Cyxtera Technologies, which voluntarily filed for Chapter 11 bankruptcy relief last month, has continued to reject unprofitable data center leases. Its latest target is a facility located in the suburb of Elk Grove Village, just outside of Chicago, Illinois. The building is owned by STACK Infrastructure, a hyperscale data center developer and operator backed by IPI Partners.
In June 2023, Cyxtera was granted a court order by the U.S. Bankruptcy Court for the District of New Jersey, authorizing the company to either reject or assume certain executory contracts and unexpired leases. Additionally, the order established formal procedures for carrying out these actions.
To date, Cyxtera has sought to reject leases for a facility in Moses Lake, Washington, in the United States, owned by Serverfarm, and another located outside of Amsterdam, Netherlands, owned by CyrusOne. However, the rejection of the CyrusOne lease has been postponed to a later date. Therefore, Cyxtera’s notice to reject the lease for STACK Infrastructure’s data center in Chicago represents its third data center lease rejection since entering Chapter 11 bankruptcy. STACK has 10 days to file a written objection, should they choose to do so, in response to Cyxtera’s notice.
Cyxtera Rejects Data Center Lease in Chicago
Cyxtera Technologies plans to reject an unexpired lease at its ORD3 data center, located at 1441 Touhy Avenue in Elk Grove Village, Illinois. This suburb is situated approximately 20 miles northwest of downtown Chicago.
The single-story, purpose-built data center supplies Cyxtera with 3.5 megawatts of conditioned power, deployed across two data halls in an N+1 redundancy configuration. Through ORD3, Cyxtera offers its customers 27,000 square feet of raised floor space within a total building interior of 133,000 square feet.
Cyxtera has scheduled to cease operations at this data center and reject the lease effective from September 4, 2023. This plan also includes the abandonment of fixed assets such as general office equipment and mechanical & electrical equipment related to its colocation services.
Originally, Cyxtera’s lease for this property was scheduled to expire on January 31, 2035, leaving a remaining lease term of approximately 11.6 years. However, by rejecting this lease as of September 4, 2023, Cyxtera is seeking to end its lease at ORD3 approximately 11.4 years earlier than its original contractual end date.
Building Owner – STACK Infrastructure
STACK Infrastructure, operating through the entity SI CHI01 ABS, LLC, is the landlord of Cyxtera and owns the property at 1441 Touhy Avenue in Elk Grove Village, Illinois. Constructed in 2015, this data center, referred to by STACK as CHI01A, offers total capacity of 13 megawatts across 221,000 square feet of space.
Cyxtera’s lease payments for space and power capacity have served as collateral for STACK Infrastructure’s recent data center securitizations. In particular, these payments have been included as collateral in STACK’s Series 2023-1 and Series 2021-1 asset-backed security (ABS) transactions. While the exposure to Illinois constitutes 20.1% of STACK’s Series 2023-1 securitization pool’s annualized adjusted base rent (AABR) of $187.6 million, the contribution from Cyxtera’s Chicago lease is a smaller component of this.
Interestingly, STACK has indicated that its Chicago campus is currently undergoing an expansion to deliver additional capacity.
IPI Partners – Exposure Beyond STACK to Cyxtera
STACK Infrastructure is owned by IPI Partners, a digital infrastructure private equity firm, which is a joint venture between ICONIQ Capital and Iron Point Partners. Notably, IPI Partners itself is listed among the ‘top 20’ unsecured creditors of Cyxtera, having submitted a trade payable claim amounting to $568,775.