Cyxtera is to become a real estate investment trust (REIT).
Adopting REIT status provides beneficial tax status and regular dividends for shareholders, but requires the company to make the majority of its money from income-producing real estate. To classify as a REIT, a company needs to meet certain requirements around how it is owned and how it spends its money.
The company announced this week that its Board of Directors unanimously approved Cyxtera’s conversion to a REIT for federal income tax purposes with a target to complete the conversion by January 1, 2023.
“Following a thorough analysis of the impact a REIT election would have on our business, we are confident the REIT structure will best position us for continued growth while maximizing long-term shareholder value. We look forward to completing the REIT conversion process over the next few months,” said Carlos Sagasta, chief financial officer atCyxtera.
As part of the REIT conversion the company also plans to; reincorporate in Maryland; adopt charter provisions to establish REIT-related ownership restrictions; and separate a portion of its business into taxable REIT subsidiaries.
Cyxtera joins Equinix and Digital Realty as publicly-listed pure-play data center REITs.
Switch Inc. is also undergoing a conversion into a REIT, while also being acquired by DigitalBridge.
DigitalBridge itself recently went the other way and reverted to a traditional C-Corp, while its Vantage and DataBank units are either already are, or shortly becoming, REITs.
American Tower, which recently acquired CoreSite, is also a REIT that owns a massive number of cell tower sites. Iron Mountain is also a REIT but owns a large amount of non-data center real estate
Investment manager Jim Chanos recently said he was taking large short positions against data center real estate investment trusts (REIT), betting that cloud providers will take their business.
A number of firms came out against Chanos, saying he misunderstood the data center sector. Digital Realty CEO Bill Stein, along with investors Jefferies and GGV all came out in support of data center REITs.
Earlier this month Cyxtera closed an accounts receivable securitization facility of $37.5 million with PNC Bank, N.A.
The company said the new facility provided increased availability and reduced interest expense compared to its former accounts receivable factoring facility. The facility has a committed term of three years.
“This new facility is an important piece of our overall liquidity and financing strategy, and we are very pleased with the terms of the facility as it provides us with greater flexibility and a low-cost source of capital,” said Cyxtera CFO Sagasta.