It's already been a year for staggering levels of data center investment and huge financing deals in the wake of the AI boom, and here's another example.
Global data center developer, owner and operator CyrusOne, a specialist in delivering state-of-the-art digital infrastructure at scale, has in short order this Spring and Summer lined up nearly $12 billion in debt financing to support its growth, including $7.9 billion aimed at new data center projects in the United States.
Headquartered in Dallas, Texas with digital infrastructure supporting over 800 customers including approximately 200 Fortune 1000 companies, CyrusOne delivers tailored build-to-suit, colocation, and interconnection platforms. Working with both hyperscaler and enterprise customers, the company operates more than 55 data centers and 4 million square feet of data center space across the U.S. and Europe.
Focus on Accelerated Digital Infra Deployment
CyrusOne’s focus on accelerated deployment of digital infrastructure has propelled it the very top levels of the cloud and AI data center business. The company was acquired in 2022 by global investment firm KKR and investor Global Infrastructure Partners (GIP) in a $15 billion transaction. Later that year, CyrusOne hired Eric Schwartz, a veteran executive at Equinix, as its CEO.
In a recent interview with Data Center Frontier, Schwartz noted that while the 2023 launch of his company's Intelliscale AI data center build-to-suit offering up to 300 kilowatts per rack "has become a bit of a lightning rod...there's a lot more to building data centers for AI platforms than just getting to density."
That comprehensive mindset is a big part of why the company and its investors are confident in positioning the Intelliscale high-density offering to compete for major AI deployments. CyrusOne bills Intelliscale as a state-of-the-art AI workload-specific data center solution developed to address the rapidly growing needs of AI applications and services.
Warehouse Credit Facility Will Stock U.S. Data Center Locations
On July 8, CyrusOne announced its closing of a $7.9 billion warehouse credit facility. CyrusOne's executed transaction was incremental to the company's $1.8 billion revolving credit facility financing completed in May. Taken together, those transactions account for approximately $9.7 billion of additional debt capital for CyrusOne raised with broad-based support from its lenders.
A warehouse line of credit is a credit line used by mortgage bankers. Warehouse lending involves a line of credit given to a loan originator. Wikipedia defines it as "a short-term revolving credit facility extended by a financial institution to a mortgage loan originator for the funding of mortgage loans."
Morgan Stanley, TD Securities and KKR Capital Markets served as lead arrangers for the warehouse credit facility, while Wells Fargo served as lead arranger for the revolving credit facility. Global Infrastructure Partners also worked closely with the company in connection with these transactions.
CyrusOne said the warehouse credit facility will primarily fund existing and future data center development projects in the United States, while the global revolving credit facility will be used for working capital and for general corporate purposes.
As an example of such U.S.-based data center development, also in July CyrusOne celebrated the groundbreaking of its fifth data center campus in San Antonio. Located in Texas Research Park, one of the most well established and innovative business development complexes in the region, the new campus will feature two buildings with a total of 276,000 square feet (SF) of space delivering an IT capacity of 36 megawatts (MW).
“We are pleased to announce the completion of the Warehouse Credit Facility and the Revolving Credit Facility, both of which will provide CyrusOne with attractively priced capital and enhanced liquidity,” said Fran Federman, CyrusOne’s Chief Investment Officer. “Our ability to raise these debt facilities and the tremendous interest that we have received from the lender community are a testament to the strength of our business and the market’s confidence in our ability to continue to build on the significant momentum we have achieved thus far.”
Sustainability Importance
The company emphasized that both credit facilities "are sustainability-linked and align with sustainability-linked loan principles. Accordingly, the pricing on the debt facilities will be adjusted based on our achieving target reductions in Greenhouse Gas Emissions," added a CyrusOne statement.
Notably over the past year, CyrusOne took a step to meet expanding customer demand for AI while enhancing the company’s sustainability goals by announcing its plan to accelerate its net-zero carbon pledge by a decade to 2030.
In June, CyrusOne published its 2024 Sustainability Report. The fifth annual report provides comprehensive insights into the company's ongoing efforts to construct and operate data centers that support a sustainable future.
Per a press release, key highlights of the CyrusOne 2024 Sustainability Report include the following:
- Customer Sustainability Reports: In 2023, CyrusOne provided its customers with individualized reports detailing their share of key environmental metrics (GHG emissions, water, and fuel consumption), aiding them in delivering accurate sustainability disclosures.
- Decoupling Business Growth from Carbon Emissions: CyrusOne’s 2023 Scope 1 & 2 carbon emissions were 4.7% lower than they were in 2018, even as business activity (measured by overall energy usage) more than doubled.
- Successful CNDCP Audit: CyrusOne became the first signatory of the Climate Neutral Data Centre Pact to have all fully operational data centers in Europe comply with the Pact’s reporting terms.
- Green Building Initiatives: The company is committed to achieving BREEAM certification at all standard new facilities in Europe and LEED certification at all standard new facilities in the U.S.
- Investing in Biodiversity: In 2023, CyrusOne received NWF Wildlife Habitat certification for its two largest data center campuses in Arizona and Northern Virginia, dramatically increasing the percentage of land certified to support native plants and wildlife.
Improving Operational Circularity: CyrusOne implemented a company-wide initiative to address operational waste, resulting in an overall diversion rate of 46%, more than double that in 2022. - Net Positive Water: In 2023, CyrusOne added its Phoenix (PHX8) and San Antonio (SAT1) facilities to its net positive water portfolio. The company now restores more water than they use at 12 facilities, plus the US headquarters in Texas.
- Renewable Electricity: The Omaha – Council Bluffs (OCB1) data center became CyrusOne’s twelfth facility to operate on 100% renewable electricity through participation in MidAmerican’s GreenAdvantage® program.
Double Shot of Capital for CyrusOne DFW1
On July 15, CyrusOne announced it secured a $687.1 million Single Asset Single Borrower (SASB) CMBS loan for the company's DFW1 data center in the greater Dallas-Ft. Worth market. This transaction brings CyrusOne’s total capital raised this year to nearly $12 billion.
The 670,000 SF CyrusOne DFW1 data center in Dallas/Carrollton serves more than 100 customers and hosts the CyrusOne National IX Platform. The company also contends the facility represents the first co-location/enterprise data center single asset single borrower securitized financing since the financial crisis in 2008.
(Data Center Frontier recently toured CyrusOne's DFW3 data center in Allen, Texas.)
Remarking on the company’s inaugural CMBS issuance, CyrusOne CEO Schwartz said, “Today’s announcement is another example of our ability to access large amounts of capital and tap different markets through institutional demand. This transaction comes on the heels of our $1.175 billion ABS issuance and CyrusOne securing $9.7 billion in new debt capital to fund data center growth.”
CyrusOne's EVP/Chief Investment Officer Federman added, “This is CyrusOne’s entrance to the CMBS market, diversifying our debt investor base with strong support from institutional investors. We are grateful to our fixed income investors for their continued support. Through this transaction, we have entered into a new market that will allow us to expand the scope of our permanent financing solutions.”
Morgan Stanley served as Lead Manager and Bookrunner, and Wells Fargo Securities, LLC, Goldman Sachs & Co. LLC and KKR Capital Markets served as Co-Lead Managers and Joint Bookrunners for the CMBS loan. Global Infrastructure Partners also worked closely with the company in connection with this transaction.
“The successful closing of this significant financing, combined with our strong business outlook for growth, expands our ability to deliver world-class digital infrastructure projects that meet the growing needs of our customers while positioning CyrusOne for future investment and development opportunities,” concluded Schwartz. “We are extremely grateful to our financial partners for their continued support of CyrusOne.”
