Last week large towercos and market analysts convened to talk real estate and how it impacts wireless infrastructure. MoffettNathanson’s Senior Analyst Nick Del Deo reported he had the opportunity to meet with each of the data center operators that his firm covers, as well as Crown Castle, at the annual REITworld conference.
“The timing was fortuitous,” Del Deo said, “in that it coincided with news reports that CoreSite had received expressions of interest from Digital Realty, American Tower, and financial buyers.”
“All companies expressed optimism for their outlooks with solid demand for their assets underpinning those views,” Del Deo said. “The data centers see broad based strength, while Crown Castle cited simultaneous work from the incumbent carriers and DISH Network. They were also in agreement that supply chain issues were not affecting their businesses today, due to scale and good procurement practices.”
On the data center side, Del Deo said some were of the view that this backdrop bodes well for pricing in coming periods, while others were more cautious. He added that Digital Realty noted higher inflation and interest rates could pressure cap rates and valuation multiples. Equinix views power cost increases as a manageable risk.
“As for the rumored interest in CoreSite, there would be strategic logic to a combination with Digital Realty, but it’s not clear that Digital Realty would be willing to pay up vs. leveraging its existing assets,” he said. “A combination with American Tower does not strike us as logical, a view shared by the operators willing to express an opinion. CoreSite does not need to sell. While hard to put odds on these things, our sense is reaching a deal may be less likely than is typically the case after seeing a report like this.”
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