Data Center Reits.List of Publicly Traded Data Center REITs Listed on Major U.S. Exchanges. Data Centers Are Upbeat REITs
Bonjour Kwon2017. 2. 7. 15:34
This is not news to you because you're reading this column digitally or on your Bloomberg terminal: We all have a blossoming and apparently limitless addiction to the internet. But here's a twist: That phenomenon is fueling the growth of real estate investment trusts specializing in data centers.
Every time we stream video on Netflix, share photos on Instagram or listen to "Lemonade" on loop on Tidal, we add to the internet traffic glut -- and to the pocketbooks of data REIT shareholders. That's not going to stop anytime soon.
Worldwide, Internet traffic this year is expected to surpass a zettabyte (or 250 billion DVDs’ worth) of information, according to networking equipment company Cisco. The company expects current traffic to double by 2019.
All that Internet activity increasingly relies on the cloud or, in other words, servers located in data centers somewhere else). Research firm Forrester expects cloud adoption to accelerate this year.
That's good news for data center REITs, the real estate companies that house, power and cool data centers around the world.
Share prices of the six, publicly-traded U.S. data center REITs have risen 27 percent, on average, so far this year. Last week, Digital Realty's stock jumped on news that it’s joining the S&P 500 (making it the second data center REIT to do so after Equinix, which is the biggest in its class by market cap).
Part of these companies' successes stems from their ability to accommodate a range of data needs.
Customers have to pay up if they want a data center REIT to host private servers or set up a private cloud for them, but those are appealing options for companies that want full control over their computing needs.
Public cloud vendors like Amazon and Microsoft sell space on their servers to customers more cheaply (and often more conveniently) -- but companies can’t manage systems as directly and self-sufficiently themselves when they do so. Many big companies use a mix of their own services and those from outside vendors (an option known as the "hybrid cloud"). Amazon itself is a customer of Equinix and Digital Realty.
Equinix is located in 40 cities around the world and it's the global leader in interconnection services (which allow different companies to connect directly with each other), according to Bloomberg Intelligence analyst Joshua Yatskowitz.
Digital Realty has the most data-center square footage (22.8 million square feet). It had mainly leased its data centers to wholesale customers, until its acquisition of Telx last year amplified its retail and interconnections businesses as well.
QTS and CoreSite are smaller than their peers but offer a range of data services, including interconnection and cloud service businesses.
However rosy the stock appreciation has been for the sector, that largely appears to be a bet on future revenue, earnings, and market share growth. As the chart below shows, revenue growth thus far for these major players has been strong. Earnings for all of the REITs in the chart below have been heading in decidedly the wrong direction (a function, in part, of the large up-front capital expenditures and other large, one-time costs data centers require).
Managing and sustaining growth will be a challenge for all of these REITs, especially in a sector in which, as noted above, new data centers are costly and can take one or two years to build and launch. Repurposing existing buildings for such uses is possible, but the inventory of buildings that meet data centers' needs is limited.
While REITs in general will benefit from greater investor attention after they get recategorized as their own market sector on major indices this summer, data center REITs will still have to prove that their futures are as bright as their recent past.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the author of this story: Rani Molla in New York at rmolla2@bloomberg.net
To contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg
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List of Publicly Traded Data Center REITs Listed on Major U.S. Exchanges
The companies on this list are real estate investment trusts (REITs) that own, develop, operate and/or manage data centers. Data centers are designed to protect and secure the IT infrastructure of the customers that use them. These data centers provide many functions including powering and cooling the computer servers stored there by internet and enterprise companies around the world. The range of data centers owned by these companies varies from as low as ten to the approximate 130 owned by Digital Realty Trust (DLR) which is the largest data center REIT in the world.
Resources:
Additional publicly traded real estate companies, REITs and real estate categories can be accessed through the links below:
A comparison widget that shows trend, earnings per share (EPS), P/E ratio and beta for each of the companies on this list can be accessed through the link below.
QTS Realty Trust, CyrusOne and Digital Realty Trust are all rated at Outperform.
June 9, 2016
Wells Fargo Securities
We attended the National Association of Real Estate Investment Trusts Investor Forum this past week and hosted investor meetings with several names under our data-center coverage.
We came away incrementally positive on the secular demand drivers, including continued cloud migration and outsourcing of enterprise IT workloads.
We increasingly heard that traditional real estate investment trust (REIT) investors are moving to the data-center space for exposure to higher adjusted funds from operations (AFFO) growth and lower leverage while also seeking to avoid the commercial real estate cycle deceleration. With the data-center REITs still trading at a two times to three times discount to comparable REIT peers, we believe this sector remains attractively valued.
We spent time discussing QTS Realty Trust’s (ticker: QTSQTS -0.8297954457738325%QTS Realty Trust Inc. Cl AU.S.: NYSEUSD51.39 -0.43 -0.8297954457738325% /Date(1486418521456-0600)/ Volume (Delayed 15m) : 321886 AFTER HOURSUSD51.39 % Volume (Delayed 15m) : 5566 P/E Ratio 108.73889123994921 Market Cap 2478965240.28625 Dividend Yield 2.8021015761821366% Rev. per Employee 541681 More quote details and news »QTS in Your ValueYour ChangeShort position ) [rated at Outperform] recently announced $125 million acquisition of DuPont Fabros Technology’s ( DFTDFT -0.18664454583160514%Dupont Fabros Technology Inc.U.S.: NYSEUSD48.13 -0.09 -0.18664454583160514% /Date(1486418522436-0600)/ Volume (Delayed 15m) : 506938 AFTER HOURSUSD48.13 % Volume (Delayed 15m) : 7938 P/E Ratio N/A Market Cap 3658788979.64722 Dividend Yield 4.15541242468315% Rev. per Employee 4446900 More quote details and news »DFT in Your ValueYour ChangeShort position ) [rated at Market Perform] New Jersey data center. In our view, the transaction was a win-win for both companies. QTS was able to acquire an asset at a low basis, with target retail colocation customers that fit into its sweet spot. The data center is only about 50% utilized, while QTS plans to redevelop to double the raised floor space. QTS has an existing salesforce and customer base in the region with its Princeton and Jersey City facilities to expedite the lease-up process.
The biggest question for CyrusOne ( CONECONE -1.3840115678578806%CyrusOne Inc.U.S.: NasdaqUSD47.74 -0.67 -1.3840115678578806% /Date(1486418400347-0600)/ Volume (Delayed 15m) : 1234149 AFTER HOURSUSD47.6641 -0.0759 -0.15898617511520738% Volume (Delayed 15m) : 14232 P/E Ratio 227.33333333333334 Market Cap 4042089837.03659 Dividend Yield 3.183912861332216% Rev. per Employee 1262500 More quote details and news »CONE in Your ValueYour ChangeShort position ) [rated at Outperform] seemed to be when the trend of data-center information technology (IT) outsourcing would begin to slow. The resounding answer from management was -- not anytime soon. CyrusOne estimates that only 5% of enterprise IT spending is currently outsourced to the public cloud and about 15% of IT workloads. CyrusOne has seen ongoing momentum from this trend, which has continued into the second quarter. on June 6, CyrusOne issued a press release stating it had record second-quarter bookings on an annualized revenue basis of $49 million, with a weighted average term of about nine years. This brings its total backlog to about $100 million, which is about 25% of its fiscal 2015 revenue.
Digital Realty Trust ( DLRDLR -0.7981438515081206%Digital Realty Trust Inc.U.S.: NYSEUSD106.89 -0.86 -0.7981438515081206% /Date(1486418533380-0600)/ Volume (Delayed 15m) : 1428829 AFTER HOURSUSD106.89 % Volume (Delayed 15m) : 17680 P/E Ratio 74.74825174825175 Market Cap 17125245986.9385 Dividend Yield 3.293105061277949% Rev. per Employee 1591410 More quote details and news »DLR in Your ValueYour ChangeShort position ) [rated at Outperform] spoke extensively about its acquisition of the Equinix ( EQIXEQIX -0.8185645236734057%Equinix Inc.U.S.: NasdaqUSD381.67 -3.15 -0.8185645236734057% /Date(1486418400133-0600)/ Volume (Delayed 15m) : 368370 AFTER HOURSUSD381.67 % Volume (Delayed 15m) : 12082 P/E Ratio 375.4746679783571 Market Cap 27468066457.2436 Dividend Yield 1.8340451175098909% Rev. per Employee 674297 More quote details and news »EQIX in Your ValueYour ChangeShort position ) assets, which helped it gain scale in the important European marketplace. Digital Realty also has some dry powder for future acquisitions from its $1.2 billion equity raise. Management noted Tokyo, Germany and Australia as potential areas where they would like to grow scale.
We saw increased investor interest in DuPont Fabros’ story, which continues to trade at a multiple lagging its data-center peers. DuPont Fabros made a convincing case that its strategy offers the best pure-play exposure to cloud-company growth.
-- Jennifer M. Fritzsche -- Eric Luebchow -- Caleb Stein
