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Investing

Opportunistic Yet Leveraging Secondary Offering From Digital Realty (DLR)

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By Jon C. Ogg Updated Published
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Digital Realty Trust (NYSE: DLR) has been one of those REITs we have loved for some time, but one where we feel the price has grown too excessive.  Now the company which we call “The Landlord of the Cloud” is planning to sell 8.25 million shares of its common stock in an underwritten public secondary offering.  What is interesting is that the company intends to contribute the net proceeds from this offering to its operating partnership, Digital Realty Trust, L.P., to fund a portion of the purchase price for the acquisition of a three-property data center portfolio located in the greater London area. This area is the Sentrum Portfolio and the purchase price is roughly $1.1 billion to be paid for by this offering and from cash on hand and additional debt and a bridge loan.

Digital Realty also said that it may temporarily repay debt under its global revolving credit facility, or it can acquire additional properties, fund development and redevelopment opportunities, or for general working capital purposes.

BofA Merrill Lynch and Citigroup are the joint book-running managers for the offering.

This offering would bring in more than $580 million in gross proceeds at the closing price of $73.25 and the 52-week range is $50.63 to $76.04 and its market capitalization is just over $8 billion. Maybe this will finally take the price down to a more attractive level. Still, this transaction is being paid for by an issuance of about 7% as well as leveraging up more debt.

JON C. OGG

Photo of Jon C. Ogg
About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

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