DuPont Fabros Boosts Credit Line, Eyes Future Projects

DFT-ACC5-ACC6

Here's an aerial view of the enormous ACC5 and ACC6 data centers developed by DuPont Fabros. (Photo: DuPont Fabros Technology)

Data center developer DuPont Fabros technology (DFT) has only announced one new project. But the company is clearly thinking about another.

DuPont Fabros has begin construction on ACC 7, the huge new data center on Ashburn Corporate Campus in northern Virginia. In its quarterly earnings call last month, company officials said they were examining their options for additional new data centers, but were not ready to make any commitments.

Last week DFT made changes to its revolving credit facility that provide additional funding to support another major construction project. The company exercised an "accordion" feature that boosted its borrowing power from $225 million to $400 million. It also amended the facility, adding the option to further expand the loan to as much as $600 million. There is currently $60 million of borrowings under this facility.

"A Second Development"

"This expanded facility provides us with additional capacity at a low cost of capital to fully fund our current ACC7 development in Ashburn, Virginia and a second development, as we grow the company," said Mark Wetzel, Chief Financial Officer and Treasurer.

One motivation for acting now to line up funding for future projects is that it allows DFT to take advantage of the current interest rate environment. Interest rates have been trending higher in some parts of the credit markets amid uncertainty about how long the U.S. Federal Reserve will continue its focus on a low rate environment.

The other possibility is that the horizon for the next project may be drawing closer. What might that "second development" be? There are several possibilities. DuPont Fabros has discussed an expansion of its suburban Chicago campus, where it has nearly finished leasing its CH1 project in Elk Grove Village, Illinois.

"To capture future demand of this market, we need to secure lands and commence development of CH2," DFT President and CEOP Hossein Fateh said in last month's earnings call. "Land in Elk Grove is readily available. We've been looking at several sites over the last few months. Our plan is to secure a parcel of land this year. We will discuss the timing of CH2 after we have secured the site."

The company has also discussed adding a second phase to its development in Santa Clara. The other possibility is that DFT may enter a new geographic market. The company currently has projects on northern Virginia, Chicago, Silicon Valley and New Jersey.

"We will continue to look at new markets," said Fateh. "However, we would not enter any new market without the significant pre-lease in hand."

DFT's development plans bear watching, as their presence has been known to impact the market dynamics in some of the industry's hotspots. The new ACC7 facility will be the largest project yet for the data center developer, with a whopping 41.6 megawatts of power.