8-KOther EventsExhibits & Filings

DIGITAL REALTY TRUST, INC. 8-K Report, Corporate Update (Aug 2, 2017)

Filed August 2, 2017For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) has filed a Form 8-K detailing preliminary financial results for the second quarter of 2017 and significant corporate developments. The company reported an increase in total operating revenues for both the three and six-month periods ended June 30, 2017, compared to the prior year, driven primarily by growth in rental income and tenant reimbursements. Net income attributable to common stockholders also saw a substantial rise. The filing also elaborates on the pending acquisition of DuPont Fabros Technology, Inc. (DFT), outlining the merger terms, strategic rationale, and financing arrangements. This proposed acquisition is a key focus, expected to enhance DLR's market presence, expand its hyper-scale offerings, and solidify its customer base with a higher proportion of investment-grade tenants.

Key Highlights

  • 1Digital Realty reported increased operating revenues and net income for Q2 2017 compared to Q2 2016, indicating positive operational performance.
  • 2The company announced preliminary Q2 2017 results showing growth in rental revenue, tenant reimbursements, and interconnection services.
  • 3Digital Realty is proceeding with the acquisition of DuPont Fabros Technology, Inc. (DFT) via a merger agreement, with shares to be exchanged at a ratio of 0.545 DLR shares for each DFT share.
  • 4The strategic rationale for the DFT acquisition includes expanding presence in key US metropolitan areas, enhancing hyper-scale product offerings, and solidifying a blue-chip customer base.
  • 5Post-merger, investment-grade or equivalent customers are expected to represent over 50% of total revenue, significantly reducing customer concentration for the combined entity.
  • 6The company has secured financing commitments for the DFT merger, including a $1.4 billion bridge loan facility and a $104 million mortgage loan facility.
  • 7Digital Realty also reported on a recent £600 million Pound Sterling notes offering used to fund aspects of the DFT merger and for general corporate purposes.

Frequently Asked Questions

For the three months ended June 30, 2017, Digital Realty reported total operating revenues of $565,989,000, an increase from $514,934,000 in the same period of 2016. Net income available to common stockholders was $57,837,000, up from $27,951,000 in Q2 2016. For the six months ended June 30, 2017, total operating revenues were $1,116,558,000, and net income available to common stockholders was $123,982,000.

Digital Realty has agreed to merge with DFT, where each DFT common stock share will be converted into 0.545 shares of DLR common stock. DFT preferred stock will be converted into a new DLR preferred stock class. The merger is expected to enhance DLR's presence in key data center markets, expand its hyper-scale offerings, and improve its customer base with a larger percentage of investment-grade tenants.

Digital Realty has secured financing commitments, including a senior unsecured bridge loan facility of up to $1.4 billion and a secured mortgage loan facility of up to $104 million. The company also recently completed a £600 million Pound Sterling notes offering, with proceeds intended to fund portions of the DFT merger's debt repayment and transaction expenses.

Yes, three purported stockholder class action lawsuits have been filed against DFT and its board members, alleging violations of federal securities laws due to inadequate disclosures regarding the proposed merger. Digital Realty believes the allegations are without merit and intends to defend vigorously, but the outcome and potential costs are uncertain.