Subject to Lease Documents and Financing: Applied Digital's Conditional Anchor Tenant Agreement at Ellendale

On January 16, 2024, Applied Digital announced that "it has signed a conditional agreement to provide datacenter capacity at its Ellendale, North Dakota campus, subject to finalization of definitive lease documents." The company calls itself "a designer, builder, and operator of next-generation digital infrastructure." Its headline calls the other party an anchor tenant. The release does not name it. The release makes the agreement itself conditional on financing, which the company was discussing with potential lenders.

Capacity on a Condition

The agreement covers "a total of 100MWs for a term of 10 years," the release says, and it "is conditional on securing financing for the completion of construction." The financing is for finishing construction, and the release speaks of it as still to be secured. The company "is in conversation with potential lenders to secure the project-level financing needed."

The release puts a value on it as well. The total contract value is "approximately $2.2 billion over the 10-year term," in the company's own figure. Approximately, and over the whole term.

On the day of the release, the agreement rested on lease documents not yet final and on financing not yet in hand. A lender asked for that financing would want to see the lease, and the tenant's agreement waits on the financing. Which moves first is a question the release leaves open.

What the Release Leaves Out

The release gives no date on which a lease would begin, and it does not say what becomes of the agreement if the financing is not secured. What it does carry is a section on forward-looking statements. Such statements, it says, "are based on current expectations of future events and thus are inherently subject to uncertainty," and "actual results could vary materially from the Company's expectations and projections." It also says the company "does not undertake to update any of the information contained in these materials, except as required by law."

A contract value with no name beside it asks a reader to take the tenant on trust. Who stands behind that value, and what would the final lease documents say?