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Chicago Capital Markets Roundtable: Will 2018 Be a Bigger Year for M&A than 2017?

May 16, 2018
by Josh Anderson

CHICAGO, IL – Financing a data center is no easy task. And neither is the decision-making process that a lender must undertake when deciding whether and how to make a go of it. That’s even more true when you’re looking at a new kind of asset, such as blockchain. At CapRE’s Seventh Annual Chicago & Midwest Data Center Summit, we convened a panel of leading insiders from the regional capital markets arena to discuss this thought process, as well as their thoughts on M&A. Below is a transcription of that part of that panel discussion, Capital Markets Takeaway: What Types of Debt and Equity Sources will Become More Active in 2018?

Moderator Jonathan Petersen, Vice President, Equity Research REITs, Jefferies LLC: Do you think 2018 will be a bigger year for M&A than 2017?

Joseph Junda, Managing Director, CIT: We have Iron Mountain buying IO for a Billion. Equinix is buying Metronode for $800 Million. CyrusOne is buying Zenium for $442 Million, and then Infomart is $1.6 Billion. So, through almost the first quarter, you’ve got almost $4-5 Billion, so it’s almost on track for 2017. And there are a lot of things for the pipeline. So it could be just as good.]

Dan Bryson, Executive Vice President, Finance, JLL Capital Markets: The $20 Billion in 2017 was larger than the preceding three years combined.

Corey Welp, Managing Director, fifteenfortyseven Critical Systems Realty: Don’t forget about this time last year, MapleTree was buying Carter Validus.

Junda: That was $750 Million. But I would agree with Dave and I think that it has the potential to reach or exceed the level of 2017. If you asked me that six months ago, I would have said no way.

Welp: I think it could easily be at or above last year’s pace. Because of this global dynamic. People are looking for places to invest capital. And this is a relatively high-growth, relatively risk-adjusted high yield, so I think that acquiring large entities is, there’s a lot of money-chasing. So they are more efficient transactions to make a big splash. So I think there will be some large transactions this year.

Peterson: Anyone care to comment on who the big buyers will be in the next year?

Mario Calderone, Vice President – Real Estate, Server Farm Realty: Well we intend to be a big buyer, but that’s on a Server Farm scale, not a global scale. We are actively looking for businesses to acquire, but not anything that would make that kind of a dent – in the billions.

Junda: Are you talking domestically or internationally?

Calderone: Both.

Junda: I think CyrusOne will be active, for sure.

data center summitPetersen: I definitely think that CyrusOne will be active. Especially in Europe. They’ve been pretty public about wanting to expand there. if you look at the multiple that you paid for Zenium, you don’t pay a multiple like that unless you feel like you just bought a platform that you can grow off of. Because just stabilizing those developments there doesn’t get you enough of a return. Interaction is another one that I’m watching. They were that one European platform that everyone though would be taken out, but they’re almost a victim of their own success. They’re too expensive now and no one can afford them.

So they might have their own international plans. You might see them coming to North America. Digital Realty is always doing something. Equinix is always interesting – they did a lot of deals last year. And it seems like they’re having, from Wall Street’s perspective, a little frustration with the integration there. the growth maybe slowed a little bit. Especially with some of the Verizon assets. So it’ll be interesting to see if they keep their foot firmly on the pedal in terms of acquisitions or if they slow down, to at least give us a few months to think about everything that they did.

For more from these panelists, check out previous CapRE Insider Reports covering earlier parts of this discussion:

Banner Photo: Left – Joe Junda, Joseph Junda, Managing Director, CIT; Right – Corey Welp, Managing Director, fifteenfortyseven Critical Systems Realty

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