Wavve Announces Expansion Plan
Tenant Lease Financing Key to Plans for 10 Data Centers

Feb. 21, 2001 -- Wavve Telecommunications this week unveiled an innovative program it says will allow it to build out 10 data centers, expanding its network by 650,000 square feet of space.
The new strategy is the latest step in a reorganization for the Sacramento-based colocation firm. Just three months ago, Wavve said growing losses left "substantial doubt" about its ability to remain in business.
The ambitious but complex plan is based on tenant lease financing through Wavve's relationship with Capital Lease Funding (CLF), a New York-based real estate investor that loaned the company $35 million last month.
The strategy could prove attractive to data center owners who need to raise cash to complete their build-outs, while offering Wavve a way to expand its network and sell managed services with minimal outlay of its own cash.
Funding for the expansion - which Wavve predicts could reach $250 million - is conditioned upon Wavve first obtaining 10-year leases from credit-rated "anchor tenants" committing to at least 20,000 square feet of data center space. These leases would be used to obtain loans from CLF.
Credit tenant loans are secured by rent payments, making the credit rating of the tenant and the quality of the lease the critical factors for the lender, rather than the value of the underlying real estate.
Wavve used a credit tenant loan from CLF to complete the development of its first facility, a 92,000 square foot, $48 million data center in Sacramento, Calif.
Initially, Wavve plans to develop and offer the "ZeroCap" program for 10 new data centers throughout the continental U.S. Each data center site will be approximately 65,000 square feet, the company said.
Wavve at this point has not identified any potential cities or sites for the ZeroCap program, according to company spokesperson Lynne Wall, who said the projects would depend upon tenants' needs.
"Depending on the potential anchor tenants requirements, through the ZeroCap program Wavve will either buy an existing data center and make tenant improvements to convert the centers into Class-A data centers if they are not so already, or locate and either build a data center from the ground up or make tenant improvements to existing buildings," said Wall.
"Our ZeroCap program represents an exciting opportunity for large domestic and international firms to expand their portfolio of data centers throughout the U.S. and to do so with no capital expenditure," Bob Ingraham, Wavve's president and COO, said in a press release.
"As long as these potential anchor customers are rated at least BBB or better, through the ZeroCap program, Wavve will work with them to either locate and build new data center sites, or buy and execute a sale-leaseback of their existing data centers," said Ingraham. "Either way, these anchor customers will be able to divert their data center capital expenditures back into other areas of their business."
A "sale-leaseback" option typically involves a property owner selling their building to a second party, while agreeing to continue to lease space in the building. The transaction generates cash for the former owner (now the tenant), and provides the new owner steady rent from the lease.
As envisioned by Wavve, such deals could offer benefits for data center owners who are struggling to raise cash to complete the build-out of their facilities. Under the ZeroCap program, these companies could sell their building to Wavve, continue to occupy the site as an anchor tenant, and use the cash from the transaction to hire Wavve to complete construction on the property and provide managed services to clients.
"Not only will potential anchor tenants have the ability to private-label Class-A data center infrastructure and locations, but they will also have the ability to utilize and leverage Wavve's technologically superior suite of managed services and operational support systems," said Ingraham.
Wavve Telecommunications, Inc. is a provider of colocation, network connectivity, Internet and managed services.