Why a loan against a data center queue position can fail to survive the network upgrade study

The eleven months to sell is the part that stops me. Was that a market problem or a title and access problem? I ask because a lot of assembled acreage I've looked at has three or four separate purchase agreements underneath it with different easement terms, and it takes a while for a buyer to figure out they're actually buying one clean thing.

The structural point in your writeup is that you underwrote a stage of the interconnection process as if it were the end of it, and that's the most common way capital gets hurt on powered land right now.

The sequence generally runs feasibility, then system impact, then facilities study, with a signed interconnection agreement at the end. Each stage can change the cost allocation, and the facilities study is where network upgrade costs usually become real. Costs assigned at that stage can attach to your position because of constraints far from your parcel, which is what happened to you. Queue reform has changed how positions are studied in several regions, including cluster studies that group applicants and share upgrade costs, so the treatment depends on which regional operator and which utility, and those rules keep moving. Confirm the current process in writing with the utility's interconnection group for the specific territory rather than relying on a study document that predates a rule change.

On sizing, ag comps plus a defensible premium is a reasonable discipline, though the premium is where the argument lives. Your original underwrite treated the appraiser's powered-land value as independent of the upgrade cost, and it isn't. Powered land value is roughly what a developer will pay for the site net of everything they still have to spend to energize it, so an unquantified upgrade cost makes that appraisal a range rather than a number.

Deed in lieu versus foreclosure, cure periods, and how quickly a lender can get to a sale all differ by state, and some of it also depends on your loan documents, so that piece is worth a conversation with counsel licensed where the dirt sits.

Five thousand dollars of engineering you did not spend against $2.4m you did. The same trade gets made at every scale, right down to a buyer skipping a structural review because the seller's report looked complete. Same lesson, different zero count. The part worth adding is that the borrower probably did not know either. Everyone in that chain was reading the queue position the same optimistic way.

@monica_tran3 that is the one point worth pushing back on slightly. Somebody in that chain knew, because the feasibility study would have flagged the constrained segment even if it did not price it. Whether the borrower read it is another question. Tender, when you say you would size off ag comps, does that leave you with a business? A $2m loan against that parcel at your rate is not worth the origination work. The honest conclusion is that this kind of paper is not lendable at all until the interconnection agreement is signed, and at that point the borrower can go get cheaper money elsewhere.