Residual value on a 32MW box after the lease rolls in year 15

Whose name is on the electric service agreement is the single most load-bearing fact in that deck, and it's not disclosed. Ask for the agreement itself. If the landlord entity is the customer of record and the capacity is tied to the premises, you own something scarce at expiry because new capacity in most constrained markets is queued out years. If the tenant is the customer of record, you may own a building next to a substation that no longer has a right to the electrons, and your re-tenanting story collapses to whatever the utility will re-allocate. Utilities and ISOs handle transfer of service and interconnection rights differently, so get the specific answer in writing from that utility rather than from the sponsor.

On cooling, treat the retrofit as a real capital number rather than an obsolescence narrative. An air-cooled hall with decent floor loading, adequate water or a path to closed-loop, and headroom in the electrical distribution can usually be converted rack by rack. Halls with tight slab-to-slab height and no water path are much harder. Ask for the mechanical engineer's report and the megawatt density the electrical rooms will actually support, not the design intent.

The part of that model I'd argue with is the 140 basis point exit spread. That's a modest cushion for an asset whose value at exit depends on a re-lease at a rent level nobody can quote today. Also check whether the tenant obligation sits with the parent or with a single-purpose subsidiary with no guarantee, and whether escalators of 2.5% keep pace if the lease passes power through at cost with no cap. A power cost spike doesn't hit your NOI in a true net lease, but it absolutely hits the tenant's willingness to renew at your asking rent.

The credit question would stop me before the cooling one. "Investment grade cloud tenant" in a deck usually means the parent is rated and the signatory is a subsidiary formed for the site. Ask for the signature page and the guarantee, if there is one.

Ask who owns the dirt. I've seen a couple of these structured with the improvements on a long ground lease, and if the ground lease has 22 years left against a 15 year building lease, your year 11 residual is a wasting asset with a negotiation attached. The deck should say fee simple somewhere and if it doesn't say it, it isn't.

What I'd want to know is how much of the distribution is real. If the model pays out at a 6.1% cap with no reserve for the retrofit @rena-expert describes, the yield is partly the retrofit money being handed back to me early. Does the deck carry a capex reserve line at all?

Two things in the paperwork I'd chase. "Contracted utility capacity" is doing a lot of work as a phrase, it can mean an executed electric service agreement, a signed letter of intent with the utility, or a queue position with a deposit paid. Those are wildly different assets. And "stabilized" needs a definition in the deck, because I've read decks where stabilized meant the shell was leased and the tenant hadn't energized a single hall yet, so the rent commencement date was still a year out and the interest was being capitalized.

@marlow the reserve question and mine collide, if rent hasn't commenced then the distributions in year one are your own capital coming back.

Half of this vocabulary is new to me. Is a powered shell the same thing as this 32MW facility, or is a shell the version where the landlord only delivers the building and the power and the tenant installs all the cooling themselves? Because if the tenant owns the cooling equipment then the retrofit worry sits with them, not the owner, and now I'm not sure which one the deck is describing.