SNL Financial Highlights Data Center Investment

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Recent research data from SNL Financial indicates that data center REITs may be poised for growth through acquisition and development in excess of the broad market. Its data shows a combination of low debt levels and strong liquidity. Genesis Capital sources assets for large buyers, including REITs and institutional buyers, and keeps a watch on all asset types and buyer appetite.

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One analyst believes that the data center sector could double in size over the next 3-5 years, as the internet continues to grow and more companies find a need for storage and bandwidth.

Recent data from the research firm SNL Financial indicates that data center REITs are emerging as an attractive investment option. Increasing internet use has been significantly pushing demand for data center rack space, and this demand has allowed data centers to strengthen their balance sheets to the point where they are ready to grow.

The commercial real estate network Genesis Capital keeps an eye on all commercial asset types and buyer demand. Genesis sources off market commercial real estate or notes for buyers, typically REITs, Family Offices and institutional buyers as well as individual opportunity buyers. Bank notes are sometimes popular with some buyers, and Genesis works nationwide with lenders on disposition of assets.

Data centers are the high tech storage centers and have such well known clients as Facebook, Google, and Amazon. SNL Financial’s data shows that data centers operate with significantly less leverage than the median of equity REITs.

“This combination of low leverage and adequate liquidity places data center REITs in a good position to take advantage of acquisition and development opportunities that are in the best interest of the company,” said Jim Stevens, an analyst with SNL Financial.

SNL analyst Stevens believes that the data center sector could double in size over the next 3-5 years, as the internet continues to grow and more companies find a need for storage and bandwidth. This rapid growth could provide superior returns for investors whether they invest through REITs or directly in the data centers.

However, not everyone agrees with Stevens’ assessment. Lukas Hartwich, an analyst with Green Street Advisors, believes that increasing competition in the data center space has limited growth opportunities and lowered the returns that data centers have been receiving.

“As the data center REITs have grown in size, and acquisition and development opportunities have become increasingly scarce, it has become harder to move the needle through external growth,” he said.

About Genesis Capital
Genesis Capital is a dynamic nationwide network of seasoned commercial real estate. The members of Genesis have participated in commercial real estate transactions totaling nearly $7 billion. The company motto is "Off Market is the New Market." Genesis is an affiliate with the Off Market Association.

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Kathy Heshelow
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