Data Centers (DLR, EQIX): REIT-urning to basics - contextualizing returns for the non-REIT investor

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Data Centers (DLR, EQIX): REIT-urning to basics - contextualizing returns for the non-REIT investor

26 June 2026

US Communications Infrastructure

Data Centers (DLR, EQIX): REIT-urning to basics - contextualizing

returns for the non-REIT investor

Investor interest in data center REITs has expanded rapidly in the AI boom, attracting an Madison Rezaei

+1 917 344 8622 increasingly broad pool of capital beyond the traditional REIT crew. Non-REIT investors

madison.rezaei@bernsteinsg.com puzzle over the right way to think about these companies—both how to contextualize them

against one another and against alternate investment opportunities.

Nancy Wu

+1 917 344 8545 Data center REITs often screen poorly on traditional metrics such as return on assets or nancy.wu@bernsteinsg.com

earnings-based multiples, largely due to their capital intensity, long development timelines,

and accounting treatments. Importantly, these apparent distortions do not reflect

weak business fundamentals, but rather the limitations of applying short-duration

financial metrics to assets that are designed to operate and generate cash flows

over multi-decade horizons.

Like most forms of real estate, data centers are characterized by exceptionally long useful

lives (in some cases, 50+ years!) and significant upfront investment. These assets require

large-scale development expenditures and years of construction before generating

revenue, but once stabilized, they can deliver durable and predictable cash flows for

decades. As a result, traditional measures can understate their true economic value. Within

the REIT framework, Adjusted Funds From Operations (AFFO) provides the most relevant

lens, as it best approximates distributable cash flow. Yet even AFFO does not fully capture