Digital Realty Trust Inc. (DLR), a niche real estate investment trust (:REIT), has recently augmented its global revolving credit facility by $300 million to the tune of $1.8 billion to increase its liquidity. The company exercised the accordion feature of the credit facility to this effect.
In accordance with its international presence, the credit facility would enable Digital Realty to withdraw funds in U.S, Canadian, Hong Kong, Singapore and Australian dollars, along with the Euro, Pound Sterling, Swiss Franc, and Japanese Yen denominations.
The credit facility bears an annualized interest rate at 125 basis points over the applicable index for floating rate advances. The global credit facility is scheduled to mature in November 2015 with a one-year extension option, and includes an accordion feature by virtue of which the company can increase the borrowing capacity by an additional $750 million at its own discretion.
The move is aimed to increase the financial flexibility of the company and is consistent with its strategic objective of enhancing its financial resources at the most favorable available price in the market. Going forward, Digital Realty expects to utilize the dry powder to fund both domestic and international acquisitions that are in sync with its long-term investment objectives.
Digital Realty operates data centers and digital storage facilities, which are primarily used by telecommunication 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 primarily focuses on investing in institutional quality data center facilities in high barriers-to-entry markets with significant potential to generate attractive risk-adjusted return on investments (ROI).
The company provides flexible and cost effective data center facilities to a wide range of customers, including domestic and international companies across multiple industry verticals. Its portfolio includes 108 properties throughout Europe, North America, Asia, and Australia spanning approximately 20.8 million square feet (including 2.2 million square feet of redevelopment space).
We presently have a Neutral recommendation for Digital Realty, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for Brandywine Realty Trust (BDN), one of the competitors of Digital Realty.
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