Digital Realty Trust Inc.
), a niche real estate investment trust (REIT), concluded the
refinancing of its global revolving credit facility and term loan
totaling $3 billion. The move is a strategic fit as it enabled
the company to enhance its capacity, extend maturities and lower
its borrowing expenses.
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In particular, the global revolving credit facility of $2 billion
bears 2 six-month extension options and can be enhanced up to a
total of around $2.55 billion U.S. dollar equivalent. This credit
facility is slated to mature in Nov 2017.
On the other hand, for the $1 billion multi-currency term loan,
the maturity remains unchanged at Apr 2017. However, 2 six-month
extension options are added and total commitments can be
augmented up to $1.1 billion. As a matter of fact, the company
has upsized its global revolving credit facility by $200 million
and enhanced its term loan by $250 million.
As a result of this refinancing, based on Digital Realty's senior
unsecured debt rating of BBB/Baa2, the all-in pricing reduced by
20 basis points (bps) for the global revolving credit facility
and by 25 bps for the multi-currency term loan. Also, the company
managed to obtain better covenants terms and definitions.
This 5th largest unsecured credit facilities among US REITs is a
strategic fit as it infuses capital and offers financial
flexibility to Digital Realty for its acquisitions, development
and redevelopment moves and aids in debt payback, meet working
capital needs and expand globally.
Also, the refinancing capability is a testament of the
institutional lender community's superior view about the
company's balance sheet and underlying business. Digital Realty
enjoys the benefit of drawing the funds in U.S, Canadian,
Singapore, Australian and Hong Kong Dollars, as well as Euro,
Pound Sterling, Swiss Franc, Mexican Pesos and Japanese yen
Digital Realty operates data centers and digital storage
facilities, which are primarily used by 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.
With the rise in demand for digital storage facilities in recent
years, Digital Realty has benefited greatly by negotiating
favorable lease terms and maintaining strong occupancy rates. The
long-term lease agreements have insulated the company from
short-term volatility and unfavorable market swings experienced
during the recession.
Digital Realty currently has a Zacks Rank #3 (Hold). Some better
performing REITs include
Highwoods Properties Inc.
SL Green Realty Corp.
). All of these stocks carry a Zacks Rank #2 (Buy).