Eric Luebchow

Eric Luebchow of Wells Fargo followed up on the data center discussion, asking if the leasing slowdown is a matter of timing and whether the softer outlook would affect capital expenditure plans beyond 2025.

Answer

President & CEO William Meaney reiterated that the primary cause was a shift in customer focus. EVP & CFO Barry Hytinen confirmed there is no change to capital deployment plans, as the vast majority of growth CapEx supports the construction of fully pre-leased assets that clients are eager to bring online.

Eric Luebchow questioned the potential long-term implications of the 'DeepSeek' announcement on the data center business and asked for more details on why Iron Mountain passed on a large Q4 leasing opportunity that did not meet its return criteria.

Answer

William Meaney, President and CEO, explained that the company passed on the large deal due to unfavorable pricing, emphasizing a disciplined, long-term approach given the strength of their multi-year pipeline. Regarding 'DeepSeek', he views it as a potential accelerator for their digitization business. Barry Hytinen, EVP and CFO, reinforced that new lease pricing is meaningfully higher, which is positively impacting EBITDA margins and future returns.

Eric Luebchow asked about the company's long-term goals for the ALM business, specifically whether the 2026 revenue target of approximately $900 million from its Investor Day is still achievable.

Answer

CEO William Meaney affirmed that the company still has a clear line of sight to its Investor Day targets for ALM, driven by a combination of strong organic growth (guided at over 20%) and ongoing bolt-on M&A. CFO Barry Hytinen added that the overall company is outperforming its long-term growth plan, with ALM being a key contributor in a large and growing market.

Eric Luebchow (Wells Fargo & Company) questioned SBA's new leasing outlook for 2026, considering DISH Network's expected zero contribution, and the activity levels from the big three carriers. He also asked about monetization opportunities from recent spectrum transactions (EchoStar/AT&T, SpaceX) and the potential for satellite spectrum deployment in metro areas.

Answer

Brendan Cavanagh, President and CEO of SBA, deferred a 2026 outlook but expressed confidence in maintaining current new leasing activity levels, supported by the Verizon deal, T-Mobile, and AT&T. He noted DISH's negligible $2 million contribution to new leases/amendments in 2025. Mr. Cavanagh deemed satellite spectrum opportunities premature, with preliminary Starlink talks. For AT&T's new spectrum, he mentioned potential software upgrades for 3.45 GHz and uncertainty for 600 MHz, hoping for future upside.

Eric Luebchow of Wells Fargo Securities inquired about the trade-offs of pursuing an investment-grade rating, such as spread benefits versus reduced flexibility. He also asked if the domestic leasing run rate could accelerate into 2026 based on recent bookings.

Answer

President and CEO Brendan Cavanagh explained that the main benefit of an investment-grade rating would be on unsecured debt, as the ABS market already provides favorable rates. He feels they wouldn't give up much flexibility. Regarding 2026 leasing, he stated it's premature to give a specific forecast but acknowledged the run rate exiting 2025 will be higher and that current trends and backlogs are positive.

Eric Luebchow asked if the increasing colocation mix was driven more by carrier regulatory requirements or early signs of network densification. He also questioned if the services guidance uplift was attributable to one specific customer or was more broad-based.

Answer

President and CEO Brendan Cavanagh responded that the colocation increase is a mix of both regulatory requirements, evidenced by the rural nature of some sites, and commercial network needs. Regarding services, he confirmed a correlation with leasing activity on SBA's own sites and noted that while one carrier is a significant part of the business, the proportional increase in activity was more broad-based.

Eric Luebchow asked for an outlook on non-Sprint domestic churn and when it might fall below 1%. He also inquired about the escalator structure within the Millicom master lease agreement.

Answer

President and CEO Brendan Cavanagh reported that non-Sprint churn was approximately 1.3% in the quarter and he anticipates it will approach the 1% level in the coming year. On the Millicom MLA, he confirmed it is entirely denominated in U.S. dollars and includes escalators, but declined to share specific details of the structure.

Eric Luebchow asked about the current pricing environment, specifically if pricing is firm or improving due to capacity constraints, and sought insights into the moving parts for the 2026 AFFO growth outlook, considering interest rates and financing costs.

Answer

Adaire Fox-Martin, President and CEO of Equinix, confirmed that pricing is very firm with no dilution. Keith Taylor, CFO of Equinix, noted that the cost of borrowing is lower than originally planned, and Equinix can raise capital effectively across different markets. He also mentioned the ability to manage the balance sheet effectively and capitalize interest expense associated with increased construction in progress, which will positively impact the P&L.

Eric Luebchow asked about the current pricing environment, specifically if pricing remains firm or is improving due to capacity constraints, and sought insights into the 2026 AFFO growth rate, considering favorable interest rates and financing costs.

Answer

Adaire Fox-Martin, President and CEO of Equinix, confirmed that pricing remains very firm with no dilution. Regarding 2026, she emphasized focus on Q4 execution, strong demand, accelerated Ready-for-Service (RFS) dates, and operational efficiency. Keith Taylor, CFO of Equinix, highlighted a lower cost of borrowing and effective capital raising across diverse markets. He also mentioned the ability to capitalize interest expense for increased construction in progress, which positively impacts the balance sheet.

Eric Luebchow of Wells Fargo Securities questioned how Equinix plans to accelerate the path to stabilization for new developments under its 'Build Bolder' strategy and the role of pre-leasing in de-risking capital spend.

Answer

CEO Adair Fox-Martin detailed a three-pronged approach to accelerate stabilization: constructing new assets in fewer or single phases, catering to larger enterprise footprints driven by AI demand, and increasing pre-sales activity ahead of 'Ready for Service' dates to de-risk the investments.

Eric Luebchow of Wells Fargo Securities sought details on the strategy to accelerate the time-to-stabilization for new developments under the 'Build Bolder' plan and the role of pre-leasing in de-risking capital spend.

Answer

CEO Adair Fox-Martin outlined a three-pronged approach to accelerate stabilization. This includes building in fewer or single phases, capitalizing on larger footprint requirements from enterprise customers driven by AI, and increasing pre-sales activity ahead of Ready-For-Service (RFS) dates to de-risk the investment process.

Eric Luebchow asked for an update on the U.S. xScale joint venture's progress and how to think about nonrecurring revenue trends for the remainder of the year.

Answer

CEO and President Adaire Fox-Martin confirmed the xScale pipeline remains strong with consistent partner engagement, and the Atlanta project is progressing as expected. CFO Keith Taylor added that while Q1 had significant nonrecurring revenue from xScale fit-outs, this is expected to decrease by about $38 million in Q2, providing a clearer view of the core business's strong performance. He noted planned SG&A investments to support long-term xScale growth.

Eric Luebchow inquired about the forward demand pipeline and bookings momentum, particularly concerning larger retail or small wholesale deals and their pricing dynamics. He also asked for an update on MRR churn expectations for the upcoming year.

Answer

CEO Adaire Fox-Martin confirmed record gross bookings in Q4, driven partly by tech service providers seeking large, contiguous footprints, and noted positive pricing progress due to high demand. Regarding churn, she stated that after normalizing for a Q3 deferral, Q4 churn was 2.2%, in line with the 2024 average. For 2025, Equinix expects churn to remain within the 2.0% to 2.5% range, with a focus on increasing interconnection to lower churn propensity.

Eric Luebchow asked about the impact of new spectrum sales (like AT&T's 3.45 GHz) on future densification demand and the status of a customer who transitioned from an MLA to an a la carte leasing arrangement earlier in the year.

Answer

President and CEO Steve Vondran explained that more spectrum generally leads to more leasing revenue, even with initial software pushes, as mobile data growth (35% YOY) will necessitate densification for half of future capacity needs. EVP, CFO, and Treasurer Rod Smith added that overall application volumes are up 20% YOY, with colocation applications up 40%, indicating early densification trends. Vondran stated that American Tower is agnostic to MLA vs. a la carte arrangements, as the underlying business needs remain, and revenue will be realized either way, though timing might be more variable.

Eric Luebchow inquired about the impact of new spectrum sales, like AT&T's 3.45 GHz, on future densification demand, and provided an update on a customer who transitioned from an MLA to an a la carte leasing arrangement.

Answer

President and CEO Steve Vondran explained that more spectrum generally leads to monetizable network augmentations, even with initial software pushes, and that densification will remain critical for meeting mobile data growth. He reiterated that the company is agnostic to MLA structures, successfully monetizing deployments either way, and ongoing discussions with customers are standard.

Eric Luebchow asked about the drivers behind the 200% year-over-year increase in colocations and its future mix. He also inquired about capital allocation priorities, specifically the balance between share buybacks and M&A, given current leverage levels.

Answer

EVP, CFO & Treasurer Rod Smith clarified that while colocations are up significantly, they remain a small portion of applications, signaling the early stages of densification. On capital allocation, Smith prioritized the dividend and internal CapEx, after which the company will evaluate debt reduction, M&A in developed markets, and share buybacks based on what drives the most shareholder value.

Eric Luebchow asked about the status of discussions with the large carrier not currently on a comprehensive agreement and the outlook for their spending. He also inquired about the CoreSite sales funnel amid macro concerns about hyperscale and enterprise IT spending.

Answer

CEO Steven Vondran stated that the company is comfortable operating on an a la carte basis and that any new comprehensive agreement must create long-term value. Regarding CoreSite, he emphasized its interconnection-focused model sees robust and durable enterprise demand for multi-cloud access, which is distinct from hyperscale trends and shows no signs of slowing.

Eric Luebchow of Wells Fargo Securities questioned if recent tax reform would lead to accelerated work from carriers and asked about the company's capital allocation priorities given improving cash flow.

Answer

CEO Daniel Peyovich confirmed discussions with customers about reinvesting tax savings, anticipating the impact would primarily begin next calendar year. Regarding capital allocation, he stated the top priority is funding organic growth, followed by strategic M&A that aligns with the company's culture, balanced against opportunistic share repurchases.

Eric Luebchow asked for more detail on the AI data center opportunity, the company's ability to generate free cash flow, and the capital allocation strategy between M&A and share repurchases.

Answer

President and CEO Daniel Peyovich described the AI opportunity as massive and expanding beyond simple over-pulls to new construction, with direct engagement with hyperscalers. CFO H. DeFerrari highlighted a focus on free cash flow, noting a 6-day improvement in DSOs and low net leverage. Peyovich added that capital allocation prioritizes funding organic growth first, followed by strategic M&A and share repurchases.

Eric Luebchow questioned whether Dycom needs to ramp up its labor force to meet demand from AI and BEAD projects and asked for an update on the trend of smaller customers pausing work ahead of BEAD awards.

Answer

President & incoming CEO Daniel Peyovich stated that Dycom is strategic with talent, investing in training but not stockpiling labor ahead of confirmed opportunities, expressing confidence in their ability to scale. He confirmed a slight sequential decline in revenue from co-op customers, attributing it to them waiting for clarity on BEAD funding.

Eric Luebchow asked if the addressable market for PCF contracts has expanded due to increased hyperscaler CapEx and if tax reform provides an incentive for Lumen to increase its own investment.

Answer

President & CEO Kate Johnson described the current hyperscaler builds as 'phase one' of a three-phase AI evolution, with future phases focused on enterprise AI consumption and AI-to-AI communication, which will drive demand for advanced services. EVP & CFO Chris Stansbury added that the US administration's AI focus could also create new public sector opportunities.

Eric Luebchow of Wells Fargo asked how recent competitive activity from fiber overbuilders impacts the attractiveness of Lumen's copper footprint. He also sought confirmation that Lumen expects to be consistently free cash flow positive going forward.

Answer

EVP and CFO Chris Stansbury stated that Lumen's potential fiber footprint is the 'largest asset out there that has yet to be consolidated,' making it highly attractive. On free cash flow, he confirmed that cumulatively, the company will be positive. However, he cautioned that due to the lumpy nature of large CapEx and tax payments, there could be an individual year that is negative, but cash would be on hand to cover it.

Eric Luebchow inquired about the strength of the third-party management (3PM) program, including opportunities from the LSI portfolio, and asked for an update on top-of-funnel demand trends.

Answer

CEO Joseph Margolis reported strong growth in the 3PM program, with 174 net stores added year-to-date, partly from new LSI relationships. Regarding demand, he noted that while generic search volume is elevated due to AI, web traffic that converts is of higher quality, suggesting more educated customers.

Eric Luebchow of Wells Fargo asked if the company still expected some occupancy to burn off later in the year, potentially providing more pricing leverage. He also inquired about the expected mix between wholly-owned and JV investments in the updated acquisition guidance.

Answer

CFO P. Scott Stubbs confirmed the expectation of less occupancy benefit in the second half of the year compared to the first. He directed the analyst to a table in the press release, clarifying that of the 28 properties in the updated guidance, 27 are related to JV buyouts. CEO Joseph Margolis added that the transaction market is too quiet to quote a market cap rate.

Eric Luebchow inquired about the move-in to move-out rate spread and the remaining rate gap between LSI and EXR properties in comparable markets.

Answer

Executive P. Stubbs noted the move-in/move-out spread was over 30% for the quarter, widening to the mid-to-upper 30s in October, which is a normal seasonal trend. CEO Joseph Margolis stated the rate spread on like-for-like properties is now 6%, down from 16% at closing, and he expects it to eventually reach zero as the brand consolidation takes full effect.

Eric Luebchow from Wells Fargo Securities asked about expectations for seasonality and price competition in the latter half of the year and the interplay between rental rates, promotions, and marketing spend.

Answer

SVP & CFO Thomas Boyle responded that he expects seasonal trends and competitive dynamics to be similar to the previous year. He emphasized that the company does not have specific occupancy targets but rather uses a granular, data-driven approach to balance marketing, promotions, and move-in rates to maximize overall revenue.

Eric Luebchow asked about M&A opportunities in other developed international markets beyond Australia, given PSA's experience with Shurgard. He also sought to confirm the full-year occupancy guidance and whether performance was tracking ahead of plan.

Answer

Joseph Russell affirmed that PSA continues to study international markets, looking for opportunities with scale and an existing platform they can enhance, similar to the Shurgard and Abacus models. H. Boyle clarified that the guidance midpoint assumes average annual occupancy will be down 10 basis points, and year-to-date performance is tracking in line with that assumption.

Eric Luebchow sought more detail on the transaction market, asking about current bid-ask spreads and stabilized yields. He also asked for color on the better-than-expected performance of existing customer rent increases (ECRIs).

Answer

CEO Joseph Russell noted that momentum is building in the transaction market after two slow years, with more assets coming to market and signs of convergence on pricing. Executive H. Boyle confirmed that strong existing tenant performance was the main reason for the raised revenue outlook, driven by solid payment patterns, long stays, and a larger contribution from newer tenants becoming eligible for rent increases.

Eric Luebchow of Wells Fargo Securities inquired about the large-capacity hyperscale market in the U.S., focusing on the timing of power availability for late 2026 and 2027 deliveries and whether pre-leasing activity is expected to increase in the second half of the year.

Answer

CEO Andy Power highlighted the company's 5-gigawatt inventory runway and over $15 billion in private capital to fund hyperscale growth. Chief Revenue Officer Colin McLean confirmed that demand remains very strong, with active conversations for capacity in key markets like Northern Virginia for late 2026 and 2028 deliveries.

Eric Luebchow from Wells Fargo sought confirmation that the enterprise sales funnel is at record levels, that there are no signs of delayed decision-making, and that the goal to grow sub-1-megawatt bookings is on track.

Answer

CEO Andrew Power confirmed a strong start, with Q1 sub-1-megawatt bookings pacing 10% ahead of the prior year. CRO Colin McLean added that the demand profile is robust, the pipeline for this segment is at a record high, and there are no signs of delayed decision-making. He highlighted hybrid cloud and data localization as key drivers, with strong contributions from large enterprises and channel partners.

Eric Luebchow of Wells Fargo asked for details on the $500 million to $1 billion capital recycling plan for the year, specifically the potential mix of outright dispositions, JVs, and new programmatic fund structures.

Answer

CFO Matt Mercier broke down the plan, estimating roughly $300-$400 million from non-core asset dispositions, with the remainder targeted for expanding private capital efforts. CIO Gregory Wright added that creating a fund is the next logical step in diversifying capital sources, stating that progress is going very well and they look forward to reporting more in the future.

Eric Luebchow asked about Digital Realty's strategy for maintaining its development runway through land acquisition and requested an update on power delivery timelines in the constrained Northern Virginia market.

Answer

President and CEO Andy Power provided specific timelines for Northern Virginia, with new capacity coming online in late 2025, 2026, and 2027. CIO Gregory Wright added that the company's primary strategy is to acquire more land in its existing markets, where it already has over 3 gigawatts of buildable capacity, viewing this as the best risk-adjusted use of capital.

Eric Luebchow asked for an outlook on the New York market for 2025, specifically regarding move-in rates, occupancy, and the impact of supply in different submarkets.

Answer

President and CEO Christopher Marr expressed continued optimism for the New York MSA, expecting it to be their best-performing major market in 2025. He highlighted that the NYC boroughs (Brooklyn, Queens, Bronx) remain a bright spot with minimal new supply, supporting premium pricing. He also noted a more constructive view on suburban areas like North Jersey, where he believes the brunt of supply impact peaked in Q4 2024.

Eric Luebchow of Wells Fargo asked about the composition of the acquisition pipeline, specifically regarding single-asset versus portfolio deals, and inquired about the company's strategy for funding future external growth.

Answer

President and CEO Christopher Marr indicated the pipeline is diverse, with opportunities ranging from single assets to larger portfolios, and that CubeSmart is well-positioned to act. CFO Timothy Martin elaborated on funding, highlighting the company's low leverage at 4x debt-to-EBITDA, which provides capacity to acquire roughly $1 billion in assets with debt while remaining within target credit metrics.

Eric Luebchow asked about the acquisition pipeline, current market cap rates amid interest rate volatility, and the strategy for using balance sheet versus JV capital. He also asked for details on the more aggressive ECRI (Existing Customer Rent Increase) strategy.

Answer

CEO Dave Cramer reported no material change in cap rates, citing mid-5% for primary markets and low-to-mid 6% for secondary markets. He noted a bias towards using JV capital but using the balance sheet for strategic densification and 1031 exchanges. Regarding ECRIs, Cramer explained the increased assertiveness is a combination of getting new tenants to market rates faster and using improved data analytics to optimize increases across the entire tenant base.

Eric Luebchow asked about the current M&A environment, where DigitalBridge is finding value, and the deal pipeline. He also sought elaboration on the firm's plans and underwriting criteria for acquiring adjacent asset managers.

Answer

CEO Marc Ganzi stated they are finding value, citing the Yonder acquisition at a favorable multiple and the strategic rationale for the J-Tower and Vertical Bridge deals. For asset manager M&A, Ganzi outlined strict criteria: accretive day-one, returns north of 20% IRR, and a 2.5x MOIC. He identified the strategic priorities for M&A as 1) Credit, 2) Digital Private Equity, and 3) Energy Transition.

Eric Luebchow from Wells Fargo asked about the near-term sustainability of the 400,000 quarterly net add run rate for the fixed wireless (HSI) business, and requested color on gross add versus churn trends and the geographic rollout.

Answer

President and CEO G. Sievert noted the product's high Net Promoter Score and consistent industry leadership in net adds give them confidence. He stated that while churn trends have been favorable as the cohort ages, gross adds must continue to rise to maintain the pace. He confirmed the majority of new customers come from cable and are existing T-Mobile mobile customers, and that the service's average speed and usage continue to grow, matching cable averages.