DuPont Fabros Technology (DFT) has halted development of a major data center in Santa Clara, Calif, citing capital constraints after it was able to borrow less than it hoped to fund the project, the company said today.
The company planned to invest $270 million in the new facility, and pay for construction by arranging a loan of $300 to $400 million, secured by its new ACC4 data center in Ashburn, Virginia. DuPont Fabros said today that it had closed on a $100 million secured loan with a syndicate of lenders led by KeyBank National Association.
The company started construction on the Santa Clara project last August based on the expectation of borrowing a larger amount the ACC4 financing, but that work has now been "temporarily suspended." The Tech Hermit blog reported last week that activity had ceased at the Santa Clara site.
DuPont Fabros said it will use the $100 million to continue developing a data center project in Piscataway, New Jersey and its ACC5 facility in Ashburn, suggesting that it sees stronger demand in those markets than in Santa Clara, where Digital Realty Trust (DLR), Equinix (EQIX) and Terremark (TMRK) also are developing new data center space. A wave of layoffs at Silicon Valley startups reflects a belt-tightening in the market, which has been among the most active in the country.
DuPont Fabros said it intends to continue to seek financing to complete its development plans. The new loan includes an accordion feature that allows new lenders to join the existing bank syndicate to increase the size of funding to $250 million over the next 18 months.
"We are very pleased to have secured this loan in a very difficult credit environment when capital is simply not readily available," said Hossein Fateh, the President and CEO of DuPont Fabros. "While the financing is less than the planned $300 to $400 million, it is an accomplishment considering the times. We are actively seeking other lenders for the syndicate. In addition, we are negotiating mezzanine financing on ACC4 and exploring other financing alternatives to obtain the shortfall in the originally planned $300 to $400 million. While no assurances can be made, our goal is to obtain additional proceeds before year-end."
The ACC4 data center in Ashburn is currently 87.5 percent leased, with a tenant list including Facebook and Yahoo. DuPont Fabros said it recently signed a lease at ACC4, along with the first announced lease for its CH1 data center in Elk Grove Village, Illinois. The leases total approximately 1.0 megawatts of critical load and 5,480 square feet of raised floor space. The tenants for both leases are Internet companies that have not previously leased space with DuPont Fabros.
DuPont Fabros paid $22 million to purchase its 17-acre Santa Clara site last December. The company's plans called for a pair of 300,000 square foot data center buildings with a power capacity of 72.8 megawatts.
Santa Clara has been a favored market for data center development because the city's utility, Silicon Valley Power, has significantly cheaper power (about 7 cents per kilowatt hour) than many other areas of Silicon Valley. That has led Facebook and Yahoo to announced major leases of new space in Santa Clara this year. Earlier this year DuPont Fabros expressed enthusiasm about its Silicon Valley project.
“I think (Santa Clara) is one of the best markets in the country, and I wish we had product available sooner,” Fateh said. “Historically, from an Internet standpoint, that’s been the best market in the country."