American Tower (NYSE: AMT), through one of its subsidiaries, has entered into a non-binding term sheet with an unnamed third-party, to sell a ~$2.5bn minority equity interest in its U.S. data center business, which includes the operations of CoreSite Realty, DataSite, and Colo Atl. Specifically, American Tower notes that the valuation of its U.S. data center business, through this minority stake sale, is “anticipated to be consistent with the valuation for the company’s previously completed acquisition of CoreSite Realty Corporation and the valuations for the company’s previously acquired data centers businesses”.

As of Q1 2022, American Tower’s data center portfolio comprised 27 facilities across 10 U.S. markets, including the operations of CoreSite Realty, DataSite, and Colo Atl.

M&A History – U.S. Data Centers – American Tower

American Tower has spent ~$10.7bn to assemble the foundation of its U.S. data center business, through three separate M&A transactions. Notably, the vast majority of the company’s capital was deployed into its most recent acquisition of CoreSite:

  • CoreSite Realty: in December 2021, American Tower closed on its $10.4bn acquisition of CoreSite Realty which operated 24 data centers in 8 U.S. markets
  • DataSite: in October 2021, American Tower acquired DataSite, an owner and operator of two multi-tenant data centers in Atlanta, Georgia and Orlando, Florida for $200.6m
  • Colo Atl: in April 2019, American Tower acquired Colo Atl, an operator of a colocation data center in downtown Atlanta, Georgia, for $75m

Additionally, including capital expenditures incurred to-date, American Tower’s data centers operating segment had total assets of $11.0bn, as of Q1 2022.

U.S. Data Center Portfolio – American Tower

American Tower’s 27 data centers offer 225.6 megawatts of power capacity across 3.47 million net rentable square feet (NRSF). Also, regarding interconnection, these facilities house 35.9k total cross-connects.

At quarter-end, American Tower’s 27 data centers had an occupancy rate of 81.0%, while the company’s stabilized portfolio occupancy was slightly higher at 84.3%. Also, the portfolio’s backlog stands at $19m. Finally, these data centers produced $1,529 in monthly recurring revenue (MRR) per cabinet equivalent billed.

Financial Metrics

In Q1 2022, American Tower’s data centers operating segment reported total operating revenues of $184.3m, which comprises:

  • Rental and Power: $160.0m, equivalent to 87% of total revenue
  • Interconnection: $24.3m, equivalent to 13% of total revenue

Additionally, the data centers operating segment yielded operating profit of $91.3m, implying a 49.5% margin.

Therefore, on an annualized basis, American Tower’s data centers operating segment generates $737m of total operating revenues and $365m of operating profit.

Development Pipeline

As of Q1 2022, American Tower has 20 megawatts of power capacity, across 148k NRSF, under construction. The company estimates that the total costs for this capacity under construction will be $325.9m. Indeed, this implies a cost to build of $16.3m per megawatt and $2,200 per sqft.

Outlook

American Tower provides the following outlook for its data center segment:

  • Property revenue for full-year 2022 of $750m, at the mid-point
  • Revenue growth range between 6% to 8% (targeting the high-end of the range). Escalators comprising 2% to 4% of this growth
  • Interconnection growth range between 6% to 8%
  • Lease renewals, on a cash mark-to-market basis, expected to be up between 2% to 3%
  • Monthly recurring revenue (MRR) per cabinet is projected to grow by 4% to 6%
  • Rental churn rate, on an annual basis, of 6% to 8%

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