Are data centers the new REIT? Not quite \u2014 but Meta\u2019s new mega\u2013data center in northeast Louisiana marks what one expert calls a \u201cdecisive shift\u201d in how hyperscalers finance the AI era: by turning data centers into a new investable asset class.<\/p>\n
\u201cThis is where capital markets meet compute,\u201d said Sean McDevitt, a partner at management consulting firm Arthur D. Little, which provided commercial due diligence advice to Meta<\/a>.\u00a0<\/p>\n Traditionally, tech giants like Meta, Google<\/a>, and Microsoft<\/a> have funded their data center buildouts directly. This time, Meta is partnering with Blue Owl Capital, a private-credit investment firm, on the $27 billion data center known as Hyperion. As reported by The Wall Street Journal<\/a>, Blue Owl owns 80% of the project, while Meta holds 20%, operating and leasing the facility long-term. BlackRock<\/a> bought more than $3 billion of bonds that the joint venture (dubbed Beignet) issued last week to finance the project, in a sale arranged by Morgan Stanley<\/a>.<\/p>\n The deal stands out for its scale\u2014the largest private-debt offering ever\u2014and for its A+ rating from S&P, which reflects Meta\u2019s backing of the project (albeit with just a single agency rating). Yet the debt had a yield of 6.58% at issue, a level closer to high-yield, or \u201cjunk,\u201d bond territory.<\/p>\n That structure allows Meta to build its data center without putting the full $27 billion of debt on its own balance sheet. The approach\u2014known as a special-purpose vehicle (SPV) or off\u2013balance-sheet financing\u2014is largely new territory for hyperscale infrastructure.<\/p>\n \u201cBy being able to access outside capital, you\u2019re not limited to your own free cash flow generation,\u201d McDevitt said. \u201cYou\u2019re bringing on investors with return profiles on an infrastructure-type investment that allows companies to build bigger, larger, quicker, and faster.\u201d He compared it to taking out a mortgage: you can buy a bigger house\u2014or, in this case, build more data centers\u2014by borrowing instead of paying cash up front.<\/p>\n McDevitt believes the Hyperion deal could become a template for the industry. He estimates that roughly $150 billion in AI-driven data center construction is coming in the next few years. If other hyperscalers\u2014Microsoft, Google, Amazon<\/a>, and OpenAI among them\u2014adopt similar models, capital markets rather than tech companies themselves will effectively fund the infrastructure of the AI era. \u201cThis is replicable,\u201d he said, though he cautioned that it remains to be seen how the project performs in practice.<\/p>\n \u201cNow what has to happen? Meta has to build this thing, then put workloads in it and operate under the presumption that they\u2019ll monetize those computing loads driven by AI in the future,\u201d McDevitt added.\u00a0<\/p>\n That is precisely where criticism of the deal lies: According to Global Data Center Hub analysis<\/a>, \u201cIf AI workloads or margins stumble, these SPVs could echo the dark-fiber overbuild of the 1990s vast capacity sitting idle while debt remains outstanding.\u201d\u00a0<\/p>\n Still, for now, there\u2019s no reason to think other major banks won\u2019t try the same thing, said McDevitt. \u201cWhy wouldn\u2019t others look to mimic [this deal]?\u201d<\/p>\n Sharon Goldman Submit a deal for the Term Sheet newsletter here<\/a>.<\/p>\n Joey Abrams curated the deals section of today\u2019s newsletter. Subscribe here<\/a>.\n<\/p>\n VENTURE DEALS<\/p>\n – Legora<\/b><\/a>, a Stockholm, Sweden-based developer of a collaborative AI platform for lawyers, raised $150 million in Series C funding. Bessemer<\/b> Venture<\/b> Partners<\/b> led the round and was joined by ICONIQ<\/b>, General<\/b> Catalyst<\/b>, Redpoint<\/b> Ventures<\/b>, Benchmark<\/b>, and Y<\/b> Combinator<\/b>.\u00a0<\/p>\n – EnduroSat<\/b><\/a>, a Sofia, Bulgaria-based satellite-as-a-service company, raised $100 million in funding from Riot<\/b> Ventures<\/b>, Google<\/b> Ventures<\/b>, Lux<\/b> Capital<\/b>, and others.<\/p>\n – Archy<\/b><\/a>, a San Jose, Calif.-based AI-powered platform designed to automate processes for dental practices, raised $20 million in Series B funding. TCV<\/b> led the round and was joined by Bessemer<\/b> Venture<\/b> Partners<\/b>, CRV<\/b>, Entr\u00e9e<\/b> Capital<\/b>, and others.<\/p>\n – Indomo<\/b><\/a>, a Boston, Mass.-based developer of an injectable therapy for acne, raised $25 million in funding from Atomic<\/b>, Foresite<\/b> Capital<\/b>, Polaris<\/b> Partners<\/b>, and others.<\/p>\n – PACT<\/b><\/a>, a Cambridge, U.K.-based developer of biomaterials from natural resources, raised $20 million in Series A funding. Forbion<\/b> and HV<\/b> Capital<\/b> led the round and were joined by existing investors.<\/p>\n – The Mobile-First Company<\/b><\/a>, a Miami, Fla.-based developer of an AI suite designed to replace legacy business software for small teams, raised $12 million in seed funding. Base10<\/b> and Lightspeed<\/b> Venture<\/b> Partners<\/b> led the round and were joined by others.<\/p>\n – SalarySe<\/b><\/a>, a Haryana, India-based financial wellbeing platform, raised $11.3 million in Series A funding. Flourish<\/b> Ventures<\/b> led the round and was joined by Susquehanna<\/b> Asia<\/b> VC<\/b> and others.<\/p>\n – Bevel<\/b><\/a>, a New York City-based AI health companion, raised $10 million in Series A funding. General<\/b> Catalyst<\/b> led the round and was joined by others.<\/p>\n – CUE Labs<\/b><\/a>, a Zug, Switzerland-based developer of an open source configuration language, raised $10 million in funding. Sequoia<\/b> Capital<\/b> and OSS<\/b> Capital<\/b> led the round and were joined by Founders Fund<\/b>, Dell<\/b> Technologies<\/b> Capital<\/b>, and angel investors.<\/p>\n – Human<\/b> Health<\/b><\/a>, a Sydney, Australia-based precision health platform, raised $5.5 million in funding from LocalGlobe<\/b>, Airtree<\/b>, Skip<\/b> Capital<\/b>, Aliavia<\/b>, Scale<\/b> Investors<\/b>, and angel investors.<\/p>\n – VeroSkills<\/b><\/a>, a Birmingham, Ala.-based AI-powered hiring platform, raised $5.3 million in funding. Yonder<\/b> Ventures<\/b>, Circadian<\/b> Ventures<\/b>, and Motivate<\/b> Ventures<\/b> led the round and were joined by others.<\/p>\n PRIVATE EQUITY<\/p>\n – Ping<\/b> Identity<\/b>, backed by Thoma<\/b> Bravo<\/b>, agreed to acquire Keyless<\/b><\/a>, a London, U.K.-based developer of biometric authentication technology. Financial terms were not disclosed.\u00a0<\/p>\n EXITS<\/p>\n – Boyd<\/b> Group<\/b> Services<\/b> agreed to acquire a majority stake in Joe Hudson\u2019s<\/b> Collision<\/b> Center<\/b><\/a>, a Pike Road, Ala.-based collision repair company, from TSG<\/b> Consumer<\/b>, for $1.3 billion.<\/p>\n – Coats<\/b> Group<\/b> acquired OrthoLite<\/b><\/a>, an Amherst, Mass.-based insole company, from Trilantic<\/b> North<\/b> America<\/b>. Financial terms were not disclosed.<\/p>\n PEOPLE<\/p>\n
X:<\/strong> @sharongoldman<\/a>
Email<\/strong>: sharon.goldman@fortune.com<\/a><\/p>\n