Right. Good afternoon, everybody. Hope the conference is going well. My great pleasure to welcome Keith back from Equinix. Great to have you here, Keith. I think you have a space, safe, safe harbor statement.
Yes, I do. We might be making some forward-looking statements and, to the extent that that we do, please refer to our risks and uncertainties in our SEC filings.
Great.
Thank you.
For Morgan Stanley, morganstanley.com/research disclosure. If you have any questions, reach out to your MS representative. So, the conference theme is like it was last year, I think, AI and generative AI, and you know, certainly, data centers have been at the center of a lot of those discussions. It feels like you've done a lot since we sat down this time last year. But you had your investor day in June. You put out your guidance just a few weeks ago. So perhaps just talk us through what you see in the kind of the 2024, and then beyond that.
Well, yeah. So thank you for sort of setting the stage or setting the table. We just gave our guide on February 14, 2024. Coming off the Analyst Day, we continue to feel very good about the business, albeit we talked about some crosscurrents, or Charles referred to some crosscurrents in the business. But notwithstanding that, which... And I'm happy to talk about, the theme for me would be that demand feels good, although there can be troughs. Lines aren't always straight, as we know, in business. And the supply feels like it's gonna get more constrained, and therefore, the pricing environment feels very, very solid.
That coupled with where we are in our, our evolution, we're inflecting on a, on a cost model, and so simultaneous with continuing to grow the business, we can operate the business more efficiently. I foresee that as something that you, you should continue to expect, on a go-forward basis. And, and hence, the return that we can deliver on, on a per-share basis, cash flow on a per-share basis, or in our case, AFFO per share, I think continue to... can continue to be very, very healthy. You know, with, you know, with one thing that's somewhat out of our, out of our control, but something we certainly manage against very tightly, is currency. I think currency, you know, again, on the first guide, you saw the benefit of a small move on, on the US dollar.
I think, you know, as the U.S. dollar continues to trade, I think more downwards, you're gonna see further inflection.
'Cause what are you, 60% non-US at this point, approximately?
Yeah, we're probably about 60% non-U.S. And so, you know, as I said at Analyst Day, a 5% move can have a dramatic impact on our AFFO per share. And to suggest that 5%, you know, a weakening of the U.S. dollar, 5% relative to some of these currencies, maybe it's the cleanest shirt in the dirty laundry, as they say, but it's still - it feels like the... I think, with the U.S., eventually going to see rates come down, I think you're gonna see a move in the dollar accordingly, and that's gonna benefit us.
Great. Well, maybe we just pick into the guide a little bit. You had record xScale bookings, 90 MW, I think, and, you know, that spoke to some of the AI demand, but then you still have that elevated churn, so-
Sure.
So, are you, is it very, very different between hyperscale demand and enterprise demand, or?
It's probably a little bit like the equity markets, right?
Mm-hmm.
The Magnificent Seven, to some degree. Look, the xScale demand is, is very real. And as we said, we sold about 90 MW, $1.9 billion of... $1.8 billion of contract value, 15-year term. The hyperscalers that you know, that you would expect, are consuming that. We're about, close to 85% utilized of what we've announced and what we've built. If, if you add to that, what we're negotiating right now, we're probably north of 95% sold out. And, you know, we have a commitment to put up roughly 800 MW, and we're at 330 right now, and so we have, we have a runway, you know, a, a nice runway ahead of us.
Concentrated in Europe and Asia? Yeah.
I think we... And so to some degree, the Americas-
Yeah
... so Brazil, Mexico, and like, Canada. So I think there's an opportunity. I think the opportunity can be much greater, but we're gonna continue to show, I think, some level of discipline around how big that we want that to be. But I think, you know, as Charles alluded to previously, I think that, you know, we were historically not gonna focus on North America. I think, actually, North America has applicability now, and so that's gonna be an opportunity. And then as it relates more to the core business, yeah, we saw a little bit... We've seen churn, as you alluded to, but churn to me is more. I feel like we're a little bit of a lagging indicator. So when you saw a lot of those variable price, variable consume businesses that were...
You know, they saw sort of a downturn Q1, Q2 of last year. For us, I think we're just a lag, a bit of a lag, and so, you know, with the market continuing to pinch on a number of customers, or pinch just you know, generally speaking, you certainly have the winners and you have the losers. I mean, we saw that in the earnings call. There was a, you know, a fair number of companies, I shouldn't say customers, 'cause they're not all customers, that saw, you know, they disappointed on the guide. And for us, I think that just it presented itself in the last sort of quarter and a half. And so we anticipate that's gonna continue until we hit the trough.
I think you're gonna see an inflection in the second half of this year, you know, notwithstanding what, you know, what maybe some of the macro conditions will do. But it feels like we're in a, you know, we're in a good spot. I felt it was a good guide, knowing what we saw, and although disappointing in some respects, 7%-8% versus our 8%-10%. But I'd rather go out conservative than go out aggressive, because then we're just chasing it. And, you know, we, you know, we knew that we're doing other things to create value for our, for our shareholders, and that was managing the cost model differently.
That's why you saw 100-- you'll see 160 basis point improvement on our margin line, and I think that there's plenty of runway ahead of us for that.
Great.
So it's a combination to expect. If I just sort of finish off my thought, we want to be as transparent as we think. We don't need to go chase something. I'd rather delight you later than disappoint you. And so our view is always be, "Let's do what we need to do for the business." The market knows that it is a tough market, and if anybody sees it differently, other than those that are investing in the Magnificent Seven, and that they've had a hell of a run. But at some point, you've got to step back and then say: Well, that's not a space that I'm going to play in that much. We're going to play in it, but we have to be careful that we're not putting all our eggs in that basket.
It's, it's akin to what happened with the clouds 10, 12 years ago. You know, it feels like a little bit of a Groundhog Day, that everybody wanted us to go chase the big cloud opportunities, but that wasn't, that wasn't where we wanted to be. We wanted to be the place where once the clouds were, were established and the customers were consuming, they had to bring it back to a place that the, that the data got aggregated and, and distributed and consumed by the, the consumer or the enterprise, and that's the major metros. That will hold true for AI, too.
That eventually, whatever happens in the large training models and where they happen to be, and these big deals that get done by whomever, that's gonna. We're gonna be the beneficiary of all that, but it just takes time to root there.
Right. And on the enterprise behavior, I think there was a comment on the call, something to the effect of that IT budgets were getting squeezed a little bit, that, you know, CIOs had to make room for AI spend, and that they would look at their overall IT spend a little bit more critically, 'cause the board's not gonna give them an extra 10% or 20% just to-
Well, I-
-for kicks.
One of your peers at another bank told a story at one of our events. He said, "Well, I talked to our internal team, and they said that our IT spend is being cut by 10%, but data center spend is going to increase by 20%." And it just gives you a sense that this is... You've got to find ways to create capacity, and whether it's cutting stuff that got you to here but won't get you to where you need to go, I think that holds true. And that, and Equinix, too, I mean, part of it, we're stepping back and looking in the mirror and saying: Well, what are we doing differently, and how should we sort of spend our money?
Our vendors and suppliers and partners know full well that the days of enjoying too much profit on the heels of Equinix, those days are over, and that's why we've invested in a procurement and strategic sourcing team, and we have energy teams that focus on sourcing, hedging, and renewables. So we're building these teams to create advantages for ourselves and hopefully put us in a better spot relative to anybody else in the market, in our market, I think. And that holds true for our sustainability and renewables team under Katrina. You know, these are investments we've been making over the years, and you're now starting to see the fruits of our labor.
It was hard because I know that certainly as an investor, you wanted to see more profit, but we also knew we had to invest for our future, and we've done that. Now we're benefiting from it.
Great, and you brought up the margin expansion point earlier, which I think was a positive surprise for the street, and people have given up waiting for 50% margins down the road. But can you just unpack the, you know, the what the elements of that sequential improvement are on margins?
Well, there's a number of things, but it's just, it's still early days. So I mean, the things we did, and you heard us talk about it, we needed to look at our human capital differently. We've got different, you know, different initiatives underway. One of them is Project Home. I've spoken to some of you in the room today. Project Home is really about an initiative to source your human capital in a more cost-efficient market. Toronto, Dallas, Singapore, Manila, Bangalore, Bogotá, and Warsaw. So seven markets. And, you know, we think we can create 50-100 basis points of improvement just on that one project alone. Now, it takes time. It's not, it's what we call, it's not a lift and shift, it's a cap and attrit.
So as people trade out of the business, we're moving their, the workforce to a different part of the world. So that's phase one. Going after our corporate real estate. We just don't need as much corporate real estate. We closed two offices in the Q4 , as you're aware. We're being more judicious on our headcount planning. We're going after, you know, optimization and our product. And I would tell you that there's a list. You know, we hired a transformation officer in Nicole Collins. Some of you might have met her, and she's awesome. But we're gonna go after those three or four strategic projects, and it's really about driving revenue, customer success in our go-to-market engine.
There's things that we have to keep on doing because, you know, we've grown the business quite substantially over the last 5 and 6 years, but the systems and processes have to grow. You can't be a $10 or $12 or $15 billion dollar business on the back of a $5 billion dollar system. And so that's why, you know, you'll, you'll see us continue to invest in our, our CRM and our quote-to-cash opportunities.
... And what are you seeing on cost inflation? I mean, it will come onto your pricing power, but how is that working?
Yeah. Look, inflation still exists. Obviously, the levels are much higher. All you have to do is go to a restaurant or your utility bill, you'll see it. You'll see rates are high, and so we pass that on, and you've got to increase your pricing to reflect that. And we think we can continue to inflate, which is good. We're gonna pass, you know, our higher costs on. I think we can continue to get a nice return even off the higher invested capital. But, you know, you're as a business, inflation isn't necessarily all bad, depending on where you are. And so we're working hard at, you know, driving down our costs, both our capital and operating costs, and simultaneously working to get the revenues that we need.
I think, you know, going back to my earlier comments, in a more constrained environment and whether, you know, some say, well, you can't have a trough and yet be constrained, and I would argue it's just a matter of timing. I think we are gonna get into a constrained market, largely because of power, supply chain, civil and social activism, higher capital cost of capital, higher sort of borrowing costs. So, you know, the capital markets are tough. A lot of these big deals that are being announced out there, they still have to figure out their funding. So it's gonna take time, and we know it's hard to raise capital in this market, notwithstanding, you know, what some can do.
But I just think it's, you know, the way that the model is evolving and the demand that's gonna be put on the industry, I think is gonna be substantial. But I also think that's the opportunity that allows you to get outsized returns relative to many other industries or companies out there.
Great. Can we talk a little bit about the pricing opportunity? Your same-store sales have been pretty strong over the last couple of years here. You did have a large increase of power pass through a year ago.
Yeah.
We were sitting down, it just sort of happened here, but I'm sure there were some learnings from that as well. But your contracts are, what? 3-4 years, and how are the escalators looking right? So relative to maybe some of the hyperscale firms, you've got a faster cadence here, which may give you a little bit better leverage to move pricing up-
Yeah
... on a more consistent basis.
Yeah, look, I think our power pricing. We did a modest reduction this year, about $68 million in revenues related to power, to power costs.
Is that global or is that mostly Europe again?
That's global. That's global-
Yeah
... but mainly Europe.
Yeah.
Mainly Europe. You know, we have a very strong hedging program. Some will like it, depends on where we are on the upswing or the downswing. But, you know, when you hedge into your positions, you, you can be above or below spot, and you have to look at your forward contracts and your ability to contract, looking out. I think we do a good job between our regulated and unregulated markets. But it's not just about how you contract with the utility provider, it's what are you doing to run the business more efficiently? You know, and our objective is to take roughly 4%-5% efficiency out of the system or be more efficient and take that cost out of the system.
And so you get to take that and redeploy the, if you will, the infrastructure. I think that's another really important thing. It's not. You can squeeze the lemon from both ends. You can work, you know, to obviously work to to increase costs or pricing where, where appropriate. But at the same time, if you can run the place more efficiently, the customer benefits from that. And so it's a combination of those two things that I think has made a difference to our model. Looking forward, too early to tell, but we're already putting our hedges in place for 25. And again, you know, we have parameters in which we live with, and we think that it holds really well for the customer. And who knows where the markets are gonna go over the next sort of 6-12 months?
But again, I feel really good about what we're doing.
So as we look forward in your guidance and the long-term guidance, is it gonna be more balanced between increased cabinets billing and MRR? Because a lot of the last year was primarily MRR.
Yeah. I would... Look, if we do what I think we can do, you're gonna see more MRR-
Yeah
... and more cabinets go out the door. But I also think, you know, if we get less cabinets, you're gonna see MRR per cabinet go up because it means that more power is being consumed.
Yeah.
So a higher density environment and the like. But look, the expectation at some point, notwithstanding the higher density, more cabinets should be... For us to deliver against our expectations, the expectations we set for ourselves, is we sell more units, more cabinet units.
Good. So, just to dive into AI a little bit deeper, I think a year ago you were saying, "You know, we're really positioned for the inference side of this." And obviously, you've got xScale getting some benefit right now, but you signed the NVIDIA, you know, partnership for sort of private AI. So update us a little bit, and even NVIDIA themselves, in their earnings call, were saying a bigger percentage of the chips were now inference-focused-
Mm-hmm
... than they were training. But what do you see-
Yeah
... right now and, and the next year or so?
What I, I see is executing, it's gonna be a multi-pronged approach, no surprise. The xScale business will be the beneficiary of those large hyperscalers consuming our capacity, not only present but on a go-forward basis. That will sit out in the xScale. We'll reap the benefits on a non-recurring basis, on the revenues from the sales and marketing fee and the development fee. And then eventually, it'll turn into our operating asset, and we'll get asset management fees and operating costs. And then the third piece of recurring will come in through AFFO, through our 20% equity interest.
What's the timing on when that really becomes material?
Well, I don't think it ever really becomes material in the sense that I've always said... Sorry, pardon me. I've always said that on the revenue side, it'll be 1%-2% of our revenues. So I mean, so 2% on a $8.8 billion business. So let's just say roughly $180 million, and that will grow over time for sure, but it'll never be substantial. But the value on an AFFO per share basis is 3%-5%. And so that adds a lot of value to the business. I think there'll be promote fees, you know, as our partner or partners choose to monetize their equity share. I think we have the opportunity to earn promotes as well.
But that, you know, those are all pre-negotiated, and we'll see how it plays out. But overall, I feel really good about, about, that. But the, you know, that's so the AI or the large hyperscale stuff, and it might not just be AI, they'll be doing other things with that capacity. I also think that there's, you know, the, the Lambdas, the CoreWeaves, the Crusoes , and others who are coming in and basically being an aggregation or network. They're putting these nodes inside our facilities, and they're doing what they do, but the benefit is they access our environment to do part of it. But that's not where the value is.
I think the value is what you alluded to earlier on, and the inference and the generative work and the inference work, where that falls, I don't know. But this private DGX Cloud with NVIDIA and the opportunity set in... That we would have with those customers, as they think a little bit about how do they use AI as a means to an end inside their environment and keep it private? And the way you can do that is no different than cloud. You can have a hybrid cloud, you know, a hybrid multi-cloud environment, but you can also have AI, which is very, very private. And I think doing that inside Equinix, we're best suited for that, largely because we have all the networks.
We have, you know, the cloud on-ramps, we have the cable landing stations, and I think we're gonna have an AI ecosystem. And that just feels like it's gonna present itself. Not to, we're seeing the green shoots, the early opportunities. I know. Again, working with our friends over at NVIDIA, hopefully that will present itself much more meaningfully. But what I would say is, I still think it's really early. Everybody wants, you know, they want something to go hang their hat on, and there's gonna be a tremendous number of great use cases, but they're not presenting themselves just yet. I think you need a few more quarters. And you heard one over the weekend, I forget the name, Klarna or something, you know, it was a call center.
And they talked about, you know, how they can reduce their cost to operate and, you know, the value that it can bring, blah, blah, blah. I get that. But how does it present itself inside an environment like Equinix? I think it's gonna be very, very healthy.
Maybe just pull back a little bit on, for people who are not familiar with your announcement with NVIDIA and just how, you know, the economics work. Who’s buying the chips? Who’s buying the servers? How do the economics all work?
Yeah, the beauty is we don't buy the chips or the servers, it's the customers. So it does sort of like, and NVIDIA has a broad set of customers-
So it's a bundled offer to the customer, yeah.
Well, I think that they're working obviously with the large hyperscalers and others, but they're also working with very large enterprises. Those enterprises are, "Well, how do I take what you're offering and put it into a production, a productive environment?
In a proprietary data set, yeah.
Where would that be? Well, Equinix. They have the networks, they have the clouds, they have the capacity. That's the right place. And so you create an environment where somebody else is paying for it, and we're the recipient of it. So NVIDIA, again, you know, sells what they sell, we do what we do, and the customer benefits. But they have to, you know, they have to ante up.
You're leasing cabinets.
Yeah, it's just, it's an ecosystem.
Well, that brings up the question of power density and liquid cooling, and how do you think about that? I think you'd had a reference in your K about building new IBXes at 2x the power density of the existing ones.
That is true. But that's true just because, you know, there's an increase in density across the different industry groups. But there's an element of use cases where you need liquid cooling. It's just that it's so dense that you either have to do immersive cooling or... I mean, you can do, to some degree, probably up to 20 kW per cabinet, you can manage within the current environment. But once you get you increase beyond that, you have to do immersive cooling technologies, and you're basically you're immersing the chips and the chipsets because they're getting so hot. And you probably can manage the business, again, I'm not a technical person, but 50-60 kW per cabinet, so meaningfully higher, right?
Our very first data centers were building to 1.75 kW per cabinet, and now we're talking about 60 kW per cabinet in some cases. But we have the ability in 45 markets, so roughly 100 data centers, to do liquid cooling, and now, on a go-forward basis, our technology will... I'm not sure we'll ever build a data center that's wholly liquid-cooled. But I think there's a scenario where there could be components or data halls that would have a different technology to make sure that we can sell at a higher density.
Give you the flexibility, right?
Have the flexibility.
You can, you can deploy the NVIDIA solution with the tech that you have today?
Yes.
Yeah. Great. So, I think you talked about sort of late 2025 into 2026 as really being when you thought inference would scale for Equinix. Is that, is that the right timeframe to really-
Yeah
... be material?
Okay. Well, scale, I'm not sure. Material, obviously, that's very subjective. But I think the significance that if it takes root, as we all are anticipating. I'm not sure why you wouldn't start to see some of these use cases in a more meaningful way start to show up in the second half of the year, but certainly in 2025.
And just to-
And there'll be these one-off signing. I mean, and then it, it'll be early days, and Company X will do something and, you know, whether it's a pharma or a financial institution, they're gonna go do things, and then others are gonna try and emulate them. And that's key, you know, that's how ecosystems get created, and... But I don't know if it's widespread yet. And then how AI gets infused into, you know, whether it's an Oracle or a ServiceNow or, you know, any of these large software or solution-oriented companies, how they come to market with that offering.
Look, I think that presents itself maybe differently on maybe they don't give back some of the space that we're gonna get retooled for other purposes or return to us, and they start to think about, "Well, what else can I do inside that environment?" And, you know, Charles alluded to it, I think, on the call, where we're starting to see some customers who are moving their technology and already bought, if you will, technology type two, and they still are living with technology type one, and they've got to move that out.
But they're saying, "Well, maybe I'm gonna collapse that and move it to technology two, but I might keep the space because I know how constrained it is," particularly in some of the markets around the world, and particularly in the assets that, you know, they're really critical to their offerings.
Yeah, that makes sense. And you talked about the U.S., for xScale, so what's the plan there?
Well, I was basically just saying, I mean, we haven't guided you to anything, but don't exclude the U.S. anymore, or for that matter, North America, Canada as well. I think there's opportunities that will present themselves.
Yeah.
You know, we're already doing xScale in Brazil and Mexico. We have Silicon Valley. There'll be other markets as well. I'm not sure you'd see us, though, and this is just, maybe this is just Keith speaking. We'd have to talk to Jon Lin about it, but I'm not sure Ashburn's a place that you'd see us do xScale, where everybody's built around us, and we're that sort of hub that everybody's connecting to. I'm just not sure we need to play in that space.
But probably off-balance-sheet.
Generally, off balance sheet. It's hard to imagine we do much on balance sheet.
Yeah.
I mean, I think there's a scenario for at least a temporary period of time that some stuff might be on balance sheet. But it can. You know, as I was talking to some of our investors today in our meeting, capital is hard to go get that capital and to think about constraining oneself just to go do these large deals when there's so much else that's out there. And maybe that's naive on my behalf, but I think, you know, we want to continue to take advantage of that opportunity. And if we all of a sudden constrained ourselves because we went and did a big deal, and I mean, as you know, there could be very sizable deals out there, our balance sheet can only tolerate so much.
And that discipline that we've shown over the last few years allowed us to continue to grow and scale when others were basically selling off their future.
You know, pick your spots.
Yeah, I think you got to pick your spot. And, again, I feel very comfortable that, you know, we have the wherewithal. We certainly have, I think, the business plan, and, you know, we shouldn't veer from it. AI is gonna be a great opportunity as, as whatever the next thing is after AI. And I think just having that foundational element of networks and clouds and, and subsea cable landing stations and the like, and eventually satellite, I think we should just, just keep on doing what we do. And if that sometimes means moderating your growth, because you and I have talked about this over the years, we could fill the darn thing up really fast if you want, but it comes at a price point that I'm not sure is good, and we know that supply is gonna get more constrained.
The customer who has connectivity, who needs to be there.
Well, and then eventually, you become less relevant, and so you always have to create environments for people to grow in. And, and so that sometimes means you, you step back on your growth rate.
So let's assume inference is coming in the next 18-24 months. Remind us of why Equinix is so advantaged in that scenario with your global locations and, you know, how do you stand up against competitors if they're looking to find that low latency connectivity?
I think you just answered it. I mean, but the fact is, we are globally diverse. We'll be in 75, 76 markets. We're looking at more. It wouldn't surprise me if we get to 80 markets over the not-too-distant future. We're gonna be in 35 to 36, 37 countries. We have, you know, we have the networks. We have the cloud on-ramps. We have the subsea cable landing stations. We have the fabric that connects everything together, and so when you think about a customer and how they want to consume, aggregate and consume and disperse, I just think we're the best representation of, of something that is very fluid.
You have dominant share on the cloud on-ramps, right?
We have dominant share on the cloud on-ramp.
It's probably a good proxy for...
But the reason that we have dominant share of the cloud on-ramps is because we have, we're dominant on the network side and the cable landing sites. That's where everybody wants to aggregate to, and that's why the clouds, they sit on top of that, and then the customers sit on top of that. Basically, we've given them the, the entryway to the internet and the cloud, and therefore, the customers consume it. Because it goes both ways. It's those who are distributing and those who are receiving. So-
... you alluded to the power issue a couple of times already. You've got a license, you've got 20 MW, I think, in Singapore. A lot of people didn't have to go to Malaysia. Dublin is problematic right now-
Mm-hmm.
And, you know, whether it's Ashburn or Silicon Valley or whatever. So I think if you can just take the issue more broadly before the Equinix specific situation, but, you know, is this is that gonna be a real limiting factor, or can people move to Manassas or move to Ohio or Mississippi or?
Well, I think they can, yes. I mean, look, some of our investors asked us that question: "Well, what does it mean when somebody's gonna have to go somewhere else to get access to power?" And well, that has held true for many years, as you know. Whether it's the Apples or the Facebooks or the Oracles, Googles, whomever, they're in a lot of very remote locations, but the customers haven't moved, and they still have to consume the consumer, the enterprise. And so there'll be some element of that, yes. We might have to build elsewhere, and we do that. So when Singapore ran, became full, and they put basically a limitation on future growth, we immediately went to Johor, Jakarta, and Kuala Lumpur. We're looking in Thailand, Philippines, Vietnam.
Are there properties to buy as tuck-ins, or is it primarily just buying up some land?
Probably a little bit of both-
Yeah
... to be honest.
There's no big platforms anymore.
There are no platforms.
Yeah.
I mean, you got Global Switch, but I don't think that's a platform that we would... Oh, there's Global Switch. I'm not sure that would make sense for them or for us. But then there's Hong Kong that's becoming more relevant again. You know, there's a little bit of thawing of relationship between ourselves and China, and I think that will present itself. And so Hong Kong, because Singapore is all full, full up, if you will. The house is full there, and so people you can go down to Sydney, but that's too far, and so Hong Kong feels very relevant again. We're building our Hong Kong 6 asset up there. And so those are the kind of things you do, but we also can bifurcate a market. Think about London. We're in Docklands, but we moved the market to Slough.
In New York, we moved it to Secaucus. You know, there, there's other things you can do. And the beauty that we have is we create all, we take the assets, and we put them all together anyway. They sit on top of our fabric. We have, if you will, at least a name, maybe not in application, we have a platform, and that platform allows customers to be resident somewhere and access all of our assets everywhere in the world. And so that's something that others just can't do, and we're not gonna let them do it. They can ride their own fiber if they want to.
What about other elements of the supply chain? We've been hearing, like transformers and
Yeah
... backup generators and, I mean-
All of it.
... you've got a big development pipeline.
Yeah. And so again, having a, you know, a good sourcing and procurement team has done wonders for this company. And, you know, we're planning. We have, like, London, Slough, we reached capacity. I saw there was a note today from Segro, at least out in the marketplace. But we bought a large piece of land that will take us out the next 10-15 years, and so we'll develop on that. We'll prepare the land, we'll get the permits, we'll access the power, we'll do our best to make it as sustainable or renewable as possible, and we'll continue to build on those places.
We're looking at, at least in the major metros, as far out as we can then makes, you know, on a reasonable basis or responsible basis with, you know, hanging up too much development costs sitting on our balance sheet, land development. And so we're doing that. You know, we're managing out and thinking about it, and we measure it on the IBX on a per building basis across each market. And we keep you know, the buildings will be defined on whether it's a network-oriented building or a cloud or an AI or whatever it may be, and we're gonna map it all out. And the team does a really good job of figuring out what we need, when, and where.
There'll be some markets that are just gonna be harder to build in, and so you have to decide whether you'll build or you'll go somewhere else. We're okay with that. I mean, it is what it is, but we know we're not competitively disadvantaged, and we have access to all those networks. So wherever that may be, if we're full up in Frankfurt for whatever reason, I'm using that as an example, then what is the next market that we could go to? Warsaw is very relevant. You know, we talked about we sold a full building to one of the large players in Warsaw recently. Madrid is very important, although it's, you know, Madrid. I should have said broader Spain, but it's got limitations because of water.
So there's a number of things that are going on, and I think if you—as long as you're staying ahead of it, and we have professional teams that just focus on that, that I think create all these opportunities. And I always talk about our competitive advantage. And some of it, I refer to it as somewhat proprietary. Nothing's really proprietary per se, but by investing in it and getting ahead, whether it's our sustainability team, our renewable team, our power procurement, or sourcing, or hedging team, these are all value adds along, you know, our supply chain that create opportunity for the future. And I just think that, you know, despite what, you know, despite what others might be doing, I think, you know, we've got our model right.
We just have to keep on investing and think the next step, you know, forward. Singapore, we did a lot to win that. I can't tell you exactly. You made a reference to a number. I can't sort of confirm or deny that, but what I can tell you is we made a very heavy commitment to the Singapore government, and we also are gonna invest heavily in Indonesia and Malaysia, and work alongside all the different parties so that we can create capacity for our customers in that part of the world. And those are good markets. I'm excited about what Indonesia has in store for us, and we have a really good partner there in Jardines. So things are going well from that end.
You always have that great slide in there of your cash on cash returns and your stabilized businesses. How are you thinking about the incremental returns on the dollars that you're committing today?
Yeah, the beauty is that's not changing.
Yeah.
It's not changing. Largely, it doesn't change because we deliver something that's different than most.
Still high 20s, I forgot the last number.
Yeah, I will see. You know, it ranges depending on the phases and, you know, the markets. Markets are different, but it's 20-30, and you have some stuff that's a little bit low at times because you're first phasing or it's a new emerging market. Then we have stuff in the high 30s and low 40s. But, you know, I think playing in that zip code of 20-30 feels really reasonable, and that's before leverage. Then at the corporate level, as you know, we put leverage on the business. I think we're appropriately levered. And, you know, even though we carry a lot of cash, that cash is all spoken for. You know, you got to carry a certain amount of cash in the business, given the investments and the growing dividend and the like.
So a lot of what you hear us talking about now is not about cash for this year. We're already planning for 2025 and 2026. Okay, well, what do we need to raise next? What debt do we have to refinance? And we're probably going to be a little bit ahead of what we thought. Quite openly, you know, our cost of capital, at least to refinance our debt, is going to be below what we anticipated, so that's good. Gives us a little bit of wind at our back. Euro seems like the natural place for us to raise our future debt. Our teams are, you know, really smart. We raised capital in Japan and Switzerland last year, 2023, because we can.
You know, we have operating assets of scale and size that we consume in market, and/or we've got swaps or other things we'll put in place to fully advantage of that opportunity. You know, when we did that JPY 600 million equivalent in March of last year, we basically transferred the part that we didn't need in Japan back to the US at 115, and the yen is trading at 150 right now because of the swap arrangement we put in place. I think it was 112, to be honest. So really good rate. So when I translate that back into dollar, I get value for it.
You can't just go and raise a whole bunch of money in Japan at 1 or 2% and just move it anywhere in the world, because now you've exposed yourself to the currency, or the tax implications, or the accounting implication. As a public company, we just have access to these markets, and I think that's something very, very different than most.
Great. Well, maybe just one last one tying into that. You've done some green bonds here, and maybe just a last word on sustainability and, you know, where, where are you seeing, you know, the biggest-- Are you moving to on-site generation to, you know, you know, with all these grid issues, are there sort of... You know, are you looking at wind, solar, fuel cells? What's the nuclear? What's the-
Yeah.
-topic here?
I know we're running out of time here, but absolutely, we're looking at all sources of energy. We have teams that just focus on sourcing, so, you know, from renewables to nuclear. And I would just say we do on-site generation. In Dublin, there's no EirGrid that can't deliver the capacity, and so we're using gas turbines, technically jet engines, inside the plant for a hyperscaler. In other markets, in Silicon Valley, in New York, we're going to use Bloom Energy's fuel cells. So I think we're setting ourselves up to do the PPAs. You know, we have a commitment to be 100% renewable by 2030. We just signed our last PPA for one of the markets that will take us to 100%, and so I'm excited about that.
We're in a really good spot from an energy sourcing perspective.
Great. Thank you-
Good
... so much, Keith.
Thank you.
Really appreciate it.
Thank you, all.
Thanks.