Stabilised
A data centre that is built, leased and operating at its expected level, so its cash flow can support long-term financing such as ABS.
How it works
A data centre is stabilised when it is built, leased and operating at its expected level, so that rent is being paid and the cash flow is predictable. Financing documents usually define stabilisation precisely, for example by occupancy, rent commencement under specified leases, or a period of operating history.
In GPU and data centre deals
Stabilisation is the point at which a data centre moves from development finance to long-term finance. Construction loans and bridge facilities are repaid when the asset is refinanced through ABS, CMBS, project bonds or term loans that price on stabilised cash flow. Lenders test whether the definition has really been met, because rent-free periods, staged lease starts and tenant fit-out can make a building look more stabilised than its cash flow shows.
What gets negotiated
- The contractual definition: occupancy, rent commencement or operating history
- Treatment of rent-free periods and phased leases
- Conditions for converting construction debt to term debt
- Valuation basis used at stabilisation for loan to value tests
How it works in a deal
An asset is stabilised once it is built, energised and leased, with rent being paid. Stabilisation is usually the trigger to move from construction debt to cheaper term debt, such as ABS, CMBS or a project bond.
Example. QTS's Thunder ABS is backed by 12 stabilised data centres leased to investment-grade hyperscale tenants, with about 15.2 years of remaining lease term on average. QTS: Thunder master indenture ABS →
For in-house counsel
Take it to the documents
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Related terms
Explanatory definition, not a statement that a particular transaction contains this term or a substitute for its contractual definition.
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