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Based in Carrollton, TX, CyrusOne (CONE) scheduled a $281 million IPO with a market capitalization of $1.05 billion at a price range mid-point of $17, for Friday, January 18, 2013.

Four other IPOs are scheduled for the week of January 14, 2013. The full IPO calendar is available here.

S-11 filed January 8, 2013.

Manager, Joint Managers: Morgan Stanley/ BofA Merrill Lynch

Co Managers: Deutsche Bank Securities/ Barclays/ Citigroup/ KeyBanc Capital Markets/ RBS Securities/ UBS Securities

SUMMARY

CONE is a data center carve-out of Cincinnati Bell (CBB), $1 billion market capitalization.

The data center REIT stock sector has been strong since November lows, up an average of 20%, including Digital Realty Trust (DLR), CoreSite Realty (COR) and Dupont Fabros (DFT).

CONE is bringing on new rentable data center space in early 2013 so the chance of a slightly increased payout is reasonable, if CONE can rent out the new space at favorable rates … because CONE's anticipated payout is 68% of expected to be available cash.

VALUATION

In the meantime- CONE is priced in the middle of the pack in terms of price-to-sales. CONE is losing money on a P&L basis because of large depreciation charges. CONE is priced at a discount on a price-to-book value basis except for DFT.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

annualizing Sept 9 mos

Cap (MM)

Sales

Earnings

BookValue

TangibleBV

Payout

CyrusOne

$1,054

4.8

-49

1.5

3.3

3.76%

Digital Realty Trust

$8,510

8.9

51

2.4

3.0

4.23%

CoreSite Realty

$623

4.4

173

2.7

3.8

3.66%

DuPont Fabros Tech

$1,560

4.8

30

1.2

1.3

3.25%

CONCLUSION

IPOdesktop is neutral to slightly positive on CONE based on near term growth plans and based on the valuation matrix above.

POST IPO OWNERSHIP & CONTROL

Cincinnati Bell , $1 billion market capitalization, will own 72% of the common stock and operating partnership units

DISTRIBUTION POLICY

$0.16 per share for a full quarter. On an annualized basis, it's $0.64 per share, or an annual distribution rate of approximately 3.8% at the price range mid-point.

CONE anticipates that, at least initially, the distributions may exceed the then-current and accumulated earnings and profits as determined for U.S. federal income tax purposes due to non-cash expenses, primarily depreciation and amortization charges. Therefore, a portion of these distributions may represent a return of capital for U.S. federal income tax purposes.

BUSINESS

CONE is essentially a carve-out of Cincinnati Bell , with 500 customers.

CONE is an owner, operator and developer of enterprise-class, carrier-neutral data center properties. Enterprise-class, carrier-neutral data centers are purpose-built facilities with redundant power, cooling and telecommunications systems and that are not network-specific, enabling customer interconnectivity to a range of telecommunications carriers.

As of September 30, 2012, customers included nine of the Fortune 20 and 108 of the Fortune 1000 or private or foreign enterprises of equivalent size. These 108 customers provided 79% of CONE's annualized rent as of September 30, 2012. Additionally, as of September 30, 2012, the top 10 customers (including CBB) provided 46% of CONE's annualized rent.

MARKET GROWTH

Gartner, Inc. estimates that the global market for data center services was approximately $150 billion in 2011 and will grow to approximately $200 billion in 2012.

GROWTH PLAN

CONE plans to continue to target existing customers, because CONE believes that many have significant data center infrastructure that has not yet been outsourced, and many will require additional data center space to support their growth and their increasing reliance on technology infrastructure in their operations.

According to a recent IDC survey, less than 10% of large U.S. enterprises use third-party data center colocation services. Increasingly, enterprises are beginning to recognize the complexities of managing data center infrastructure in the midst of rapid technological development and innovation.

RECENT DEVELOPMENTS

90% of the signed leases in the fourth quarter, including all of the Westover Hills Blvd (San Antonio) leases, did not commence billing in 2012 but are expected to commence billing during the first half of 2013.

Therefore, the percent leased was 76% as of December 31, 2012 due to the additional Co-located Square Feet (CSF) commissioned at the South Ellis Street (Phoenix) facility and the commissioning of 30,000 NRSF of office and other space at the Frankford Rd (Carrollton) facility during the fourth quarter of 2012.

Adjusting for the leases sold in the fourth quarter but excluding the lease for the unfinished expansion for the Kestral Way (London) facility, CONE's utilization was 78% as of December 31, 2012, consistent with CONE's utilization as of September 30, 2012.

COMPETITORS

CoreSite Realty Corp

Digital Realty Trust, Inc.

DuPont Fabros Technology, Inc.

USE OF PROCEEDS

CONE expects to net $281 million from its IPO.

CONE will contribute net proceeds of the IPO to the operating partnership in exchange for operating partnership units.

The operating partnership will subsequently use the proceeds received to fund future acquisitions of real estate, development of real estate, recurring real estate expenditures and other non-real estate capital expenditures and general working capital.

Source: IPO Preview: CyrusOne