8-KOther Events

DIGITAL REALTY TRUST, INC. 8-K Report, Corporate Update (Sep 18, 2019)

Filed September 18, 2019For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust (DLR) has announced two significant transactions with Mapletree Investments Pte Ltd and Mapletree Industrial Trust, involving both an asset sale and a joint venture. The company is selling 10 fully occupied North American data centers for approximately $557 million and contributing three additional data centers into a new joint venture in exchange for a 20% interest and $811 million in cash. These transactions, expected to close by Q1 2020, are intended to reduce debt and fund future investments. While these moves are strategic for strengthening the balance sheet and enabling future growth, investors should note the immediate impact on Net Operating Income (NOI). DLR anticipates a reduction of approximately $49 million from the joint venture and $37 million from the asset sale in its portion of property NOI for 2020, unless proceeds are effectively redeployed. The company acknowledges the risks associated with transaction timing, closing conditions, and the successful redeployment of capital, as detailed in their forward-looking statements.

Key Highlights

  • 1DLR is selling 10 North American data centers to Mapletree for approximately $557 million.
  • 2DLR is forming a new joint venture with Mapletree, contributing 3 data centers for a 20% interest and $811 million cash.
  • 3The combined transactions are valued at approximately $1.57 billion ($557M asset sale + $1.013B JV contribution).
  • 4Proceeds from these transactions are designated for debt reduction and future investment funding.
  • 5An estimated $86 million reduction in DLR's portion of property Net Operating Income (NOI) is expected for 2020 due to these transactions.
  • 6The transactions are expected to close by the first quarter of 2020, subject to customary closing conditions.
  • 7The company explicitly states risks related to the timing and successful consummation of these transactions and the redeployment of proceeds.

Frequently Asked Questions

The immediate financial implications include a significant inflow of capital intended for debt reduction and future investment. However, there will be a reduction in DLR's share of property Net Operating Income (NOI) for 2020, estimated at approximately $49 million from the joint venture and $37 million from the asset sale, totaling an estimated $86 million reduction, unless the proceeds are successfully redeployed.

The asset sale of 10 data centers is valued at approximately $557 million, and the contribution of three data centers into the new joint venture is valued at approximately $1,013 million. In total, these transactions represent an aggregate value of approximately $1.57 billion.

The transactions are expected to close by the first quarter of 2020, subject to customary closing conditions. Key risks highlighted by the company include uncertainties regarding the timing and successful consummation of the transactions, the ability to redeploy the proceeds effectively, and general market conditions that could impact the closing or terms of the deals.

DLR is contributing three Turn-Key Flex® data centers valued at approximately $1,013 million to a new joint venture. In return, DLR will receive a 20% interest in the joint venture and approximately $811 million in cash. An entity owned by Mapletree Investments and MIT will contribute the cash and receive an 80% interest in the joint venture.