CONE
#I think over the last several years, you're just seen the average length of all the deals that we've been doing increase.
I think the average length of the deal last year, was it nine years.
Seven years last year, nine years in the fourth quarter.
I just think that as people become more comfortable with that outsourced model, they are going to do more of it.
Actually, our energy bookings this quarter were consistent with the same amount of bookings that we've done per quarter over the last year.
The churn that we had in the quarter was related to a couple weird things.
One is we had some customers move out of ---+ and this is like what we saw last year.
We had customers move out of one facility, get out of a contract there, enter into a new contract into our facilities.
And the facilities that they were getting out of was lease contracts that where we're a sub-tenant of.
So we'll be getting out of those.
We'll get some bottom-line savings that go away once we get out of those leases as well.
Another customer actually gave us space back that's going to allow us to repurpose that.
This is a customer that's been in a facility actually in Cincinnati.
They've been in space that is about 30 years old.
We are going to basically be able to take back a space from them and with a fairly incremental amount of additional capital be able to repurpose that and earn three times as much as we were charging previously.
That also gets counted as a churn metric.
But even in the case of that particular customer, they ended up moving into a smaller space with us at the bigger power densities and entered into a 10-year lease agreement with us.
Here is the ---+ there is about 7 billion devices connected to the internet then and that number is going to get to 25 billion devices in just the next couple of years, so each time each device gets connected to the internet, the more data gets created; and all of that data is stored in the garages that we build.
We expect that ---+ the pace of growth in that is going to continue to increase and go up into the right and there's going to be more stuff going on in the future than we can never even imagine the opportunities in front of us, relative to where the digital age has gone over the last two decades.
It's going to be dwarfed by all of the new technologies that we don't even know are going to get created.
Our play in that is all ultimately just creating these digital garages that store all of this stuff.
The business is becoming more and more scale so from a competitive perspective, it's becoming the haves and the have-nots.
And I think what you saw last year in all the M&A that went on in the industry, which was the highest amount of M&A ever, all those deals traded to strategics.
And you just become larger and larger black holes and that type of nexus just becomes much more difficult to compete against.
And I don't see that going in an opposite direction at all.
I continue to see, just like every other industry, as industry matures, there's less competitors and you'll [cull a lash] around a couple of key players over time.
I think just given the underlying growth in this industry, there is still many years left before that happens but you kind of saw that with the wireless industry about a decade and a half ago, where consolidation really started happening and now we're left with a couple big players.
This space will eventually more to follow that similar type of consolidation.
One we know is going to renew with us.
That will be renewed.
The other one we are expecting that they are going to churn.
And that is the reason why we have assumed elevated churn levels in our forecast.
Thanks, <UNK>.
So yes, with respect to AFFO, I don't think we see anything particularly different going on there.
All of our leases, including the CME, need to be treated with the straightlining of rent but I don't think that, that's going to drive anything unusual in any future quarters.
With regard to filing the S3, we were just coming up on the limits of our prior registration and so it was time to refresh with the new shelf, and that's just a universal shelf that will last for years.
What we think in terms of capital is, I think really consistent with what we said at our investor day, which is that we could do $300 million of development using our retained FFO and debt and remain relatively leverage neutral because of the high returns that we earn on that capital.
To the extent we start exceeding that $300 million, then there's probably additional capital needed around that excess.
And then if we are involved in any kind of acquisitions, we would also look to finance those with some kind of combination of debt and equity in order to maintain a strong balance sheet.
For us, that's really a critical feature of our game plan.
<UNK> just talked about kind of this, as far as the eye can see growth, in the business and in demand for data and driving the need for data centers.
And so having a strong balance sheet is the way to compete for the long term for that business.
So within those parameters that I just described, we would raise additional capital if we start to exceed the growth that we have currently baked in.
So your point makes a lot of sense that longer-term leases if you have large rent escalators built in could result in a larger gap there for some kind of unique reasons around the structure of that lease, I don't think we're going to see a large gap developing there.
But as we lengthen the term of the leases, that might turn out to be the case that there is a little bit more of a gap between cash and GAAP rents going forward.
Thanks, Matt.
It's a good question.
So we remain in kind of almost continuous communication with the rating agencies.
That's kind of just how the process works, and in my background I've worked with a company that was investment grade rated, and so have familiarity with some of the folks at those shops and kind of know how they like to work.
We're kind of always in front of them telling them how strong our balance sheet is today, but also how we kind of intend to manage that as we move forward.
They, kind of then, will go through their our own process on that front in terms of determining what they think appropriate ratings are, in light of the credit metrics of the company, as well as their view of the industry.
My main issue, I would say there, is that I think they are going through a kind of learning process around the industry.
It's a kind of hybrid for them between tech and real estate and they don't necessarily know how best to analyze it relative to those other comps.
As they think about the tech component of it, they look at leverage one way and if they think about the real estate component, they look at it another way.
And even within the firms, they kind of have discussions but I'm not sure that they fully have been able to come up the curve yet, just because it's a relatively new thing for them.
But I think over time, they will come to appreciate what the points we're trying to make here on this call, and that we really believe, which is that there is consistency in the cash flow, that the escalators provide growth in that, and that the overall industry continues to grow.
And as we've positioned our portfolio, we've diversified in every which way you could diversify and all of that is deserving of better ratings than we currently have.
We're actually very close to completing on a couple of those but they were not commissioned during the quarter.
Those got pushed out just for that.
But it wasn't really a resource thing at all.
The other thing I would mention here, is that as we complete some of those facilities, we will ---+ it may take a period of time then to sell into those spaces so the stabilized portion of that will kind of get delivered as the leases materialize and then the construction in progress piece will kind of remain there until those portions are leased up.
No.
Actually, we had our strongest bookings, I think, from that business was this quarter so that should continue to go.
The challenge though is that you are doing these bigger deals and the proportion of the IX relative to the bigger deals is smaller.
Even though the growth in that continues to go up, it's we're doing a lot of other deals that aren't bringing as much ---+ proportionally as much IX revenue too, so Josh has got to work harder.
We're going to putting out more pieces on that.
Our customers have been very resistant to explaining exactly what types of products and services we can announce there until they're ready to do that.
We've just got an agreement with them that we can announce that we have them as partners as part of this.
And as we roll those out, we will have press releases that explain exactly what each company is wanting and is planning to offer there.
Thanks, everyone.
Appreciate you taking the time to talk with us this morning.
We really enjoy you learning more about our business.
And just to kind of reiterate what I said earlier, everyone in the industry is doing phenomenally well, and I think over time, we are going to continue to see this asset class continue to provide superior investor performance relative to some of the other asset classes that real estate investors have to choose from.
So thanks a lot.
See you next quarter.
