Diane Morefield has spent virtually her entire career in commercial real estate, with the last 20 years working directly for REITs. On her watch as CFO of CyrusOne Inc. (NASDAQ: CONE), the data center REIT has raised more than $5.5 billion in capital and has begun to transition from a U.S.-focused company into a global player.
What are the primary demand drivers for CyrusOne?
Our top cloud customers have indicated that they each need at least a gigawatt of data center requirements over the next few years on a global basis. Forty percent of our revenue is from the IT cloud companies, and we see that growing to 60 to 70 percent over the next couple of years.
The enterprise companies remain equally a focus for us, and in the fourth quarter they generated 77 percent of our leasing activity. Enterprise customers are focused on hybrid solutions. While most companies are moving some of their applications and IT support to the cloud, they also have internal IT platforms that they intend to retain. Overall, we think we are extremely well-placed for all the demand drivers in the data center industry.
How are the competing forces of top-line growth and leverage discipline playing out at CyrusOne?
The upfront capital intensiveness of this business to produce long-term, attractive development yields and recurring cash flow returns is where the competing forces come into play. We are currently developing approximately $1 billion in new data centers across the U.S. and Europe.
We have to fund the development capital upfront, with earnings flowing to the bottom line within the next 12 to 18 months.
Our revenue and EBITDA growth this year will create significant capacity to fund our future capex requirements starting next year, but we need to build the data centers in these new markets this year to position ourselves for the current wave of demand. We think this is a transition year for us to have significant capacity for the future.
You mentioned new markets—where are they?
London, Frankfurt, Amsterdam, Dublin, and Santa Clara, California, which is a new U.S. market for us. Now we have exposure to really all the key global markets, including our investments in China and Latin America. 2019 represents a significant and strategic expansion year.
Since going public, CyrusOne has consistently punched above its weight in terms of its market share of leasing throughout the U.S. By building in these European markets, we are positioning ourselves to get more than our market share in those geographies in the same way we have achieved that in the U.S.
As co-chair of Nareit’s Dividends Through Diversity & Inclusion Initiative (DDI), what progress are you seeing across the industry?
The good news is that more companies in the industry, including CyrusOne, are creating their own initiatives. Women and diverse groups need to own their own careers and be proactive in seeking stretch assignments or promotions, but it’s very important for companies to have conscious and targeted approaches to hiring and promoting.
There’s also been a meaningful initiative to add women to public company boards. These more conscious efforts to add diversity to boards will trickle down into how companies are managed. I do think the movement there has been a very positive trend.