Zacks_Analysts' Blog : Digital Realty Secures Funds - Analyst Blog

Digital Realty Trust Inc. (DLR), a niche real estate investment trust (REIT), has recently closed a $1.5 billion senior unsecured revolving credit facility to replace and augment its existing credit facilities comprising corporate revolving credit facility (a borrowing capacity of $750 million) and Asia Pacific revolving credit facility (a borrowing capacity of approximately $100 million) that were scheduled to mature in August 2012.

The new credit facility is scheduled to mature in November 2015 and has an accordion feature that would enable Digital Realty to extend the maturity by an additional year subject to the fulfillment of certain conditions. At the same time, the company can increase the borrowing capacity of the credit facility to $2.25 billion. 

To facilitate the international operations of the company, the credit facility provides for an option to borrow funds in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as in Euro, Pound Sterling, Swiss Franc and Japanese yen denominations. The new credit line provides greater financial flexibility to Digital Realty to address any upcoming debt maturities and increases its liquidity for potential acquisitions and development opportunities in core markets.

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. Datacenters usually incur high costs for building and maintenance, and as such 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 98 properties throughout Europe and North America spanning approximately 17.4 million square feet of space (including 2.1 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 to pay out solid dividends to its shareholders.

The rating on Digital Realty is currently ‘Neutral’ and the stock presently has a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for MPG Office Trust Inc. (MPG), one of the peers of Digital Realty.