US based  data centre operator CoreSite Realty joined DuPont Fabros and Digital Realty Trust as the third data centre real estate investment (REIT)  trust to be listed on the NYSE.  The company was formally part of the Carlyle Group.  Coresite is quite a different provider compared with the other two companies by virtue of the fact it sells retail colocation products in addition to the large scale wholesale solutions that the other two focus on.

Coresite operate 11 facilities across the North American market offering a total of 2m sq ft of net tech.  Of their facilities 1 Wilshire, the LA based interconnection hub, will be the most well known to the international market.  1 Wilshire is a a key facility for the exchange of traffic from the US to the Far East.  In New York the Coresite facility at 32 Avenue of the Americas (pictured opposite), or 32 “A 0f A” formerly an AT&T facility is also well established and has benefited from its proximity to the other key US hub, the better known 60 Hudson Street and indeed the two buildings at first glance appear remarkably similar, apart from the prominent antennae atop 32 A of A.   In both these locations and in the smaller 1275 K Street in Washington DC CoreSite do not own the building but are tenants, leasing space from the landlord and focus on selling retail colocation products, ie racks and cages.  This is a key differentiator for CoreSite compared with Digital Realty Trust and DuPont who only sell leases.

At the $16 per share flotation price CoreSite is the smallest of the data centre REITs by market value at around $700m, which is about half the value of DuPont and is dwarfed by DLR’s $5bn market valuation.

It will be interesting to see if CoreSite will use the funds raised or their listing to expand into overseas markets, though DuPont has yet to do so and DLR’s own international expansion into Europe is still quite a small part of the company’s operations,  accounting for only 10% or so of the their 16m sq ft of net tech.

Summary of US REITs

The real estate or wholesale data centre model offers very competitive prices for large scale users who have the financial clout to sign a long term lease, with typical commitments being for a minimum of 500kW or more on a 10 year lease. 

A REIT is a special type of company which pays no Federal Income Tax on its earnings provided it meets the criteria to maintain its REIT status.  This means investors receive a high portion of the company’s income as dividends.