The dealings of data center developer and operator QTS with the securitization market in 2026 contain both a framework for success and warnings for prospective issuers.
The Blackstone-owned company has navigated pockets of tepid investor demand to price multiple offerings in the asset-backed and commercial mortgage -backed securities markets this year, with a combined size of about $4.5bn across four deals.
QTS has been vocal with investors about its need to raise $40bn this year across corporate bonds, securitizations and other markets.
This week, it returned to the with another ABS that offered up to $870m of notes backed by data centers leased to hyperscalers.
Initial price thoughts for the deal’s senior five year note, at 160bp over the I-curve, were 40bp wide of where Compass priced its data center ABS deal in February.
Multiple tranches of the QTS deal are more than three times subscribed — one is more than 12 times subscribed, when order guarantees are factored in.
The wider start to QTS’s new deal was the result of market push-back towards its other issuance this year.
With a focus on delivering data center space for hyperscalers, QTS securitizations are backed by leases to Microsoft, Meta and Oracle, among others.
But investors have repeatedly said that having such glamorous tenants is not enough to justify repeatedly buying QTS paper, as the deals come in such quick succession.
The warnings
QTS quickly found out it would need to pay up if it wanted to flood the market with paper.
No data center securitization issuer in the public 144A market has matched QTS’s pace of issuance in the past two years.
This year, it started its deal making with relative ease, pricing a $750m ABS in January and a $1.95bn CMBS in February — not long after a mammoth $3.46bn CMBS in November 2025.
But when QTS returned with an ABS in March, dealmaking got a little tricky.
Initially, it wanted to sell seven and 10 year bonds via a $510m offering. But investors, cognizant that it was an asset class that had not been tested through economic cycles, did not clamor to buy the 10 year bonds.
Ultimately, those bonds were dropped and five year notes were added, and the deal was priced at the wide end of guidance, with the senior note five year note at 195bp over.
While that may seem wide, when compared to the latest QTS offering at 160bp over, the benchmark was 75bp lower at the time.
A month after the 10 year bonds were dropped from its ABS offering, QTS tried the that tenor in the corporate bond market, ultimately pricing a $4.6bn at 137.5bp over the I-curve in April. But the spread on those bonds has widened to about 170bp.
As its corporate bond widened, QTS also had difficulty pricing its $1.26bn CMBS this month, which offered five tranches with 10 year tenors.
The deal was priced between 40bp and 100bp wide of initial price thoughts, with the senior note coming at 140bp over the J-curve.
On Tuesday, the $870m QTS deal was tightened significantly at guidance to 145bp over on the triple-A rated (Fitch) five year note.
Framework for success
QTS’s this year has shown that if issuers want to extend tenors to 10 years or repeatedly issue paper, they will need to pay up.
There has been talk about data center securitization issuance becoming commoditized, and spreads grinding to sub-100bp due to the scale of capital needed to support the build-out of the digital world.
There have been some signs of that with the CloudHQ and Compass data center ABS deals printing in the region of120bp for five-year paper.
But, ultimately, data center securitizations remain idiosyncratic, as deals by QTS and others like Flexential, which priced at 245bp over in April, have shown.
Meanwhile, QTS has demonstrated its nimbleness to attract capital. Its latest ABS deal will offer $155m of triple-A rated floating rate paper to be placed in the private 4(a)(2) market. That note appears to be one of the first, if not the first, of its kind in data center ABS.
It is reasonable for investors to expect more of these kinds of notes, given the scale of capital issuers will be asking for in upcoming months and years.
The wider story
Deutsche Bank predicts there will be $25bn and $15bn issued in the data center ABS and CMBS markets, respectively, this year.
About $6.34bn (ABS) and about $4.79bn (CMBS) of data center paper have already been issued this year.
Now, after a near two-month pause, following the CloudHQ in April, the data center ABS pipeline in the public 144A market is filling up.
Aligned has asked investors for feedback on its ABS deal this week. While last week, Sabey received a single-A rating from S&P for an ABS deal that is yet to go public.
CloudCapital, which operates and manages data centers, was in front of investors last month for non-deal roadshows. Investors believe it is preparing for another ABS deal.
This week, the Digital Reality Trust filed documents showing its intention to issue a CMBS data center deal.
Vantage, which launched the data center ABS market in 2018, is also likely to issue again in the coming months.
If the trends displayed in QTS’s dealmaking prevail, repeat issuers returning to the market may face spreads that remain wider for longer.