Josh RabinaCyrusOne Inc., a real estate investment trust (REIT) that owns data centers, has acquired two data centers from Sentinel Data Centers LLC for $490 million. The deal's valuation: 14.4 times pro forma run-rate annualized EBITDA of approximately $34 million, CyrusOne said.Another way to look at it: CyrusOne is paying roughly 10 times annual revenues for the data centers, which generated nearly $50 million in annual revenues for 2016. CyrusOne will finance the acquisition with proceeds from its forward equity sale completed in August 2016 and an expanded credit facility of $1.55 billion, which arrived in November 2016.
The "enterprise-class" data centers are located in Raleigh-Durham, North Carolina and Somerset, New Jersey. The CyrusOne and Sentinel teams have known each other for a decade, which means the customers will be in good hands, according to Josh Rabina, Sentinel's co-founder and co-CEO.The deal is expected to be "immediately accretive," according to CyrusOne CEO Gary Wojtaszek, which means the company expects immediate upside from the acquisition.As of December 31, 2016, the two properties consisted of more than 160,000 colocation square feet and approximately 21 megawatts ("MW") of power capacity, with nearly 85% of the power capacity leased, CyrusOne said.
What CyrusOne Gets
The potential upside for CyrusOne, according to the company, includes:
Enhanced Geographic Diversification
Long-Term Leases with High Quality Customer Base: The facilities currently support nearly 30 customers, more than two-thirds of which will be new to CyrusOne, including five new Fortune 1000 companies. Approximately 70% of the portfolio rent is generated from investment grade customers, the company said. That sounds like the potential exposure (i.e. risk) to digital startups appears somewhat limited.
Increased Penetration in Healthcare and Financial Services Verticals: Over 80% of rent from the facilities is generated from customers in the Healthcare and Financial Services verticals, CyrusOne said.
Additional Development Opportunity: There are approximately 34,000 colocation square feet and 8 MW of power capacity that are either currently available for lease or can be developed in the near term at a total cost of less than $15 million, CyrusOne said.
CyrusOne has made multiple financial and business moves in recent months.Indeed, CyrusOne acquired CME Group’s Chicago-area data center, which houses CME’s electronic trading platform, for $130 million in March 2016. A separate data center acquisition in Sterling, Va., arrived in August 2016. The company in 2016 also acquired land in Northern Virginia, Illinois and Phoenix for ongoing data center buildout plans.
Rival Data Center Acquisitions
Mergers, acquisitions and exits across the data center landscape have accelerated in recent months. Recent example deals include:
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