Digital Realty Trust Inc. (DLR), a niche real estate investment trust (:REIT), concluded the offering of 5.875% Series G cumulative redeemable preferred stock. The move comes as part of its effort to infuse capital and increase financial flexibility.
Specifically, Digital Realty closed an underwritten public offering of 10.0 million shares of 5.875% Series G cumulative redeemable preferred stock at a price of $25.00 per share. The gross proceeds from this offering is $250.0 million (incorporating 1.0 million shares pursuant to the partial exercise of the underwriters' over-allotment option).
The proceeds generated from this offering would help its operating partnership, Digital Realty Trust L.P. to pay back debt as well as finance acquisitions and development opportunities. Moreover, the proceeds could be used for other general corporate purposes.
A host of companies acted as joint book-running managers for the offering including Morgan Stanley & Co. LLC of Morgan Stanley (MS) and Wells Fargo Securities, LLC, a unit of Wells Fargo & Company (WFC).
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.
Digital Realty is also capitalizing on acquisition opportunities. Recently, it closed the acquisition of 1500 Towerview Road in Eagan, Minn. The company shelled out $37 million for this data center facility, which is fully leased to Delta Air Lines Inc. (DAL). Such strategic acquisitions are expected to add to the company’s top line going forward.
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).
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