing asset or with raw land slated for development. Accelerate, Potts said, focuses on sale-leasebacks underneath critical infrastructure in the digital, renewable and transportation sectors so these owners can develop the projects that keep the world running without worrying about financing the real estate or disrupting ongoing operations

“Owners who are developing a project are solving for a rate of return that their company or their investors are looking for,” Potts said. “Oftentimes, buying the real estate associated with the project can drag on those returns because the real estate does not produce any income.”

Accelerate solves this by purchasing the land and renting it back to owners, allowing them to focus on developing their projects for 20, 30, 40 or even 100 years without having to worry about financing the land, potentially increasing their project returns. 

Accelerate takes a partnership-oriented, flexible approach to these deals, structuring each of them to meet a client’s unique needs.  This, Potts said, is why so much of the firm’s business is with repeat customers. 

He added that the firm offers a compelling cost of capital that makes clear the financial benefits of selling their land to Accelerate rather than financing it themselves or keeping it on their books. The company is able to offer this because it aggregates these properties into a large, diversified portfolio, minimizing its risk and offering more stable returns to its investors, which allows Accelerate to give better pricing to its customers, Potts said. 

He gave an example of a solar developer who came to Accelerate in the preconstruction phase of a 460 MW utility-scale solar project in Texas. The developer had signed an agreement to provide a major tech company with power for 15 years, but it needed to purchase the land in 30 days or less to make it happen. Accelerate acquired the property for $21M, and in less than 30 days the developer was on the land and on track to build the solar farm. 

Looking ahead, Potts predicts continued growing demand for digital infrastructure projects, which all require real estate. He added that as these projects get bigger and supply chain disruptions and other economic issues continue, the timelines will be pushed out and companies will need to purchase real estate earlier in a project's life cycle to keep it on track. For all of these reasons, he expects more owners to turn to sale-leaseback deals with firms like Accelerate. 

“We are specialists in real estate under infrastructure — we know the markets and the developers we serve extremely well,” Potts said. “Because we only focus on this space, we're in the unique position to meet this booming industry’s needs.” 

This article was produced in collaboration between Accelerate Investment Partners and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.