How to Read a Data Center Offering Circular

A section-by-section walkthrough of a Form 1-A offering circular for a data center deal — which parts matter, what to read first, and the specific sentences that change the investment case.

An offering circular is the disclosure document in a Regulation A offering: Part II of Form 1-A, the issuer's primary disclosure, filed on EDGAR, and it may not be used to sell anything until the offering statement is qualified by the Commission (SEC). It runs to a hundred pages or more and it is written to be complete rather than clear.

You do not have to read it front to back. Read it in this order.

Read these four things first

If you only have twenty minutes, these four decide most outcomes.

1. Use of Proceeds. Where your money goes. The question is how much reaches the building. Look for what is paid to the sponsor and affiliates at closing, how much is held for working capital, and whether any of the raise repays an existing loan or reimburses the sponsor for pre-development costs. Money that leaves at closing is not at work in the project.

2. Risk Factors. Tedious and genuinely useful, because it is where the lawyers write down what the marketing omits. Read for the specific rather than the generic. "Real estate investments are subject to market risk" is boilerplate. "We have not entered into a lease with any tenant" and "the utility's proposal is non-binding until a service agreement is executed" are facts about this deal, and they are usually in here before they are anywhere else.

3. The property or project description. Does the issuer own the land or hold it under contract? Is the power contracted or proposed? Is there a signed lease? See how data center leases work and why power is the constraint.

4. Compensation of the sponsor and affiliates. Usually its own section, sometimes buried in "Interest of Management in Certain Transactions". Every fee, with its percentage and when it is paid. This is where a projected yield quietly becomes a smaller actual return.

Then the rest, in order of what it changes

Securities Being Offered / Description of Securities. What you actually own. Units in an LLC? Non-voting? What are your rights if the sponsor is removed, if more units are issued, or if the project needs more capital? Look for dilution on a follow-on raise — if the sponsor can issue units later on terms you do not approve, your economics are not fixed.

Plan of Distribution. Who is selling it and what they are paid. A broker-dealer commission is a real cost, typically paid out of proceeds.

Management. Names, and what they have done. For a capital-intensive, power-constrained asset class, ask whether they have built this asset class at this size. Prior success in residential or self-storage does not carry over to a 10 MW interconnection.

Financial Statements. Tier 2 requires audited statements. For a new project entity there may be very little history — which is itself the answer to a question. Read the auditor's opinion, and read the notes: related-party transactions and commitments live there.

Management's Discussion and Analysis. The issuer's own account of its condition. Compare its tone against the risk factors; a gap between them is informative.

The sentences that change everything

Search the PDF for these phrases. Each one, if present, moves the deal from "operating asset" to "development project".

• "has not entered into" — commonly completing as "a lease with any tenant".
• "non-binding" — usually the utility's supply proposal.
• "no assurance" — note specifically what it attaches to.
• "under contract" versus "owns" — for the land.
• "before" near "fees" — as in a yield stated before management fees.
• "affiliate" — maps the related-party web.
• "we may" — permissions the sponsor has granted itself: to borrow, to issue more units, to change the business plan, to pay distributions from offering proceeds.
• "offering proceeds" near "distributions" — a distribution funded from new investors' money rather than from operations is a return of capital wearing the clothes of a return on capital.

Three arithmetic checks worth doing yourself

Rent against the market. Find the assumed rent per kW per month. Compare it with CBRE's global weighted average asking rate of $217.30 per kW per month in Q1 2025 (CBRE) and its North America outlook of $200+ per kW per month (CBRE). These are asking rates across markets and deployment sizes, so they are a sanity check rather than a benchmark — but a model far above them needs a stated reason.

Revenue from first principles. Contracted MW × 1,000 × monthly rate × 12. Does it match the projection? If the projection is higher, something other than capacity rent is in there, and you should find out what.

Cost per megawatt. Total budget ÷ MW. Compare it with the other deals you have been shown. A number far below the others is not necessarily good news; it can mean the budget omits the interconnection upgrade.

After you invest: the filings

For a Tier 2 issuer, Form 1-K arrives annually within 120 calendar days of fiscal year end, Form 1-SA semiannually within 90 calendar days after the half year, and Form 1-U within four business days of certain events (SEC).

Read them. They are the only independent record of whether the lease was signed, the power energised and the building delivered. Set a calendar reminder, because nobody will send you one.

And if the issuer is selling under Regulation D instead, there is no offering circular and no ongoing reporting at all — see Regulation A vs Regulation D.