Some data center REITs offer the potential for above-average growth and reduced risk in the long term from a portfolio perspective relative to real estate due to less exposure to employment or GDP rates, says Dave Rodgers, CFA, a Director at RBC Capital Markets.
“There is a differentiating factor to some of these specialty REITs, including data centers, that really give them a unique aspect to investing,” he said. “You put it in your portfolio, that offers a differentiation and diversification, which should reduce risk over time. So we do like that, and again, it does offer above-average growth.”
Rodgers favors CoreSite Realty Corporation (COR), a small company with solid execution in its first year as a public company in 2011. He says COR remains active in the higher-growth aspects of data centers, which are the network and interconnection businesses, and he expects growth in those areas, where the company is having meaningful success and has been able to drive dividends.
“COR remains what I would call a little bit of a middle-of-the-road player dabbling in the wholesale, or power side, of the business, but aggressively pursuing the network side with fundamental characteristics suggesting a small company with the ability to grow,” Rodgers said.
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