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Digital Realty Achieves Operational Excellence for 12th Year

Zacks Equity Research

Digital Realty Trust, Inc. DLR announced that it has achieved "five nines" of uptime, surpassing 99.999% availability throughout 2018, for the 12th consecutive year. This reflects the data-center REIT’s efficiency in developing and delivering data-center solutions, which can be relied upon by customers.

This operational excellence has been achieved despite growth of the company’s portfolio over the years, which has expanded from 74 data-center suites at the beginning of 2007 to more than 800 by the end of 2018.

Moreover, recently, the company exceeded 2.1 billion operating minutes across its 214 data-center properties. These properties included around 30 million square feet in 35 metropolitan areas internationally.

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. Also, the estimated growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to eight years. In fact, demand is outpacing supply in top-tier data center markets and despite enjoying high occupancy, these markets are absorbing new construction at a faster pace.

Amid these, accretive acquisitions and development efforts are expected to boost top-line growth for Digital Realty. The company recently announced the expansion of its Singapore-connected campus with a new facility. Further, during the Dec-end quarter, it completed the previously-announced acquisition of Ascenty, a data-center provider in Brazil, in a transaction worth nearly $1.8 billion. The company also completed the acquisition of 424 acres of undeveloped land in Loudoun County, VA, for $236.5 million. It is situated near the Washington Dulles International Airport, and positioned near bulk transmission lines and a major fiber path.

Earlier in September 2017, Digital Realty announced the completion of a merger with DuPont Fabros in an all-stock deal, for an enterprise value of about $7.8 billion. This move enhanced the company’s portfolio in the top U.S. data-center metro areas across Northern Virginia, Chicago and Silicon Valley. It helped Digital Realty enhance hyper-scale product offering and grow its blue-chip customer base. The company is also focused on expanding its footprint in Europe and Australia.

However, given the solid growth potential of the data-center real estate market, competition is expected to intensify in the upcoming period from existing as well as new players. Amid all these, an aggressive pricing pressure is anticipated in the data-center market.

Digital Realty has a Zacks Rank #3 (Hold). The stock has gained 4.4% in the past month, while the industry inched up 0.2%.

Stocks Worth a Look

A few better-ranked stocks from the same industry are Boston Properties, Inc. BXP, Piedmont Office Realty Trust, Inc. PDM and Rexford Industrial Realty, Inc. REXR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Properties’ Zacks Consensus Estimate for 2019 FFO per share has been revised 0.9% upward to $6.90 over the past month.

Piedmont Office Realty Trust’s FFO per share estimates for the current year inched up 1.1% to $1.78 in a month’s time.

Rexford Industrial Realty’s FFO per share estimates for 2019 have been revised approximately 1.7% upward to $1.18 over the past month.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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