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What Should CyrusOne and CoreSite Shareholders Do Now?

By Matthew Frankel, CFP® and Matthew DiLallo – Dec 8, 2021 at 2:22AM

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Now that these data center REITs have agreed to be acquired, what should their investors do with their shares?

Data center REITs CyrusOne (CONE) and CoreSite (COR) have agreed to be bought out, and this cuts the number of publicly traded data center REITs in half. In this Fool Live video clip, recorded on Nov. 16, contributors Matt Frankel and Matt DiLallo, along with editor Deidre Woollard, discuss what shareholders of these two companies might want to do next.

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Deidre Woollard: So, one more question. What happens if you're a CyrusOne shareholder and they're going private? What does that mean over time? Do you guys think that deal is actually going to go through or does that one requires shareholder approval?

Matt DiLallo: I believe they both require shareholder approval. If they do both go through, they're going to end up with cash. In the case of like CoreSite Realty, I want to bring this up because, believe it or not, that's been the best-performing REIT over the past decade. It's like 1,100% over the past 10 years, 30-something percent annualized. Those shareholders, they're losing their gravy train there. Because it has been just a fantastic REIT. I was actually surprised it didn't go for a higher price, a very small premium. A lot of that was built in because of all the rumors and stuff like that.

But I would've thought if I was one of their shareholders, I would want equity because American Tower (AMT -3.24%) is a great company and they're going to create a lot of value through those deals. I'm surprised they didn't ask for equity in this deal. Then say with CyrusOne, that's going to be a cash deal unless Brookfield is able to convince them just knowing how Brookfield (BN -0.13%) operates, they probably offered shares of Brookfield Infrastructure Partners (BIP 1.10%) as part of their bet and it was probably turned down because they want to a certainty of cash. But again there's so much growth in the data and sector that I would want equity. Both of you are selling for cash. Maybe that's smart. Maybe they feel this is a topped-out market. But I think this is a decade's long trend. I would want to own these.

Matt Frankel: I wouldn't be surprised if a lot of their shareholders roll their money into Digital Realty (DLR -0.39%) and Equinix (EQIX 0.87%) when the deals are done. Just because they're the only two names left in if you want a pure-play on data centers. A lot of their shareholders might not want to be an American Tower. It's more of a slow-growth, a slow and steady than just like an explosive growth market right now. I could see Digital Realty and Equinix being a net beneficiary of it.

Deidre Woollard owns shares of American Tower. Matthew DiLallo owns shares of American Tower, Brookfield Asset Management, Brookfield Infrastructure Partners, CyrusOne, Digital Realty Trust, and Equinix. Matthew Frankel, CFP® owns shares of Digital Realty Trust. The Motley Fool owns shares of and recommends American Tower, Brookfield Asset Management, CyrusOne, Digital Realty Trust, and Equinix. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV, Brookfield Infra Partners LP Units, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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