Equinix further expansion in Chicago

Today, Equinix (EQIX) announced its intention to further expand at 350 E. Cermak in Chicago, with a new offering (IBX shared suite) specifically targeted at the Financial Trading Companies in need for space in close proximity to its existing Financial eXchange (downtown CH1 and CH2 data centers).

The space has been leased from Digital Realty Trust (DLR):

>>Equinix Signs New Turn-Key Datacenter(SM) Lease Agreement With Digital Realty Trust

SAN FRANCISCO, July 15 /PRNewswire-FirstCall/ -- Digital Realty Trust, Inc. (NYSE: DLR - News), the world's largest wholesale datacenter provider, has completed a new Turn-Key Datacenter(SM) lease agreement with Equinix (Nasdaq: EQIX - News), a provider of global data center services. Through this agreement, Equinix will expand its presence in Digital Realty Trust's 350 E. Cermak property.

"The Downtown Chicago market is one of our fastest growing markets in the U.S., driven by financial trading companies seeking low-latency proximity trading solutions," said Pete Ferris, Equinix's President, United States. "This agreement helps us quickly meet the growing demand from our customers in Chicago."

The lease has a fixed term of 12 years, with renewal options. Equinix will invest about $ 10 million to "Equinize" the space to its quality standards.

Most probably, this is part of the property that Qwest terminated recently - the following comments are taken from the 4Q 2008 Digital Trust conference call (Seeking Alpha transcripts):

• These items consist primarily of the remaining $4 million from the net termination fee of $11.9 million from Qwest at our 350 East Cermak property

• Bill Stein (CFO)
  
• Yes, that’s what Qwest was, the termination fee.
• Jordan Sadler – KeyBanc Capital Markets
• Right. Any prospects on backfilling that space?
• Michael Foust (CEO)
• Yes, I mean we’ve signed one pod customer and we’ve got prospects that we are negotiating with for virtually all the space.
• Jordan Sadler – KeyBanc Capital Markets
• So, leased by year-end safely?
• Michael Foust
• Yes.
• Jordan Sadler – KeyBanc Capital Markets
• Okay.
• Bill Stein
• Signed.
• Michael Foust
• Yes, we expect to have signed leases for the floor by the end of the year.

Within the same P/R, Equinix also announced the opening of the expansion of its existing CH2 data center, ahead of schedule, so adding another 200 cabinets in downtown Chicago:

>>The company also opened the previously announced expansion of its Chicago 2 (CH2) International Business Exchange™ (IBX®) data center.

With this additional capacity, Equinix is leasing about 27% of the space available in the Lakeside Technology Center.

Let's have a look at the characteristics of this new offering for the Company:

>>The IBX Shared Suite offering will provide additional customer colocation space in close proximity to the ecosystem of companies participating in Equinix’s metro area IBX centers. These smaller centers will feature Equinix’s standard product offering for cabinets, power, cross connects, and SmartHands service. IBX Shared Suites will be configured as shared space versus the independent cages that Equinix offers in its traditional IBX centers.

Current Equinix Financial eXchange participants in Chicago include the Chicago Mercantile Exchange (CME), IntercontinentalExchange (ICE), Deutsche Borse, NYSE SFTI and Trading Technologies.

With 37 percent year-over-year revenue growth, Chicago is one of Equinix’s fastest growing markets

Given the relatively small space leased (19.400 sq.ft.), the number of cabinet equivalents achievable (600) is extremely high (as comparison, CH2 will reach about 1,350 cabinets, with the recent addition just opened, within a 120,000 sq.ft. data center).

This is the second expansion announced by the Company after issuing $373.75 million of convertible subordinated notes due 2016. The first one was in Zurich:

>>Equinix to Build the Company's Fourth Data Center in Zurich to Accommodate Customer Growth Requirements