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Msg  56 of 66  at  11/22/2021 1:00:30 PM  by


American Tower's bid for data centers bets on 5G demand

from SNL Real Estate Daily

American Tower's bid for data centers bets on 5G demand

Byline: Chris Hudgins, Christie Moffat

American Tower Corp.'s agreement to purchase data center developer CoreSite Realty Corp. for $10.1 billion marks the first major deal involving a U.S. communications tower real estate investment trust making a significant acquisition in the data center market.

The transaction will greatly expand American Tower's data center footprint and suggests that the firm expects 5G to take off and generate sizable data requirements, according to Kelly Morgan, research director at 451 Research. By acquiring CoreSite, the company demonstrated its focus on edge computing, which means positioning data processing and storage facilities closer to sources of data.

"The key question is whether American Tower is way out ahead of this and perhaps anticipating edge demand a bit too soon, or whether, given their exposure to edge [computing] already, they have better visibility than most as to what is coming and what infrastructure will be required," Morgan said.

American Tower's focus on catering to edge computing could signify a big shift in requirements close to customers and devices, as well as network connectivity and centralized storage and processing, Morgan added.

The transaction will include CoreSite's entire portfolio of 25 data centers located in eight U.S. markets, amounting to almost 2.8 million rentable square feet, according to an investor presentation. The deal is expected to close by the end of 2021 or shortly thereafter.

American Tower President and CEO Tom Bartlett said during a Nov. 15 acquisition conference call that the transaction will transform the company's ability to compete at the edge.

Bartlett noted that CoreSite was an attractive acquisition for several reasons, including the firm's differentiated assets, high-quality customer base, development pipeline and well-located facilities in attractive metro areas.

"Importantly, we expect the addition of these assets to our extensive tower portfolio to provide us with an enhanced ability to influence the evolution of emerging network configurations. And that will expand the role that our suite of communications real estate assets play within that evolution," Bartlett said.

In a Nov. 15 research note, Synergy Research Group said the transaction, in addition to KKR & Co. Inc. and Global Infrastructure Management LLC's $15 billion acquisition of CyrusOne Inc., is one of the biggest deals seen in the data center industry so far.

Notably, CyrusOne and CoreSite are the third and fourth-largest U.S. data center operators, ranked by colocation and data center revenues. The fifth- and sixth-ranked companies, QTS Realty Trust Inc. and Cyxtera Technologies Inc., also changed hands earlier in 2021.

Hyperscale operators are continuing to expand their operations, while both enterprise and consumer-oriented cloud markets continue growing rapidly, Synergy Research Group Chief Analyst John Dinsdale wrote in the note.

"The level of data center investment required is too much for even the biggest data center operators, causing an influx of new money from external investors," Dinsdale said.

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