Data Center Mezzanine Financing, June 2026

Data center mezzanine is typically HoldCo mezzanine, a loan secured by a pledge of the equity in the entity that owns the project company, sitting above the senior construction or stabilized loan and below sponsor equity. It layers on top of a senior position to a combined stack around 75 to 80% of cost on contracted, cash flowing assets, governed by an intercreditor agreement. Pricing runs all in roughly 11 to 15% (current pay coupon plus PIK, sometimes a small equity kicker), and underwriting centers on the power and interconnection position and the credit of the hyperscale or colocation tenant. Deals run $1 billion to $30 billion plus.

Power first, secured capacity (utility load letter or energization commitment), interconnection queue position and timeline, and the megawatt take in the lease or capacity contract. Then tenant credit: a hyperscale lease signed by an investment grade cloud or AI tenant underwrites very differently from a multi tenant colocation lease up. They also size on contracted revenue, the development timeline and GMP construction contract, the sponsor's data center track record, and the senior loan attachment point.

Tranches generally run $1 billion to $30 billion plus, sitting above senior facilities that can run into the hundreds of millions or billions on a hyperscale campus. The deepest demand is on single asset or campus level financings where a sponsor wants to keep cheaper senior debt in place and fill the subordinated gap rather than dilute common equity. Smaller edge or enterprise data centers without a signed or guaranteed hyperscaler lease are not this box.

On a contracted, cash flowing data center the senior loan typically sizes to a 60 to 65% gold standard LTV/LTC; mezzanine then layers to a combined position around 75 to 80% on stabilized, leased assets, never to 100%, with the sponsor still contributing meaningful equity. Attachment and detachment points are set deal by deal on debt yield, contracted DSCR, lease term versus loan term, and the strength of the power position. Development and pre lease assets carry lower combined leverage until power and a tenant are secured.

Mezzanine debt is a loan secured by a pledge of the equity interests in the project HoldCo, governed by an intercreditor agreement, and lets the sponsor keep cheaper senior debt in place while filling only the subordinated gap. Preferred equity sits below mezzanine, is exercised through equity ownership remedies rather than loan foreclosure, and is used when the senior lender will not permit a mezzanine pledge or a second lien, common on large hyperscale construction facilities. Pricing overlaps (roughly 11 to 16% all in), but remedy mechanics, control rights, and senior lender consent differ materially.

Yes, it is a primary use. Mezzanine and preferred equity fill the gap above a senior construction loan to reduce the sponsor's equity check on a powered shell or turnkey build, drawn alongside the senior in line with the construction schedule. Underwriting focuses on the GMP contract, the energization and interconnection timeline, the pre lease or signed capacity contract, completion guarantees, and the take out. Development mezzanine prices wider than on a stabilized, fully leased asset to reflect completion and lease up risk.

Institutional mezzanine and preferred equity placements typically carry a 1 to 2% advisory/placement fee on the committed amount, paid at closing. The advisor structures the layer, runs a competitive process across data center credit funds, infrastructure debt platforms, and private credit lenders, and negotiates the intercreditor terms with the senior construction or stabilized lender. On a $100M tranche, a 1.25% fee is $1.25M, generally well below the value created by tightening the coupon, improving proceeds, and reducing the equity kicker.