Data Centers Equity Research. Outperform Data Centers. Data Centers December 19, 2014

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1 Data Centers 2015 Equity Research Data Centers December 19, 2014 Reliable Leasing Demand to Drive Occupancy, Cash Flow, Margins and Dividends in 2015 Outperform Data Centers Trading Data (EQIX): Last Price (12/18/2014) $ Week High (12/11/2014) $ Week Low (12/17/2013) $ Market Cap. $12.97(B) Shares Out. 57,750(M) 3 Month Avg. Daily Vol. 651,650 AFFO Estimates (EQIX): (Dec) Q1 Q2 Q3 Q4 FY FY-16E FY-15E FY-14E 3.03A 3.27A 3.58A FY-13A Valuation (Data Center Sector): Multiple Curr. FY Next FY Next PT P/AFFO EV/EBITDA PEG Source: Burke & Quick Partners LLC estimates SVP/Senior Analyst (561) See required disclosures at the end of report. The Internet while widely adopted still remains an evolving, growing sector that is gaining market share. Over 40% of the world s population has access to the Internet. It has surpassed 3 billion users. 1.1 billion websites exist today, up 68% year over year. Harnessing the power and reach of the Internet has become a competitive necessity for companies around the globe. Internet growth powers forward at a double-digit rate. Global digital advertising spending in 2014 could reach $138 billion, up 15%, representing 25% of total advertising spending according to emarketer. Worldwide ecommerce spending could increase 20% this year to $1.5 trillion. More access to content via higher speeds is fueling Internet demand. Internet company growth rates, international exposure, profit creation and valuations vary widely. Many of the largest, most visible leading Internet stocks have moderating growth rates, heavy non-us revenue, marginal profit and/or high valuations. Stocks like Amazon (AMZN), Alibaba (BABA), Facebook (FB), Google (GOOG), Netflix (NFLX), Priceline (PCLN) and Twitter (TWTR) may have high economic sensitivity, volatility and risk. Given that the Internet sector has become more established and we may be in the late stages of the stock market recovery, we believe investors may find appealing less risky, reasonably valued, but still solidly growing Internet related stocks, like data centers. Data center stocks provide exposure to demand generated by Internet growth trends with less volatility and risk. Outsourcing and leasing demand has accelerated, pricing looks stable and facilities investments are scalable allowing margin expansion as existing customers demand more storage space. The global data center market defined as colocation, hosting and cloud could total approximately $58 billion dollars in 2014 and is forecasted to increase at a double-digit annual growth rate. The Data Center stocks trade at 14x AFFO and 13x EBITDA. We believe that the valuation multiple can go higher as the data center sector delivers increasingly reliable growth and margin expansion in 2015 which fosters returning cash to shareholders. The Burke & Quick Partners data center stocks includes CyrusOne (CONE- Outperform), CoreSite Realty (COR-Outperform), DuPont Fabros Technology (DFT-Outperform), Digital Realty Trust (DLR-Market Perform), Equinix (EQIX-Outperform) and Internap (INAP-Outperform). Trading (800) / Member FINRA/SIPC

2 Investment Thesis Data centers stocks could outperform Internet growth powers forward at a double-digit rate More content at faster speed is fueling demand Data Centers capture less than 20% of all data storage Leasing demand has accelerated $58 billion dollars in 2014 REIT structures shields from most corporate income tax Investors may look to less risky Internet related stocks Increasingly reliable growth and margin expansion The Burke & Quick Partners research universe of data center stocks includes CyrusOne (CONE-Outperform), CoreSite Realty (COR-Outperform), DuPont Fabros Technology (DFT-Outperform), Digital Realty Trust (DLR-Market Perform), Equinix (EQIX-Outperform) and Internap (INAP-Outperform). We believe that the sector of data centers stocks will outperform for the following reasons: 1) Internet growth powers forward at a double-digit rate. Global digital advertising spending in 2014 could reach $138 billion, up 15%. Worldwide ecommerce spending could increase 20% this year to $1.5 trillion. 2) More content at faster speed is fueling Internet demand. Internet traffic and data storage demand has blossomed over the last few years and could sustain strong growth for many more years. 3) Today, data centers capture less than 20% of all data storage. As companies experience the superior reliability, speed and pricing of outsourced offerings demand should blossom allowing market share gains. 4) Outsourcing and leasing demand has accelerated, pricing looks stable and facilities investments are scalable allowing margin expansion as existing customers demand more storage space. 5) The global data center market defined as colocation, hosting and cloud could total approximately $58 billion dollars in 2014 and is forecasted to increase at a double-digit annual growth rate. 6) REIT structures shields from most corporate income tax. Dividends are yielding between 3% and 5% annually and will likely grow with free cash generation. 7) Given that the Internet sector is more established and we may be in the late stages of the stock market recovery, we believe investors may look to less risky, reasonably valued, but still solidly growing Internet related stocks. 8) The Data Center stocks trade at 14x AFFO and 13x EBITDA. 9) We believe that the valuation multiple of data centers can go higher as the sector proves increasingly reliable growth and margins expand which fosters returning cash to shareholders. The stocks could prove rewarding and outperform. Equinix, Inc. Page 2 of 18

3 The Data Center Industry Data centers are buildings that house servers and related hardware Data centers are buildings that house servers and related hardware. Data centers require four things: power, space, bandwidth (fiber) and cooling. They are typically located in large metropolitan markets where these resources are readily available. The major US data center markets are Silicon Valley, New York, Northern Virginia, Dallas, Miami, Chicago and Los Angeles. The primary European markets are London, Frankfurt, Amsterdam and Paris. The top locations in Asia are Hong Kong, Tokyo, Singapore and Sydney. Different markets are driven by different customers, and the differences are predictable. Silicon Valley has many Internet content and software-as-a-service companies. New York has a sizable financial contingent complementing generally smaller Internet companies and European telecommunications companies. Northern Virginia is primarily telecoms, Internet companies and government. Miami hosts many Latin American companies. Data Center demand is growing annually at a midteens pace The global data center demand is growing annually at a double-digit pace while supply rises mid-single digits. Data center construction typically takes about one year. Over the past year demand have accelerated. Pricing has held steady. Pricing typically starts to move up once 70% of capacity is reached in any one center. At 70%, space is still available but not easily accessible for expansion by an existing customer. Businesses across Internet commerce, advertising and content, data center demand remain robust with sustained revenue growth. Internet traffic should growth over 20% per year through 2018 according to Cisco. Capacity, connectivity, power and uptime The biggest concerns of data center customers are capacity, connectivity, power and uptime. Other concerns include cooling, computing power, tech support, security and speed of expansion, which are equally important but somewhat easier to duplicate. Customers are typically charged rental space, power utilization fees and service costs. The main reasons for purchasing new servers are normal demand driven needs for increases in capacity, upgrades to old servers and new server purchases for new applications. All three of these drivers should increase demand for either data center capacity and/or power utilization. Addressable Market Worldwide IT spending is on pace to total $3.8 trillion in 2014, a 3.2% increase Worldwide IT spending is on pace to total $3.8 trillion in 2014, a 3.2% increase from 2013 spending, according to the latest forecast by Gartner, Inc. International Data Corporation (IDC) Worldwide Black Book projects worldwide IT spending will increase by 4.1% in constant currency this year down from last year s growth of 4.5%. Forrester estimates Global Tech Purchases will rise 3.3% in IT will not be outsourced completely. However, a significant amount of IT infrastructure could be outsourced to data center providers over time. Another indicator of the addressable market for IT infrastructure is total IT hardware expenditures. IT infrastructure providers replace internal data centers, which represent a significant portion of IT hardware costs. IT infrastructure is becoming an increasingly larger portion of hardware costs as applications are delivered over networks instead of individual desktops. IDC says the top priority of Chief Equinix, Inc. Page 3 of 18

4 Information Officers is reducing costs. Sharing infrastructure via outsourcing is the most compelling way to reduce this capital and operating expense. Growth Drivers Data Center revenue growth has been about 15% per year Data Center revenue growth has been about 15% annually. Growth is maintained as companies recognize the efficiency inherent in sharing infrastructure. Cost savings of as much as 50%, coupled with more flexibility, drive corporations to outsource. Faster broadband speeds and improving technology also contribute to IT outsourcing growth. Roughly 85% of servers are on the premises of the company utilizing them. Blossoming Internet communications is a primary contributor to data center growth. The evolution of Internet communications as the primary means of communication for both companies and individuals is a core driver of IP and data center growth. This is evident in the consumption of Internet media, content and information, represented by Google, Facebook, Netflix and YouTube. Ecommerce is another contributor, best exemplified by the market share gains of online commerce companies like Amazon. Ecommerce spending sustains 20% growth while retail grows at a mid-single digits pace. Internet consumption continues to increase rapidly Consumer Internet consumption continues to increase rapidly. According to emarketer, 75% of online users watch digital videos. However, Nielsen believes the average online user watches less than four hours of online video per month. We believe as broadband speed increases, the consumption of online video will grow rapidly. The list goes on gaming, peer-2-peer, rich media advertising all should contribute to an explosion in usage that requires greater server capacity and drives data center demand and revenue. Beyond consumer-driven IP growth, corporations are relying increasingly on IP for communicating. , instant messaging, and voice are currently delivered via the Internet. In addition, software and applications such as customer relationship management are utilized via the Internet and housed remotely at data centers. Increasing real-time business requirements and storage needs add to demand. Electronic trading is also growing rapidly and adding to network and server demands. Internet data traffic grew increased more than fivefold over the last 5 years Internet data traffic has increased more than fivefold over the last 5 years and could increase threefold over the next 5 years according to Cicso Systems. Cisco Systems, which is the largest manufacturer of IP equipment, believes IP traffic will grow at a compound annual growth rate of over 20% through While IP traffic is growing rapidly, IT continues to be complex and everchanging. Coupling this with recent technology improvements such as virtualization and faster broadband speed creates an attractive environment for outsourcing IT to data centers. Given as much as 80% 90% of computing capacity on dedicated servers goes unused at any given time, virtualization enables unused capacity to be utilized. Equinix, Inc. Page 4 of 18

5 REITS REITS are Real Estate Investment Trusts REITS are Real Estate Investment Trusts. Companies with this tax structure can be of higher relative value than non-reit companies because profits are largely shielded from corporate income tax. That savings can be passed along to the shareholders in the form of dividend. Often REITs have fairly high dividend. The publicly traded data center REITs have dividends ranging from 3% to 5% annually. To qualify as a REIT a company must have at least 75% of its assets in real estate, 75% of income must come from real estate, 90% of pre-tax income must be distributed to shareholders, no more than 50% of the stock can be owned by five or fewer individuals, and the company cannot own more than 10% of a tenant. Most of the publicly traded Data Centers are REITs Today, most of the publicly traded Data Centers have a REIT structure. All would likely qualify because data centers are physical buildings that rent space to clients housing servers to store and transmit data. Risks Macro-Economic and Interest Rates Rising interest rates can hurt data centers Data center demand can fluctuate depending on economic conditions. Rising interest rates can hurt data center stocks in a number of different ways. First, rising interest rates make the dividend yield of REITs less attractive because alternatives including risk free treasuries become a more viable alternative. Second, the cost of borrowings of both existing variable loans and future loans can impair bottomline profits including AFFO. Third, rising interest rates lessen the present value of future cash flow. Competition and Pricing Communications real-estate and hosting services are highly fragmented and competitive sectors. Pricing may be pressured Recently contracts have spanned 3-7 years Pricing may be pressured over time as data centers compete with large companies that have greater resources, such as Microsoft, IBM, EDS, AT&T and Amazon. These companies have the ability to invest materially more capital in their businesses. They also could lower pricing given they have greater scale. Historically data center industry colocations contracts have averaged 2-3 years, but more recently contracts have spanned 3-7 years. While pricing pressure and potential margin erosion is a threat to the business opportunity, the outstripping of demand versus supply has allowed stable pricing in Virtualization and Potential Pricing Power Deterioration Virtualization is a broad IT term referring to the abstraction of computing resources to perform multiple tasks. As much as 80% 90% of computing capacity on dedicated servers goes unused at any given time. Cloud computing is a hot Equinix, Inc. Page 5 of 18

6 area within virtualization. Cloud computing refers to computing resources made accessible as scalable, on-demand services over a network. Cloud computing combines virtualization, service-orientation, elasticity, multi-tenancy and pay-asyou-go billing. Adopters of cloud computing seek to capture improved cost efficiencies, accelerated innovation cycles, faster time-to-market deployment, and scalability on-demand. Virtualization enables colocation clients to occupy less space Virtualization enables colocation clients to occupy less space because server efficiency improves. Customers can now run multiple applications or projects on a single or group of shared servers, as opposed to dedicating individual servers for each project or task. This can result in lower colocation revenue per customer for the group but might aid cloud revenue. Virtualization is an example of how technological advancement might impact the colocation business negatively. In general, as server hardware advances, the amount of physical space required to power the same computing capacity could lessen. If technological advancements overwhelm the trend of growing IP traffic, then colocation demand and pricing could decline. Availability of and Access to Credit Availability of capital is critical Churn Data Center development requires meaningful, substantial upfront spending to construct and build facilities. Availability of capital is critical to future growth. Should lending markets tighten, facility development could suffer. Dependence on a Limited Number of Large Enterprise Clients Liquidity crises and customer bankruptcies add to churn. Recent signs point to steady improvement in the economy, the consumer, credit and the economy, but demand can be sensitive to any change in these variables. Publicly Traded Data Center Operators CyrusOne Inc. CyrusOne operates 25 Data Centers comprising 1.2 million square feet serving 656 customers Has enough data center building shell to allow for nearly a doubling of total company capacity CyrusOne (CONE) operates 25 Data Centers. It serves 656 customers including 141 of the Fortune CyrusOne seeks to serve as the preferred global data center provider to the global Fortune Its 25 facilities comprise 1.2 million colocation square feet. While its customer base is fairly diversified, two of CyrusOne s largest sectors are Energy and IT, each representing roughly 30% of revenue. The company headquarters is located just north of Dallas, Texas at 1649 West Frankford Road, Carrollton, Texas CyrusOne should sustain strong business momentum in 2015 as it has already constructed enough data center building shell to allow for nearly a doubling of total company capacity, its latest facility in Phoenix was built in an industry record 107 days, year to date new lease signings are at record levels and management led by CEO Gary Wojtaszek appears focused on both operational and stock performance. Equinix, Inc. Page 6 of 18

7 Record rate of lease signings at $70mm 2014 Average lease term for leases signed in 2014 was 6 ½ years Added $350 million of new facilities AFFO could reach $1.70 per share in 2014 CyrusOne has had a record rate of lease signings in Almost 200,000 colocation square feet representing an estimated $70 million of incremental revenue of new leases have been signed thus far this year. CyrusOne is attracting customers who are signing larger deals for more space with longer-term contracts and metered power. The average lease term for leases signed in 2014 was 6 ½ years versus roughly a 3 year average lease life remaining across its top 20 clients. This demonstrates demand momentum and sustainability. Existing data center customers drive the majority of new demand with a tail of growing capacity requirements. On average, 40% of the present value of from a customer is not realized in the initial lease signing. The explosion of data and increased comfort of outsourcing has fostered customers to steadily increase their capacity needs. CyrusOne has added $350 million of new facilities in the last two years. Total investment in real estate is roughly $1.2 billion. It now has 1.2 million colocation square feet of data center space developed across 25 facilities. 44 new customers of which 12 are Fortune 1000 have been added so far this year driven via internal sales in the first half and thanks to help from indirect sales in the third quarter from 120 sales partners. Improved brand recognition has also contributed to new account wins. Utilization is 88%. Expansion construction on new facilities continues in Houston, San Antonio and Northern Virginia which by early 2015 could add 580,000 net rentable square feet including 90,000 colocation square feet. The initial phase of Phoenix 2 which included the shell and 30,000 pre-leased colocation square feet was completed in October 2014 in a record 107 days. The Phoenix 2 shell has room to double total colocation square feet. Total company square feet available for lease at early 2015 should reach 1.3 million. CyrusOne - Consensus Estimates ($ in thousands, except per share data) Burke & Quick 4Q14E Company Guidance 4Q14E Street Consensus Revenue $86,000 $85,727 EBITDA $43,300 $42,485 AFFO $0.45 $0.42 Revenue $330,000 $327,500 $329,777 EBITDA $168,000 $167,500 $166,539 AFFO $1.70 $1.66 Revenue $380,000 $381,701 EBITDA $198,000 $194,193 AFFO $2.10 $1.97 Source: Factset and Burke & Quick Partners Estimates. 18% EBITDA growth to $198 million and AFFO of $2.10 per share in 2015 For the full year 2014, we estimate revenue will grow 25% to $330 million yielding EBITDA of $168 million, up 21%. AFFO could reach $1.70 per share. Our 2015 estimates call for 15% revenue growth to $380 million leading to 18% EBITDA growth to $198 million and AFFO of $2.10 per share. Management plans to re-allocate capital into existing markets rather than start new markets. Equinix, Inc. Page 7 of 18

8 We speculate another roughly 200,000 csf could be added in The plan is to spend less capital in 2015 with a higher return. Net debt to annualized EBITDA stands at 3x CyrusOne has long-term debt of $555 million plus $14 million of capital lease obligations and cash of $30 million. Net debt to annualized EBITDA stands at 3x. CyrusOne pays a $0.21 per share quarterly dividend. CyrusOne trades below peers despite superior market positioning and growth potential. Using 17x AFFO and 15x EBITDA, we maintain our per share price target for CyrusOne of $36. CoreSite Realty Corporation 16 data centers with 1.3 million of CRSF square feet CoreSite Realty is headquartered in Denver Carlyle Group is CoreSite s largest shareholder owning 55% of the company CoreSite Realty Corporation controls a property portfolio which includes 16 data centers with 1.3 million of colocation raised square feet (86% utilized) and real estate totaling 2.7 million square feet in eight major communications markets across the United States serving more than 800 customers. While CoreSite is one of the smallest data center REITs, its facilities are strategically located in some of the largest and fastest growing data center markets in the United States, including Los Angeles, the San Francisco Bay and Northern Virginia areas, Chicago, Denver, Miami, New York City and its new campus in Secaucus, New Jersey. CoreSite is one of the fastest organically growing publicly-traded Data Center REITS with potential to sustain leading growth for years to come. CoreSite Realty Corporation is headquartered at th Street, Suite 500, Denver, CO The Carlyle Group is CoreSite s largest shareholder owning 55% of the company. Carlyle is one of the largest and most prestigious private equity firms with more than $203 billion in assets under management. Typically private equity firms invest for a number of years and then look to execute a liquidation event. CoreSite Realty - Consensus Estimates ($ in thousands, except per share data) Equinix, Inc. Page 8 of 18 Burke & Quick 4Q14E Guidance 4Q14E Consensus Revenue $70,072 $71,110 EBITDA $34,977 $33,782 FFO $0.58 $0.56 AFFO $0.47 $0.47 Revenue $270,000 $270,000 $271,026 EBITDA $132,000 $131,000 $128,860 FFO $2.15 $2.14 $2.16 AFFO $1.75 $1.73 Revenue $302,000 $304,417 EBITDA $150,000 $144,014 FFO $2.45 $2.43 AFFO $2.10 $2.12 Source: Factset and Burke & Quick Partners Estimates. For the full year 2014, we estimate revenue will grow 15% to $270 million ($268 million prior estimate) yielding EBITDA of $132 million, up 23%. We estimate 2014 FFO could reach $2.15 per share. CoreSite management s guidance of FFO

9 calls for a range of $2.12 to $2.16. Our AFFO estimate which deducts recurring capital spending is $1.70 per share AFFO $2.10 Dividend yields over 4% Our 2015 financial projections call for 12% revenue growth to $302 million leading to 14% EBITDA growth to $150 million FFO could reach $2.46 per share and AFFO $2.10 per share. For CoreSite Realty, debt to EBITDA stands at roughly 2x. Including preferred obligations of $115 million the ratio jumps to 3x. CoreSite Realty offers shielded free cash generation thanks to its favorable REIT tax status. A $0.42 quarterly dividend currently yields over 4% annually. Using 20x AFFO and 15x EBITDA, our price target for CoreSite is $41. DuPont Fabros Technology, Inc. 11 facilities in 4 major markets with heavy exposure to Northern VA Average remaining lease term of 6.3 years Yahoo! entered into a triparty sublease agreement DuPont Fabros Technology, Inc. owns, develops, operates and manages data centers. It leases access on a triple-net wholesale basis. Its portfolio includes 11 facilities in 4 major markets totaling 2.8 gross square feet and 1.4 million wholesale computer room square feet (CRSF) offering 240 megawatts of critical load. It has heavy exposure to Northern Virginia via a 6 facility campus in Ashburn, a facility in Reston and one in Bristow; all in an area that is one of the two most fiber dense areas in the U.S. We believe DuPont Fabros is the largest Data Center provider in Northern Virginia. The portfolio was 97% leased (93% if you include not stabilized properties. DuPont Fabros serves Internet industry leaders, including Microsoft, Facebook, Yahoo! and Rackspace. In total, DuPont Fabros serves 34 customers with 100 different lease expirations and an average remaining lease term of 6.1 years. The top 4 clients represent 61% of annual base rent. Investment grade or equivalent large enterprises represent 77% of revenue. The company is structured as a Real Estate Investment Trust (REIT). DuPont Fabros is headquartered in our Nation s capital just four blocks from the White House at 1212 New York Avenue, NW, Suite 900, Washington, D.C Yahoo! has begun a multi-year shift of its servers away from DuPont to its company-owned Buffalo, NY based facility which offers it company specific tax advantages. Yahoo! entered into a tri-party sublease agreement with one of DuPont Fabros existing large customers for MW expiring in 4.55 MW tranches in in its ACC$ data center. Yahoo! will pay through the remainder of its lease. Then the sublease customer has contracted to continue at lower current market pricing levels, so that the entire lease now terminates in Management has extended its CEO succession plan in an effort to hasten a nearterm resolution. The company plans to hire a candidate to immediately assume the role of CEO and President. Current CEO Fateh will support the successor and remain on the Board. 97% leased Given DuPont s facilities are almost at full capacity, 97% leased, and management has taken a methodical approach to new facility development, growth may be somewhat hindered as pricing typically does not outpace inflation. AFFO could reach $2.50 per share in 2014 and $2.70 in 2015 Equinix, Inc. Page 9 of 18 For the full year 2014, we estimate revenue will grow 11% to $417 million yielding EBITDA of $268 million, up 10%. AFFO could reach $2.50 per share.

10 Our 2015 estimates call for 7% revenue growth to $447 million leading to EBITDA of $290 million, up 8%, and AFFO of $2.70 per share, up 8% DuPont Fabros - Consensus Estimates ($ in thousands, except per share data) Burke & Quick 4Q14E Guidance 4Q14E Consensus Revenue $107,385 $106,249 EBITDA $68,388 $71,056 FFO $0.62 $0.62 $0.62 AFFO $0.62 $0.66 Revenue $417,000 $415,000 $415,003 EBITDA $268,000 $271,498 FFO $2.42 $2.40 $2.41 AFFO $2.50 $2.51 Revenue $447,000 $443,758 EBITDA $290,000 $290,336 FFO $2.60 $2.56 AFFO $2.70 $2.66 Source: Factset and Burke & Quick Partners Estimates. Performance might be boosted by two projects currently under development including Santa Clara SCA Phase 11B offering 9.1 megawatts which is currently 50% pre-leased and expected to deliver in early 2Q15 and Chicago CH2 Phase 1 offering 7.1 megawatts expected 3Q15. Net debt to annualized EBITDA stands at 3.5x DFT s dividend yields 5%. It was increased 5 times over the last 11 quarters DuPont Fabros has long-term debt of $965 million. Debt maturities begin in 2018, 2019 and balloon with $600 million due in Net debt to annualized EBITDA stands at 3.5x. Cash flow coverage of interest is almost 6x. Preferred stock adds $351 million to liabilities. DuPont Fabros offers shielded free cash generation thanks to its favorable REIT tax status. It pays a $0.42 quarterly dividend yielding 5% annually. The dividend was increased 5 times over the last 11 quarters. The payout ratio is less than 65% of AFFO. Digital Realty Trust DLR is one of 20 largest publicly-traded U.S. REITs 24.5 million square feet Digital Realty Trust, Inc. is one of the 20 largest publicly-traded U.S. real estate investment trusts (REIT) and the biggest that specifically focuses on infrastructure for the digital economy. Digital Realty offers data center solutions by building and leasing facilities throughout the world via 130 properties. Its portfolio is located in 30 markets throughout North America, Europe, Asia and Australia. The properties aggregate 24.5 million square feet including approximately 1.3 million square feet of space under active development and 1.4 million square feet of space held for future development. Equinix, Inc. Page 10 of 18 Digital Realty offers data center and colocation service to over 600 clients via over 2,000 leases. Its clients include domestic and international companies across multiple industry verticals, of all sizes, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences,

11 health care, and consumer products. Digital Realty Trust has been a publicly traded stock for ten years generating positive year over year growth in both dividends and FFO per share every one of those years. It is headquartered at Four Embarcadero Center, Suite 3200, San Francisco, CA Potential assets sales over the next few quarters Pricing disciple Digital Realty s management mentioned its plans for potential assets sales over the next few quarters. It could strengthen the balance sheet ensuring the company s investment grade debt rating while supporting the dividend and possibly sparking an extra one-time dividend. Digital Realty s pricing disciple combined with increased rent per square foot should allow mid-single digit revenue and EBITDA growth. For the full year 2014, we estimate that revenue could reach $1.62 billion, up 9%. EBITDA could hit $935 million, up 6%. Core funds from operations (CFFO) could reach $4.90 per share in 2014 and adjusted funds from operations (AFFO) could be $3.75. In 2015, we estimate CFFO of $5.00 and AFFO of $4.00. Digital Realty - Consensus Estimates ($ in millions, except per share data) Burke & Quick 4Q14E Guidance 4Q14E Consensus Revenue $415,778 $413,448 EBITDA $232,359 $233,650 CFFO $1.19 $1.23 AFFO $0.89 $0.95 Revenue $1,620,000 $1,619,342 EBITDA $935,000 $927,993 CFFO $4.90 $4.93 $4.91 AFFO $3.75 $3.74 Revenue $1,720,000 $1,703,372 EBITDA $980,000 $977,564 CFFO $5.00 $5.09 AFFO $4.00 $3.99 Source: Factset and Burke & Quick Partners Estimates. 10 consecutive years of dividend increases Digital Realty offers shielded free cash generation thanks to its favorable REIT tax status. It has provided 10 consecutive years of dividend increases. The last authorized quarterly cash dividend of $0.83 per share to common stockholders was paid on September 30, A $0.83 quarterly dividend currently yields 5% annually. Digital Realty Trust trades above the data center group despite slower growth likely due to its size and high dividend yield. Using 18x AFFO and 15x EBITDA, we maintain a price target of $70 for Digital Realty Trust. Equinix 100 data centers in 32 markets across 15 Equinix, countries Inc. Page 11 of 18 Equinix Inc. builds and operates data center facilities across the United States, Europe and Asia. It operates 101 data centers in 32 markets across 15 countries in the Americas, EMEA, and Asia-Pacific on five continents. In total it controls

12 3.8 million square feet of colocation space. The company headquarters is located at One Lagoon Drive, 4th Floor, Redwood City, CA Equinix will convert into a REIT at the start of 2015 Equinix has filed for REIT tax status. It is scheduled to convert into a REIT at the start of Employing a REIT structure will shield it from most corporate income tax. The introduction of a regular dividend will be required in order to comply with being a REIT. The conversion to a REIT could boost valuation as shielding future corporate income taxation results in incremental shareholder value creation in the form of dividends. Inclusion in REIT indexes could broaden Equinix s shareholder base Inclusion in REIT indexes could broaden Equinix s shareholder base and further enhance valuation. After Equinix converts to a REIT on 1/1/2015. In our opinion, it will likely get reviewed and included into the two leading REIT indices RMZ and FTSE/NAREIT. We expect this to occur mid to late in the first quarter of For the full year 2014, we estimate revenue will grow 13% to $2.437 billion yielding EBITDA of $1.112 billion, up 11%. AFFO could reach $13.50 per share. Our 2015 estimates call for 9% revenue growth leading to EBITDA of $1.234 million, up 11%, and AFFO of $15.00 per share, up 11%. Weakening foreign economies and currencies remain an overhang as almost half of revenue is generated in international markets. Equinix - Consensus Estimates ($ in thousands, except per share data) Internap stands at an operational and financial inflection point Equinix, Inc. Page 12 of 18 Equinix trades in-line with peers despite dominant market positioning and pending conversion to a REIT. We believe that as Equinix evidences ongoing, reliable growth and becomes a REIT offering a sustainable dividend, its stock will prove rewarding and outperform. Our price target is $250. Internap Burke & Quick 4Q14E Guidance 4Q14E Consensus Revenue $631,346 $629,000 $631,092 EBITDA $292,475 $293,000 $294,252 AFFO $3.62 $3.29 Revenue $2,437,000 $2,435,000 $2,436,404 EBITDA $1,112,000 $1,112,000 $1,115,005 AFFO $13.50 $13.19 Revenue $2,655,430 $2,697,324 EBITDA $1,234,000 $1,266,856 AFFO $15.00 $15.18 Source: Factset and Burke & Quick Partners Estimates. We believe that Internap stands at an operational and financial inflection point which should allow break-out EBITDA cash flow growth and margin expansion. Management led by CEO Eric Cooney has navigated the company well through its strategic repositioning.

13 Invested $300mm launching new data centers Data center service now represents 73% of total company revenue Gabelli sold a net of roughly 400,000 shares Gabelli remains positioned for the long-term Growth has accelerated thanks to new data center launches and the acquisition of iweb. Having spent roughly $300 million over the last few years building out 16 company owned data centers which are at only a 60% data center capacity utilization rate, Internap has room to meaningfully add customers without spending heavily on facilities expansion. Data center service now represents 73% of total company revenue, up from 60% only two years ago. The core owned data centers alone represent 59% of revenue versus 42% two years ago. Core owned data center revenues grew 16% on an organic basis in 3Q14. Mario Gabelli s GAMCO, Gabelli Funds and associated entities stand as Internap s largest shareholder owning roughly 10.1 million shares (down from a peak of 10.5 million) or 18.6% (prior 19.3%) of the company. According to a Form 13-D filed with the SEC on November 18, 2014, Gabelli sold a net of roughly 400,000 shares of Internap between 9/19/14 and 11/18/14 at prices ranging from $6.55 per share to $8.17 per share. We speculate that Gabelli has traded around his core position in Internap likely for tax planning and/or short-term trading reasons. Gabelli s investment style often uncovers unrecognized value through investing in companies that sell below private market value while waiting patiently to see the value get recognized. We believe Gabelli remains positioned for the long-term especially given the recent impressive operating results and potential for break-out margin improvement ahead Internap reported accelerating growth and expanding margins in its 3Q14 financial results and guided to higher than expected 4Q14 EBITDA. Internap - Consensus Estimates ($ in thousands, except per share data) Burke & Quick 4Q 2014 Consensus Revenue $85,000 $84,518 EBITDA $21,984 $21,768 AFFO $ Revenue $335,696 $335,372 EBITDA $78,000 $77,176 AFFO $ Revenue $355,000 $350,967 EBITDA $90,000 $88,931 AFFO $0.90 Source: Factset and Burke & Quick Partners Estimates. Equinix, Inc. Page 13 of 18

14 $78 million EBITDA 2014 Margins can be sustained and extended further EBITDA could grow 15% to $90 million in 2015 Internap trades at only 8x We estimate Internap will produce $336 million of revenue, $78 million EBITDA, $36 million of recurring free cash flow and $0.66 per share of AFFO in After all capital requirements Internap may burn roughly $24 million in cash in On a recent investor conference call management confirmed they believe that the new margin levels can be sustained and extended further. We suspect that as EBITDA margins rise thanks to an increasing percentage of growth coming from the core owned data centers, Internap s valuation gap relative to its peers could improve. In 2015, EBITDA could grow 15% to $90 million producing $0.90 per share in AFFO and/or recurring free cash flow per share. Internap has long-term debt of $293 million, $54 million in capital lease obligations and working capital of negative $4 million. Net debt to EBITDA stands above 4x. The company s goal is to reduce leverage ½ a turn every year until it hits 3x. Internap trades at only 8x AFFO and EBITDA, a substantial discount to the group. Using 11x AFFO of $0.90 and 10x EBITDA of $90 million, our price target is $10. Our rating on Internap is Outperform. Valuation The Data Center sector trades at 14x AFFO and 13x EBITDA with a double-digit rate of annual growth. With a recurring business model and infrastructure that has strategic value, we believe the multiple can go higher. Equinix, Inc. Page 14 of 18

15 Data Center Peer Group Universe Data Centers Burke & Quick Partners (561) /18/2014 S&P 500 CyrusOne CoreSite DuPont Fab Digital Realty Equinix Internap QTS Realty SP50 CONE COR DFT DLR EQIX INAP QTS Average Stock Price $2, $26.58 $38.14 $33.98 $66.44 $ $7.83 $ Week High 2, Low 1, % Change YTD 12% 19% 18% 38% 35% 29% 4% 30% 25% Relative 8% 7% 26% 24% 17% -7% 19% 13% Dividend $0.84 $1.68 $1.68 $3.32 $1.16 Yield 3.2% 4.4% 4.9% 5.0% 3.6% Capitalization Fully Diluted Shares 65,300 46,966 81, ,762 57,750 54,386 37,177 Market Capitalization $1,735,674 $1,791,267 $2,781,678 $9,219,347 $13,178,550 $425,842 $1,201,561 Long-Term Debt (624,300) (420,250) (1,316,250) (4,322,687) (3,925,888) (346,469) (581,846) Working Capital (10,700) (18,432) (7,843) (471,323) 189,511 (4,785) (47,049) Enterprise Value $2,370,674 $2,229,949 $4,105,771 $14,013,357 $16,914,927 $777,096 $1,830,456 AFFO/Share AFFO/Share 2016 $ $2.50 $2.40 $2.90 $4.30 $16.50 $1.10 $2.50 Multiple AFFO/Share Multiple AFFO/Share Multiple AFFO/Share $ EBITDA EBITDA 2016 $225,000 $170,000 $310,000 $1,050,000 $1,350,000 $100,000 $143,146 Multiple EBITDA , , , ,000 1,234,000 90, ,134 Multiple EBITDA , , , ,000 1,112,000 78,000 97,733 Multiple EBITDA , , , ,901 1,000,898 58,033 75,422 Target Multiple AFFO Price Target $36.00 $42.00 $38.00 $70.00 $ $10.00 Upside to Target 35% 10% 12% 5% 10% 28% Rating: Outperform Outperform Outperform Marketperf Outperform Outperform Not Rated Source: Company reports; Burke & Quick Research estimates Equinix, Inc. Page 15 of 18

16 DISCLOSURES: ANALYST CERTIFICATION I,, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. DISCLOSURES Additional information available upon request. This report was prepared by (BQP) BQP is a Member of FINRA and SIPC. RATINGS INFORMATION Rating and Price Target Change History 3 Year Rating Change History 3 Year Price Change History Source: Burke & Quick Partners Created by: Blue-Compass.net 3 Year Rating Change History 3 Year Price Change History Source: Burke & Quick Partners Created by: Blue-Compass.net 3 Year Rating Change History 3 Year Price Change History Source: Burke & Quick Partners Created by: Blue-Compass.net Equinix, Inc. Page 16 of 18

17 3 Year Rating Change History 3 Year Price Change History Source: Burke & Quick Partners Created by: Blue-Compass.net 3 Year Rating Change History 3 Year Price Change History Source: Burke & Quick Partners Created by: Blue-Compass.net 3 Year Rating Change History 3 Year Price Change History Source: Burke & Quick Partners Created by: Blue-Compass.net Burke and Quick Partners, LLC Stock Ratings and Definitions Outperform (O) Market Perform (MP) Underperform (U) % of Companies Under Coverage With This Rating % of Companies for which Burke & Quick Partners, LLC has performed services for in the last 12 months Investment Banking Brokerage The stock s total return is expected to outperform the S&P 500 over the next 12 months % 0.00% 0.00% The stock s total return is expected to be in line with the S&P 500 over the next 12 months % 0.00% 0.00% The stock s total return is expected to underperform the S&P 500 over the next 12 months. 4.55% 0.00% 0.00% Equinix, Inc. Page 17 of 18

18 Covered Not Rated (CNR) The stock is covered by the firm but ratings and estimates are not issued. Equinix, Inc. Page 18 of 18