In our view, data centers have been increasingly embodying characteristics of both telecom and real estate companies. On the one hand, data centers are telecom companies, because they provide storage to and connectivity among enterprises, network providers, and cloud providers. On the other hand, data centers are real estate companies because they rent large amounts of space (in some cases, constructing the buildings themselves) and generate most of their revenue from rental income. In analyzing credit factors of data centers, S&P Global Ratings weighs features of the companies' operations, including operating models, contract terms, and customer mix. Our analysis focuses on the cash flow stability of the business, which in our view could support higher leverage tolerance for real estate-like
