Maintenance capex is 4% of revenue in one filing and 11% in another

Question

I've been reading through public filings for the listed data center owners because I wanted to understand what a passive holder actually pays out of the rent before anything reaches them. Two of them report recurring maintenance capex on wildly different scales relative to revenue, roughly 4% in one and something over 10% in the other once I stripped out what looked like expansion spend.

I can construct two explanations and I can't tell which is true. One is a lease structure difference. If the tenant owns and maintains the mechanical and electrical equipment and the owner holds the shell and the power path, the owner's recurring spend should be low, closer to industrial. The other explanation is age and density. An older facility built for low kilowatts per rack needs cooling and distribution rebuilt to stay leasable, and that spend shows up as maintenance rather than expansion because it doesn't add capacity.

Why it matters for me: if I assume 4% and the truth is 11%, my distributable yield estimate is wrong by a margin that swamps every other assumption I've made. So the question I'd put to the room is what number a passive holder should actually carry as a reserve when the disclosure won't separate keeping the box leasable from making the box bigger.

diane_kowalski · Answer

Both explanations are live, and they compound. A shell-and-power owner with newer buildings shows both effects at once, so you can't read one number and back out the other.

What I'd do with the filings is stop looking at percent of revenue and look at dollars per megawatt of critical load, then compare across years for the same owner. Percent of revenue moves when rents move, which tells you nothing about the physical building. Dollars per critical MW holds still enough to see a trend, and if that trend is climbing on a stable portfolio, something is being rebuilt.

On the reserve question, I don't think there's a single right figure, and the thing it depends on is who holds title to the mechanical plant under the lease. Read the definition of landlord property in the lease exhibits if the deal gives you them. In a shell lease with the tenant carrying the equipment, your recurring spend is roof, structure, and the switchgear you kept. In a turnkey lease you own chillers on a fifteen to twenty year life and you should be reserving like it, which is a much bigger number than any industrial comp will suggest.

The uncomfortable part is that with a listed vehicle you don't get the exhibits. You get the aggregate and a management explanation, so you're pricing disclosure quality as much as buildings.

Maintenance capex is 4% of revenue in one filing and 11% in another

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