Rapid QTS data center dealmaking both a warning and a sign of success

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 through corporate bonds, securitizations and other markets.

This week, it returned with another ABS, now at the price guidance stage, that offers 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, a rival, had priced its data center ABS 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.

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 dealmaking 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, execution 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 five year note at 195bp over.

While that may seem wide, compared to the latest QTS offering at 160bp, the benchmark was 75bp lower at the time.

A month after dropping the 10 year bonds from its ABS offering, QTS tried that tenor in the corporate bond market, ultimately pricing a $4.6bn bond 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.

That deal was priced between 40bp and 100bp wide of initial price thoughts, with the senior note coming at 140bp over the J-curve.

Then on Tuesday, the triple-A five year tranche of QTS's $870m ABS deal was tightened significantly at guidance to 145bp.

QTS’s issuance this year has shown that if developers want to extend tenors to 10 years or issue repeatedly, they will need to pay up.

There has been talk about data center securitization becoming commoditized, and spreads grinding down below 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 CloudHQ and Compass pricing five year ABS in the region of 120bp.

But ultimately, each data center securitization is different, as deals by QTS and others like Flexential, which priced at 245bp over in April, have shown. The market has not yet gravitated towards the 'rinse and repeat' type deals seen in credit card and auto loan ABS.

Meanwhile, QTS has demonstrated its nimbleness at attracting capital. Unusually, its latest ABS includes $155m of floating rate triple-A paper, to be placed in the private 4(a)(2) market. That note appears to be one of the first, if not the first, FRN 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 the coming months and years.

Deutsche Bank predicts $25bn of data center ABS and $15bn of CMBS will be issued this year. About $6.34bn of ABS and $4.79bn of CMBS have already come.

Now, after a nearly two month pause since the CloudHQ deal in April, the data center ABS pipeline in the public 144A market is filling up.

Aligned has asked investors for feedback on an ABS this week. Last week, Sabey received a single-A rating from S&P for an ABS that is yet to go public.

CloudCapital was in front of investors last month for non-deal roadshows. Investors believe it is preparing for another ABS deal.

This week, Digital Realty Trust filed documents showing its intention to issue a CMBS.

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.