Deeper understanding leads to better outcomes
20 May 2025
SMBC Americas Data Center Project Finance Featured in The Tech Capital
This article first appeared in edition 1 of The Tech Capital Magazine and has been published below with the publication’s permission
The Tech Capital – The past present and future of data centre project finance
As data centres get bigger, so does the cost of building them. SMBC's Quynh Tran explains how bank-led project financing is changing to meet this growing need.
By Jack Haddon, Deputy Editor, The Tech Capital
As the backbone of the digital economy, data centres have become indispensable for powering everything from cloud computing to artificial intelligence (AI) and global connectivity.
With demand for hyperscale facilities and edge computing solutions accelerating, financing these critical infrastructure assets has emerged as a complex but vital challenge.
Ready to help developers solve this challenge is Sumitomo Mitsui Banking Corporation (SMBC)’s Quynh Tran, the deputy head of structured finance for SMBC Americas.
From 2022 through 2024, SMBC played a pivotal role in shaping the digital infrastructure landscape, structuring and leading approximately US$25 billion in hyperscaler data centre construction financing in North America, not including deals where it was a participant, revolver, or supplier of debt to Devcos.
“We do expect that number to really grow. We have already seen 2025 get off to a very strong start with very large deals in the market right now,” Tran tells The Tech Capital.
The 20-year veteran of the bank has worked across a wide range of infrastructure deals during her tenure, including in the transport, rail and water sectors.
Over the past three to four years, however, her workload has taken on a new look.
“With everything that has been happening in digital infrastructure and particularly data centres, the vast, vast majority of what my team looks at today is within the digital infrastructure space,” she tells The Tech Capital.
While this shift has occurred since the turn of the decade, SMBC’s track record in project financing in the sector dates back to 2016, when Tran says her team structured and led the first-ever project financing of a data centre.
When we were presented with that first lease, it was the first time we’d ever seen a data centre lease. I never even thought about what a data centre was,” she admits.
But fast-forward to today, and the team has emerged as one of the leaders in the field, utilising its vast experience to continue executing some of the largest deals the industry has seen.
Growing projects, growing deals
Over the past nine years, the size and frequency of the transactions SMBC has executed have increased significantly.
Between 2016 and 2021, Tran says the bank would work on one or two a year, all of which were in the US$100-200 million range.
“Many of those we did on a bilateral basis or maybe brought in maybe one or two other partners”, she reveals.
But in 2022, the market exploded, as cloud demand led US hyperscalers to ramp up third-party data centre development.
Now faced with the challenge of constructing far larger cloud facilities than the industry was used to, project finance structuring took on a new form.
“The first widely syndicated project finance deal was not that long ago, in March 2022,” Tran says.
“Because we had a head start before many of our peers, we underwrote 100% of that US$850 million deal.”
Despite not many other banks having backed data centres as a project finance transaction, SMBC’s experience since 2016 gave them a clear sight of the strong industry tailwinds and the confidence to push ahead.
“I don’t think there are very many other sectors that banks finance that have such really strong industry dynamics,” she says.
Despite this milestone, just three years later, a US$850 million deal is considered relatively small from a project financing perspective, reflecting the seismic shift the industry and its debt capital providers have witnessed.
This boom has led to the sector’s maturity from a financing perspective, which Tran claims SMBC helped create.
That US$850 million transaction was when SMBC began educating the project finance market about the asset class.
This was necessary because banks often collaborate on larger deals to spread risk, pool resources, and leverage their combined expertise.
This collaboration can take various forms, such as syndication, co-financing, or forming consortia.
“A lot of the questions were very basic. What is a data centre? How do I ensure that the data centre doesn’t go down? What are the technology risks that I need to look at? But now the questions are getting increasingly sophisticated because banks have really had to keep pace.”
With AI-driven demand increasing the size of new build projects even further, the tailwinds are even stronger.
Other banks are having to “learn very, very quickly,” Tran says. “I think the incentive really is that the industry story is so strong, and there is such a pipeline that it really behooves people to really take a very, very deep and long look at the space.”
Leading the pack
Introducing AI data centres into the equation has meant that SMBC’s quest to bring the rest of the industry up to speed has continued, explaining how AI data centres differ from cloud facilities and what new and different factors lenders need to consider.
The key is building an understanding that refinancing options are available for all this bank debt.
“Banks can see looking ahead that once these projects reach stabilisation, their capital will be recycled. This is not an asset class where the balance sheet just continues to grow without any take out available for it,”
Tran explains. Tran is insistent that SMBC’s early start and its leadership position within the US industry has not just been instrumental to its already significant volume of deals, but that it sets the bank in good stead to continue to lead on larger and larger transactions moving forward.
“With any new sector that people get into, you start off being a bit conservative and then you get more and more comfortable the more that you dig into the space,” she explains.
“That first mover advantage really gave us a very good view and extra time to get the bank, including our credit and our management comfortable with the sector.”
As a result, when it became necessary to underwrite a very large deal, SMBC was ready “perhaps earlier than some of our peers.”
As the data centre industry evolves, SMBC’s network of developers, with whom it has already worked, allows it to scale its expertise.
Conversations are regularly held with not just data centre developers themselves but utilities and other ecosystem players.
“We’re able to pinpoint the differences between different markets, different leases, different developers and their different strategies to understand what works and what may not work for our bank and for others,” she says.
Being close to several developers it has already worked with, SMBC can use that information and talks to rating agencies to determine the best take-out options for many of these assets.
Tran says SMBC’s market-leading position is exemplified by a string of industry firsts over the past nine months.
In July 2024 it acted as Left Lead Placement Agent and Sole Ratings Advisor on the market’s first data centre US Private Placement executed under a project financing structuring.
“To get that done, we spent about a year, a year and a half talking with the rating agencies and kind of repeating the same process that we had on the bank side, even though intuitively it makes sense that this is a very strong asset and a very strong lease,” Tran explains.
Then, in January 2025, it followed up on this achievement by taking a data centre construction loan through the rating agency process and obtaining a high investment grade rating.
Given the strong institutional investor appetite it saw on that first USPP, having a strong investment grade rating on an asset still under construction should provide an additional liquidity pool for buildouts of data centre campuses on a standalone basis as a USPP, or alongside bank debt.
These two deals mark a shift in the asset-backed securities market, which until very recently focused on a more diversified portfolio of stabilised co-location facilities.
“The private placement from a single stabilised asset, with one long-term hyperscale evolved from the data centre single asset project financing that we ramped up in 2022,” she adds.
A new AI world
As drafters of some of the initial deals, SMBC strongly understands how leases and the credit documents underpinning them have evolved over time.
“Just because it’s a hyperscale lease doesn’t mean they’re all similar across the board. There are differences among them,” Tran says.
With a new category of data centre capacity off-takers entering the market, Tran’s team’s experience and knowledge put it in a strong position to continue financing new projects.
With the advent of AI-specific builds, Tran says her team is increasingly fielding questions about how the likes of Coreweave or OpenAI acting as the tenant of a facility changes a bank’s analysis.
The project finance market has matured and become comfortable with cloud-dedicated data centres, but this new breed of facility and tenant makes for a more complicated landscape.
“We’re having to think deeper about that with our peers in the market,” she adds. “I don’t know if we have a resolution on that, but we are very interested in finding a solution that works.
”Cloud divisions are among the most profitable and fastest growing segments of hyperscalers businesses, whereas despite the hype, AI businesses are yet to prove their profitability.
“The next step is to understand how they differentiate themselves? And will they be there? Say, even if you have a 15-year lease. How do you support a CoreWeave or an OpenAI for a long-tenured lease?”
Tran doesn’t see this so much as a challenge, but an evolution of the project finance model.
“If we had picked up our first data centre lease and said, ‘Oh no, if you’re down for a minute, you lose a day of rent, there’s no way project finance can accept this’ then we wouldn’t have gotten anywhere,” she reflects.
Relationships are key
If one thing is certain in light of the increased demand for demand data centres, the development landscape is much harder now. This is not lost on the project financiers sitting behind data centre development.
“From a development perspective and how this plays into what we’re doing on the construction side, it’s become extremely competitive,” Tran says.
While a secured long-term hyperscaler lease is “almost a given” to securing project financing, Tran’s team pays close attention to other relationships beyond that between a developer and a hyperscaler.
Construction risk in itself is less of a factor, as construction is relatively simple compared to other projects the bank might work on such as an airport or a power station.
But given the vast number of data centres being built simultaneously, data centre developers “have to make sure that they have trade and contractors available to work on that site.”
“You may be doing a billion-dollar development in a certain market, but there could be another or two other billion-dollar, US$2 billion development right next to you,” Tran says.
As such, ensuring a data centre developer has the right relationships with the trade and the construction contractors in order to ensure that that development is successful and delivered on time is a key consideration.
So too are relationships with local authorities in order to get the permitting and also utilities to secure power for the site.
“It’s not just a relationship with the hyperscalers when we’re talking to developers that are important, but it’s the relationship with the whole ecosystem, in order to make sure that that big project is successful.”
Access to power
Specifically, access to power is anticipated to be one of the closely watched areas for SMBC moving forward.
Tran acknowledges that an evolution in development is taking place. Leases signed over the past two years “were not signed in a vacuum,” she observes.
“They were signed because that particular developer has been working on the land banking, been working with the utilities over the last two to three years prior to offer it up to the hyperscaler.
”In a nutshell – low-hanging fruit. But the next stage of the conversation focuses on what happens if power is unavailable immediately or in the near term.
Tran says SMBC and other banks are starting to consider projects in which the data centre and the power are developed side by side.
“How will project finance lenders evaluate that, and how do you structure something like that?” she asks. “I think that’s probably the next stage of where we go with all this.
”As the digital infrastructure landscape expands, the complexities of financing these essential assets will surely evolve in tandem.
With AI-driven demand reshaping the industry and access to power emerging as a critical factor, financial institutions will likely need to yet again adapt their approaches to risk assessment, deal structuring, and long-term capital strategies.
The project finance model itself may undergo further refinement as new categories of tenants and hybrid development models emerge, and one can bet that Tran and her team will be there as it does.
The Tech Capital – The past present and future of data centre project finance
As data centres get bigger, so does the cost of building them. SMBC's Quynh Tran explains how bank-led project financing is changing to meet this growing need.
By Jack Haddon, Deputy Editor, The Tech Capital
As the backbone of the digital economy, data centres have become indispensable for powering everything from cloud computing to artificial intelligence (AI) and global connectivity.
With demand for hyperscale facilities and edge computing solutions accelerating, financing these critical infrastructure assets has emerged as a complex but vital challenge.
Ready to help developers solve this challenge is Sumitomo Mitsui Banking Corporation (SMBC)’s Quynh Tran, the deputy head of structured finance for SMBC Americas.
From 2022 through 2024, SMBC played a pivotal role in shaping the digital infrastructure landscape, structuring and leading approximately US$25 billion in hyperscaler data centre construction financing in North America, not including deals where it was a participant, revolver, or supplier of debt to Devcos.
“We do expect that number to really grow. We have already seen 2025 get off to a very strong start with very large deals in the market right now,” Tran tells The Tech Capital.
The 20-year veteran of the bank has worked across a wide range of infrastructure deals during her tenure, including in the transport, rail and water sectors.
Over the past three to four years, however, her workload has taken on a new look.
“With everything that has been happening in digital infrastructure and particularly data centres, the vast, vast majority of what my team looks at today is within the digital infrastructure space,” she tells The Tech Capital.
While this shift has occurred since the turn of the decade, SMBC’s track record in project financing in the sector dates back to 2016, when Tran says her team structured and led the first-ever project financing of a data centre.
When we were presented with that first lease, it was the first time we’d ever seen a data centre lease. I never even thought about what a data centre was,” she admits.
But fast-forward to today, and the team has emerged as one of the leaders in the field, utilising its vast experience to continue executing some of the largest deals the industry has seen.
Growing projects, growing deals
Over the past nine years, the size and frequency of the transactions SMBC has executed have increased significantly.
Between 2016 and 2021, Tran says the bank would work on one or two a year, all of which were in the US$100-200 million range.
“Many of those we did on a bilateral basis or maybe brought in maybe one or two other partners”, she reveals.
But in 2022, the market exploded, as cloud demand led US hyperscalers to ramp up third-party data centre development.
Now faced with the challenge of constructing far larger cloud facilities than the industry was used to, project finance structuring took on a new form.
“The first widely syndicated project finance deal was not that long ago, in March 2022,” Tran says.
“Because we had a head start before many of our peers, we underwrote 100% of that US$850 million deal.”
Despite not many other banks having backed data centres as a project finance transaction, SMBC’s experience since 2016 gave them a clear sight of the strong industry tailwinds and the confidence to push ahead.
“I don’t think there are very many other sectors that banks finance that have such really strong industry dynamics,” she says.
Despite this milestone, just three years later, a US$850 million deal is considered relatively small from a project financing perspective, reflecting the seismic shift the industry and its debt capital providers have witnessed.
This boom has led to the sector’s maturity from a financing perspective, which Tran claims SMBC helped create.
That US$850 million transaction was when SMBC began educating the project finance market about the asset class.
This was necessary because banks often collaborate on larger deals to spread risk, pool resources, and leverage their combined expertise.
This collaboration can take various forms, such as syndication, co-financing, or forming consortia.
“A lot of the questions were very basic. What is a data centre? How do I ensure that the data centre doesn’t go down? What are the technology risks that I need to look at? But now the questions are getting increasingly sophisticated because banks have really had to keep pace.”
With AI-driven demand increasing the size of new build projects even further, the tailwinds are even stronger.
Other banks are having to “learn very, very quickly,” Tran says. “I think the incentive really is that the industry story is so strong, and there is such a pipeline that it really behooves people to really take a very, very deep and long look at the space.”
Leading the pack
Introducing AI data centres into the equation has meant that SMBC’s quest to bring the rest of the industry up to speed has continued, explaining how AI data centres differ from cloud facilities and what new and different factors lenders need to consider.
The key is building an understanding that refinancing options are available for all this bank debt.
“Banks can see looking ahead that once these projects reach stabilisation, their capital will be recycled. This is not an asset class where the balance sheet just continues to grow without any take out available for it,”
Tran explains. Tran is insistent that SMBC’s early start and its leadership position within the US industry has not just been instrumental to its already significant volume of deals, but that it sets the bank in good stead to continue to lead on larger and larger transactions moving forward.
“With any new sector that people get into, you start off being a bit conservative and then you get more and more comfortable the more that you dig into the space,” she explains.
“That first mover advantage really gave us a very good view and extra time to get the bank, including our credit and our management comfortable with the sector.”
As a result, when it became necessary to underwrite a very large deal, SMBC was ready “perhaps earlier than some of our peers.”
As the data centre industry evolves, SMBC’s network of developers, with whom it has already worked, allows it to scale its expertise.
Conversations are regularly held with not just data centre developers themselves but utilities and other ecosystem players.
“We’re able to pinpoint the differences between different markets, different leases, different developers and their different strategies to understand what works and what may not work for our bank and for others,” she says.
Being close to several developers it has already worked with, SMBC can use that information and talks to rating agencies to determine the best take-out options for many of these assets.
Tran says SMBC’s market-leading position is exemplified by a string of industry firsts over the past nine months.
In July 2024 it acted as Left Lead Placement Agent and Sole Ratings Advisor on the market’s first data centre US Private Placement executed under a project financing structuring.
“To get that done, we spent about a year, a year and a half talking with the rating agencies and kind of repeating the same process that we had on the bank side, even though intuitively it makes sense that this is a very strong asset and a very strong lease,” Tran explains.
Then, in January 2025, it followed up on this achievement by taking a data centre construction loan through the rating agency process and obtaining a high investment grade rating.
Given the strong institutional investor appetite it saw on that first USPP, having a strong investment grade rating on an asset still under construction should provide an additional liquidity pool for buildouts of data centre campuses on a standalone basis as a USPP, or alongside bank debt.
These two deals mark a shift in the asset-backed securities market, which until very recently focused on a more diversified portfolio of stabilised co-location facilities.
“The private placement from a single stabilised asset, with one long-term hyperscale evolved from the data centre single asset project financing that we ramped up in 2022,” she adds.
A new AI world
As drafters of some of the initial deals, SMBC strongly understands how leases and the credit documents underpinning them have evolved over time.
“Just because it’s a hyperscale lease doesn’t mean they’re all similar across the board. There are differences among them,” Tran says.
With a new category of data centre capacity off-takers entering the market, Tran’s team’s experience and knowledge put it in a strong position to continue financing new projects.
With the advent of AI-specific builds, Tran says her team is increasingly fielding questions about how the likes of Coreweave or OpenAI acting as the tenant of a facility changes a bank’s analysis.
The project finance market has matured and become comfortable with cloud-dedicated data centres, but this new breed of facility and tenant makes for a more complicated landscape.
“We’re having to think deeper about that with our peers in the market,” she adds. “I don’t know if we have a resolution on that, but we are very interested in finding a solution that works.
”Cloud divisions are among the most profitable and fastest growing segments of hyperscalers businesses, whereas despite the hype, AI businesses are yet to prove their profitability.
“The next step is to understand how they differentiate themselves? And will they be there? Say, even if you have a 15-year lease. How do you support a CoreWeave or an OpenAI for a long-tenured lease?”
Tran doesn’t see this so much as a challenge, but an evolution of the project finance model.
“If we had picked up our first data centre lease and said, ‘Oh no, if you’re down for a minute, you lose a day of rent, there’s no way project finance can accept this’ then we wouldn’t have gotten anywhere,” she reflects.
Relationships are key
If one thing is certain in light of the increased demand for demand data centres, the development landscape is much harder now. This is not lost on the project financiers sitting behind data centre development.
“From a development perspective and how this plays into what we’re doing on the construction side, it’s become extremely competitive,” Tran says.
While a secured long-term hyperscaler lease is “almost a given” to securing project financing, Tran’s team pays close attention to other relationships beyond that between a developer and a hyperscaler.
Construction risk in itself is less of a factor, as construction is relatively simple compared to other projects the bank might work on such as an airport or a power station.
But given the vast number of data centres being built simultaneously, data centre developers “have to make sure that they have trade and contractors available to work on that site.”
“You may be doing a billion-dollar development in a certain market, but there could be another or two other billion-dollar, US$2 billion development right next to you,” Tran says.
As such, ensuring a data centre developer has the right relationships with the trade and the construction contractors in order to ensure that that development is successful and delivered on time is a key consideration.
So too are relationships with local authorities in order to get the permitting and also utilities to secure power for the site.
“It’s not just a relationship with the hyperscalers when we’re talking to developers that are important, but it’s the relationship with the whole ecosystem, in order to make sure that that big project is successful.”
Access to power
Specifically, access to power is anticipated to be one of the closely watched areas for SMBC moving forward.
Tran acknowledges that an evolution in development is taking place. Leases signed over the past two years “were not signed in a vacuum,” she observes.
“They were signed because that particular developer has been working on the land banking, been working with the utilities over the last two to three years prior to offer it up to the hyperscaler.
”In a nutshell – low-hanging fruit. But the next stage of the conversation focuses on what happens if power is unavailable immediately or in the near term.
Tran says SMBC and other banks are starting to consider projects in which the data centre and the power are developed side by side.
“How will project finance lenders evaluate that, and how do you structure something like that?” she asks. “I think that’s probably the next stage of where we go with all this.
”As the digital infrastructure landscape expands, the complexities of financing these essential assets will surely evolve in tandem.
With AI-driven demand reshaping the industry and access to power emerging as a critical factor, financial institutions will likely need to yet again adapt their approaches to risk assessment, deal structuring, and long-term capital strategies.
The project finance model itself may undergo further refinement as new categories of tenants and hybrid development models emerge, and one can bet that Tran and her team will be there as it does.