Founded by a data center veteran just four years ago, Tract Capital oversees a land-development company that has secured more than 30,000 acres from Nevada to Virginia along with a portfolio of water rights.
When JPMorgan Chase & Co. hit the market to sell $3.8 billion worth of junk bonds for the construction of a data center backed byNever mind that few of them had much experience dealing with the company now responsible for bringing that data center to life: Tract Capital.
Founded by a data center veteran just four years ago, Tract Capital oversees a land-development company that has secured more than 30,000 acres from Nevada to Virginia along with a portfolio of water rights. It’s betting that powered land, or real estate that has the energy access needed for data centers, will pay off richly as AI infrastructure becomes essential to the US economy. “When we started Tract, we were still boring people at dinner parties talking about data centers — people’s eyes rolled back in their heads,” said Graham Williams, the president of Tract Capital’s land-development company. “Now it’s all people want to talk about.” Counting land that’s both owned and under contract, the upstart holds one of the country’s biggest property reserves for data centers — the total area is bigger than San Francisco. The goal is to equip all of that space with power, ready it for data centers within five to seven years and then flip it at big premiums.Yahoo turns to AI-powered answer engine Scout to lead it back to its roots in online searchThere’s little doubt demand exists for what Tract is pitching. Hines Real Estate Holdings, a privately-held firm whose business also includes helping secure land with energy connections for Big Tech sites, estimates that 40,000 acres of powered land will be needed to meet data center demand through 2030. “We feel really good about the inventory that we’ve created, because really the low hanging fruit’s all gone,” said Tract’s Williams. Some rivals and industry insiders are skeptical about whether Tract has a clear path to electricity and profits. They complain it’s one of many in a horde of speculators clogging queues for power on an increasingly stretched grid. Tract says it hasn’t heard that criticism. The firm is investing private money to create a product that hyperscalers and developers need to grow, a spokesperson said. Denver-based Tract Capital launched after serial data center entrepreneur and South Africa native Grant van Rooyen rounded up former colleagues. Cologix, a data center company sparked by an idea scribbled on a napkin in van Rooyen’s kitchen, sold a majority stake to Stonepeak Partners in 2017 and has since landed billions in additional financing. Van Rooyen wants his next act to be even bigger. Tract Capital already manages over $6.3 billion across its portfolio companies — the land-development entity and Fleet, which builds data centers. Its land-buying platform can transact on 2,000 acres in one swoop. Over the last two years it doubled its footprint and aims to secure over 22 gigawatts of electricity, the power needs of some 20 million households, for data centers. The goal, it tells investors, is to create planned communities complete with power infrastructure and roads where data centers can then be built seamlessly. But it’s early days, and the land unit has just one exit to its name so far: a sale of some Nevada land to the data center builder Tract Capital oversees. Similar deals may take shape in the future, but the two units operate independently of one another, Williams said. The data-center builder now has two projects underway, according to bond offering documents seen by Bloomberg.Tract’s rapid expansion has put itself in the middle of a fierce competition for both land and power. The AI frenzy has given rise to modern-day land prospectors ranging from the world’s biggest real estate firms to a Halloween attraction owner in Pennsylvania. “There are very few people who understand that our space is really about the confluence of a number of things,” Williams said. “It’s not just about land. It’s not just about power. It’s not just about network. It’s about all of those things, plus it’s understanding how to work with communities to find the right and appropriate land use.” To set itself apart, Tract hammers on the experience of its management team. Van Rooyen spent 28 years investing in digital infrastructure. Williams, president of the land-development unit, was an early employee at Cologix and served as its chief operating officer until its 2017 sale. Chris Vonderhaar, previously of Alphabet Inc.’s Google and a veteran of Amazon Web Services, runs the data-center development company. By lining up Nvidia to lease an unbuilt data center in Nevada, an entity backed by Tract Capital was able to borrow $3.8 billion from the junk bond market despite the fact that the entity has no revenue. It’s an indirect subsidiary of Tract Capital and the data center developer it oversees, neither of whom guaranteed the bonds. But enough orders poured in to cover the debt sale more than three times over. Moody’s rated the bonds just a notch below investment grade, which is higher than similar, past deals from crypto miners looking to pivot to AI data centers. And JPMorgan lined up anchor orders for the debt well ahead of time, according to people familiar with the matter, who asked not to be named discussing private details. “It’s like a warm and fuzzy feeling when you have a name brand as a backstop,” said Michael Levitin, a portfolio manager at MidOcean Partners.With the financing secured, little time remains before deadlines start creeping up on the project. The first batch of power is due by October 2027, and a full 200 megawatts are expected by the middle the following year, according to the bond offering documents. Nvidia has protections embedded in the deal that allow it to terminate the lease if 100 megawatts of power haven’t been delivered by the end of March 2031. Electricity has become a major constraint for developers across the country, with new projects now waiting more then four years for a power connection. Construction of new data centers in the US last year fell for the first time since 2020 as developers faced delays in permitting, zoning and power procurement, according to real estate brokerage CBRE Group Inc. Goldman Sachs Group Inc. estimates almost all US power grids will lack critical spare capacity by 2030 as demand surges to supply data centers. In Arizona, Tract has already spent more than a year winning a local government’s blessing to devote a 2,000-acre property to data center development. Despite its $136 million price tag, the land’s path to industrial-scale power is unclear. It hopes to eventually lock in 1.8 gigawatts of electricity — the equivalent of about two nuclear reactors. It believes the site is well suited for connections to large substations that will be built on site, and the company is working with local utility Arizona Public Service to scope out the costs and upgrades needed. But the total price tag for procuring the energy and necessary infrastructure could balloon to more than $100 million, it projects. Tract is weighing whether to build its own generation facilities instead. “As these campuses get bigger, the choreography of infrastructure is more complex and more expensive and takes longer,” Tract’s Williams said. –With assistance from Edison Wu, Joe Lovinger, Paula Seligson, Miranda Davis, Naureen S. Malik and Marie Monteleone.This Sacramento suburb is booming. 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