Summary
Digital Realty Trust, Inc. (DLR) has filed an 8-K report disclosing the creation of a significant financial obligation related to a new development project. On September 3, 2008, the company's operating partnership, via an indirect subsidiary, secured a £53.7 million (approximately $95.6 million) development and investment facility to fund the construction of a new datacenter in the United Kingdom. This facility is notable because the entire datacenter will be leased to a single tenant upon completion, providing a strong revenue stream visibility for this specific project.
Key Highlights
- 1DLR entered into a £53.7 million (approx. $95.6 million) development and investment facility for a UK datacenter.
- 2The facility finances the construction of a datacenter that will be leased entirely by a single tenant.
- 3As of September 8, 2008, £24 million had been drawn, with approximately £21 million still available.
- 4The remaining facility availability is contingent on construction milestones.
- 5Loans under the facility bear interest at LIBOR plus a margin, currently 1.75%, potentially reducing to 1.2% upon tenant lease commencement.
- 6The facility matures five years after shell and core completion, with a hard stop of no later than November 30, 2013.
- 7Repayment is structured as a bullet payment at maturity, with acceleration clauses for specific default events.
Frequently Asked Questions
The primary purpose is to finance the construction of a new datacenter located in the United Kingdom. This development is secured by a long-term lease agreement with a single tenant upon completion.
The total development and investment facility is valued at £53.7 million, which was approximately $95.6 million based on the exchange rate on September 3, 2008. As of September 8, 2008, approximately £24 million had been drawn under this facility.
Loans under the facility accrue interest at LIBOR plus a margin, initially set at approximately 1.75% per year. This margin is expected to decrease to about 1.2% once certain conditions, including the datacenter's shell and core completion and the tenant's lease commencement, are met. The facility matures five years after the completion of the shell and core, but no later than November 30, 2013, with repayment due as a bullet payment.
While £24 million had been drawn and £21 million was available, the remainder of the facility's availability is dependent on the satisfaction of certain conditions, specifically related to construction milestones. The reduction in the interest margin is also tied to construction completion and tenant lease commencement.