I get the real estate backstop that makes it highly leverageable and steady recurring revenues, but aren't these highly capital intensive businesses? I believe maint capex is low, but it feels you could only get revenue growth (beyond rent escalation) through growth capex, and these things are expensive to build and set up. As an example, Americold's assets went from $2.4b to 8.2b from 2017 to 2021 whereas revenues went from $1.5b to $2.7b. That's a $1.2b increase in revenue over a $5.8b increase in asset base. If you look at Equinix, you see a similar thing. Both models show low to mid single digit ROICs.
I know PE has been piling into these assets in recent years, but would appreciate some color on why the capital intensity is not a concern here. Is it that the PEs lever up the existing asset base to the hilt and slow down growth capex while under their sponsorship, thereby generating all the return from deleveraging?
Attractive risk adjusted return
Que?
Jim Chanos.
How do you make LBO return buying at 15x?
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