Digital Realty Trust Inc.
), a niche real estate investment trust (REIT), has recently
completed acquisition of the Sentrum Portfolio - a three-building
data center portfolio spanning 761,600 square feet space in London,
U.K. The properties were acquired from an unnamed seller for
approximately 715.9 million pounds Sterling, which equated to $1.1
billion, based on an exchange rate of 1.00 pound to $1.56 as of
June 25, 2012.
The acquisition is in sync with the long-term investment objectives
of the company that focus on investing in institutional-quality
data center facilities in high-barrier-to-entry markets which have
significant potential to generate attractive risk-adjusted return
Moving forward, the transaction is expected to provide
stabilized cash flow in the short term, a substantial upside
potential in the long term, and a lucrative opportunity to expand
its footprint in one of the strategic global data center markets in
DIGITAL RLTY TR (DLR): Free Stock Analysis
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The properties are spread across diverse locations namely Woking,
Watford and Croydon in the greater London area and would enable
Digital Realty to cater to the increased demands for high-quality
data center space in the region. Presently, the portfolio is 80%
leased to a huge roster of 21 tenants that include leading
multinational financial institutions and global network providers.
With demand for digital storage facilities increasing in recent
years, Digital Realty has benefited greatly by negotiating
favorable lease terms and maintaining strong occupancy rates. The
long-term lease agreements have also insulated the company from
short-term volatility and unfavorable market swing experienced
during the recession.
This has in turn enabled Digital Realty to continue to pay solid
dividends to its shareholders. The year-to-date return for the
stock is noteworthy at 10.41% compared to an S&P 500 tally of
Digital Realty operates datacenters and digital storage facilities
which are primarily used by telecommunication companies to maintain
their Internet presence or augment their data networks. Data
centers usually incur high costs for building and maintenance, and
as such the supply is relatively inelastic.
Digital Realty provides flexible and cost effective datacenter
facilities to a wide range of customers, including domestic and
international companies across multiple industry verticals. Its
portfolio includes 105 properties throughout Europe and North
America, spanning approximately 20.0 million square feet of space
(including 2.3 million square feet of redevelopment space).
We presently have a Neutral recommendation for Digital Realty,
which currently has a Zacks #2 Rank that translates into a
short-term Buy rating. However,
MPG Office Trust Inc.
) - one of the competitors of Digital Realty - with an Outperform
recommendation and a matching Zacks #1 Rank (short-term Strong Buy
rating), looks more attractive at current levels.