Data Center REITs: Merger Madness
The Data Center REIT sector has been substantially and rapidly transformed as the three largest data center portfolio acquisitions in history have been announced in just the past several months.
We predicted an impending M&A boom but expected Digital Realty and Equinix to scoop up their smaller peers. Instead, CyrusOne and QTS have been taken private while American Tower acquired CoreSite.
While we'll bid farewell to these three data center REITs, Switch announced plans last week to convert to a REIT while Cyxtera sees a REIT conversion as a "medium-term" goal.
The lack of serious interest from DLR and EQIX - which are sitting on a mountain of dry powder - suggests that these REITs are working on a major M&A deal of their own and a mega-merger between the two isn't outside the realm of possibility.
Scale is critical amid intense competition from the hyperscale giants – Amazon, Microsoft, and Google. Pricing power remains soft, but external growth through building and buying continues to fuel solid FFO and dividend growth.
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