Digital Realty Trust Inc. (
, a niche real estate investment trust (REIT), has recently
completed the acquisition of a sprawling data center and office
complex, spanning around 286,000 square feet, over a large-spread
built up space in Aurora in the Denver Metropolitan area of
Colorado. This acquisition is expected to provide stabilized cash
flow in the short term, a substantial upside potential in the long
term and the opportunity to expand its footprint in the downtown
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The purchase is also in sync with the long-term investment
objectives of the company of 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 on investments.
The acquired data center is located in the Cornell Business Park in
11900 East Cornell Road. The property is 94% leased to two clients
with an average lease term of 10 years. The data center is divided
over three interconnected buildings. The proximity of the property
to 8534 Concord Center Drive facility - one of Digital Realty's key
properties in the same Denver Metropolitan area - makes it a
noteworthy and strategic buy.
Digital Realty aims to augment financial flexibility and enhance
its financial resources at the most favorable available price in
the market. To add to this, the company has also increased its
global revolving credit facility by $300 million to the tune of
$1.8 billion for improved liquidity.
With demand for digital storage facilities surging in recent years,
Digital Realty has benefited greatly through negotiation of
favorable lease terms and maintenance of 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.
These factors have in turn enabled Digital Realty to pay steady
dividends to its shareholders. Digital Realty declared a
dividend of 73 cents per share in the second quarter of 2012, which
marked a 7.4% increase over the year-ago quarter. Since 2005, the
company has raised its dividend 10 times from 24.4 cents, and even
continued dividend payment during the recession. The current
dividend payment affirms a yield of 4.2%.
Digital Realty provides flexible and cost effective data center
facilities which are primarily used by domestic and international
telecommunication companies to maintain their Internet presence or
augment their data networks. The strong customer base of the
company includes major companies - such as
Facebook, Inc. (
Yahoo! Inc. (
Microsoft Corporation (
. As of September 17, 2012, its portfolio includes 109 properties
throughout Europe, North America, Asia, and Australia. It spans a
total of approximately 21.1 million square feet (including 2.2
million square feet of redevelopment space).
We currently have a long-term Neutral recommendation on Digital
Realty. Also it carries a Zacks #3 Rank (a short-term Hold