DuPont Fabros Focused on Leasing

The DuPont Fabros Technology ACC4 data center facility in Ashburn, Virginia.

DuPont Fabros Technology (DFT) hopes to complete leasing of its new data centers in Chicago and Virginia by the middle of 2010, but has no immediate plans to restart construction on its projects in New Jersey and Silicon Valley, the company said today.

In the meantime, solid revenue from the company’s five fully-leased data centers in northern Virginia helped DuPont Fabros post first quarter earnings that were in line with expectations. The real estate investment trust reported funds from operations (FFO) of $0.25 per share for first quarter of 2009, which was at the top end of guidance.

“During the quarter, we continued to execute on our overall business plan,” said Hossein Fateh, President and CEO of DuPont Fabros.

Fateh: Stimulus to Drive ‘Enormous’ Demand

The Obama administration’s stimulus package will drive “an enormous amount of new data center demand,” according to Hossein Fateh, the president and CEO of Dupont Fabros Technology (DFT). In this interview, Fateh discusses the outlook for real estate investment trusts in the data center sector. “For any REIT, it’s a challenging environment,” said Fateh. “The demand (for data centers) still outpaces supply in a very substantial way.” This video runs about 4 minutes.

For more information, see our DuPont Fabros Channel. For additional video, visit our DCK video archive and the Data Center Videos channel on YouTube.

DuPont Fabros Reports New Leases

The DuPont Fabros Technology ACC4 data center facility in Virginia.

Data center landlord DuPont Fabros Technology (DFT) continues to report strong leasing activity at the company’s data center facilities. The company announced three new leases this morning, including two leases with Fortune 500 enterprise companies for all the remaining space in its flagship ACC4 data center in Ashburn, Virginia. The leases totaled 2.275 megawatts of critical power load.

The leases continue a flurry of leasing activity in northern Virginia, as users with large footprint requirements look to lock up space. ACC4 was completed in the fourth quarter of 2007, and has a total power capacity of 36.4 megawatts of critical load.

Net2EZ Confirmed as DuPont Fabros Tenant

DuPont Fabros Technology (DFT) has identified Net2EZ Managed Data Centers as one of the companies that has leased space at its ACC5 data center in Ashburn, Virginia. Net2EZ, a national provider of colocation and managed data center services, has pre-leased a total of 2.275 megawatts (MW) of critical load, or about 12.5 percent of the power capacity of Phase I.

Net2EZ currently leases 2.275 MW of critical load at DuPont Fabros’ ACC4 data center in Ashburn. It is one of three tenants that have signed leases for more than 50,000 square feet of space in ACC5, representing 57 percent of the facility’s capacity. DuPont Fabros now expects to complete ACC5 during the third quarter of this year.

Creative Loan Structure Boosts DuPont Fabros

Tough times call for creative solutions. When data center REIT DuPont Fabros Technology (DFT) saw its borrowing ability curtailed by the credit crisis, it worked out a creative way to restructure loans secured by two of its data centers. The solution, which was announced this week, freed up $150 million and shifted the company’s next major debt repayment from December 2009 to August 2011. The move helped boost investor confidence in DuPont Fabros, which saw its shares soar 36 percent Thursday.

Here’s the scenario; DuPont Fabros had hoped to borrow at least $300 million through a loan secured by its huge ACC4 data center in Ashburn, Virginia and use the proceeds to fund construction of three new data centers in Silicon Valley, New Jersey and Ashburn. But then several potential lenders, including Lehman Brothers, were wiped out or hobbled by the Wall Street financial crisis in September.

With lending severely curtailed, DuPont Fabros was eventually able to borrow just $100 million, despite an appraisal that valued ACC4 at $680 million - a 15 percent loan to value ratio on a facility that was 87 percent occupied with long-term leases. As a result, it was forced to halt construction on the three data center projects.

DuPont Fabros Borrows $180 Million

Data center developer DuPont Fabros Technology (DFT) has borrowed $180 million this week, and is using the money to pay off a key loan and resume construction on a new data center in northern Virginia. The company also reported strong leasing activity at data center projects in both northern Virginia and Chicago. Shares of DuPont Fabros soared 30 percent in early trading on the New York Stock Exchange, adding $1.21 to $5.23.

DuPont Fabros obtained an additional $150 million Tuesday on a loan secured by its ACC4 data center in Ashburn, Virginia, using an “accordion” feature that allowed it to access additional funds. The company used the money to pay off a $135 million construction loan for its Chicago data center, leaving it with no major debt coming due until August 2011.

Last Friday DuPont Fabros raised $30 million in new debt, which it will use to complete construction on ACC5, its next major data center in Ashburn, Virginia. Three tenants have signed leases for more than 50,000 square feet of space in ACC5, representing 57 percent of the facility’s capacity. DuPont Fabros now expects to complete ACC5 during the third quarter of this year.

DuPont Fabros Halts Data Center Projects

Data center developer DuPont Fabros Technology (DFT) said today that it has halted construction at data center projects in New Jersey and Virginia after it failed to arrange additional financing. The company said talks to arrange $150 million in mezzanine debt recently ended after the lender revised its terms.

“After a careful evaluation of our development initiatives we believe this is the prudent course of action at this time,” said Hossein Fateh, President and Chief Executive Officer of DuPont Fabros. “Although we continue to pursue financing arrangements acceptable to the Company, we are confident that our existing sources of cash will satisfy all construction-related obligations that have been committed to date at ACC5, NJ1 and SC1 in Santa Clara, California.”

DuPont Fabros said Oct. 28 that it was halting work on its planned $270 million data center in Santa Clara, saying the credit crunch had limited the size of a new loan to $100 million. At the time, the company said it planned to will use the $100 million to continue construction on new data centers Piscataway, New Jersey and its ACC5 facility in Ashburn, Virginia.

Another Selloff for DuPont Fabros Shares

Shares of data center REIT DuPont Fabros (DFT) sold off sharply again today, losing 87 cents to close at $1.88 a share for a one-day decline of 32 percent. The selloff followed a downgrade from UBS analyst Omotayo Okusanya, who lowered his recommendation from Buy to Neutral. The company’s stock headed lower last Thursday after DuPont Fabros said it is seeking additional funding to complete construction on two major data center projects.  At the current share price, DuPont Fabros has a market capitalization of about $67 million.

The company said Thursday that it is negotiating a $150 million loan with a large pension fund to finance construction on new data centers in New Jersey and Virginia, and hopes to complete the funding by the end of 2008. In the meantime, DuPont Fabros has suspended its fourth quarter dividend to preserve capital. Okusanya, the UBS analyst, expressed concern about the dividend suspension during last week’s conference call with securities analysts (see full transcript at Seeking Alpha).