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Digital Realty Mulling Over Buyout of Dulles' Western Lands


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Data-center REIT Digital Realty Trust Inc. DLR is on an expansion spree. The company is set to acquire around 424 acres on the western side of the Dulles International Airport, per a report from Loudoun Times-Mirror. It will reportedly shell out $236.5 million for purchasing the land from the Metropolitan Washington Airports Authority (MWAA).

The transaction, which now awaits approvals from the MWAA Strategic Development Committee and the company's board of directors, will likely close between Sep 28 and Oct 12. Notably, following the execution of the terms of purchase by the airports authority, Digital Realty went ahead with its plan to acquire the airport's western lands property in July and made a $5-million deposit.

As a matter of fact, Loudoun ranks among the world's largest data-center hubs. Per the Loudoun County Economic Development , 70% of the world's Internet traffic flows through Loudoun's data centers each day. Currently, 10.5 million square feet of data centers are operational and another 2.5 million square feet are under development in this area.

Furthermore, this region boasts the largest concentration of tech workers in the United States, and lures data-center firms with available incentives, including 6% sales, and use tax exemption on servers, generators, chillers and server-related equipment. Digital Realty too, encouragingly, enjoys a large and expanding data-center presence in this prominent hub. Thus, the company's latest move, when materializes, will help fortify its footprint in Loudoun.  

In addition, with growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, data-center REITs will likely continue experiencing a boom market. Also, the projected growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets will remain robust over the next five-eight years.

These factors, along with an improved outlook for economic growth, are anticipated to be significantly conducive to growth of data-center REITs, such as Digital Realty, Equinix, Inc. EQIX , CyrusOne Inc. CONE , CoreSite Realty Corporation COR and others.

Particularly, Digital Realty is poised to benefit from this solid demand for data centers through accretive acquisitions and development efforts. Last year, the company completed the merger with DuPont Fabros, and has also enhanced its presence in Europe, Australia and Asia in recent years through the development of high-quality facilities.  

The company also focuses on maintaining an investment-grade balance sheet, enjoys ample liquidity and has a well-laddered debt maturity schedule. Nevertheless, aggressive pricing pressure is likely to continue in the near future. Additionally, it has a substantial debt burden and hence, rate hike remains a key concern.

Digital Realty currently has a Zacks Rank #3 (Hold). Shares of Digital Realty have outperformed the industry it belongs to, in the past three months. The stock has gained 15.5%, while the industry has rallied 3.6%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: EQIX , COR , CONE , DLR



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