Really enjoyed this ☝️. It seems the structure you reference between Meta and the paper entity Beignet sets up a situation where if the AI boom swings away from CapEx suddenly, then Meta walks away from the lease guaranty, the lender could be stuck with significant losses.
A good example of the financial engineering that led to the mortgage backed security, 2008 GFC where collateral for loans were worthless.
I saw this in the industrial space recently (2021-22) when Amazon walked away from a number of distribution center deals it had under contract. A bunch of developers took steep losses. Luckily my partners and I weren’t one of them.
An edited out portion noted that there is an implicit assumption these assets will have value even absent their investment grade tenant. It is true that when it comes to data centers and AI infra in general we are all tied to the mast a bit.
Really enjoyed this ☝️. It seems the structure you reference between Meta and the paper entity Beignet sets up a situation where if the AI boom swings away from CapEx suddenly, then Meta walks away from the lease guaranty, the lender could be stuck with significant losses.
A good example of the financial engineering that led to the mortgage backed security, 2008 GFC where collateral for loans were worthless.
I saw this in the industrial space recently (2021-22) when Amazon walked away from a number of distribution center deals it had under contract. A bunch of developers took steep losses. Luckily my partners and I weren’t one of them.
Appreciate the thoughtful insights as always!
An edited out portion noted that there is an implicit assumption these assets will have value even absent their investment grade tenant. It is true that when it comes to data centers and AI infra in general we are all tied to the mast a bit.