EQIX - 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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