Digital Realty Trust Inc.
), a niche real estate investment trust (REIT), has recently
completed the acquisition of '8025 North Interstate 35' - a data
center facility spanning 62,000 square feet of space in Austin,
Texas, from an unnamed seller for $12.5 million. The property also
includes 11.28 acres of land to accommodate about 135,000 square
feet of future data center development.
The acquisition conforms to the long-term investment objectives
of the company that focus on investing in institutional-quality
data center facilities in high-barrier-to-entry markets. These
markets have significant potential to generate attractive
risk-adjusted return on investments.
Presently, the facility is fully leased on a long-term
triple-net basis to a leading provider of integrated disaster
recovery solutions, managed services, IT consulting and business
continuity management software solutions. The data center facility
is located in close proximity to the Austin-Bergstrom International
Airport, and delivers approximately 4.5 megawatt of critical
The acquisition is expected to provide stabilized cash flow in
the short term, with a substantial upside potential in the long
term and the opportunity to expand its footprint in the Austin
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 103 properties throughout Europe and North
America, spanning approximately 19.7 million square feet of space
(including 2.3 million square feet of redevelopment space).
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 swings experienced
during the recession. This has enabled Digital Realty to continue
paying out solid dividends to its shareholders.
We presently have a Neutral recommendation for Digital Realty,
which currently has a Zacks #3 Rank, translating into a short-term
Hold 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.
DIGITAL RLTY TR (DLR): Free Stock Analysis
MPG OFFICE TRST (MPG): Free Stock Analysis
To read this article on Zacks.com click here.