Why hyperscalers may try to exit leases earlier than expected

Kelly Evans (Anchor) 00:00.110

we're watching shares of oracle which are lowered today on these reports that blue owl capital will not finance their ten billion dollar data center project in michigan financial times report it comes as investors have been raising all these different red flags about the AI data

Kelly Evans (Anchor) 00:13.270

center build out oracle shares are down four and a half percent but there's a real estate angle here as well diane olick has that story for this week 's property play diana

Diana Olick (Senior Real Estate Correspondent) 00:21.910

well kelly investors are increasingly concerned about hyperscalers who are turning to private equity markets rather than funding the buildings themselves they're entering to lease agreements which could prove risky if the technology changes as in becomes more efficient and no

Diana Olick (Senior Real Estate Correspondent) 00:35.670

longer requires these huge spaces i sat down with billionaire developer fernando de leon who predicts hyperscalers will be trying to get out of their leases earlier than expected

Fernando De Leon (CEO) 00:47.690

i look at a data center that's ten billion dollars right first of all there haven't been any exits above you know four or five billion dollars you haven't seen comp so that worries me quite a bit then i see large technology companies the largest companies on the planet with four

Fernando De Leon (CEO) 01:04.050

trillion dollar market cap saying i don't want to own this asset i don't want to have this on my balance sheet so i ask why why doesn't the largest company in the world want to own its own asset that is very very important to them right this is the AI business is everything for

Fernando De Leon (CEO) 01:20.990

them today for the large hyperscalers and so they're saying no you you build it you finance it deleon

Diana Olick (Senior Real Estate Correspondent) 01:27.670

's concern is that if big private equity is left holding the bag it's not their money it's the investors in their funds and a lot of that is pension funds for much more on this story go to the property play newsletter CNBC dot com forward slash property play or use that QR code

Diana Olick (Senior Real Estate Correspondent) 01:42.430

kelly it's

Kelly Evans (Anchor) 01:43.110

true some of the retirees were probably shaking their heads at this whole AI thing are the very ones whose pension money is kind of at stake because it's being invested in some of these projects absolutely

Diana Olick (Senior Real Estate Correspondent) 01:53.320

i mean there's risk ahead because you talk about AI making everything more efficient well guess what it's going to make itself more efficient so the question becomes five years even eight or ten years down the road does it need this huge amount of space no absolutely

Kelly Evans (Anchor) 02:06.310

and what was sully saying the other day that there was like an old racetrack being turned into a data center so what are we going to turn the old data centers into

Diana Olick (Senior Real Estate Correspondent) 02:13.150

what next office buildings

Kelly Evans (Anchor) 02:14.990

apartments diana thanks very much diana oleg