Digital Realty Expands in Australia - Analyst Blog

By Zacks | January 10, 2013 AAA

In order to expand its Australian footprints, Digital Realty Trust Inc. (DLR) recently acquired an established data center in Macquarie Park, New South Wales for AU$11.75 million. The inclusion of this high-quality data centre facility to its portfolio added a new global blue-chip tenant to Digital Realty's customer base.

Positioned in 23-25 Waterloo Road, the 7500 square-meter acquired property is fully operational and fully occupied by Fujitsu Australia.  The data center facility comprises 750mm raised floors and HVAC temperature-control systems with separate cooling zones.

Macquarie Park is a major business centre in Australia as well as the state of New South Wales. Industry-leading companies, such as Microsoft Corporation (MSFT), Johnson & Johnson (JNJ), Oracle Corporation (ORCL) and Sony Corporation (SNE), have significant presence in the city.

The property marks the second data centre of Digital Realty in New South Wales region. The first one - 1-23 Templar Rd - is situated in Erskine Park, within the Western Sydney Employment Hub. The building houses four Digital Realty Turn-Key Flex solution data centers. The company's Turn-Key Flex solution is a modular approach to safely deliver enterprise quality data centre space to fulfill customers' just-in-time requirements. The property comprises 5.7MW of power and an N+1 free air cooling architecture. It also marked Rackspace Hosting, Inc.'s (RAX) - a premier provider of cloud computing services - debut in Australia.

Digital Realty made a couple of acquisitions worldwide in the last quarter of 2012, expanding its footprint in international market along with strengthening its traditional U.S. base. Earlier in October 2012, the company unveiled two new facilities at Digital Chessington data center in South West London, bringing on board 2,880 KW Turn-Key Flex data center space available for lease. In late November last year, Digital Realty completed the acquisition of a sprawling redevelopment property, spanning about 271,000 square feet, over 34.31 acres of land in Totowa, New Jersey.

With rising demand for digital storage facilities in the recent years, Digital Realty has benefited greatly through negotiation of favorable lease terms and maintenance of strong occupancy rates. The long-term lease agreement insulates the company from short-term volatility and unfavorable market swing experienced during the recession. These factors, in turn, have enabled Digital Realty to pay steady dividends to its shareholders.

Digital Realty is expected to release its fourth-quarter 2012 results on February 15, 2013. The Zacks Consensus Estimate for the company's fourth quarter FFO (fund from operations) is currently pegged at $1.15 per share.

The Earnings ESP (Expected Surprise Prediction), the percentage difference between the most accurate estimate and the Zacks Consensus Estimate, for Digital Realty is 1.74%. This combined with its Zacks Rank #3 reflects that the company will beat the Zacks Consensus Estimate in the fourth quarter.

We presently have a long-term 'Neutral' recommendation for Digital Realty.

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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