Financing Data Centres In Canada: A 2026 Primer

Canada's data centre market is expanding rapidly, driven by the demands of artificial intelligence, cloud computing, and various other factors.

Financing this growth in Canada will invariably rely on a sophisticated toolkit of conventional and innovative funding structures and solutions already proven in the United States and Europe. Proven financing products deployed elsewhere include platform asset‑backed securitizations, single-asset commercial mortgage‑backed securities, project‑style construction loans, and private credit.

Many analysts suggest there will be a funding gap through 2028 for data centre development. Creative and flexible funding solutions will be critical to sustain growth in data centre development for sponsors, lenders, and investors navigating the Canadian market. Efficient execution of financing solutions will be key.

This primer summarizes the existing data centres financing playbook and highlights key Canadian legal and commercial considerations.

The three core financing structures: Project finance, real estate finance, and securitization

The main financing structures used successfully to date in the data centre context are project finance, real estate finance, and securitization. These solutions can be deployed in combination and at different stages in the data centre development life cycle. We will explore below, in high-level terms, these three main financing approaches.

Project finance

In the data centre context, project finance can fund new-build facilities where they are backed by long-term anchor leases from hyperscale tenants. The funding thesis or credit premise for the project financing of data centres rests on contracted leases supporting the incurred debt rather than relying primarily on the developer's balance sheet.

As is typical for project finance solutions, the main lender assessment is whether the contracted revenues available to the borrower entity can support repayment of principal and interest rather than determining the sufficiency of recourse to the borrower’s own credit. In these financings, a special purpose vehicle is ordinarily established by the data centre project sponsor which typically owns the new-build data centre facility, with lenders taking a first lien on such SPV assets and receiving revenues through cash flow sweeps.

These project finance transactions are consummated on a limited-recourse basis to the project sponsor or borrower. Project finance can support construction or interim financing, as well as permanent or take-out financing. Construction financing typically achieves 65-80% loan-to-cost ratios, while permanent financing reaches 65-75% loan-to-value ratios, protected by minimum 1.35-1.50x debt service coverage ratios and covenants restricting lease modifications, asset sales, and distributions without lender consent.

The critical legal protection to the lending group procured from the project sponsors is a Subordination, Non-Disturbance, and Attornment Agreement (“SNDA”), which ensures the tenant recognizes the lender as its new landlord post-foreclosure while the lender agrees not to disturb the tenant's occupancy, preserving the lease's value as collateral.

Real estate finance

Real estate finance typically targets stabilized, multi-tenant facilities where lenders underwrite against asset value, operating history, and a diversified tenant base rather than a single anchor lease.

This structure secures the lending group with a first mortgage on the real estate, personal property, and leases associated with the data centre facility, achieving 60-75% loan-to-value with 1.25-1.40x debt service coverage ratios—often lower than project finance due to re-leasing diversification—and typically requires a debt service reserve of 6-12 months.

Lenders impose controls on lease modifications, major capital projects, and asset dispositions to protect against concentration risk where any single tenant exceeds 50% of revenues.

Securitization

Securitization (especially where a credit-rated securitized instrument is involved) provides the lowest-cost permanent capital by pooling multiple data centre leases or mortgages into a special purpose entity that issues notes to institutional investors. Senior tranches of rated deals typically achieve A- or A ratings with yields of 5.5-6.5% over 5- to 7-year maturities, while subordinated tranches rated BBB to B absorb initial losses.

Rating agency criteria, such as S&P's utility score (evaluating location, power costs, and redundancy) and Moody's expected loss methodology (emphasizing net cash flows and tenant concentration), are critical. Legal counsel must manage the execution and implementation of the deal documents and ongoing rating agency interaction.

The Canadian Precedent: eStruxture’s $1.35 Billion Financing

Cross-border offerings by data centre issuers have included Canadian assets and Canadian-domiciled investors. By way of example, in 2025, eStruxture Data Centers—Canada's largest domestic data centre issuing platform—raised $1.35 billion, comprising $750 million in securitized notes and a $600 million bank revolving facility. The issuance, completed under a Green Finance Framework, attracted pension funds, insurance companies, and infrastructure funds.

This transaction appears informed by the U.S. securitization template pioneered by Vantage Data Centers, achieving substantially equivalent pricing and terms and confirming robust institutional investor appetite for Canadian data centre credit.

Key legal and credit considerations

Tenant creditworthiness drives all structures, with investment-grade hyperscalers commanding premium terms. In contrast, emerging AI operators may require credit enhancements such as parent company guarantees or value maintenance agreements.

Access to efficient and abundant energy sources is another critical element. Canadian facilities gain a credit advantage from low-cost hydroelectric power in Québec, abundant natural gas in Alberta, and clean energy grids in provinces like Ontario and British Columbia, which improve debt service coverage and support higher leverage versus many U.S. markets.

The standard covenant package for data centre financing documentation includes debt service and interest coverage minimums, prohibitions on lease modifications without lender consent, capital expenditure controls, and detailed quarterly reporting.

Cross-border execution between Canada and the U.S.

U.S. data centre financing models transfer seamlessly to Canada because standardized rating criteria evaluate tenant credit, power costs, and redundancy substantively the same across borders. We have seen major hyperscalers deploy largely consistent lease terms in both markets, and regulatory differences relating to energy and construction matters between the two markets have proven to be manageable by the deal structurers.

Structuring requires attention to legal and regulatory matters such as special purpose vehicle form and domicile, where, for instance, tax advisors consider partnership versus corporate tax treatment and the effect of cross-border guarantees. Counsel will be engaged to diligence key aspects of the data centre projects including commercial lease terms, provincial title registration, environmental Phase I/II assessments, and power procurement agreements, by way of example.

Financing documentation for data centres with Canada and U.S. components often is documented under US-law precedent note indentures in order to benefit from investor familiarity alongside Canadian-law security packages to address local perfection and protection of collateral matters.

Current market dynamics

Market data demonstrates that the AI boom drove over $125 billion in global data centre debt during 2025, with funding for AI-specific facilities surging. Morgan Stanley research estimates this has created a global financing gap of $1.5 trillion through 2028. Private credit funds are filling bank syndication gaps with financing at costs of 7-10%, at times offering more flexible terms than 5-7% securitization yields.

In Canada, the federal government is supporting the sector with a committed $2.4 billion for computing infrastructure and a proposed $15 billion loan and investment program.

Conclusion

Data centre financing follows a proven playbook: project finance for development, securitization for permanent capital, and increasingly standardized credit protections and financing documentation.

For developers, lenders, and investors in this large, specialized, and rapidly growing market, law firms with integrated project finance, securitization, and infrastructure expertise across borders can execute deals efficiently and manage risk effectively.

The team at Gowling WLG looks forward to further discussions with our clients’ finance teams to develop innovative and nimble solutions that address data centre project funding needs in Canada. Stay tuned for further articles that expand on the financing framework of data centres, and build on this initial primer.

Please contact one of the authors or a member of our Canadian data centre team to discuss your data centre-related project if you have any questions.

Read the original article on GowlingWLG.com

Originally published 13 February 2026.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.