Change of control and assignment of a data centre lease
Does a sale or IPO of the tenant need the landlord’s consent, and what test must an assignee meet?
Fermi needs Texas Tech’s approval, not to be unreasonably withheld, for a change of control away from its two founders, but not for a qualifying IPO, and the approval right falls away once revenue rent starts or after an IPO. Assignment needs approval unless it is to a Fermi special purpose vehicle, and approval cannot be withheld from an assignee with enterprise value of at least 200% of the prior year’s revenue rent and the experience to run the project. Nscale’s Cedarvale lease treats a transfer of more than 50% of the equity as a transfer, but lets the tenant transfer on a sale of substantially all its assets, a merger or a public offering if the transferee runs similar data centres and its net worth is no lower.
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What the filed contracts say
Contract
What the filed wording says
Fermi Texas Tech ground lease
A change of control away from the founders needs landlord approval, not to be unreasonably withheld.
Fermi Texas Tech ground lease
A qualifying IPO needs only 30 days’ notice, and the approval right ends once revenue rent starts or after an IPO.
Fermi Texas Tech ground lease
Approval of an assignee cannot be withheld if its enterprise value is at least 200% of the prior year’s revenue rent.
Ionic Digital lease to Nscale
The tenant may transfer on an asset sale, merger or public offering without consent, if the transferee’s net worth is no lower.
The filed wording
Section 4.10 Key Person Change of Control. Except as otherwise expressly provided in this Section 4.10, Tenant must obtain the prior written approval of Landlord prior to any Key Person Change of Control, which approval shall not be unreasonably withheld or conditioned. Landlord shall not withhold its approval of a Key Person Change of Control if Tenant reasonably demonstrates that the new controlling owner(s) (i) possess the necessary qualifications and experience to develop, operate and maintain the Project in accordance with the terms of the Ground Lease, and (ii) is capable of making all required certifications contained in this Lease and applicable guaranties or liquidity instruments at the time of such Key Person Change of Control. The approval of Landlord shall not be required to the extent that Tenant or FERMI (or a direct or indirect wholly-owned subsidiary of Tenant or FERMI) completes an underwritten public offering or direct listing resulting in its securities being listed on a national securities exchange (a “Qualified IPO”), but only after giving Landlord at least thirty (30) days’ prior written notice of Tenant’s intention to complete a Qualified IPO. Following the earlier to occur of (i) the AV Rent Commencement Date or (ii) a Qualified IPO, Landlord shall have no approval rights with respect to any Key Person Change of Control of Tenant, so long as Tenant gives Landlord at least thirty (30) days’ prior written notice of any Key Person Change of Control.
Fermi 99-year ground lease with the Texas Tech University System for its Amarillo data centre and power campus, section 4.10 · Fermi S-11, Exhibit 10.9
Each extract is quoted from the contract as filed with the SEC, checked against the filed text when it was added; “…” marks words left out. Filers redact commercial terms, so a [***] or [*] is the filer's, not ours. The summaries describe the wording, not how a court would read it, and each contract's defined terms and other clauses can change the effect. General information drawn from public filings. It is not legal advice on any transaction, and using this page does not create a lawyer-client relationship. Views are personal.
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