Questions to Ask a Data Center Sponsor

The questions that decide a private data center investment, grouped by what they test, with what a good answer looks like and what the usual evasions sound like.

In a private deal your outcome rests on a sponsor's execution more than on anything else. These are the questions worth asking, grouped by what they test. Ask for the answers in writing — not because you expect bad faith, but because a written answer is specific and a verbal one drifts.

The four that matter most

Ask these first. If the answers are unsatisfactory, the rest is detail.

1. Is there a signed tenant lease? Who is the tenant, for how long, at what rate per kW per month? Good: an executed lease, a named counterparty, a term, a rate. Evasions: "advanced discussions", "a letter of intent", "strong interest from a hyperscaler", "we are under NDA". An NDA can prevent naming a tenant; it cannot prevent confirming that a binding lease exists, its term and its rate.

2. Is there a signed electric service agreement? What is the contracted energisation date and what is it conditional on? Good: an executed agreement with a date. Evasions: "we have a 10 MW proposal from the utility" — a proposal is typically non-binding and commits nobody. See why power is the constraint.

3. Do you own the land? If not, when does closing occur and what happens to my money if it does not? Good: owned, or under contract with a firm date and a stated plan for subscribed funds if closing fails.

4. What is the net-of-all-fees cash yield in your base case? Good: a single number, with the fee schedule attached. Evasions: a repetition of the gross figure, or "it depends". If a yield is stated "before possible management fees", the sponsor is the only party who can tell you the net, and declining to is itself an answer.

On money and alignment

5. List every fee: acquisition or sourcing, asset management, financing, construction management, disposition. Percentage and timing for each.

6. How much do you earn at closing, before the project performs? Fees earned on transacting are earned whether or not the building works.

7. How much of your own capital is in this deal, on the same terms as mine? "On the same terms" matters — sponsor capital in a senior position is not alignment.

8. How many Sponsor Units are there and how do they share in distributions?

9. Walk me through the distribution waterfall. Who gets paid in what order, what the preferred return is, whether it is cumulative and whether it compounds.

10. Can you issue more units later, and on what terms? A follow-on raise you cannot vote on can dilute you materially.

11. Will distributions ever be funded from offering proceeds or borrowings rather than from operations? A distribution paid out of new investors' money is a return of capital dressed as a return on capital.

On construction and the schedule

12. What is the construction timeline, and whose is the benchmark? A vendor's quoted timeline is the vendor's best case.

13. Who bears cost overrun? A fixed-price contract with a creditworthy general contractor is a real answer; "overruns come from project cash" means they come from your return.

14. Who supplies the long-lead equipment, and from where? A single overseas supplier adds tariff, certification and shipping risk to the schedule that drives the returns.

15. Who pays for utility network upgrades, and is that in the budget?

16. What is the plan if the utility slips twelve months, and who carries the cost while rent is not being earned?

On the asset and the market

17. Why would a tenant choose this location over a primary market? Cheap power is a real answer. "The market is short of capacity" is not, because the shortage is concentrated where tenants already are. See data center markets.

18. What rate does the model assume and how does it compare with published market data? For context: CBRE's global weighted average asking rate was $217.30 per kW per month in Q1 2025 (CBRE), with a North America outlook of $200+ per kW per month (CBRE). Asking rates average across markets and deployment sizes, so this is a sanity check rather than a benchmark.

19. Is the 10 MW figure utility service or critical load? The difference can be 20–30% of revenue.

20. What capital replacement reserve is in the model? Chillers, UPS and switchgear have finite lives. A fifteen-year projection with no reserve understates cost.

On the sponsor

21. What have you built before — this asset class, at this size? Prior success in self-storage or residential does not transfer to a 10 MW interconnection.

22. May I speak to an investor in your last deal? A willing referral is among the most informative answers available.

23. Has any prior project of yours missed its projections, and what happened? Everyone has one. A sponsor who claims otherwise is either new or not being straight with you.

24. Who audits the project entity, and will I receive audited statements?

On getting out

25. What is the exit, concretely, with a mechanism and a timeframe? "A planned Reg A offering" or "an anticipated liquidity event" is a hope with a date missing.

26. Can I sell or transfer my units, to whom, and with whose consent?

27. If the project needs more capital and I do not participate, what happens to my position?

And after you invest

For a Regulation A Tier 2 issuer, ask whether Form 1-K (annual, within 120 calendar days of year end), Form 1-SA (semiannual, within 90 calendar days after the half year) and Form 1-U (within four business days of certain events) have been filed for prior offerings (SEC). A filing history is a record you can check against what investors were told at the time. Under Regulation D there is no such reporting at all — see Regulation A vs Regulation D.