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DIGITAL REALTY TRUST, INC. 8-K Report, Material Agreement (Jun 26, 2012)

Filed June 26, 2012For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) announced on June 26, 2012, a significant acquisition of the Sentrum Portfolio, a three-property data center portfolio in the United Kingdom, for approximately £715.9 million (USD $1.1 billion). This strategic move expands DLR's international footprint and enhances its data center offerings. The portfolio comprises 761,000 square feet and is diversified across 21 tenants with long-term leases, providing a stable revenue stream. The acquisition is expected to be accretive to DLR's 2012 Funds From Operations (FFO). However, DLR anticipates one-time transaction expenses ranging from $10 million to $35 million, primarily related to the repayment of existing indebtedness within the Sentrum Portfolio. Despite paying a premium that indicates a going-in capitalization rate below their target range, DLR sees significant potential for future growth through leasing vacant space and renegotiating expiring leases.

Key Highlights

  • 1Acquisition of the 'Sentrum Portfolio', a three-property UK data center portfolio for approximately $1.1 billion.
  • 2The portfolio totals 761,000 square feet and is located in Croydon, Woking, and Watford.
  • 3The acquisition includes 21 tenants across various industries with long-term leases, contributing to a diversified and stable revenue base.
  • 4The deal is expected to be accretive to Digital Realty's 2012 Funds From Operations (FFO).
  • 5Anticipated one-time transaction and debt repayment expenses are estimated between $10 million and $35 million.
  • 6Funding for the acquisition will come from a mix of existing credit facilities, new debt/equity financing, and available cash.
  • 7The acquisition is subject to closing conditions and is expected to close around July 31, 2012.

Frequently Asked Questions

The Sentrum Portfolio is a collection of three data center properties totaling approximately 761,000 square feet. These properties are located in Croydon, Woking, and Watford in the United Kingdom.

The total purchase price for the Sentrum Portfolio is approximately £715.9 million, equivalent to $1.1 billion based on the exchange rate at the time of the filing. Funding is expected to come from borrowings under DLR's global revolving credit facility, a bridge loan facility, proceeds from debt and equity financings, and/or available cash.

Yes, DLR anticipates one-time transaction expenses and early termination fees related to repaying existing indebtedness on the Sentrum Portfolio. These costs are estimated to range between $10 million and $35 million.

Digital Realty expects the acquisition of the Sentrum Portfolio to be accretive to their 2012 Funds From Operations (FFO), excluding transaction expenses. While the initial capitalization rate is below their target, the company sees significant potential for future upside through leasing vacant space and renegotiating existing leases.