Ladies and gentlemen, thank you for standing by and welcome to the American Tower Corporation CoreSite Acquisition conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. If you wish to ask a question, please press one, then zero on your telephone keypad. You may withdraw your question at any time by repeating the one, then zero command. If you should require assistance during the call, please press star then zero. As a reminder, today's conference is being recorded. I would now like to turn the conference over to your first speaker, Mr. Adam Smith. Please go ahead.
Thank you. Good morning, and thank you for joining American Tower's conference call regarding the CoreSite transaction we announced earlier today. We have posted a presentation regarding the transaction, which we will refer to in our prepared remarks in the Investor Presentation section of our website, www.americantower.com. This morning, I am joined by Tom Bartlett, our President and CEO, Rod Smith, our Executive Vice President, CFO, and Treasurer, Steve Vondran, our Executive Vice President and President, U.S. Tower Division, and Ed Knapp, our Senior Vice President and CTO. Before I turn the call over to Tom to walk through the deal, I would like to remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties.
Examples of these statements include those regarding the CoreSite transaction, including the anticipated closing timeline and the expected consideration and financing for the transaction, and our expectations regarding future growth, industry trends, the impact on our consolidated results, and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's press release, those set forth in our Form 10-K for the year ended December 31, 2020, and in other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances.
With that, I'll turn the call over to Tom.
Hey, thanks, Adam. Good morning, everyone, and thank you for joining us, particularly on such short notice. As you saw in today's press release, we've signed a definitive agreement to acquire CoreSite. We are very excited about this transaction and believe that the combination of American Tower and CoreSite will create a global leader in neutral host multi-tenant digital infrastructure that will be poised to drive significant value for our shareholders and expanded customer base, particularly in a hyper-connected 5G world. Over the next few minutes, I'll highlight the strategic rationale behind this transformative deal, and then we'll open the line for some questions. As many of you will recall, we launched our Stand and Deliver strategy back in the beginning of 2018, with platform expansion as one of the four central pillars that we believe would define our growth path over the next decade.
Since then, we focused on evaluating a variety of adjacent communications real estate business models with the goal of further enhancing American Tower's position as a leading neutral host infrastructure provider in a 5G world and beyond, while delivering compelling returns to our stockholders and tremendous value to our customers. Through this process, we've identified the evolution of the multi-axis network edge on a global basis as one of the most meaningful catalysts for future value creation across the communications infrastructure universe. We expect the transaction we announced this morning to enable us to capitalize on this emerging trend. As summarized on Slide 3 of the presentation, we will be acquiring CoreSite for a total consideration of approximately $10.1 billion or $170 per share.
As of the end of the Q3, the portfolio consisted of 25 data centers in eight highly attractive metro areas exclusively across the United States. In our view, CoreSite is especially attractive for several reasons. First is the differentiated nature of their assets, including the high density of latency-sensitive interconnections, a strong, high-quality customer base, a meaningful development pipeline, and well-located facilities in attractive metro areas. We expect that these qualities, together with CoreSite's experienced management team, would drive strong, sustainable long-term growth simply on its own, like it has done for so many years now. Second, the transaction positions American Tower as a leader across multiple classes of communications real estate as 5G deployments in wireless and wireline convergence accelerate. We think this will be increasingly critical, particularly on a global basis, as next-generation networks emerge.
By creating a hub-and-spoke network originating from the core and extending through the various layers of the edge through the CoreSite platform, we expect to provide our customers with market-leading solutions that meets the demand of future latency-sensitive use cases, reduces transit costs, and provides a one-stop shop on networking and compute. Third, the combination of CoreSite's data center industry expertise, interconnection platform, and American Tower's global wireless presence creates an intriguing option to expand the core data center platform internationally while simultaneously evaluating international network edge deployments. From a financial perspective, we expect this transaction to be modestly accretive to AFFO per share on day one, with accretion ramping up over time as we grow organically and execute on the significant expansion opportunities created through the combined business.
We expect to finance the acquisition in a manner consistent with maintaining our investment-grade credit ratings, which as you know, remains a key priority for us. Similar to prior large strategic deals, we anticipate temporarily bringing our net leverage above our stated three to five times target range, with a path towards returning to that range over time. As part of this approach, we expect there to be an equity funding component to this transaction. As always, we will be targeting an optimal financing path that minimizes dilution for our common stockholders and maximizes total shareholder returns over the long term. Turning to Slide 4, I'd like to spend a bit more time in the characteristics of CoreSite's high-quality, well-positioned assets that we believe we can leverage for strong future growth.
As at the end of the Q3, CoreSite consisted of 25 data centers across 8 key U.S. metros with access to 21 critical cloud on-ramps. A strong development pipeline is also in place, driven by demand from a diverse and growing customer base of key cloud providers, network operators, and large enterprises. Given the competitive positioning of these facilities, we expect the ongoing migration of enterprise workloads to public-private hybrid cloud and rising demand for compute-oriented processing to result in continued momentum for the business. Importantly, we anticipate that these assets can augment our AFFO per share growth trajectory over the long term as we continue to seek to drive double-digit average annual growth in that metric. Moving on to Slide 5, let's take a closer look at the key strategic considerations behind the transaction.
First, we believe that CoreSite's asset footprint and strategic positioning are extremely difficult to replicate. Their core market presence with network-dense, interconnection-rich facilities and critical cloud on-ramps, along with an inherently scalable software-defined interconnection platform, are extremely well-positioned. Further, there is an attractive development pipeline in place that we believe is optimally positioned to capture demand from the ongoing evolution in the space. With our financial resources now in the mix, we are confident that there is room to accelerate that pipeline to create value even faster. Second, we believe the transaction strengthens American Tower's option to play and win at the edge as the 5G application ecosystem continues to come into view. In addition to what we view as a best-in-class set of assets, CoreSite brings strong relationships with enterprises and cloud service providers that complement our long-standing MNO partnerships.
This augmented customer relationship position will help connect MNOs and cloud service providers across our distributed portfolio of real estate. Our enhanced visibility from the core of today's network to the mobile edge should result in meaningful opportunities to develop neutral host compute facilities that meet increasingly stringent low latency requirements. Importantly, we expect the addition of these assets to our extensive tower portfolio to provide us with an enhanced ability to influence the evolution of emerging network configurations and the role that our suite of communications real estate assets play within that evolution. Third, we expect to leverage CoreSite's management expertise and scalable data center platform together with our more than two-decade-long international operating history to drive international expansion within the core data center business over the long term.
Data usage is accelerating globally, and we expect data center infrastructure to be in high demand across many of our international markets. In addition, just as we have seen with 3G and 4G, 5G will eventually be deployed in all of these markets, and low latency requirements for emerging applications are likely to follow. We anticipate our combined communications infrastructure platform, customer relationship synergies, and collective management expertise to drive meaningful value creation opportunities on the edge across these markets over time, augmenting the core data center growth path. Finally, our acquisition of CoreSite further diversifies our global business into a complementary class of telecommunications real estate with characteristics that are in many respects consistent with the tower business. These include multi-service, multi-tenant contracts with large, high-quality customers, real estate exclusivity, and predictable recurring long-term growth.
We are also meaningfully expanding our relationships with critical cloud service providers and a number of large, well-capitalized multinational corporations through this transaction, which we anticipate will be key sources of demand growth for years to come. Finally, we continue to balance our emerging market growth opportunities with more mature, developed market cash flows, and this transaction enhances that diversification strategy. On the next two slides, we'll take a deeper dive into perhaps the most important element of why we're acquiring CoreSite. That is how we expect the transaction to fundamentally transform our ability to compete and win at the edge. Starting with Slide 6, let's take a look at how we expect the core to edge evolution to play out over the next decade.
As I alluded to earlier, we anticipate that this edge evolution will require a continuum of sites, beginning at today's core data centers, where CoreSite has a strong competitive position, moving out to the mobile edge as latency-sensitive use cases emerge over time. Over the next several years, enterprise applications, connected devices such as cameras and various other IoT sensors will drive data center demands across public, private, and hybrid cloud platforms. As exploding data sets and latency-sensitive applications emerge, the cost of transport and access delays across multi-hop networks will drive latency-sensitive workloads to more local data centers. As a result, we anticipate accelerated growth of compute needs beyond just core hyperscale data centers to facilities in Tier 2 and Tier 3 markets. Collectively, we refer to this as the metro edge.
Given our strong balance sheet combined with CoreSite's platform, we expect there to be a meaningful opportunity for development investment across these markets over time. Additionally, as latency demands continue to become more and more stringent, mobile networks will have to break out data traffic locally for immersive mobile applications such as AR/VR, multiplayer gaming, on-demand video conferencing, AI/ML inferencing with automated mobility use cases, and many more. As broad adoption of 5G leads to new use cases, these applications will operate across MNO and CSP platforms at scale, leading to new wireless interconnection exchanges at natural mobile traffic aggregation points such as our tower sites. Ultimately, we believe the market will demand efficient neutral facilities to host low-latency mobile edge applications.
In summary, we anticipate a continued evolution of the edge across a continuum of real estate from more centralized core data centers to the rapid and necessary development of the mobile edge. This acquisition positions us to be able to create a hub and spoke model across multiple edge layers that leverages the capabilities and performance of the broader ecosystem, meeting performance demands of next-generation applications. In turn, we will be positioned to play a meaningful role in the deployment of the shared edge infrastructure that will be necessary to facilitate this progression with a comprehensive network offering that significantly enhances the value proposition to an expanding customer base.
Moving on to Slide 7, and with the core to edge evolution now as a foundation, I want to spend a minute discussing the high-level market sizing for these two critical network edge layers and how the combination of American Tower and CoreSite meaningfully enhances our positioning to compete in both. As you can see, within just the next five years, the combined American Tower addressable market for the mobile and metro edge is estimated to be around $3 billion, with that number expanding meaningfully beyond that timeframe. This implies a significant near-term ramp-up in revenue growth as next-generation low-latency applications are deployed and an even larger longer-term opportunity, particularly at the mobile edge. While American Tower and CoreSite each have strong, viable, strategic standalone businesses that stand to benefit in the hyper-connected 5G world, together, we believe that our position is meaningfully strengthened.
The combination of expanded customer relationships, two high-quality distributed real estate portfolios, and American Tower's strong financial position is expected to meaningfully augment our edge position, and that is a critical component of this deal. Moving to Slide 8, and in conclusion, we have a proven track record of identifying, executing, and operating strategic businesses globally that enhance our positioning in the mobile network ecosystem. Over the past several years, we've applied the same approach in evaluating a variety of platform expansion opportunities, focusing on business models that are not only complementary to our existing asset base, but also those that have the potential to create significant long-term value in new areas. We firmly believe that this transaction will deliver on both counts.
It will provide us with the opportunity to meaningfully enter the data center market at scale with differentiated assets and participate in the industry's strong growth for years to come. Furthermore, it sets the stage for us to deploy capital towards accretive development initiatives that drive shareholder and customer value and significantly advance our edge strategy. This all comes at a reasonable cost that enables immediate AFFO per share accretion just from the base CoreSite business before taking into account other long-term value drivers, which we expect to be significant. Fundamentally, we believe that this transaction can create a leading, differentiated, neutral host platform at the forefront of an accelerated convergence of wireline and wireless networks, positioned to execute across multiple layers of the network edge. We expect this positioning to translate into significant value creation and compelling long-term shareholder returns.
With that, I'd like to have the operator open the line for some Q&A. Operator?
Of course. Once again, if there are any questions from the phone lines, please press one then zero. Our first question today comes from the line of Ric Prentiss with Raymond James. Please go ahead.
Thanks. Good morning, everyone.
Hey, Ric.
Hey.
Morning, Ric.
Hey, good to talk to you both. A couple questions. Obviously, a significant transaction, opportunity to keep pushing the edge forward. We're getting a lot of questions about what does this mean for your ability to continue to look at large portfolios, possibly in Europe and other regions of the world for towers, since you are flexing the leverage up. Is there still the ability to go after some of those, or should we think of those off the table?
Absolutely, Ric. I mean, we've identified that, Europe in particular right now, but other areas, even in the Asia area are areas that we want to continue to develop on. This transaction doesn't get in the way of that at all. You know, we have a number of different ways to be able to finance transactions, particularly in Europe, as we've partnered with a couple of significant partners in that market. Now we're you know, we continue to look very closely at a number of different opportunities around the globe. In Europe, there's a lot of things going on as you well know. We talked to you about it on our earnings call. No, we continue to want to and desire to develop the tower portfolio.
Candidly, with the distribution that we have on a global basis, coupled with this particular asset, you know, we think that really puts us in a real special position from a competitive perspective. We're very anxious to continually developing out our platform globally.
Okay. Then more specific, so good to hear those are still on the table because we obviously like the tower model a lot. When you talk about growth at CoreSite's fundamental business, I know you talked about double-digit revenue growth, but it looked like over the last several years, the most recent years, 2019, 2020 and 2021, growth had been more mid-single-digit versus double-digit. Is there the ability to accelerate them into double-digit revenue growth? Is it more the acceleration of the pipeline? Or how do you get them to double-digit revenue growth more near term versus what was really a few years back?
Well, I think there are a couple things going on. Firstly, they're an incredibly well-managed business, a very disciplined managed business. They do have strong pipeline. They've obviously talked about that on their Q3 call. There are also a number of facilities, even within the United States, within their existing businesses, as well as even additional metro opportunities in the United States, that we believe that we're gonna be able to participate in now and fund and grow, that they perhaps wouldn't have been able to do on their own. We think that that's also an opportunity to be able to accelerate their growth even faster than they have in the past.
We also are hopeful that, you know, there are going to be some cross-selling opportunities even within our existing customer base that we'll be able to bundle some products and increase the overall value proposition for existing customers, which we think will also drive incremental value. I think there are a number of things, candidly, Ric, in the near term that together we'll be able to support and be able to really even accelerate that rate of growth that they perhaps would not have been able to realize on their own.
Great. Thanks for taking the question. Good luck, guys.
Thanks.
Our next question comes from the line of Simon Flannery with Morgan Stanley. Please go ahead.
Great. All right. Thank you. Good morning. You talked a little bit, Tom, about management, but how should we think about this organizationally within American Tower? You've obviously had a number of investments in this area, so you've got some people already. Are you primarily leaning on the CoreSite management team to, you know, bring this forward and run the expansion? Or are you gonna bring some people across from AMT or a little bit of both? Is this gonna be essentially a separate unit within the organization, maybe from a reporting standpoint? What are we gonna see from there as well? Just a quick financing. I was wondering if you had any response from the rating agencies. Do you think you'll need any equity to finance this down the road? Thanks.
Yeah, no, sure, Simon. I mean, first from a management perspective, they have a terrific management team. One of the key attributes of this is absolutely being able to leverage the deep talent there. You know, while we have built up some really, I think, impressive capability within our own business, we're really gonna be leveraging the capability within the CoreSite team. It will be, you know, stood up as a separate entity within our U.S. business. Steve Vondran, who runs our total U.S. operation, will be responsible for the business. There will be some, you know, opportunities to be able to integrate some functions.
I would expect that there will be, you know, people from both sides moving around such that we can absolutely, you know, be able to merge the cultures. I mean, everything that I've seen from a cultural perspective is they have an outstanding culture. It's very similar to ours, very entrepreneurial, very focused on the customer. I think that there is going to be a lot of opportunities to learn from each other, but an awful lot of opportunities to be able to grow together. I think on the equity side, as I mentioned before, you know, we do have the ability and have worked very closely over the years with all of the agencies.
I think we've demonstrated, you know, going back to even the GTP and Verizon tower transactions, the notion that, you know, we'll go up into the north of the five times, which is our stated leverage range. Then, given the kind of cash flow generation that we have, be able to bring that down in a relatively short term. Our teams continually are working with the agencies. As I mentioned in my prepared remarks, we'll take our leverage up. We expect to take our leverage up again in that same fashion. But there will be an equity component of this transaction. As I said, we'll do that as we've always done it, in an optimal way for our shareholders.
You know, Rod and his team are already all over it, obviously, but we'll be working on that one. I don't know, Rod, do you have anything you might wanna add to that?
Yeah, Tom, I think maybe I'll just address Simon's other question in terms of the reporting. Simon, as we get closer to closing, and certainly when we close on the transaction, we'll fully evaluate exactly how we'll report on this business, whether it'll be a different segment or otherwise. We haven't made that decision yet, but we're certainly putting a lot of consideration in it. The one follow-on thing that I would say is we go out of our way to really make sure that our disclosures and our supplemental information is really thorough and full. That's the direction we would certainly lean in to make sure that the investors are getting the level of information and reporting that they would expect and that we would want them to have.
We will be evaluating that between now and when we close, and then we'll let you know exactly how we'll be reporting the, you know, this acquisition in our financial statements.
Great. Many thanks.
Thanks, Simon.
Our next question comes from the line of Michael Rollins with Citi. Please go ahead.
Thanks, good morning. I'm curious, as you look at the CoreSite portfolio, what percent of your tower portfolio can be addressed or augmented in terms of the metro and mobile edge, if you look at that overlap or the proximity? The second question I had was, you know, you mentioned the opportunity to invest in development with CoreSite. Just curious if you have a sense of magnitude that you could share, either in a global context, 'cause I think that was mentioned in the slides, or even in a you know, metro edge context, just to get a sense of the quantum of investment that you're looking to drive into this asset pro forma. Thanks.
Yeah, sure, Mike. Hey, Steve, do you want to address the overlap with the eight metro centers?
Sure. What I would say is I look at it a little bit differently versus overlap. The way we see the edge evolving is more of a hub-and-spoke model. If you look at CoreSite's existing business, they've already sort of started down this path with their campus approach. The way I would think about this is that the overlap would really be something that grows out sort of concentrically from their eight metro markets. As you think about expanding their presence into maybe Tier 2 and Tier 3 markets, using that campus approach, that hub-and-spoke model, eventually could cover the entire U.S. For now, we're looking at the incremental adds that you would take to get into those Tier 2 and Tier 3 markets, and the things that are in proximity to those eight markets today.
Yeah. Michael, maybe I'll address your question on capital. You know, we've done a lot of work, of course, looking at capital, and a couple of things to point out. One is when you think about maintenance CapEx, the profile of CoreSite is very much in line with kind of the profile of American Tower, right around that 2%, give or take, as a percent of revenue. When it comes to development CapEx, the way we've underwritten this model is really the CoreSite business continuing to operate the way that it does. We, you know, we certainly view this set of assets as a very, attractive set of assets, kind of standalone with existing management and continuing with everything that they've been doing. You know, they've been deploying in the range of $100 million-$150 million.
I think, the guide for next year, they talked a little bit about maybe in the $200 million range. Certainly, that level of CapEx investment is what's in our models in terms of the steady-state standalone business. Beyond that, when you think about that next level of investment, some of the things that Tom talked about in his prepared remarks, pushing these data center locations further out to the metro edge and then the far edge, we'll wait and see how that develops. Certainly, we would expect that those investments would be good financial transactions for us. You know, when CoreSite deploys capital, I think, you know, the whole team talked about how strong their business is going through the Q3. They made reference to, you know, delivering another strong quarter. Demand continues to be very positive.
The sales volume continues to be at very high levels. A key takeaway for us is that targeted, you know, post-stabilized annual NOI yields run in the, you know, the 10%-15% range. When they deploy capital to these new centers, it, you know, it gives very compelling returns. We're looking forward to that certainly. We would be planning to fund this business at the levels that they have been, and then as and when the edge and the far edge develop, we'll be looking forward to making those capital deployments as well. At the moment, you know, we're not gonna be giving ranges or numbers in terms of future investment, but as we get into the, you know, a little bit into next year, we'll come out with guidance.
By the beginning of the year, we'll own the asset, we would have gotten through the close process, and then we'll let you know exactly what we plan to invest for 2022.
Rod, just following on that point you were making about the standalone CoreSite and then the opportunities to leverage. What's the timetable that investors should keep in mind for the possible accretion of marrying these assets together? You know, is it a one year, one to three years, three plus years? Like, what's the right timeframe that people should keep in mind to see the progression?
Yeah, I think, Michael, the good news here is that we stay true to our core principles of making sure that any transaction we do is immediately accretive, and this one is as well. You can take comfort in the fact that we've underwritten this deal in a way and plan to finance it in a way that drives AFFO per share accretion right out of the gate. Beyond that, there is a development cycle here that could be a year or 1.5 years In terms of getting new properties and building out new properties.
In terms of the accretion that might come from additional investments beyond kind of the normal course of business, my sense is it's a year, you know, to two years out where you'd see meaningful new capital potentially being deployed, you know, in ways that CoreSite may not have done it on their own. And that could be as simple as taking their model and expanding it internationally. You know, coupling their experience and their management with ours and building a few centers selectively around the globe is a place where we think we can drive value. But that'll take a year or two to really develop those assets, of course.
Michael, you know, I would also, I'd probably just add, I mean, CoreSite has actually publicly stated that, you know, they hold a lot of capacity for development, and they just haven't been able to deploy it. You know, I believe that there is going to be some expansion within their existing facilities that is going to allow for some incremental opportunity to increase some growth. Then there are also other metro areas, even within the United States, excuse me, that I know they've been very focused on but haven't been able to build out. We'll be looking to do those. You know, obviously, the metro facilities take some time to build.
I, you know, I think that kind of, you know, one to three years is probably I think a good way to think about it. Earlier on can be kind of building out existing space that the team just hasn't had the capital to be able to expand.
Thanks.
Our next question comes from the line of Matt Niknam with Deutsche Bank. Please go ahead.
Hey, guys. Thank you for taking the question. Congrats on the deal. Two if I could.
Thanks, Matt.
Hey. First, can you talk about what tilted you in favor of buying a platform like CoreSite relative to some of the smaller tuck-ins and initial organic investment you've done in the past? Secondly, maybe to go back to the last question, in terms of expansion, how soon do you anticipate leveraging the CoreSite platform as a launching pad for international expansion? Would Europe presumably be next on the list? Thanks.
Yeah, sure. You know, we've been, as I mentioned in my remarks, and as you know, Matt, we've been looking at platform expansions for, you know, three or four years now, looking for additional infrastructure models that are consistent with the overall tower model, particularly being neutral host, multi-tenant types of opportunities. We've been deploying certain facilities and picked up a couple of facilities around the country and even internationally, particularly down in Latin America, you know, we continue to look at opportunities to create scale. We can continue to build out the platforms we have. What we really identified was the need for that interconnection platform.
The CoreSite business model brings us that type, you know, brings us that kind of interconnection that is so critical to be successful in this. It's not about owning hyperscale data centers per se, it's about having access to the rich, interconnected, cloud-based ecosystem that CoreSite has built. That's why we found this particular asset so compelling.
That's how we think that this is really gonna position us well, going forward, not just to be able to enjoy the benefits of the existing business and existing growth, the diversification of customers, all of those types of things, but really that platform that we think is gonna be, you know, be unique, and create a platform that we can be able to take advantage of, not just in the United States, but then to your other point, kind of, internationally.
Clearly, Europe is an opportunity, but more importantly, there are even some areas in some of our developing markets where there is no presence, but there's a tremendous amount of traffic that's coming in and out of it that we think could be very compelling out of the gate as well. We continue to evaluate those, have identified those, have even looked to partner with certain players in some of those markets. We've identified a very specific need in some of those areas where we think that this particular platform expansion could be really meaningful and interesting.
That's great. Thanks, Tom. Congrats again.
Hey, thanks, Matt.
Our next question comes from the line of Brandon Nispel with KeyBanc Capital Markets. Please go ahead.
Awesome. Great. Thanks for taking the question. I guess beyond just putting new ways to work with the capital you have, why does owning data centers make sense versus a partnership with a much larger provider like Equinix? Thanks.
Yeah, sure. Now, by the way, you know, we're not ruling out partnerships going forward either, you know? Again, this is a neutral host in a multi-service type of an opportunity. Again, what's really unique about the CoreSite is that interconnection platform and having control over the deployment of that interconnection platform, not just in the United States, but on a global basis, as well as all its very specific cloud service provider relationships. That is something that we would never have been able to really take control of in a partnership type of a relationship. Now we have control over that, and we have really that ownership opportunity, which really will give us, I think, a leg up in terms of being able to get scale and to be able to create meaningful value for shareholders.
If I could just follow- up. When you're looking to build some new assets, what type of returns are you targeting on that initial yield? Thanks.
Rod, do you want to?
Yeah, I think, Brandon, the way you should think about that is consistent with the way that the CoreSite team has, you know, deployed capital in the past of building out these new facilities. When you get them to that post-stabilized area, we would expect them to have double-digit, you know, double-digit annual NOI yields. That's sort of a mechanism. Of course, when you build them out and you first start off, the yields are much lower. As you build up that utilization, you get the density within the footprint, you get more and more new logos kind of in that facility, you see that yield rise. We would be looking for double-digit annual NOI yields consistent with the way CoreSite has always operated.
To Tom's point earlier, you know, that model works really well. Our, you know, our expectation is that we can provide some of the attributes of our really strong balance sheet to drive a little bit more capital, maybe a lot more capital, if there are good compelling opportunities to build out more facilities and capture that double-digit NOI yield that those assets offer.
Our next question comes from the line of David Barden with Bank of America. Please go ahead.
Yeah, guys. Thanks for taking the questions. So I guess first, Tom, you know, the reason why CoreSite's for sale, despite using the word scale all the time, is that it isn't scaled, you know. Literally today, you know, CyrusOne is getting bought. QTS just got bought by Blackstone. Cyxtera just got bought by SPAC. You know, so you're kind of entering a dogfight where if global scale is your goal, you're really kind of going in the deep end right now at this moment in time.
I know we're talking a lot about development CapEx and things like that, but if you're really gonna be serious about being a global edge player, and this is the starting point for that, there's got to be a few next steps that you can tell us about how you're gonna get there. The second question I have is, you're spending 27x EBITDA of 2022 on our numbers for CoreSite. You've spent a lot of years explaining why being in the small cell business wasn't an economic proposition for you guys. It's too competitive. It didn't have the right returns.
You know, can you kind of square all the things that you've said about why being in the small cell fiber business wasn't a good idea, but paying 27x EBITDA for a data center business that's subscale in eight markets in the United States and not internationally is? That would help people really think this through. Thanks.
Yeah, sure, Dave. I mean, what we've always said is that the digital transformation that we expect to occur over the next several years is gonna be cloud-based, it's gonna be interconnected, and it's gonna be distributed. There's no one that can compete right now with the distribution that we have on a global basis. That provides us an incredible, what we believe, competitive advantage going forward. What we don't have, though, is the interconnection and those cloud relationships. A portfolio like CoreSite is not one that we're gonna continue to, as you said, a dogfight. I'll look, yeah, at their real estate that they have and where it's located and the kinds of returns that they've been able to generate. I mean, I think they've done really well on their own.
I do believe that there are opportunities to even be able to expand their business by itself. The opportunity for us and why we see this as so unique is to be able to take advantage of the real estate that we've invested in for the last 20 years. As a result of having that real estate, which is not something we need to go out and further buy because we already own it, is to be able to have that platform, which now we can interconnect, and we can have those relationships with the cloud. That's the optionality that we're really very excited about here.
I would say that in a very manageable way, we've been able to secure a portfolio that we believe is really unique, really different, and one that we can really expand, taking advantage of the breadth of distribution that we have on a global basis. You know, the cloud ramp, we've been, and you and I have spoken about, we're always looking for our next customer. Who is our next customer going to be? You know, with the kind of cloud ramps and the kind of relationships that they have with the cloud, as well as with all the logos that they have, you know, we're finding that this could be, again, a very interesting way to be able to expand our overall customer base.
This is not an area where we're gonna be competing head-to-head in the small cell kind of an environment. We're taking advantage of a platform that we think can really expand our presence within the distribution, within the site presence that we have. Now, as Rod said, we've underwritten the transaction merely based upon the business being able to grow on its own as it would have been. The benefit here is that the optionality, the opportunity value that we think we can create is something that we're gonna be able to control given the distribution that we have and something that we'll be able to realize over time. We're not looking to be in, as you said, in kind of the dogfight, if you will.
I'd argue that it's not necessarily a dogfight. The value proposition that CoreSite presents to the customers is very unique and very interconnection. If you look at their interconnection to facilities, their interconnect capabilities, they're a leading player in the marketplace from that perspective. If you take a look at the facilities that they have and the uniqueness of where those facilities are and the amount of traffic that's coming in and out of those facilities, again, it's, I think, a real leading position that they have in the marketplace. This is absolutely a terrific asset. It's a terrific asset for us. As I said, the combined businesses between the two are gonna be able to leverage each other's capabilities. I think really position us well as we try to really create that leadership role in that cloud-based, interconnected, distributed world.
Yeah, Tom, maybe I'll just add one. [crosstalk] Maybe, David, I'll add one comment there in terms of the comparison between data centers and small cells, where they really just don't compare. I think Tom kind of laid that out. I'll make one point, which is the return on invested capital profile is much different from those two businesses. You know, we look at the small cell deployed capital. Everything that we've looked at, we've deployed some in the U.S., we've got about 500 distributed antenna system nodes out there, and they're mid-single-digit returns. You don't see that flex up, or you don't find that inflection point at any point. It's just every time you deploy a new node, it's new capital, and you end up being kinda stuck in that mid-single-digit return on invested capital.
These assets, as we deploy capital, will be double-digits, is our expectation. If you look at CoreSite in particular, it's even hard to compare that set of assets for all the reasons Tom said to some of the other data centers that went out. You know, we do view CoreSite as the most well-connected data center platform in the U.S. Certainly having these cloud on-ramps in many of the key markets around the globe, it's a very unique set of assets from our point of view. I think you've seen it in the return on invested capital that the CoreSite management has been able to drive over a long period of time, you know, solidly in the double-digits, approaching it even over 20%. You don't get that in small cells.
You can get it with this set of assets if you're very select in terms of where and when you build. Taking that platform that has good, solid base fundamentals and adding capital to it and be able to expand it in the U.S. and outside the U.S. is pretty compelling.
Thanks, Rod. Thanks, Tom.
Oh, you bet.
We have time for one last question from the line of Brett Feldman with Goldman Sachs. Please go ahead.
Thanks for squeezing me in. A couple of follow-up questions around the concept of scale. First, at the data center level, you've talked a lot about the interconnected nature of the CoreSite facilities. As you're looking to broaden the portfolio, either organically or through M&A, how do you think about the need or opportunity to be more significantly invested in hyperscale facilities? That's the first question. The second is some of the larger data center operators that are very interconnection-focused have increasingly been making acquisitions that expand their service capabilities, for example, in the bare metal space. I mean, are you expecting that you'll be doing something similar with meaningful services overlay? Then, the last question, this is a broader scale question.
Is it increasingly important as you look ahead, when you see opportunities to invest in either tower infrastructure or data center infrastructure, that there'd be an obvious synergy in that particular market between the two? If you don't see that in certain parts of the portfolio, particularly the existing tower portfolio, are you considering selling off any assets? Thanks.
Okay, Brett. Ed Knapp hasn't had an opportunity to say anything, so I'm gonna ask Ed to kind of address that. Hopefully we'll be able to get through some of the questions you have, but if there was a D or an E version on that, make sure you come back to it and remind us again what that might have been. Ed?
Will do. [crosstalk] Thanks, Tom. Brett, on the hyperscale piece, we're not focused on that in particular. I think the key here is focusing on the interconnection and the cloud on-ramps. The growth in the business is really about this continuum of the edge building out to 5G. We haven't talked a lot about 5G on this call, but unleashing 5G is just beginning with mid-band deployments and with the prospects of having much different sets of applications in the future. It's at that point where we'll be able to look at how do we provision and how do we create more service opportunities to turn up those networks at the edge for our mobile customer partners, so we can create an end-to-end solution.
Imagine an ability to be able to take the connectivity that we have now in these eight metro centers and extend that into other metro areas as well as into the mobile edge. That's where the growth is. We talk about scale in the previous call about, you know, where our scale is today in classic data center. We're looking at the scale really growing and the CAGRs being super high as we move to the metro edge and into the mobile edge. Those are the areas we wanna focus on. Yes, we'll have a series of capabilities, and if we have to grow up the stack to be able to compete better, we'll be able to put those capabilities in place.
Great. The last part was just about the synergy between towers and data centers and the importance of that going forward.
Yeah, I think.
Rod, do you wanna [crosstalk]
Well, one more point I'd say is there's really three overarching things that are happening here. The first thing is the convergence of networks. We talk about multi-access edge. That's really about the wireline and wireless coming together. These networks are turning into software-defined cloud native, and it's becoming a lot easier to sort of commingle them. The second part of this is really about this edge evolution I just discussed. A lot of the capabilities that are gonna be required is to be able to look at where the applications are gonna have the best capability from a low latency perspective. That may be in an existing facility in the core, or it might be all the way out at the tower site at the edge. Those are the two components.
The tower at the edge is really where bridging those together end- to- end is gonna give us a strategic advantage. We see those things coming together naturally over time as 5G opens up the opportunity to have local breakout of traffic. Today, we don't have that in the mobile networks. That's coming with the current generation of Release 16 and the core network being upgraded to 5G core. That'll open up the network even more and allow our assets, our new assets, to take front and center stage.
Yeah, Brett, maybe I would just add to that from an expense synergies. This is not an expense synergy-heavy transaction. We're not looking for significant synergies and expenses. This is about future growth going forward and all those elements of upside beyond kind of the core business, the things that Ed just talked about in terms of you know utilizing tower sites and connecting those into edge compute centers and metro edge and those sorts of things. We certainly do have some expense synergies. You've got two public companies. There's certain expenses that won't be needed going forward, so we built that in the model. There's opportunities maybe for a little bit more than what's in the model, so there could be some upside there.
You really wanna think about the synergies being revenue synergies, and they would be upside to the model really and potentially significant upside to the model. In terms of your question about selling assets, the only thing I would say there is we are certainly long-term investors. We wanna hold and operate productive assets. To the extent that we have any assets that are unproductive, we'll make decisions around that. We don't expect that certainly in the CoreSite transaction. There is one center that they may be exiting, that they picked up in a smaller acquisition kind of along the way.
We'll continue to look at those sorts of opportunities to prune the portfolio, not just on the data center side, but you know we dismantled a few towers here and there. If there are unproductive assets, if it's better for the investors to have those assets disappear, you know, we certainly do that. This is really about revenue growth synergies, and the significant opportunities that the metro edge and the far edge could hold, as well as taking this business international.
Great. Thank you.
Okay, thanks, Brett. I think that operator completes the kind of Q&A. I mean, you know, obviously, we will be around to talk with you all over the next week or so, and today in particular. I really appreciate you all coming on, as I said, kind of right up front in such short notice. We're really excited about this opportunity as you can tell. We think it's really gonna be a game changer for the industry. CoreSite has been an incredibly well-managed business. We think that there are short-term opportunities to be able to even expand the growth here within the United States, within the facilities, as well as in some new areas.
As Ed said, we're really excited about the opportunity that we can create here by combining the businesses and really creating a really unique global service offering that we think is gonna be really well suited and create some really interesting value for us over the long term. Again, thanks for all your interest this morning, and I'm sure we'll be talking with all of you very shortly.
And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Conferencing Service. You may now disconnect.