Jabez Tan on Equinix acquisition of Verizon data centre assets

• December 7, 2016

Source: Data Center Knowledge

The deal significantly expands Equinix’s ability to attract North American companies that want to serve Latin American markets, Jabez Tan, research director at Structure Research, said in an interview.

Latin America was a $445 million retail colocation market in 2015, projected to more than double by 2020, according to Structure Research, which expects a nearly 17 percent annual growth rate there. For comparison, the US market was $8.2 billion last year, projected to reach $14.3 billion in 2020. While the US market grew 15 percent between 2015 and 2016, Structure expects growth to slow down to 12 percent for the next four years.

In Asia-Pacific, Equinix acquired the Japanese provider Bit-isle last year and recently launched a new data center in Sydney. “From a portfolio stand point [Verizon’s] presence in Asia was very limited,” he said.

According to Tan, an expert on Asia-Pacific data center markets, Equinix already has a strong position in core Asia-Pacific markets, such as Singapore, Hong Kong, Tokyo, and Sydney, and does not appear to want to move into emerging markets in the region.

Another box Equinix will be able to tick once the acquisition closes is strengthening the case for its status as a Real Estate Investment Trust. The company started operating as a REIT in the beginning of this year. In exchange for substantial corporate tax benefits, a company must meet a list of criteria to qualify for REIT status, which include investing at least 75 percent of its assets in real estate and cash.

Equinix leases many of its facilities from wholesale data center providers, such as Digital Realty, but will own the real estate for 21 of the 29 data centers it is buying from Verizon.

The company has been wanting to switch from a predominantly leased asset model to a predominantly owned one, and the acquisition will shift it from deriving 33 percent of its revenue from owned assets to 40 percent, which is where it really wants to trend, Tan said.