Data Center Development: Specialized Security, Communications, Cooling, and Power Needs; Service Agreements

Addressing Operation and Financing Concerns of Real Estate Counsel

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Thursday, July 22, 2021

Recorded event now available

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Course Materials

This CLE course will address the issues associated with the development, operation, and financing of data centers. The panel will discuss features that make data centers unique--including power usage, connectivity, temperature and humidity controls, and security--and the need for proper service level agreements between the appropriate stakeholders.

Description

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. There are physical features and operational issues unique to data centers that counsel and developer clients must address before proceeding with a data center project.

Data centers are more than just leased space. The owner must supply an uninterrupted source of power, climate control, including temperature and humidity controls, connectivity, wiring, build-out, and security. As such, they are significantly more expensive to build and maintain than standard offices or industrial facilities. Data centers house systems critical to the functioning of the businesses they serve, so counsel must address liability for any service interruptions and related insurance coverage.

The operating document for a company that occupies part of a data center is typically a service agreement or a license to use certain facilities within a designated space, rather than a lease. 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 the necessities in both leases and service level agreements.

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Outline

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

Benefits

The panel will review these and other important issues:

  • What are the distinct characteristics of data centers, and how do they affect development costs?
  • How do the non-space-related needs of a data center (power, environmental, security) impact rent and the landlord's potential liability?
  • How do service license agreements and leases differ when used for a data center?
  • Why is financing a data center more difficult than more conventional property types?

Faculty

Merar, Michael
Michael J. Merar

Partner
Seyfarth Shaw

Mr. Merar has experience handling all aspects of real estate transactions for retail, data center, office, industrial...  |  Read More

Rechtin, Michael
Michael D. Rechtin, Jr.

Partner
Seyfarth Shaw

Mr. Rechtin's practice has a focus on data center, headquarters, office, industrial and retail leasing. He also...  |  Read More

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