Which asset class uses EBITDA multiples for valuation?

EBITDA multiples are commonly used for valuing companies and their assets based on their earnings before interest, taxes, depreciation, and amortization. This metric allows investors to assess the operational performance of a business by focusing on its core profitability without the influence of capital structure and non-cash expenses.

In the context of the asset classes mentioned, data centers are particularly suited for valuation using EBITDA multiples because they tend to have significant operating income driven by recurring revenue from contracts with customers for data storage, cloud services, and related operations. The operating model of data centers aligns well with EBITDA as it reflects these core earnings effectively, providing a clearer picture of value than other metrics that may be distorted by capital expenditures or tax considerations.

Moreover, the technology-driven nature of data centers, combined with their substantial fixed costs and relatively predictable revenue, makes EBITDA a relevant measure for investors looking to understand profitability and compare different investment opportunities within this sector efficiently. Other asset classes like office, logistics/industrial, and retail may rely more on different valuation methods and metrics considering their unique operational characteristics and revenue models, which can vary widely across those sectors.