Equinix Inc. approved a plan to pursue conversion to a real estate investment trust (REIT).
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Equinix said it decided to pursue a REIT operating structure after considering various options, including alternative financing, capital, and tax strategies, for the purpose of maximizing long-term shareholder value.
If Equinix is ultimately successful in the conversion process, Equinix expects to elect REIT status for its taxable year beginning January 1, 2015.
"We are committed to creating long-term shareholder value. The REIT structure supports this objective and positions us to achieve profitable, strategic growth domestically and internationally," said Peter Van Camp, executive chairman of Redwood City, CA-based Equinix.
"We have already seen several of our peers in the data center industry operate under a REIT structure, and we believe that this tax-efficient structure will enhance shareholder value and enable us to be even more competitive," said Steve Smith, CEO of Equinix.
To cover conversion-related cash requirements, including shareholder distributions, tax payments and other conversion costs, Equinix is considering issuing debt and/or equity, and it has also been raising money through the sale of properties.
Most recently, an investment team led by 365 Main agreed to acquire a 16-property portfolio of data centers in nine states from Equinix located in a transaction valued at $75 million, among the largest data center purchases of 2012.
The investment group, which consists of 365 Main, Crosslink Capital and Housatonic Partners, agreed to buy the 16 properties spread across 16 markets and totaling 280,000 square feet.
Equinix estimates that the 16 data centers generate less than 2% of the company's annual revenues and the financial results derived from the properties will be excluded from Equinix's continuing operations for the quarter and will be reflected as discontinued operations.
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