Month: August 2021

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QTS Realty Trust Stockholders Approve Acquisition by Blackstone Funds

QTS Realty Trust (NYSE: QTS) (“QTS” or “the Company”) today announced that, at a Special Meeting of Stockholders held earlier today, QTS stockholders voted to approve the acquisition of QTS by affiliates of Blackstone Infrastructure Partners, Blackstone Real Estate Income Trust, Inc. and Blackstone Property Partners.

“I thank our stockholders for their strong support of the transformative transaction with Blackstone, which will provide compelling, immediate and certain value to stockholders and position QTS to better serve customers’ expanding data center infrastructure needs,” said Chad Williams, Chairman and CEO of QTS. “With this significant milestone now behind us, we look forward to completing the transaction with Blackstone.”

Under the terms of the merger agreement announced on June 7, 2021, QTS common stockholders will receive $78.00 in cash for each share of QTS common stock they own. Subject to the satisfaction or waiver of all of the conditions to the closing of the transaction in the merger agreement, the transaction is expected to be completed on August 31, 2021. Upon closing of the transaction, QTS’ common stock, Series A preferred stock and Series B preferred stock will no longer be listed on any public market.

The final voting results will be reported in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission after certification by QTS’ inspector of elections.

About QTS
QTS Realty Trust, Inc. (NYSE: QTS) is a leading provider of data center solutions across a diverse footprint spanning more than 7 million square feet of owned mega scale data center space within North America and Europe. Through its software-defined technology platform, QTS is able to deliver secure, compliant infrastructure solutions, robust connectivity and premium customer service to leading hyperscale technology companies, enterprises, and government entities. Visit QTS at, call toll-free 877.QTS.DATA or follow on Twitter @DataCenters_QTS.

About Blackstone
Blackstone is the world’s largest alternative asset manager. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, and the communities in which we work. We do this by using extraordinary people and flexible capital to help companies solve problems. Our $684 billion in assets under management include investment vehicles focused on private equity, real estate, public debt and equity, life sciences, growth equity, opportunistic, non-investment grade credit, real assets and secondary funds, all on a global basis. Further information is available at Follow Blackstone on Twitter @Blackstone.

Source: PR Newswire

The “Ferrari of Fiber” is Finally Coming out of the Garage

Last week, Lumen made an announcement which likely went unnoticed by many but offers hints as to the company’s purest ambitions.  On August 19th, they introduced Lumen Edge Private Cloud.  The new service includes compute, storage, network and security. It builds on the bare metal Edge Compute platform Lumen launched last year, VMware Cloud Foundation and software-defined data center technology. 

The service is expected to meet 95 percent of US enterprise demand within five milliseconds of latency. Lumen has 44 edge nodes deployed in the U.S.  The service is  also available to 2,200 third party data centers   via VMware Cloud on AWS. In a press call with reporters, CEO Jeff Storey noted this was a “unique opportunity to grow our enterprise business by leveraging our expansive fiber network … utilizing our edge computing network to move critical workloads closer to the source of data.”

In an interview with Fierce Telecom Chris McReynolds, Lumen’s VP of cloud edge product management said this is just the “first layer” of Lumen’s drive to stack up the edge infrastructure and discussed plans to launch a multi-tenant virtual machine and an edge orchestrator in early 2022. 

Why is this important?  Well, it represents a canary in the coal mine of things to come.   Don’t be surprised to see Lumen’s future press releases and talking points to very much center around the edge and their role in enabling it.  These talking points get easier to draft now that it is beyond the announcement it will sell 20 of its states to Apollo Global Management.  While that deal will take one year to close, the messaging as to what Lumen is going to be when it ‘grows up’ is much easier to craft now. 

Why is this important?  Well, it represents a canary in the coal mine of things to come.   Don’t be surprised to see Lumen’s future press releases and talking points to very much center around the edge and their role in enabling it.  These talking points get easier to draft now that it is beyond the announcement it will sell 20 of its states to Apollo Global Management.  While that deal will take one year to close, the messaging as to what Lumen is going to be when it ‘grows up’ is much easier to craft now.

The irony is not lost on me that if Level3 were still standing as a solo company, the press releases that we would have seen from them likely would have been a whole lot like the one we saw just last week.   Simply put, Lumen is boomeranging back to its old Level3 days at the perfect time.  In past reports I used to call Level3 the “Ferrari of Fiber.”  By detaching themselves from a good amount of their copper assets, that engine is poised to rev again!

Importantly, this fiber will be the basis for their enterprise and edge push.  A simple word search of the word “enterprise” in LUMN’s Q2’21 earnings call came up 28 times vs. only nine times for the word “consumer.”  Although Lumen likely will push hard on FTTH initiatives in the remaining states it owns post Apollo (management noted 15MM of the 21MM remaining homes it will keep in its region are investable), the lens in which these consumer projects are viewed will likely have some enterprise “pixie dust” to them.

At the Cowen conference, Maxine Moreau, Lumen’s President of Mass Markets, acknowledged as such when he said: “about 70 percent (of consumer homes) would be considered urban and suburban, which makes it the most attractive areas for investment because of the densification as well as the overlap with our enterprise business. We have a lot of network within Lumen and we can leverage that network as we expand our fiber.”  While it makes total sense, it is a subtle change of tone that should not go unnoticed.  The enterprise hand may be directing the consumer segment….under the “old” CenturyLink model it was quite the opposite.
Although many may think Apollo got the Lumen divested assets at an extremely low multiple given that FTTH is all the rage, there is an intangible benefit to Lumen that will pay (proverbial!) dividends overtime.  It gives Lumen nimbleness, removes the copper refrigerator from its back and (most importantly) allows it to be front-footed in its fiber lean in.  These are things it has wanted for a LOONNNGGG time – perhaps maybe even since November 1, 2017 – the day the Level3 merger closed! 

Welcome to Space 3.0 Digital Infrastructure

August 2, 2021

As a life long sci-fi fan, I have to admit that the news that Branson and Bezos have in the last few weeks properly kickstarted the space tourism model left me a tad cold. I freely admit that I am terrified of heights and fast moving things so I’m probably not the target market but my skepticism was more nuanced than that. Sure, space tourism is exciting but I think it is a side show to a much bigger story, namely the brand new space-based digital infrastructure model that is taking shape above us.

To understand the real revolution underway lets first rewind. Space 1.0 was largely state run, funded by militaries and bureaucrats and comprised huge, bulky satellites. Space 2.0 took off in the last decade and spawned a fleet of listed satellite owners of communications platforms in search of specialist niche markets. As David Williams, co-founder of Avanti Communications Group plc, the United Kingdom’s first start-up satellite operator and now boss of satellite focused quantum cryptography form Arqit freely admits, this model had its flaws which became increasingly obvious to stock market investors by the middle part of the last decade. These Space 2.0 stalwarts were, he admits, “cost plus” platforms, forced to focus on broad products such as maritime comms to generate enough cashflow to pay the bills. We all know how unsuccessful that model was compared to functionally specific satellite-based platforms such as Sky in Europe and Dish in the US. These operators made their money out of using the satellites for a much bigger content first product. For Sky, a satellite firm, space-based costs were probably just a couple of per cent of total costs.

Space 3.0 is radically different again. The cost of sending a kilo via a launch outfit such as SpaceX is now one hundredth of the cost in the 1980s and there are now over 150 other rocket launch companies competing for business launching thousands of low earth orbit satellites for every purpose imaginable.

Media and investment commentators such as yours truly tend to focus on one itsy bitsy aspect – rural broadband in the developed world. Here in the UK, Space X has just launched its open beta for the Starlink product and from many subscribers I have talked to, the feedback is positive so far. Latency is massively reduced; speeds are as promised and at the moment there’s no big challenges around data usage (though I’ll bet that will change very very soon). Another operator OneWeb, rescued in part by Her Majesty’s UK government, also looks to be making solid progress and has just announced what I think could be a very fruitful partnership with incumbent telco BT to operate village level satellite hubs that can redistribute the signal to nearby rural houses.

But even this focus on rural broadband – obviously, a crowd pleaser for rural politicians seeking infrastructure spends – is I think missing the bigger picture. The real story is that the multitude of these low earth orbit constellations are pioneering a new product set – satellite data products. Rural broadband is one part of a broader mix of products that ranges from autonomous cars to land mapping.

One way of gauging this new digital infrastructure market is through the lens of recently stock market listed UK space fund Seraphim, which raised £180m to invest in this space using a venture capital approach. They also helpfully run a Space VC investment index. Cynics will snort that this an early stage side show with its obviously high valuations but I’d suggest that the headline numbers for Q1 2021 below tell you something is happening out there.

  • $8.7bn invested in last 12 months
  • $2.7bn invested in Q1 ($2.6bn in Q4 20)
  • 68 deals closed in Q1 (highest since Q1 18)
  • $850m biggest deal closed in Q1 (SpaceX)
  • $46m average deal size in Q1 21 (vs. $50m Q4 20)
  • 11 space-related SPAC mergers announced
  • $7.2bn funding committed to these SPAC mergers.

A better way of understanding the Space 3.0 model is to focus on investment stories, or more specifically some of the businesses in that Seraphim portfolio. Perhaps the most traditional example is a firm called AST Group which has just reversed into a SPAC with the ticker ASTS. The best way of describing this business model is that they provide cell towers in space.  

A more radical product comes in the shape of Iceye which provides 25cm resolution day or night of every metre of the earth every hour. That presumably requires a huge amount of data that needs to be processed back on earth in huge data centres? Or perhaps not.

Circling the earth are another constellation of satellites from a firm called D Orbit which is currently trialling something called Nebula, an on-demand, on-orbit cloud computing and data storage service. According to a recent press release this new product “features an intelligent automation SpaceCloud iX5-100 radiation tolerant computing module by specialist Unibap, will demonstrate a range of innovative applications for advanced geospatial Earth Observation (EO) and Space Surveillance and Tracking (SST) applications using sophisticated, Artificial Intelligence/Machine Learning (AI/ML) algorithms for extremely low-latency decision support”.

In layman’s terms, this a data centre in space. Sci-fi nerd heaven. All we need now are space elevators!

Stepping back from the company-by-company details, a new model emerges for space-based infrastructure: it’s just a tool by which new products can be slotted into a digital framework. So just as investors have pumped money into everything from cloud-based firms, or Google and its search technology through to enterprise as software business models, we have low earth, lower cost space based constellations as adjuncts to new products. With all the same bonkers valuations.

That said, despite those pie in the sky (!) valuations, I’d maintain there are some very earth bound investment implications for infrastructure investors.

The first, as evidenced by Seraphim’s successful fund raise and their wider index data, is that space is moving out of the shadows of early stage VC and becoming a mainstream sub asset class. Even fairly ‘traditional’ infrastructure investors such as Cordiant admit that they’ve been looking in detail at these Space 3.0 propositions. And that’s all because these are fast turning from ideas into market ready products.

I’d also counsel caution for the space based rural connectivity argument. In countries such as the UK our incumbent telcos have certainly been slow off the market, but I think fibre will end up becoming the default solution for between 90 and 95 percent of the homes in the developed world, eventually. It might take five years to get there but I find the up front expense of solutions such as Starlink and the high monthly running costs unattractive.  I also think they’ll run into capacity issues as that final one to five percent of difficult to reach homes swarm on to the space based networks.

In the developing world, by contrast, I think space base broadband solutions are viable and exciting but I’d wager that upstart space telcos will face intense competition from the Big Tech giants. I can absolutely imagine services from Facebook or Netflix delivered directly by satellite – cutting out the telco – for a monthly fee by Bigtech.

But all of these markets are a side show to what I think is the real big deal. Autonomous cars. I’d be a rich man for every telco and digital infrastructure payer who says the future of 5G is autonomous transport. I believe them until I think what happens when my self-driving car skips out of a 5G network zone. Do I trust the major mobile telcos to have 100 percent connected within a decade to 5G? Of course not and until that happens and I can be guaranteed seamless connectivity all the time, in all national geographies, I’ll avoid autonomous cars. The solution? Look to the heavens for seamless global connectivity with a small receiver built into the car. Is this imminent, not yet but IT IS the future.