Digital Realty Trust (DLR) plans to sell 2.5 million shares of its common stock in an offering that could raise more than $84 million after expenses. The new shares will be issued an existing shelf registration the company filed with the Securities and Exchange Commission. Credit Suisse Securities will be the sole manager for the offering, and will have the option to purchase up to an additional 375,000 shares of common stock to cover over-allotments. Digital Realty closed at $35.39 Monday, meaning the offering could raise as much as $96 million after expenses.
Digital Realty's decision to sell stock in the midst of the difficult economy is notable on several fronts. It comes as several other data center developers - including the only other data center REIT, DuPont Fabros - are scaling back their development plans due to the closing of the credit markets. The move also capitalizes on shifting investor sentiment on the data center and colocation sector. The potential capacity crunch in the data center market has prompted several brokerages to taker an optimistic view of the sector in recent weeks.
In October 2007 Digital Realty raised $130 million in a stock offering, and a subsequent offering in July 2008 raised another $211 million. The company also raised $198 million in 2008 by refinancing properties. "Our ability to access capital from multiple sources is a critical component of our success," CFO Bill Stein said on the company's most recent conference call with analysts.
The company said it will use the proceeds of the stock sale repay all or some of the money it has borrowed under its revolving credit facility, to acquire additional properties, and to fund redevelopment opportunities under its Turn-Key Datacenter program. Turn-key space is fully developed for data center use, allowing companies to accelerate their data center expansions.
Digital Realty Trust (DLR) signed more than $1 billion in leases in 2008, leasing more than 1.1 million square feet of data center space. That includes 276,000 square feet of new leases signed during the fourth quarter, after the onset of the U.S. financial crisis.
NOTE: This post was updated with additional information from Digtial Realty Trust on the expected yield of the offering.