Real estate investment trusts (REITs) focusing on the data center sector are a pretty exclusive group. It's a club with only two members - Digital Realty Trust (DLR) and Dupont Fabros Technology (DFT). The investment potential of these two REITs was the subject of an Associated Press article yesterday, which appeared in a number of daily newspapers around the nation. The story notes that securities analysts from Raymond James, UBS AG and KeyBanc Capital Markets are all bullish on the sector.
The analysts' sentiments closely track the key findings in our February series Crunch Time: The Credit Crunch and Data Centers, particularly the segment on The Incumbent Advantage. Investors interested in the sector will also want to check out our review of data center stock performance in 2007 and the first quarter of 2008.
Posted by Rich Miller 
April 10, 2008 | Permalink | Newsletter
February 05, 2008
Microhoo: 1,600 Pound Gorilla for Vendors?
Sometimes it's nice to have an "800-pound gorilla" as a customer. It's even better to have two of these huge companies as customers. But what happens if the two 800-pound gorillas merge? That's an important question in light of Microsoft's $44 billion bid for Yahoo (YHOO). Several publicly-held companies in the data center sector do big business with both Microsoft (MSFT) and Yahoo, to the extent that the two companies add up to half their revenues. Here are a couple of examples:
- Rackable (RACK) gets 57 percent of its revenues from its top three customers, which are Microsoft, Yahoo and Amazon (AMZN), with Amazon assumed to represent the smaller chunk of the three. Rackable's focus on DC power and energy-efficient servers has helped it gain traction among companies with the largest server farms. Its customer base has become more diverse with the emergence of Amazon's utility computing operation and the growth of Facebook, another large customer.
Posted by Rich Miller February 05, 2008 | Permalink | Newsletter
January 15, 2008
DuPont Fabros: A Bet on Internet Growth
Data center real estate is a fast-growing but specialized business requiring large amounts of capital and engineering experience, according to Hossein Fateh, the President and CEO of DuPont Fabros Technology (DFT). Fateh offered his insights into the data center industry last month in a presentation to investors at the 35th Annual UBS Annual Global Media and Communications Conference.
DuPont Fabros, which had its IPO in October, was among a presenter list filled with some of the world's largest media companies, such as Viacom, News Corp., Walt Disney and NBC Universal. UBS analyst Omotayo Okusanya said DuPont Fabros is positioned to benefit as media content moves online.
"We are very, very bullish on the data center real estate space," said Okusanya, a director and equity analyst on UBS team tracking the REIT sector. "We believe owners and operators of data center space have done very well over the past two years due to strong fundamentals. We expect the fundamentals to remain very strong for the next few years, which will create a supply and demand imbalance that should be to the benefit of companies like DuPont Fabros."
"This is a real estate bet on the growth of the Internet," said Fateh. "We see growth much faster than that of a typical real estate companies. The product we rent and sell is really power, cooling and the security for the front door. As the Internet has exploded, so has demand for this space. At every iteration, there are new business models that come up."
Microsoft and Yahoo represent more than 60 percent of DFT's leasing revenue, but the company's customer base is diversifying. "If you told me two years ago that social networking sites would be important to our business, I wouldn't have believed it," said Fateh. "Today they are a very large part of our business," as Facebook and MySpace both lease space in the company's data centers. Fateh said he expects online video to become a large part of DuPont Fabros' business, along with online delivery of medical records.
Posted by Rich Miller January 15, 2008 | Permalink | Newsletter
December 13, 2007
DuPont Fabros Closes on Santa Clara Site
DuPont Fabros Technology, Inc. (DFT) has closed on the purchase of 17.2 acres of land in Santa Clara, California for $22.0 million, the company said today. DuPont Fabros plans to build two large data centers at the site. The cost and date of the closing was expected, and had been disclosed in the company's SEC filings.
The two data centers will include 600,000 gross square feet and 342,000 square feet of finished data center space, with a power capacity of 72.8 megawatts. DuPont Fabros expects the first phase, SC1, to be completed in 2009, but has not announced a timetable for the second phase (SC2).
Posted by Rich Miller December 13, 2007 | Permalink | Newsletter
November 01, 2007
32 Generators at New DuPont Fabros Facility
DuPont Fabros Technology (DFT) said yesterday that it has completed the second phase of its ACC4 data center in Ashburn, Virginia. The 348,000 square foot facility, which will house servers for Facebook, MySpace and Yahoo, features some of the most extraordinary power infrastructure yet seen in the data center industry. As power usage at data centers continues to grow, the new DuPont Fabros facility may offer a glimpse into the future of infrastructure for premium data centers.
The ACC4 facility has a 36.4 megawatt power feed from Dominion Virginia Power, and is supported by 32 huge 2.25 megawatt diesel generators. That number is correct: 32 generators. The building has four 50,000 gallon tanks of diesel fuel tanks for a total of 200,000 gallons of storage, enough to run the facility on generator power for up to 55 hours during a grid outage. To protect against short-term power outages, ACC4 has 32 rotary power (flywheel) systems that can each produce 1.3 megawatts of output to maintain power until the generators can start.
Posted by Rich Miller November 01, 2007 | Permalink | Newsletter
October 30, 2007
DuPont Fabros Execs Buying Shares
Ten days after its IPO, shares of DuPont Fabros (DFT) are trading close to the initial offering price of $21 a share. The company's executives apparently think that's a bargain, and have been buying shares. Chief executive and president Hossein Fateh and executive chairman Lammot J. du Pont each bought 47,600 shares of stock at $21 a share, spending about $1 million each, according to Securities and Exchange Commission filings last week. DuPont Fabros closed yesterday at $21.28 a share.
In other news, the underwriters of the company's Oct. 19 IPO said they had exercised their option to buy an additional 4,575,000 shares of DuPont Fabros common stock at $21, raising the total proceeds from the offering to $678 million after expenses.
Posted by Rich Miller October 30, 2007 | Permalink | Newsletter
October 19, 2007
DuPont Fabros Raises $641M in IPO
DuPont Fabros Technology (DFT) has completed its initial public offering at $21 a share, the top end of the $19 to $21 range projected by the company. Shares moved as high as $23 in early trading, and have receded slightly to $22.05 a share in midday trading on the New York Stock Exchange. DuPont Fabros will trade as a real estate investment trust (REIT), joining Digital Realty Trust (DLR) as the only REITs targeting the market for data center facilities.
DuPont Fabros plans to use $405 million of the proceeds to pay down existing debt, and another $100 million to buy out the investment interests of partners in various real estate entities being rolled into the REIT. About $22 million is expected to be used to purchase the land for its two data center properties in Santa Clara, Calif.
Posted by Rich Miller October 19, 2007 | Permalink | Newsletter
DuPont Fabros IPO Set For Today
DuPont Fabros Technology Inc. is scheduled to make its initial public offering today on the New York Stock Exchange. Last week the company announced that shares would be priced at between $19 and $21 a share. DuPont Fabros plans to sell 30.575 million shares in the IPO, with underwriters Lehman Brother and UBS having an option to buy another 4.5 million shares. The offering is expected to raise $610 million, with an upside potential of $736 million if the overallotment sells as well. The Washington, D.C. company has also launched a brand new web site, which includes detailed descriptions of the company's data centers and executive bios.
The DuPont Fabros offering is shaping up as a significant indicator of investor interest in the data center sector, as it represents the first IPO by a "pure-play" data center builder since the resurgence began in the data center market. The company plans to trade on the New York Stock Exchange under the symbol DFT. Check back for updates once trading begins.
Posted by Rich Miller October 19, 2007 | Permalink | Newsletter
October 08, 2007
DuPont Fabros Plans IPO Price of $21
Data center developer DuPont Fabros Technology (DFT) will price shares for its initial public offering at $19 to $21 per share, the company said in an SEC filing on Oct. 5. DuPont Fabros plans to sell 30.575 million shares in the IPO, with underwriters Lehman Brother and UBS having an option to buy another 4.5 million shares. If the company sells all 35.075 million shares at $21, it would raise $736 million. The IPO is scheduled sometime during the week of Oct. 15.
DuPont Fabros announced in August that it filed for an IPO as a real estate investment trust. The Washington-based company is an experienced player in the data center space, with five fully-occupied data centers in northern Virginia leased to tenants including Microsoft (MSFT), Yahoo (YHOO) and Google (GOOG). It also owns 13 properties for future development as data centers.
The DuPont Fabros offering is shaping up as a significant indicator of investor interest in the data center sector, as it represents the first IPO by a "pure-play" data center builder since the resurgence began in the data center market. The company plans to trade on the New York Stock Exchange under the symbol DFT.
Posted by Rich Miller October 08, 2007 | Permalink | Newsletter
August 10, 2007
DuPont Fabros Files for $700M IPO
Data center developer DuPont Fabros Technology has filed for an initial public offering (IPO) as a real estate investment trust, in which it hopes to raise $700 million. The Washington-based company is an experienced player in the data center space, which currently owns and operates five fully-leased data centers in northern Virginia to tenants including Microsoft, Yahoo and Google. It also holds 13 properties for development as data centers. DuPont Fabros has also developed and then sold properties to Equinix (EQIX) and Digital Realty Trust (DLR). The company plans to trade on the New York Stock Exchange under the symbol DFT.
DuPont Fabros just completed the 150,000 square foot first phase of a major new data center in its Ashburn Corporate Center, which was fully-leased upon its opening. The company will complete the second phase in November (which is already 43 percent leased), and also expects to bring a data center in Elk Grove, Ill. on the market early next year.
The IPO will provide DuPont Fabros with additional capital to develop its portfolio of expansion properties in an environment where rising power and cooling requirements mandate significant infrastructure investment. That's especially true for companies like DuPont Fabros that focus on developing the most highly-engineered facilites for premium tenants in the Internet and financial sectors.
Posted by Rich Miller August 10, 2007 | Permalink | Newsletter
January 09, 2006
Google Video a Bonanza for Data Center Operators
Data center owners should be giddy about the launch of Google Video and imminent arrival of similar services providing online video. It's clear that in coming years, television and movie content will become widely available for download across IP networks. An enormous volume of digital files will need to be stored in data centers for delivery via the Internet.
Think about it. Most major network TV shows, and eventually movies as well, will be digitized and reside on a server. Even in the age of blade servers, the companies that succeed in selling and delivering online video will require large amounts of data center space. This content will need to be stored in facilities offering high reliability and redundancy, ensuring that consumers will have uninterrupted, around-the-clock access to downloads. This is a dream scenario for companies that own or operate quality data centers, particularly those that already have tenant relationships with the providers positioning themselves for leadership roles in this business. Keep in mind that any demand generated by online video comes on top of an already rosy outlook for data center space.
So who are these data center operators poised to benefit from the online video boom? They're the companies we track here at Data Center Knowledge. Here are some of the industry players positioned to benefit from Google Video and similar services:
Posted by Rich Miller January 09, 2006 | Permalink | Newsletter
July 29, 2005
DuPont Fabros Pays $58 Million for AOL Center
DuPont Fabros, the Washington, D.C.-based technology real estate specialist, has paid $58 million to acquire a 230,000 square foot northern Virginia data center built by America Online, the Washington Post reports. DuPont Fabros, which recently sold five data centers to Digital Realty Trust for $92 million, expects to have a tenant for the facility by the fall.
The Post also reports that Fortress Technologies (formerly DataCentersNow) has leased its Manassas site, which has been vacant since 2001.
Posted by Rich Miller July 29, 2005 | Permalink | Newsletter
June 03, 2005
Digital Realty Pays $92M for 5 SAVVIS Centers
Hardly a day goes by nowadays without news from Digital Realty Trust, which announced today that it had an agreement to acquire five California properties that are fully leased to web host SAVVIS Communications. DRT will pay $92.5 million for the facilities, which span 560,000 square feet of space and include three data centers and an office in Santa Clara and a fourth data center in El Segundo. That prices the deal at about $165 per square foot.
DuPont Fabros Development paid $52 million to buy the five former Exodus properties from SAVVIS in February 2004 after SAVVIS won a bankruptcy auction for the operations of Cable & Wireless America (which had bought Exodus in an earlier bankruptcy auction in 2002). DuPont Fabros will thus gain $40.5 million on the sale after about 16 months of ownership. The sale is subject to the completion of due diligence, and is expected to be funded with borrowings from DRT's revolving credit facility.
Posted by Rich Miller June 03, 2005 | Permalink | Newsletter
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