Powered shell

Under a powered shell lease, the landlord delivers four walls, a slab rated for the load, the high-voltage grid connection and often the utility substation. Everything else belongs to the tenant: transformers, UPS (uninterruptible power supply) systems, generators, cooling, racks. Hyperscalers use the format when they want their own engineering design without carrying the land or waiting for a grid connection, which takes years in Northern Virginia. For the insurer, the whole question is who insures what, and the lease answers it less clearly than people assume. The landlord insures the shell and whatever forms part of the building; the tenant insures its improvements and equipment, whose value per MW is often several times that of the building. The electrical point of delivery serves as the dividing line. But an improvement fixed to the building may, depending on the governing law and the lease terms, pass to the landlord at lease end by accession: the tenant's insurable interest then becomes arguable on an asset it paid for. Both policies also have to line up on waivers of subrogation, otherwise the tenant's insurer pays for a fire that started in a landlord switchboard and then pursues the landlord. On business interruption, the landlord mostly insures rent and the tenant its operations, two amounts with no relation to each other. A building leased for a few million a year can house a service that loses as much per hour of downtime.