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The lines between data center business models have been blurring for years, but they still matter to acquirers and investors. The alignment of facilities and business models looms large in this week’s announcement that Equinix will buy the Dallas Infomart for $800 million.

The deal is a strategic win for Equinix, and also addresses the somewhat bifurcated nature of the portfolio of Infomart Data Centers, which was formed in 2014 by combining wholesale and retail colocation businesses. The transaction also changes the game for the remainder of the Infomart portfolio, offering a clearer value proposition to acquirers and investors.

Equinix had many reasons to covet the Dallas Infomart, the leading carrier hotel in one of the nation’s most important data center markets. Its strategic importance is reflected in the premium purchase price, as Equinix paid $800 million for a property that generates $50 million of revenue a year.

Of that $50 million in annual revenue, $20 million is rent from Equinix, which operates four data centers within the Infomart. That existing footprint provides a compelling incentive for Equinix to control the property, rather than having a rival provider as the new landlord.

The Infomart deal also gives Equinix control of the two leading hubs for data traffic to Latin America. Equinix already owns the NAP of the Americas in Miami, which it acquired when it bought a portfolio of Verizon data centers last year.

The Infomart property on Stemmons Freeway also offers additional capacity, a key attribute for data center companies in expansion mode. Equinix noted that the Dallas property “provides significant expansion opportunities to Equinix through the existing underdeveloped capacity (approximately 11MW of power), as well as the potential to develop additional capacity (approximately 40MW of power) on land adjacent to the Infomart building.”

Focus on Dallas, Not Wholesale Assets

Given those attributes, Equinix sought to move decisively with an aggressive bid to secure the deal. “We recognize that it is a high-value deal,” said Keith Taylor, the CFO of Equinix. “But our belief is that we’re going to get the returns and we’re going to develop a strategy that will drive value to the bottom line over the not-too-distant future.”

There’s also the matter of the other properties owned by Infomart Data Centers. Here’s where the business models come into play. Equinix has historically focused on leasing cages and cabinets, often at premium pricing due to the excellent connectivity of its data centers. The Dallas Infomart is also predominantly a retail colocation and interconnection facility.

Infomart’s facilities in San Jose, Portland and Northern Virginia operate under a wholesale model, where tenants lease entire turn-key data halls. Although Equinix is pursuing strategic wholesale deals with hyperscale clients, the Infomart wholesale properties didn’t fit the bill.

“We would have taken a look at the total asset,” said Peter Van Camp, Interim CEO at Equinix. “But frankly, the most strategic part and interesting piece of it all was the Infomart in Dallas, and so we didn’t push as hard for the remaining assets. There was nothing unique or different from a strategic level in those other assets, whereas now that we have Infomart Dallas, the interconnection and network routes to everything to the southern half of the Americas kind of flow to Equinix. And so the Infomart Dallas became the real interesting objective.”

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The Equinix Infomart: What It Means for the Data Center Industry
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