Recently, Equinix, Inc. EQIX announced that it has formed a joint venture (JV) in the form of a limited liability partnership with GIC — Singapore's sovereign wealth fund — to develop and operate xScaleTM data centers in Europe. The JV, worth more than $1 billion, was signed on Jun 27.
Per terms of the agreement, GIC will own an 80% equity interest in the JV and Equinix will own the remaining 20%. The JV is anticipated to close in third-quarter 2019.
Moreover, Equinix will sell both its Paris PA8 and London LD10 (retaining part of that business under a lease back) IBX data centers as well as other development interests, to the JV, in return for net cash proceeds and equity stake. Notably, a major part of the London LD10 and Paris PA8 are already leased.
Further, additional new xScale data centers will likely be developed in Amsterdam, Frankfurt (two sites) and London. When fully built out, these initial six facilities will provide nearly 155 megawatts of power capacity.
The initial facilities provided through the JV will cater specific workload deployment needs of targeted group of hyperscale companies, including preeminent cloud service providers. These facilities situated on or close to some of Equinix's existing International Business Exchange (IBX) campuses will enable companies to streamline their continued growth. As enterprises rapidly adopt hybrid multi-cloud, it will fortify Equinix's leading position in the cloud ecosystem.
In fact, well-known hyperscale operators like Alibaba Cloud, Microsoft Azure, Amazon Web Services, Oracle Cloud Infrastructure and Google Cloud have partnered with Equinix owing to the company’s global platform of 200 IBX data centers. This vast network of data centers enables companies to directly connect to strategic business partners and customers.
Also, Platform Equinix offers the most points of access to the global cloud service providers. Moreover, hyperscale companies are ramping investments in large-scale data center deployments to serve their rapidly growing core workload needs. Hence, development of xScale data centers is a strategic fit as it will allow hyperscale companies to add core deployments at Equinix’s facilities to their existing access point locations. This will offer direct interconnection to their customers and strategic business partners, as well as assist growth on a single Equinix platform, spanning more than 50 global metro cities.
Notably, the deployment of core hyperscale infrastructure at Equinix’s facilities through xScale data centers will attract additional partners and other hyperscale providers to Equinix's ecosystem, and also benefit the “network effect”. However, the sale of the London and Paris data centers is estimated to result in a decline in the company’s 2019 revenues, adjusted EBITDA and AFFO guidance by nearly $15 million or less. This is projected net of the fees earned and the lease payments incurred by the company from the JV.
Shares of this Zacks Rank #3 (Hold) company have gained 9.3% over the past three months, outperforming the real estate market's growth of 0.1%.
Investors can consider better-ranked stocks from the same space like Host Hotels & Resorts, Inc. HST, Duke Realty Corporation DRE and Lamar Advertising Co. LAMR, each carrying a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Host Hotels & Resorts’ funds from operations (FFO) per share estimates for 2019 moved marginally north to $1.82 in two months’ time.
Duke Realty’s FFO per share estimates for the ongoing year have been revised slightly upward to $1.42, in the past 30 days.
Lamar Advertising’s FFO per share estimates for the current year have been revised slightly upward to $5.83, over the past 30 days.
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