JLL’s Conan Lee Talk Mergers and Acquisitions at Seattle Data Center Summit
by Josh Anderson
SEATTLE, WA — 2017 was a record year for mergers and acquisitions – over $10 billion, in fact. Conan Lee, of JLL, says that some might say that people were just looking for pipeline. “Or, you know, cash is cheap right now, so why not make some acquisitions?” he asked. “I on the other hand think these were all strategic, targets acquisitions. And the telecommunications activity – I don’t think it’s talked about a lot at events like this but from a mergers & acquisitions standpoint, it’s at a completely different level.”
At CapRE’s Seattle and Pacific Northwest Data Center Summit earlier this month, Lee provided a keynote address titled State of the Data Center Industry, Current Demand Levels and the Evolving Types of Supply (Cloud vs Enterprise), part of which focused how the plethora of mergers & acquisitions in recent memory have impacted the Pacific Northwest data center arena.
“Let me just show you,” said Lee as he delved in. “AT&T – headquartered out of Texas, Time Warner, headquartered out of NY, — $85 billion. CenturyLink and Level 3 Transaction — $25 billion. Or Zayo Group and Electric Lightwave, a local group actually, $1.5 billion. Which looks like nothing compared to these two giants, but just from a commerce perspective, it’s an extremely large transaction. So it’s insane. And I think you’re going to see people in my space dig in more to telecommunications, because you can’t have one without the other. And I think that people only now are beginning to understand that.”
Next, Lee transitioned to talking about IT mergers and acquisitions.
- Verizon acquired Yahoo for $4.5 billion, recalled Lee. “Right now, because of this acquisition, they have two major facilities in Washington – one of which is in Quincy,” Lee shared. “I believe it’s 45 megawatts and growing, so it’s a very significant presence, primarily fueled by the merger and acquisition.”
- NTT Acquired Dell: NTT’s (locally headquartered out of Texas) Dell acquisition was also affecting Quincy in a significant way. “There was a facility owned by Dell and now as a result of NTT’s ownership, they’re bringing additional core competencies into that market,” said Lee. “So it’s only benefiting us, again.”
Next up was colocation operators.
- Digital Realty and Dupont Fabros had a $7.6 billion deal. “This is great because it gives these two REITs entry into the northwest market,” observed Lee. “Because Dupont owns significant land in Hillsboro, and Digital Realty owns and operates a fully leased operates in Hillsboro. And Digital is a partial interest owner of the Westin Building exchange here in downtown Seattle. $7.6 billion is crazy.”
- Equinix purchased 29 data center assets that were formerly owned by Verizon. “Some would argue they did that for a couple of key internet exchanges and carrier hotels around the world – but it really affected us here,” Lee divulged. “Verizon owned a data center in Kent and now it’s owned by Equinix, they’re figuring out what to do with it. And Equinix is a major player in this market, FYI.”
- Cyxtera’s acquired CenturyLink’s assets for $2.3 billion. “This created a company that no one had ever heard of, to become really one of the largest colocation operators in the entire Northwest, because they have major facilities in Tukwilla and Central Washington,” said Lee.
- Peak 10 merged with ViaWest. “Peak 10-ViaWet was a smaller acquisition,” Lee said. “Very strategic in my mind. It’s the only merger & acquisition where there is no overlapping facilities. So it made a lot of sense. Plus, ViaWest and Peak10 have similar ownership structure and a past with GI Partners, so it made a lot of sense.”
Conan Lee is a Managing Director at JLL, where he provides real estate advisory and brokerage services to data center and office clients throughout the Pacific Northwest and North America. Conan specializes in all data center related practice lines including dispositions, acquisitions, and leasing. He runs the data center practice group for the Northwest and Western Canada and is the most active broker specializing in data centers in the Northwest from a market share standpoint. His efforts and involvement in the local data center community have helped shape this quickly growing market over the last decade. The above snippet is just one part of this important keynote. Check out previous CapRE Insider Reports of this keynote address: