Today Equinix (NASDAQ:EQIX, news, filings) announced that its board has approved a plan to convert the company into a real estate investment trust, or REIT. They have been flirting with the idea for years now, as the REIT structure has tax advantages. But I don't think it will surprise anyone that they decided to pull the trigger and join Digital Realty Trust, Dupont Fabros, and CoreSite amongst others. Yet it will be a bit different for Equinix, as the raw real estate development side of things is not quite as big a part for them as for the others, and it should be interesting to watch how it all plays out.
The process will take quite some time to run its course though, culminating in REIT status for the taxable year beginning in January of 2015 - two and a half years away yet. Before then they will seek a private letter ruling from the IRS this year that will help clarify various tax issues, and shareholders will have to weigh in as well. In the meantime, it will be business as usual except for the lawyers.
Somewhere along the line, they'll be paying out a bundle of undistributed accumulated earnings and profits of $700-1100M, and then will begin declaring regular distributions to shareholders. There will also be costs aof $50-80M along the way to support the conversion and $5-10M in annual compliance costs. In other words, the analyst community is going to have to work a bit harder to earn its supper keeping track of all this stuff. Me too I guess, seeing as I've never really tried to make sense of REIT earnings reports thus far.
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