EFTA Document EFTA01389033

Deutsche Bank Markets Research Rating Buy North America United States Financial REITs Company CyrusOne Reuters CONE.00 Doc.rnt.ero ecnenge Te.-ket CONE US NMS CONE Demand in not dead, in fact it is very much alive CEO transition mars an otherwise perfectly fine quarier With sentiment turning negative, the market appears to be searching for reasons to sell and CONE's unexpected CFO transition provided a reason in 30. While the prior CFO's short tenure raises questions, we think liquidity is in great shape with no need to raise equity any time soon, which should help in a smooth transition. Op results in the la were also a positive. While the $27MM of 30 bookings fell short of the last 3 Os, it was CONE's 4th best ever and the outlook was about as positive as we've heard (sales funnel 2x the 20 level). Also, though churn will be above trend in '16, the '17 outlook calls for improvement to the low end of the historical guidance range. Reiterate Buy. Leasing activity and pipeline reflective of strong demand CONE signed a respectable $27MM of annualized GAAP revenue (inc. $14MM reported with 20 results). While this was below the level achieved in the last 3 quarters it was the 4th best print on record and does not include another 25kcsf in early 40 which we estimate will add -$4MM annually. New lease rent/KW came in at $126 vs. the prior 4 0 avg of $147, given the previously- announced wholesale pre-leasing activity announced in NoVA. Excluding this activity• bookings over the balance of 30 averaged $197/KW. Total utilization was 85%, while the stabilized rate was 93%, both 100bps higher than 20. Churn of 3.8% was higher than recent quarters, and included 1.4% proactively taken back by CONE, although it was in-line with the 2H outlook. Initial 2017 commentary suggests a reversion back to about 6% churn. Updating etaintares folk/vying s() earnings We have updated our model to reflect 30 results, revised guidance, and our updated outlook. Our 2016 normalized FFO/sh estimate moves to $2.60 from $2.56, FAD/sh moves to $2.22 from $2.44, and adjusted EBITDA moves to $274.9MM from $275.3MM. For 2017, normalized FFO/sh moves to $2.96 from $2.95, FAD/sh moves to $2.80 from $2.90, and adjusted EBITDA moves to $339.2MM from $337.7MM. Our FFO estimates increase to reflect updated run-rates and one-time items, while FAD falls on higher straight line rent. Valuation cox( risks We are lowering our TP to $57 from $59. Our TP is based on a 50:50 blend of our FAD-based target and our EBITDA-based target. Risks include the success of CONE's dev efforts, heightened operating risk vs. peers in light of higher tenant and geo concentration, and higher SG&A business model. 31 October 2016 Forecast Change Price at 31 Oct 2016 IUSD) 44.61 Price Target 57.00 52-week range 55.66 . 33.61 io, Ci A 744,, Elcr;, mrie, ( Research Ana ct Research Associate 1.8100t Price 59.00 to 57.00 I -3:4% FF0 IUSD) 2.56 to 2.60 I 1.3% Saint Demme Dant !Nice/price ruletivo —CviusOn• SOP 0001NOIDC IP•bard) Peri ormancell'o) Irn 3m 12m Absolute -6.2 -18.6 26.4 S&P 500 INDEX sem .en -1.9 -2.2 2.3 Year End Doc 31 2015A 2016E 2017E 0 FFO 049 0.63A 70 FFO 0.51 0.67A - 30 FFO 0.57 0.67A - 40 FFO 0.61 0.62 - FY FFO (USW 2.18 2.60 2.96 P/FFO (x) 14.7 17.2 15.1 Dividend yield I%) sown onenessniesinew roarer ems 3.9 3.4 3.7 Deutsche Bank Securities Inc. Distributed on: 01/11/2016 04:06:54 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 057/04/2016. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0093185 SDNY_GM_00239369 EFTA01389033