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Share Offering by Digital Realty

Zacks Equity Research

Digital Realty Trust (DLR), a niche real estate investment trust (:REIT), recently announced that it has priced 10 million shares at $72.25 a share. Digital Realty also plans to offer an option to the underwriters for purchasing an additional 1.5 million shares. The offering is expected to close on July 2, 2012.

The company expects to generate net proceeds of approximately $698.2 million from the offering after the underwriting discount and estimated offering expenses.

The company expects to contribute the proceeds generated from this transaction to its operating partnership, Digital Realty Trust, L.P. The operating partnership intends to use the net proceeds from the offering to fund  the acquisition of a three-property data center portfolio located in the London named  Sentrum Portfolio, to repay debt under its global revolving credit facility, to acquire additional properties and for general working capital purposes.

During the first quarter of 2012, the company generated approximately $62.7 million in net proceeds from the issuance of approximately 957,000 at an average price of $66.19 per share. Total debt increased to $3.3 billion at March 31, 2012 from $2.9 billion at December 31, 2011.

Digital Realty 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 105 properties across Europe and North America, spanning approximately 20.0 million square feet of space (including 2.3 million square feet of redevelopment space).

Digital Realty currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We have a long-term Neutral recommendation on the stock. One of its competitors, MPG Office Trust Inc (MPG) holds a Zacks #1 Rank, which translates into a short-term strong Buy rating.

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