David Guarino

David Guarino asked about the underwriting process for the Guatemala land purchase, including valuation multiples, and if SBA plans to acquire other large land portfolios. He also inquired if SBA intends to invest more heavily in the data center space or if towers remain the company's best ownership model.

Answer

Brendan Cavanagh, President and CEO, explained that SBA has an ongoing program to acquire land under its towers for accretion and risk reduction. The Guatemala deal, part of the Millicom transaction, was a special opportunity to buy land under 3,900 sites at a mid-single-digit multiple, making it immediately accretive. Regarding data centers, he stated that existing data centers were for education on edge computing at tower sites, and SBA does not intend to add more standalone data centers, but is excited about developing incremental edge compute opportunities for AI-based solutions at its tower locations.

David Guarino asked about the underwriting approach (multiple or IRR) for the Guatemala land acquisition and whether SBA plans to acquire other large land portfolios under its sites. He also inquired if SBA intends to invest more heavily in the data center space, given past smaller R&D investments, or if towers remain the preferred ownership model.

Answer

Brendan Cavanagh, President and CEO, explained that SBA has an ongoing program to acquire land under its towers, both for financial accretion and risk mitigation. The Guatemala deal, part of the Millicom transaction, was a special opportunity to buy land under 3,900 sites at a mid-single-digit multiple, making it immediately accretive and de-risking those assets. Regarding data centers, he stated that existing data centers were for education on edge computing solutions at tower sites, not for standalone data center expansion. He expressed excitement about advancing edge compute opportunities, especially for AI-based solutions, leveraging SBA's distributed asset base, but confirmed no further investment in large standalone data centers.

David Guarino from Green Street Advisors, LLC asked about the technical viability of high-frequency spectrum for macro towers, the potential timing for new spectrum auctions to reach carriers, and the specific guidance lift from the early Millicom closing.

Answer

President and CEO Brendan Cavanagh stated that higher band spectrum will propagate fine from macro sites but will require new equipment, which is favorable for SBA. He estimated spectrum auctioned by mid-2026 could be in carrier hands within two years, while other bands are likely post-2030. He also specified that the early Millicom closing contributed $16 million to the leasing revenue guidance increase.

David Guarino asked if the wide bid-ask spread on M&A was a recent phenomenon or a longer-term observation. He also questioned how SBA's portfolio would perform in an economic soft patch, given the evolution of the tenant landscape since the last major stress test.

Answer

President and CEO Brendan Cavanagh clarified that the M&A valuation gap has been an observable trend for the last year, coinciding with rising capital costs. He expressed confidence in the business's resilience, emphasizing that its substantial and reliable cash flow ($1.4 billion in AFFO) means any slowdown in incremental leasing would have a relatively small impact on the overall financial stability and shareholder returns.

David Guarino requested further details on the earn-out provision in the Millicom transaction, asking if it was material enough to significantly impact the potential obligations on the balance sheet and about the potential payment timeframe.

Answer

President and CEO Brendan Cavanagh reiterated that the earn-out is not considered material to the overall transaction value. He stated that any potential payment is contingent on achieving financial milestones that would represent a success for both parties, and he did not expect it to fundamentally change the deal's financial profile. He was uncertain about the specific future accounting disclosure.

David Guarino asked if the trend of shrinking expenses, which contributed to excellent stabilized cash gross profit growth in 2025, is expected to continue, or if staffing levels will need to increase given the outsized pace of bookings.

Answer

Keith Taylor, Chief Financial Officer, emphasized that Equinix is 'just getting started' on efficiency, aiming to reduce SG&A as a percentage of revenue from 18%-19% to 15% over time by 'bending the cost curve' through processes, systems, and tooling. He stated that the company does not necessarily need to increase headcount significantly, as new assets can be supported with existing SG&A, and expressed confidence in becoming an increasingly efficient business, aligning with the 52%+ margin target from Analyst Day.

David Guarino sought clarity on what a 'normal run rate' for annualized gross bookings and the new pre-sold gross bookings metric should look like, and if there is a price difference for customers committing to capacity 12 months out versus immediately.

Answer

Adaire Fox-Martin, President and CEO of Equinix, stated that while annualized gross bookings show consistent growth, they can be volatile. She noted a strong Q4 pipeline, with 40% of the budget already closed, suggesting confidence in meeting targets. Keith Taylor, CFO of Equinix, added that in markets with capacity shortages, pre-sale activity might outpace annualized gross bookings. Adaire confirmed there is no price difference for customers committing to capacity 12 months out versus today.

David Guarino asked for clarification on what a 'normal run rate' for annualized gross bookings and pre-sold gross bookings should look like, and whether there is a price difference for customers committing to capacity 12 months out versus committing today.

Answer

Adaire Fox-Martin, President and CEO of Equinix, explained that while annualized gross bookings have shown consistent growth, they can be volatile. She noted that 40% of the Q4 budget was already closed, with a strong pipeline. Keith Taylor, CFO of Equinix, added that in markets with capacity shortages, pre-sale activity might increase relative to annualized gross bookings. Adaire Fox-Martin confirmed that there is no dilution in pricing, indicating firm pricing regardless of commitment timeframe.

David Guarino of Green Street Advisors asked about the impact of utility companies requiring larger upfront commitments on construction costs and whether this trend is a net positive or negative for a large player like Digital Realty.

Answer

CEO Andy Power characterized the trend as a net positive that rationalizes the industry. He stated that it raises the bar for entry, requiring real counterparties with substance, which favors established operators like Digital Realty and helps filter out less committed players. He also clarified an earlier point, stating DLR holds a 20% minority stake in both the fund's operating and development assets.

David Guarino from Green Street asked if recent market volatility has impacted cap rates for stabilized data centers and requested the cap rate on the $1.5 billion of assets contributed to the new fund.

Answer

CIO Gregory Wright responded that there has been no meaningful change in cap rates, as rising interest rates have been more than offset by higher growth expectations in the data center sector. He confirmed that the assets contributed to the new U.S. hyperscale fund, valued at just over $1.5 billion, were done at a cap rate in the 'high 5s'.

David Guarino of Green Street asked whether the majority of the strong sub-1 megawatt leasing activity was signed in legacy assets, which would boost same-store occupancy, or in newer construction assets.

Answer

CEO Andrew Power confirmed the activity was broad-based across top markets like Northern Virginia, London, and Chicago. He specifically noted that in markets like Los Angeles and Chicago, the leasing occurred in established, not brand-new, assets. He also mentioned that a recent transaction created a vacancy opportunity in a legacy asset, which the company is actively working to refill at better economics.

David Guarino asked for color on the relative rental rates between markets, noting the high GAAP rate for Americas leasing and speculating if Ashburn hyperscale rates are now approaching the $225-250 per kilowatt range.

Answer

President and CEO Andy Power clarified that the high figure was a GAAP rate, reflecting lease duration and rent bumps. However, he confirmed that face rates in Ashburn for large capacity blocks have reached the $175 to over $200 per kilowatt range. He also expressed his expectation that other markets like Chicago and Dallas will continue to see rates catch up over time.