Most people will tell you that the great thing about data centres is there are so many options for how to fund them.
To name a few, they can go into two types of securitization (ABS or CMBS), they can go into infrastructure funds, or they can take the project finance route. If you can get a few those different options up and running, then you’ve likely got a strong bid.
In the US, both securitization routes are now well established. They proved their worth last week when securitization continued unperturbed even as tech stocks crashed, widely blamed on the emergence of DeepSeek.
An interesting development, as our US team reports, is that CMBS appears to be wrestling market share away from ABS. This partly comes down to a change in S&P’s methodology that levels the playing field between the two.
But it also seems to be function of where the bid is from the different pools of capital. If you put a data centre in CMBS, you get CMBS money pricing it in a CMBS framework. For now, that seems to be working out more economically than ABS.
For now, the infant European market appears set on the ABS route. The one and only deal came in ABS format — from Vantage in 2024. Demand was strong and a very solid 25 investors were allocated, encouraging others that such deals can work.
The trouble with CMBS in Europe is the lack of a pre-existing market. As we discussed last week, the ‘market’ is most comprised of Blackstone financing its logistics portfolio.
It would certainly be nice to see data centres coming out of Europe in both formats, but without more certainty on the CMBS bid, it would be a bold issuer who takes that path.