BlackRock acquires majority stake in Meta's massive El Paso data center campus under co-ownership structure with the hyperscaler.

Meta Platforms did not appear to have breached its tax break agreement with the city of El Paso when it sold majority ownership of its data center project to BlackRock Inc. last week, according to the El Paso city attorney's office.

Meta and BlackRock formed a joint venture last month to develop and operate the data center under construction in Northeast El Paso. BlackRock—the world's largest asset manager—will contribute cash and own 80% of the project, while Meta will rent the facility and hold a 20% ownership stake. BlackRock-controlled Sopaipilla Investor sold $12.3 billion in bonds to debt investors to generate cash for completing construction over the next two years.

"The City was not provided the terms of the proposed transaction before Meta's public announcement," the city said in a statement. "Based on our review of the City's agreements and the publicly available information, our preliminary analysis is that the proposed transaction does not currently appear to trigger the assignment provisions of the City's agreements."

The assignment provisions refer to clauses in the 2023 contract between the city and Meta subsidiary Wurldwide LLC addressing what happens if Meta sells all or part of the data center. In most cases, such a sale requires Wurldwide only to notify the city, not seek approval. According to S&P Global Ratings analysts, "The BlackRock-Meta joint venture owns Wurldwide LLC (Landlord), which will own and operate the campus. The project is being developed to help meet the increasing demand for AI computing and will play a vital role in Meta's AI progress."

The city said it would "continue to review any additional information that becomes available to ensure all contractual obligations to the City continue to be met."

However, city Rep. Josh Acevedo, who represents District 2, raised concerns about Meta's lack of advance notice to local officials. While acknowledging that Meta likely did not violate the economic development agreement that granted an 80% property tax break for 25 years and $12.5 million in city funds for road improvements, Acevedo criticized the company's secrecy.

"I feel that there's just no trust with Meta," Acevedo said. "They're not a good partner. They're not telling us of their moves until after they do them. And they're not even alerting us that they're moving in that direction."

He suggested the city review its 2023 sale of 1,039 acres to Meta via Wurldwide for approximately $8.5 million, noting that the land sale contract prohibits either party from assigning, subletting, or transferring ownership without written consent of both parties. Wurldwide retained ownership of the land and project following the joint venture formation.

"They know that they can get away with whatever they want to," Acevedo said. "The power is all in their hands. They don't need to tell us about anything."

Meta responded that "nothing about Meta's commitment to El Paso and the entire Borderplex region has changed," emphasizing that the data center "represents a significant long-term investment in this community—supporting thousands of construction and operational jobs and generating millions in local tax revenue."

Meta valued the land and partially-constructed data center assets it contributed to the joint venture at $2.3 billion combined. Larry Fink, BlackRock's chairman and chief executive, said the company was "excited to partner with Mark (Zuckerberg) and the Meta leadership team on the El Paso data center campus, which will create thousands of skilled jobs and help drive economic growth in the local community."

Meta confirmed the transaction will not impact day-to-day operations and that all binding agreements with the city, El Paso Electric, and El Paso Water remain in effect.

The El Paso deal appears to follow a template Meta has adopted for funding massive data center campuses. Meta used a similar structure to offload majority ownership of its Hyperion data center in Louisiana to Blue Owl Capital, also retaining 20% while the asset manager acquired 80%. The joint entity Beignet Investor sold $27 billion in bonds for the Louisiana project.

The El Paso data center bonds carry higher interest rates than the Louisiana bonds, suggesting investors were less eager to fund the El Paso facility. This likely reflects differences in project size and structure.

Meta has dramatically accelerated capital spending on data center infrastructure amid the AI boom, expecting capital expenditures to reach approximately $137 billion this year—roughly equal to spending from 2023 through 2025 combined. Wall Street analysts forecast the company could exceed $200 billion in capital spending in 2027. This massive investment has consumed much of Meta's free cash flow: analysts project the company will generate less than $1 billion in free cash flow this year, down from $43 billion last year and $52 billion in 2024. According to Bloomberg, the company's free cash flow could turn negative in 2027.

According to Moody's analysts, the BlackRock joint venture "lowers Meta's near-term cash funding requirements in comparison to a wholly owned facility and provides additional strategic flexibility should the company adjust its AI investment strategy over time."

Meta's rent payments on the El Paso facility are expected to service the $12.3 billion debt plus interest over 20 years. Fitch Ratings projects Sopaipilla Investor will have approximately $1.12 available for every $1.00 of debt owed. Should Meta abandon the facility, the company provides a guarantee to repay bondholders.

However, Moody's cited risks inherent to the AI data center sector: "Rapid advancements in AI, semiconductor technology, and cooling systems could render infrastructure outdated before full monetization."

According to Fitch Ratings senior director Anubhav Arora, the city's incentive package and property tax breaks are not required for the joint venture to service the debt. "The economic development agreement does not impact debt service coverage ratio of the issuer," he noted. This suggests Meta could have raised the necessary capital without local tax concessions—contradicting the 2023 agreement's assertion that the project was contingent on the city's benefits.

Acevedo argued this demonstrates Meta's financial capability to build the campus without taxpayer assistance. "Where did they need help from the taxpayers on this? They didn't. They got a really sweetheart deal."

El Paso Electric must still obtain approval from the Public Utility Commission of Texas to build a dedicated power plant adjacent to the site.