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Digital Realty JV Closes $135M Refinancing, Ups Flexibility

Data Center REIT Digital Realty Trust, Inc. 's DLR joint venture has completed a $135 million secured debt refinancing. The move offered greater financial flexibility by extending the debt maturity profile at a favorable cost.

Specifically, a $135 million 10-year mortgage was closed on the Westin Building Exchange which is owned in a 50/50 joint-venture partnership with Clise Properties. The property serves as the internet exchange for the Pacific Northwest in Seattle, Washington.

This new mortgage financing has interest at a fixed rate of 3.29% per annum with a maturity in Jun 2027. It is interest-only during the 10-year term, with the entire principal amount due at maturity. This refinancing replaced the previous $101 million secured loan with interest at 6.37% and maturity in Sep 2017.

Achieving this refinancing for the Westin Building Exchange marks its value creation. Moreover, significant interest from the lending community denotes the increasing importance of the data centers as an asset category.

In fact, 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 are experiencing a boom market. In fact, demand has been outpacing supply in top-tier data center markets and despite enjoying high occupancy, these are absorbing new construction at a faster pace. Also, with an improved outlook for economic growth, demand for data centers is likely to climb further.

Digital Realty is also making concerted efforts to ride on the growth curve. Early this June, the company announced that it is set to acquire DuPont Fabros Technology, Inc. DFT . This move would enhance Digital Realty's portfolio in the top U.S. data center metro areas across Northern Virginia, Chicago and Silicon Valley. It is also anticipated to be immediately accretive to financial metrics. (Read more: Digital Realty to Acquire DuPont Fabros in $7.6 Billion Deal )

Currently, Digital Realty carries a Zacks Rank #3 (Hold). In addition, year to date, shares of Digital Realty climbed 15.0% and outperformed the Zacks categorized REIT and Equity Trust - Other industry's gain of 4.0%.

Stocks to Consider

Better-ranked stocks in the REIT space include Liberty Property Trust LPT and PS Business Parks, Inc. PSB . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Liberty Property Trust and PS Business Parks have long-term funds from operations (FFO) per share growth rates of 6% and 5%, respectively.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report

PS Business Parks, Inc. (PSB): Free Stock Analysis Report

Dupont Fabros Technology, Inc. (DFT): Free Stock Analysis Report

Liberty Property Trust (LPT): Free Stock Analysis Report

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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.


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

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