Glossary
Data Center Lease Valuation Glossary
The terms behind HPC/AI data center lease economics, defined in one sentence each. Plug them into the lease valuation calculator to turn a definition into a number.
What is a cap rate?
- A capitalization ("cap") rate is the ratio of a property’s net operating income to its value — value = NOI ÷ cap rate — so a lower cap rate implies a higher price for the same NOI.See also: exit cap rate, stabilized value, NOI margin.
What is an exit cap rate?
- The exit cap rate is the capitalization rate applied to a property’s terminal-year NOI to estimate what a buyer would pay for it at the end of the holding period, forming the terminal value in a lease DCF.See also: cap rate, stabilized value.
What is yield on cost?
- Yield on cost is stabilized NOI divided by total project cost (land plus construction and other capex), and is compared against the market cap rate to judge whether building is cheaper than buying a stabilized asset.See also: cap rate, NOI margin.
What is NOI margin?
- NOI margin is net operating income divided by gross lease revenue, showing how much of contracted rent converts to operating profit — triple-net colocation leases, where the tenant pays power, typically run 80–90%.See also: $/kW/mo (the lease rate), cap rate.
What is $/kW/mo (the lease rate)?
- The lease rate, quoted in dollars per critical-IT kilowatt per month ($/kW/mo), is the price a tenant pays for contracted data center power capacity and is the primary revenue driver behind a colocation lease.See also: critical IT MW, NOI margin.
What is PUE?
- Power usage effectiveness (PUE) is the ratio of a data center’s total power draw to the power delivered to IT equipment, so critical-IT MW equals gross MW divided by PUE.See also: critical IT MW.
What is critical IT MW?
- Critical IT MW is the portion of a data center’s power capacity actually delivered to servers rather than consumed by cooling and other overhead, and it is the capacity base that lease rates are quoted against.See also: PUE, $/kW/mo (the lease rate).
What is stabilized value?
- Stabilized value is the value of an asset once it reaches its expected steady-state occupancy and NOI, calculated by capitalizing that stabilized NOI at a market cap rate.See also: cap rate, exit cap rate.
Put these terms into a valuation
The lease calculator turns critical-IT MW, lease rate, term, NOI margin, and exit cap rate into an exit-cap DCF — equity value, value per share, and cap-rate sensitivity.