I saw this article recommending a "buy" of data center REITS which have been depressed due to problem of a major tenant called Cyxtera. According to this article, the drop in price makes the REITS attractive, as the dividend yield is quite high.

Read article

I studied the fundamentals of 4 REITS that have a large component of data centers. They are shown in the table below. 

Contrary to what the article said, the REIT prices did not fall much. Compared to the highest price during the past 52 weeks, the drop was between 1% and 14%. This is not much, compared to the fall in stock prices during the period.

The dividend yield was between 4.93% and 6.29%. While this appears to be attractive, it is the full payout (as required under the regulations for REITs). It does not have any retained earnings for future growth. 

If there is any drop in revenue and higher charges for debts (e.g. due to rising interest rate), the dividend yield will drop. Actually, the dividend yield should be described as "distribution" in the case of REITs.

Furthermore, many of the assets are leasehold, which will suffer a drop in value as the years go by, due to the lease decay.

The price earning ratio is between 9.6 and 15.89. This is somewhat high and is not attractive. 

Based on these fundamentals, I prefer to avoid REITs. 

Tan Kin Lian 

Note - this is a personal opinion. It is not investment advice.