Colocation provider Equinix says it will “very seriously” examine whether it makes sense for the company to convert to a real estate investment trust (REIT), company executives said last week.
In an earnings call with investors and analysts, Equinix Chief Financial Officer Keith Taylor said exploring the merits of a REIT conversion was a key task for 2012.
“I’d tell you we are thinking about it very seriously,” said Taylor. “We’re absolutely committed to shareholder return and recognizing that there are some potential benefits attached, (a conversion) to a REIT is something we have to look at very, very seriously.”
A REIT is a corporation or trust that uses the pooled capital of many investors to purchase and manage income property. Income comes from the rent and leasing of the properties, and REITs are legally required to distribute 90 percent of their taxable income to investors. Three of the largest data center developers – Digital Realty (DLR), DuPont Fabros (DFT) and CoreSite Realty (COR) – are organized as REITs.
Equinix isn’t the only colocation provider considering the benefits of a RET structure. Last week executives of Cincinnati Bell said they were examining REIT status as one of the options for its CyrusOne colocation business.
Taylor said it wasn’t clear whether the REIT structure would be a better option for Equinix than its current corporation status.
“I think there’s always debate on what the pros and cons,” Taylor said. “Clearly we as a company are focused on driving shareholder value, irrespective of whether or not we can become a REIT or not.”
Taylor said some of the complexities in the evaluation will include Equinix’ considerable revenue from interconnection services (which is not rental income) and how REIT status might impact the company’s international operations.