8-KShareholder MattersCorporate ChangesRegulation FD+2

DIGITAL REALTY TRUST, INC. 8-K Report, Rights Modification (Sep 24, 2018)

Filed September 24, 2018For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

This Form 8-K filing by Digital Realty Trust, Inc. (DLR) on September 24, 2018, primarily announces the execution of definitive agreements for the significant acquisition of Ascenty, a leading data center provider in Brazil. The acquisition, valued at approximately $1.83 billion, is structured as a combination of cash and DLR common units, and aims to establish DLR as a major player in the growing Latin American data center market. The company is also pursuing a joint venture with Brookfield Infrastructure Group for this acquisition, sharing investment and operational responsibilities. Additionally, DLR announced an underwritten public offering of its common stock in connection with forward sale agreements, indicating capital raising activities to support its strategic growth initiatives. Investors should note that the Ascenty acquisition represents a substantial expansion into a new geographic region, bringing both significant growth potential and inherent risks associated with emerging markets, currency fluctuations, and integration challenges. The formation of a joint venture with Brookfield signals a strategic approach to managing capital and leveraging partner expertise in this new venture. The stock offering suggests a need for capital to fund these ambitious growth plans, which investors should monitor for potential dilution or the successful execution of these strategic moves.

Key Highlights

  • 1Digital Realty Trust (DLR) is acquiring Ascenty, a leading data center provider in Brazil, for an estimated $1.826.8 million.
  • 2The Ascenty acquisition is structured with a mix of $1,511.1 million in cash, $290.7 million in DLR common units, and $25.0 million in equity interests in a subsidiary.
  • 3A joint venture with Brookfield Infrastructure Group is being formed to co-invest in Ascenty, with Brookfield committing up to $725.0 million in equity.
  • 4DLR announced an underwritten public offering of 8,500,000 shares of common stock in connection with forward sale agreements, indicating capital raising.
  • 5The Ascenty acquisition significantly expands DLR's footprint into the Latin American market, a region identified for strong data center growth potential.
  • 6The company is also acquiring 424 acres of undeveloped land in Loudoun County, Virginia, for $236.5 million, signaling land acquisition for future development.
  • 7The filing includes a Seventeenth Amended and Restated Partnership Agreement for Digital Realty Trust, L.P., introducing a provision for the redemption of limited partnership units under certain circumstances.

Frequently Asked Questions

The primary purpose of this 8-K filing is to announce Digital Realty Trust's definitive agreement to acquire Ascenty, a leading data center provider in Brazil, and to disclose related financing and joint venture arrangements, as well as a public offering of its common stock.

The acquisition is valued at approximately $1.83 billion, comprising $1.51 billion in cash, $291 million in DLR common partnership units, and $25 million in equity interests in a subsidiary. The company is also raising capital through a public offering of common stock.

Brookfield Infrastructure Group is partnering with Digital Realty through a joint venture. Brookfield has committed to invest up to $725 million in equity into the joint venture entity that will own Ascenty, sharing the investment and operational responsibilities in the Latin American market.

The filing highlights several risks, including potential delays or failure to complete the acquisition, integration challenges in a new region, currency fluctuations (Brazilian Real vs. USD), political and economic instability in Brazil, reliance on Ascenty's leasehold interests, and potential difficulties in realizing expected financial benefits. The company also notes that the Ascenty EBITDA estimates are not GAAP-compliant and are based on forward-looking assumptions.