DataBank rode AI wave to billions in funding, but has no IPO plans
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DataBank launched 20 years ago to build and operate data centers, when artificial intelligence was still widely regarded as science fiction. It's now riding the AI wave to more than 65 facilities and billions of dollars in private equity investment.
- But it has no plans to go public. Maybe ever.
CEO Raul Martynek cited three main reasons, two specific to data centers and one about the broader private markets:
1. DataBank and many of its peers regularly use the asset-backed securitization market, which lets them package their properties and customer contracts into bonds that can then be sold to insurers for low costs of capital.
- But those deals come with higher leverage levels than what Martynek believes most public-market REIT investors would accept.
2. Data centers throw off lots of cash, as desired by REIT yield-focused investors, but free cashflow can be a challenge for operators that are continuing to build.
- Were DataBank to go public, it may feel the need to pull back on its growth plans. Short-term gain for long-term loss.
3. Then are are the private secondary markets, which DataBank has tapped repeatedly. For example, the entire $2.2 billion invested in 2022 was a secondary.
- If investors or employees need liquidity, there are alternatives to IPO.
Further complicating matters are labor bottlenecks, which could become a drag on quarterly earnings calls. Big operators like DataBank have relationships with large general contractors, but there are only so many electricians and mechanical engineers to go around, particularly in certain markets.
- And then there are Trump's tariffs, which could raise prices and muck up supply chains for construction materials like steel and components like transformers.
"Ultimately I do think someone is going to go public, but I think it will be a bad decision," Martynek says.
