Data Center Diligence Is a Document Problem in Disguise

Data Center Diligence Is a Document Problem in Disguise

Why interconnection, permitting, and utility M&A filings make data center due diligence a document problem for the firms underwriting these deals

By Ruban Selvakumar, Chief Client Officer

Open your favorite news app and you will likely see another gigawatt campus announced, another utility acquired to secure power, another hyperscaler pledging tens of billions at a scale that barely existed five years ago. For months, headlines and op-eds about data centers have piled up, with supporters and critics making their case from every angle.

Just this week, another major data center project made headlines: Amazon's roughly $2 billion buildout in Gilroy, California. The reason it made news is that it almost didn't have to. The site's industrial zoning dates back 45 years, long before anyone was planning for a data center boom, and that decades-old designation meant Amazon never needed a rezoning vote from the city council or planning commission.[1] Environmental notices went out and a public comment period technically ran for years, but a routine industrial filing drew little attention, and most residents didn't realize what was coming until construction was already underway. That is not how most of these deals get built.

While headlines like these make it seem like data centers go up as fast as strip malls in New Jersey, these deals actually take years to come together, and the numbers back that up. CBRE reported that capacity under construction across the eight primary North American data center markets fell to 5,994 MW at the end of 2025 from 6,350 MW a year earlier, the first decline since 2020, as permitting, zoning, and power procurement delays stretched project timelines.[2] A permitting fight that did not exist in a county two years ago can stall a project indefinitely today. The utility tied to your site's power supply can be acquired or restructured entirely before your deal closes.

Diligence does not simply fill the space between an announcement and a ribbon-cutting. It starts before there is a headline at all, when the underlying need for power and capacity first gets identified. It continues straight through the announcement and every headline that follows: permitting fights, utility disputes, ownership changes. And it only ends when a project is either energized or abandoned, an outcome that becomes its own headline months or years later.

The interconnection files, permitting records, operator histories, and utility M&A filings generated across that entire arc make these deals unusually document-intensive, even by the standards of infrastructure investing. And the record keeps changing at every stage of it.

Not every document in the record carries the same weight, either. A project sitting in the interconnection queue is not the same as one with an executed service agreement. An approved permit may still be conditional or subject to challenge. An announced transaction is not a closed one. The most recent filing in the data room is not automatically the one that controls, and the most important document is not always the one anyone flagged as important.

None of that makes it into the headline, but all of it makes it into the record.

What Makes a Data Center Deal So Document-Intensive

The record is large not because any one party produces much, but because several uncoordinated parties each add to it over years rather than weeks. A utility generates one kind of document, a county or state permitting body another, the operator a third, and a hyperscaler tenant a fourth. The documents themselves are unstructured, arriving in whatever format each source produced. That is the ordinary condition of a private equity data room, not something particular to data centers.

What sets a data center deal apart is how little these records have in common. The utility interconnection record is an application, a queue position, and years of correspondence about whether a site can connect to the grid. The permitting record is rezoning applications, hearing transcripts, and, increasingly, litigation. Add an operator's track record across prior builds, hyperscaler lease structures, environmental filings, and water and cooling specifications, and the data room holds four separate histories, each spanning years.

The power behind these projects has also been taking longer to arrive, and the delay is measurable. PJM Interconnection data reported in May showed that AI infrastructure projects entering service in 2025 took an average of more than seven years to reach operational status: more than three years to secure an interconnection service agreement, then roughly four more years before coming online. PJM's position is that the queue is no longer the binding constraint, and that transmission buildout, substation capacity, and equipment lead times now account for most of the delay.[3] These are power-side timelines rather than a data center's own construction schedule, but a site cannot open without them. And each stage generates its own paperwork, on its own clock, alongside permitting, water rights, and lease negotiations.

The documents behind a deal like this do not stand still. When a queue position advances or slips, a new filing enters the record. When a permit picks up a new condition, the record grows with it, as it did in Stokes County, North Carolina. Commissioners approved a data center rezoning in January 2026; voided it in April after residents sued over a defective public notice; rejected a planning board recommendation for a moratorium in July; and are now weighing a new application from the developer.[4] And when a utility changes hands, the paperwork follows. NextEra Energy and Dominion Energy announced a proposed $67 billion combination in May 2026 that would bring Dominion's Virginia utility operations into the combined company if the deal closes. The companies filed for merger approvals in July, starting a six-month review clock before Virginia regulators, and a transaction of that size generates a stream of filings and disclosures of its own.[5]

Managing the Record, Not Just Reading It

Managing a data room like this by hand means re-reading it every time something might have changed, and hoping the one filing that matters does not slip past. The alternative is to use an AI-powered platform such as ToltIQ, which allows investors to treat the data room as a living record. All documents are held in one place, and the system can help track what has changed and when, while helping reviewers determine whether new filings are consistent with the existing record, not just once at signing and once at close.

It ingests exactly the kinds of files these deals produce, regardless of format or which of the four uncoordinated parties produced them, bringing all of that into one queryable record instead of four disconnected ones. Reviewers can compare newer filings against the existing record and trace each finding back to the specific document and page it came from. A permit condition that contradicts an earlier approval, a queue position that has quietly moved, or a merger disclosure that touches a site's supply commitment becomes something to verify directly, not something buried unnoticed across thousands of pages and a seven-year timeline. For a firm underwriting one of these deals, that is not a matter of convenience. It is the difference between catching a change in the record and inheriting one at close.

None of this is exceptional. It is the ordinary condition of data center investing, and the asset class will not outgrow it as it matures. No single document captures the full state of a project. The diligence record becomes useful only when its documents are evaluated together, in context and over time.

Footnotes

1. "How Amazon Built a Data Center in a California Town Without Anyone Noticing," The Wall Street Journal, August 2026. Amazon filed its application in November 2020; the site's M2 General Industrial zoning, in place since 1981, meant the project needed only a staff-level Architectural and Site Review Permit, signed July 3, 2023, rather than a City Council vote or Planning Commission hearing.
2. CBRE Research, "North America Data Center Trends H2 2025," February 2026.
3. Shane Snider, "Why AI Data Center Projects Face Years of Delays After Approval," Data Center Knowledge, May 12, 2026, citing PJM Interconnection data.
4. Stokes County commissioners approved the Project Delta rezoning on Jan. 12, 2026, and declared it void in April 2026 after community groups and area residents sued over a public hearing notice that did not meet North Carolina timing requirements. The county planning board recommended a six-month moratorium on data center development on July 9, 2026; commissioners rejected it on July 15, 2026. Developer Engineered Land Solutions submitted a new rezoning application the week of July 20, 2026 (WFDD, July 14, 2026; WFAE, July 22, 2026).
5. NextEra Energy and Dominion Energy, joint announcement, May 18, 2026. Merger approval applications were filed in July 2026; the Virginia State Corporation Commission has six months to review (Virginia Mercury, July 16, 2026).