Financing Data Centres

Transcription

1 Financing Data Centres Data Centre strategies Presented by: John Wilson Date: 20 March 2012 Security may be required. Product fees may apply.

2 Today s Agenda Funder s View on the Marketplace Types of Finance How Funders Access Risk Q&A

3 Credentials Established in 1861, Asset Finance Division of RBS UK s leading provider of all asset based funding solutions Specialist Team that understands Data Centre Sector Over 200 million lent in last five years

4 Market Characteristics Data Centre Operators Managed Service Providers Provision of space, power, security & IT systems, multiple tenants, shorter contracts terms (3-5 years), shared facility (no step in rights) Colocation Providers Provision of space, power & security; longer contracts (5-10 years), typically investment grade /corporate customers, known revenues & costs Both have: High % Initial Mechanical & Engineering : Property Costs (<90%) Stable Cashflows Typically hosts mission critical applications tenants are reliant for business continuity Strong growth potential favourable supply/demand pressures Location considerations availability of power, latency, transport links, environmental

5 A typical data centre

6 Types of debt available? Real Estate Finance - linked to the Property value (minimal leverage against M&E infrastructure costs) Conventional Bank Debt Cashflow & Covenant focussed, term 3-5 years (possible re-fi risk for partial amort), history of profitability and cashflow required. Unsecured cashflow lends rare, therefore issues around security to get to LTV and full project costs. Quantum available may be restricted, need to club, installation risk rarely taken High Yield Bonds Available to Larger Corporates, costs & fees v debt, execution times, prepayment, flexible not asset specific, no amort, no early repayment allowed, longer terms than conventional debt Specialist Asset Based Funders who know the sector understand assets, commercial tenant risks, provide maximum leverage against long dated contracts to fund total DC project costs, can grow with future business, flexible, covenant light, will take construction risk, match funding term to contract/asset

7 Funding Managed Services Operators Approach Multiple tenants need to understand history of tenant profile, attrition levels and renewal rates to gain forward visibility on earnings Contracts rarely totally committed termination can take place with % of outstanding rents plus reasonable costs required Examine SLA Performance Lend based on balance sheet & financial performance Typically fund over 3-5 years Need to understand cost of obsolescence LTV based assets/balance sheet not contracts

8 Funding Colocation Full Security Package over data centre assets to include assignment over tenant contract Typical Contracts 5-10 years Investment Grade Credits typically required for tenants Understand experience and capability of Management Agreement to Lease in place i.e. non speculative Build Phase Finance power to site, M&E installation, connectivity, step in provisions, contractor s bond assignments is funding required Due Diligence Financial, Technical, Legal & Commercial

9 Funding Colocation/continued Rents less opex & tax for debt service How do revenues ramp up - initial capital repayment holiday required(12 months) Tenant Pricing Mechanisms i.e. future increases in power, inflation & end of contract renewal process Assignment over essential service & maintenance providers, insurances etc Maintenance Reserve Required? Distressed Exit Strategy Understand further expansion how accommodated/funded/how does cost base increase?

10 Summary Data Centres are a Specialist Asset Class Requiring Funders who Understand the Sector & Assets Different Approaches to Industry Sub-sectors Different Debt Mechanisms Available Lombard has funded 200m to this sector

11 Thank you Data Centre strategies Presented by: John Wilson Date: 20 March 2012 Security may be required. Product fees may apply.