A credit committee call spent fifty minutes on interconnection and four on the building

Dumb question I'd rather ask here. When you say 48 megawatts of contract capacity, is that a lease of space or a lease of power? Like is the tenant paying per square foot or per megawatt?

@jessreyes12 it's usually priced off the power, per kilowatt per month of critical load, and the square footage follows from how much gear that supports. @sonia_alvarez can correct that if it's off.

The rent commencement gap is the bit that scared me. A year of interest on a finished building with nobody paying rent would end most people I know.

That same problem shows up at a much smaller scale too, say a four unit where the gas meter set is eleven weeks out and the loan doesn't care. Different zeros, same shape. The utility runs the schedule, and everybody else on the deal tends to act as though they do.

So what's the actual protection for the lender in that window? Interest reserve funded at close, or a completion guarantee from the sponsor, or both?

@aaron_fitz10 that's what I'd want spelled out too. And who sized the reserve, because if it was sized to the sponsor's energization date rather than the utility's, it's decorative.

Curtailment means, as far as I can tell, that the utility can cut you back at certain times, which for a building whose whole job is never going down sounds like the worst clause in the file.

"A very expensive warehouse with a strange floor" is the best description of downside collateral I've read. On my scale that's a house with a commercial kitchen in it.

The line about the appraisal being beside the point does a lot of work. It's true when capacity is scarce and secured. It also means the whole valuation rests on one assumption holding, and the last time that line got said out loud about a market it was 2006 and about land.

@devon_pierce came here to say that. Doesn't mean they're wrong. Means the bubble question isn't crazy.

Four minutes on the shell tracks with what's typical on jobs like this. Shell construction is straightforward work, tilt up or precast, big clear height, heavy slab. The schedule risk lives in switchgear, generators and the cooling plant, and those lead times are usually where the real complaints come from on a general contractor's side. If a lender only asks about roof warranty, somebody else on the deal is carrying the equipment procurement question, or nobody is.

@gregpowell66 that's the question worth putting in the room. Long lead equipment already ordered and slotted, with deposits paid, or just a line in a schedule? Those are different assets.

A pattern worth noting in equipment heavy projects generally: the ones that go sideways tend to go sideways on a piece of equipment still sitting on a boat, far more often than on the building itself.

The residual is where the real analysis belongs. Fifteen years of escalating rent from a strong tenant underwrites fine on its own. At year fifteen the question becomes whether that specific power allocation and that specific fiber path still hold value for somebody else, or whether the tenant's next generation of hardware wants a density this shell cannot cool. Power scarcity argues the site stays valuable. Technical obsolescence argues the improvements might not. The whole exit value rests on which of those two assumptions dominates, and models can pick the friendly one without saying so. @sonia_alvarez, did anyone put an actual number on residual, or was it just a cap rate applied to year fifteen rent?

Reading this thread I finally understand why every job posting I see in this sector is an electrical or mechanical title and almost none of them say real estate.

The document worth asking for is the estoppel and whatever step in rights the lender gets if the tenant's parent restructures. Also whether the lease survives a foreclosure on its original terms, which turns on the subordination language and on state law, so it needs a real lawyer's read in the state where the asset sits. Everybody argues about megawatts, and then the recovery in a bad year gets decided by three paragraphs nobody printed out. @dpatel_re's residual point and this one are the same point from two ends: the thing owned in year sixteen is whatever those documents say is owned.