CyrusOne CEO Bruce Duncan brings decades of experience to a REIT with global ambitions.
When CyrusOne Inc. (Nasdaq: CONE) selected Bruce Duncan as president and CEO last summer, the data center industry outsider brought with him an extensive commercial real estate record—spanning more than four decades and multiple sectors—that the REIT considered key for its continued growth and international expansion.
During his career, Duncan has served as CEO and director of multiple public companies including: Cadillac Fairview Corp.; Equity Residential (NYSE: EQR); Starwood Hotels & Resorts Worldwide, Inc.; and First Industrial Realty Trust, Inc. (NYSE: FR).
CyrusOne, however, marks a new chapter for Duncan. The Dallas-based REIT, which began trading on the Nasdaq Exchange in 2013, has a market capitalization topping $8 billion. The company builds and operates data center facilities across the United States, Europe, and Asia, and counts among its customers 200 of the Fortune 1000 companies and nearly half of the Fortune 20. Enterprise and hyperscale customers each account for approximately half of the business, with a tenant roster spread across sectors including information technology, financial services, health care, and consumer staples.
Duncan spoke with REIT magazine on a range of issues including his background, the challenges and opportunities facing CyrusOne today, and the importance of mentorship.
How has the variety of your background equipped you to lead CyrusOne?
I have been very fortunate to have had the opportunity to be CEO of five publicly traded companies—all in different product types—as well as director of some others, which has given me a broad perspective.
My background in real estate investment, development, and management, both domestically and internationally, fits well with CyrusOne’s organic growth plan to create value through our strong development platform in the U.S. and Europe. I have also been privileged to have worked with some incredibly smart, capable, dedicated, and truly wonderful teammates throughout my career and have learned a lot from them and those experiences.
Is there a company on your resume that you think best prepared you for your current role?
I think that they all were additive to my development as a leader, manager, and investor. However, I would add that my experience as CEO of First Industrial Realty Trust has locational similarities to, and customer overlap, with CyrusOne and the data center industry more broadly.
What has surprised you about leading this company?
I wouldn’t necessarily say it’s a surprise, but you don’t know about the quality of the people you have until you meet with them. Over the last few months, I have toured our facilities throughout the U.S. and Europe and spent a lot of time getting to know our people, and we have an outstanding team.
Our people are smart, work hard, want to win, and are very focused on taking care of our customers. When you have great assets and a great team, you are in a strong position to create value for your shareholders.
What is a key change that’s occured in commercial real estate during your career?
Like many industries, technology has digitally disrupted the commercial real estate sector. Front and center is the impact e-commerce has had on traditional brick and mortar retail. Technology certainly hurt the regional mall business since retailers can get to their customers much more efficiently over the internet.
While high end retailers will still want and need stores in high quality malls to showcase their products, they will focus their efforts on the top 15%-20% of centers around the world. On the other hand, the e-commerce boom has been very beneficial to the industrial warehouse sector.
Technology has also had a major impact on the hospitality business. Technology now allows customers to have instant access to pricing, options, and information. Would anyone have predicted 10 years ago that an upstart with virtually no physical locations, Airbnb, would have a higher market cap than both Marriott and Hilton combined?
Technology is not going away, and business leaders need to make the necessary strategic investments to pivot their organizations for the new reality of our interconnected economy.
Who gets the most credit for shaping you as a leader?
That would be my parents. They taught me the value of hard work and being straightforward as well as the importance of treating people with respect and dignity.
Pandemic aside, what is the biggest challenge CyrusOne faces today?
Ensuring that we’re positioned to meet the needs of our customers in the markets in which they need capacity. Our hyperscale customers continue to grow very quickly and are increasing their deployment sizes, so we’re focused on being able to accommodate their requirements, particularly as they expand throughout Europe.
Our hyperscale clients also have a difficult time with capacity planning because it’s very difficult for them to forecast demand. It’s a major challenge and opportunity for providers to be positioned with capacity in the right markets and quantities to meet their timing requirements.
Has the pandemic reshaped your company?
I don’t know that the pandemic has significantly reshaped our company, but it has highlighted the critical role that data centers play in supporting the global economy, enabling collaboration technologies, work from home solutions, remote learning, and facilitating an acceleration in e-commerce.
As we consider what the world will look like in the future, it’s clear that there will be an increased reliance on technology, which will create additional demand for space and power in data centers.
Where do you see this company in five to 10 years?
Given the secular demand drivers in this industry and the resulting opportunities for growth, I expect us to be a much bigger company. We will also have a much larger international footprint, particularly given the growth in Europe. Our international business currently accounts for less than 10% of our revenue, and I anticipate that percentage will be significantly higher in the next five to 10 years.
Where do you see the most room for growth?
We see tremendous growth potential in Europe and have worked hard to position the company to be successful in those markets. We also continue to see significant growth from our hyperscale customers, and while they currently account for approximately half of our revenue, I anticipate that percentage will continue to increase meaningfully over time.
What makes CyrusOne unique in its sector?
Our core competency is in developing data centers, and we have the ability to deliver large amounts of capacity quickly in the key markets that our customers want to be in, with flexible solutions to meet their specific needs.
Our track record of building and delivering scale in accelerated time frames has been a key reason for our success with hyperscale companies. We also have a deep and experienced sales team, and the vast majority of our leases are sourced through this channel rather than through brokers. We had established relationships with many of our enterprise customers years before they signed their first lease with us.
CyrusOne released its inaugural sustainability report on your watch. What is the company’s commitment to ESG worldwide?
We have undertaken many initiatives in recent years in support of sustainability objectives, including operating on 100% renewable energy in London and Amsterdam and creating a net-positive water solution in Phoenix.
ESG is not only a company-wide priority but it is also very important for all of our stakeholders, including our customers, our investors, and our vendors, and it was important to us to formalize this commitment.
Our initial sustainability report highlights our progress toward sustainability goals, anchored by our Zero Carbon by 2040 pledge, as well as our commitment to a diverse and inclusive workplace, and the alignment of internal incentives with the goals and objectives of our stakeholders.
How are REITs positioned to adapt and thrive in the years ahead?
REITs are well-positioned to continue to thrive due to the industry’s outstanding job over the last 30 years. Back then, no one knew what a REIT was, and we didn’t have a track record. Today, we have a long track record of providing our investors with very good risk-adjusted returns compared to investments in other industries or asset classes. Our job collectively is to continue to do an excellent job for our investors and continually work to enhance our corporate governance.
What are some of the ingredients of a winning management team?
In my experience, winning teams have an owner’s mentality, a shared vision and mission, and a “whatever it takes” attitude to take care of their customers, their shareholders, and their people. They lock arms, work hard together, have fun together, and focus on achieving the goal.
Have have you seen the mood shift with regard to the importance of diversity within the real estate sector?
Commercial real estate has been behind on this issue compared to other sectors, and while progress has been made, there is much work we all must do. Diversity and inclusion are a bedrock principle of our company culture. Every day, we all strive to respect each other and the value that each of us brings in our different opinions and views.
What advice would you give to a college student who wants to run a REIT someday?
I would encourage them to try to get the broadest experience they can with a number of different product types. This will help them figure out where their interests lie and what they are good at.
If possible, get involved with a leading company that has smart people and is a good training ground. And, find a mentor—someone who has been successful and has good judgment and can be a sounding board as you go through life. It is very helpful to have someone who has been there and done that, to talk through life and business issues as they come up—and they will.
When it comes to fun, what are you good at?
I am truly the world’s worst golfer, but I have fun playing it if I am with my friends as we have constant banter. My lip wedge is my best club. I enjoy competition of any sorts as I love the camaraderie it brings. I am a great believer that we only have one life and we need to live it to the fullest, and have fun and enjoy each and every day.