Earlier this year 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). Analysts are predicting that the move could yield big tax savings, and is likely to prompt a morew favorable valuation from investors, according to Bloomberg news.
“The conversion would eliminate Equinix’s corporate tax and the company would send about 90 percent of income to investors, who would be taxed on the dividend received,” the story notes. “Colby Synesael, an analyst at Cowen & Co., estimates the change would save the company $312 million in taxes between 2015 and 2016, the first two full years that a plan would be in place.”
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, Digital Relaty and DuPont Fabros all report their earnings tomorrow. See Investor’s Business Daily for a preview.