Data Center Development, Operation and Financing: Special Concerns for Real Estate Counsel

Data centers have been developed (or existing buildings converted) so rapidly in recent years that they have emerged as a new real estate product type. But, there are physical features and operational issues unique to data centers which counsel and their developer clients must address before proceeding with a data center project.

Data centers must be able to supply an uninterrupted source of power, and must also meet certain specifications as to temperature and humidity controls, connectivity, wiring, build-out and security. As a result they are significantly more expensive to build and maintain than standard offices or industrial facilities. Data centers house systems which may be critical to functioning of the businesses they serve, so liability for service interruption must be addressed, and related insurance obtained.

The operative document under which a company occupies part of a data center is often not a lease but is instead a service agreement or a license to use certain facilities within a designated space. As a result data centers present unique challenges for underwriters looking to finance data center projects.

Listen as our authoritative panel discusses issues associated with the development, operation and financing of data centers and outlines approaches to address the issues that enhance property value and limit liability for the owner/operator.

1. Types of facilities - closet, office, repurposed, new construction
2. Unique features of data center
   1. Power—significant, uniterrupted
   2. Environmental controls—temperature, humidity
   3. Connectivity—fiber access, multiple carriers
   4. Access/security
   5. Physical intergrity—ability to withstand weather events, natural disasters
3. Regulatory issues associated with data center development
4. Leasing Issues
5. Financing Issues

The panel will review these and other key issues:

• What are the unique attributes of data centers, and how do they effect development costs?
• How does the critical nature of data and IT services impact the potential liability of the operator as landlord?
• How do licenses and service agreements used in data centers differ from leases?
• Why is financing a data center more difficult than more conventional property types?