NVDA - Data Center REITs: Go Big Or Go Home

• After delivering sector-leading performance in 2020, Data Center REITs have lagged this year as fundamentals have been largely unaffected by the pandemic and subsequent reopening - for better and worse.
• Data Center REITs reported solid-but-unspectacular earnings results in Q2. Leasing activity was better than expected, but "same-store" renewal pricing remains soft amid stiff "hyperscale" competition.
• As predicted early this year, we've seen a boom in data center M&A and IPO activity. Blackstone will take QTS Realty private, but several new REIT players have recently emerged.
• Cyxtera completed its SPAC listing last month, while Switch now appears poised to convert to a REIT. Meanwhile, Colony Capital completed its "digital transformation" and rebranded as DigitalBridge.
• With DLR and EQIX sitting on ample dry powder, we suspect the M&A boom is just getting started. We see consolidation as a potential catalyst and necessary to regain pricing power.

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