Digital Realty Prices, Increases Common Stock Offering

SAN FRANCISCO-Digital Realty Trust Inc. has increased its common stock offering by almost one million shares to 5.1 million shares and priced it at $17.80, which was the company’s closing stock price Wednesday afternoon. In early trading today, shares are selling for $18.25, up $0.45 on the day and less than $0.20 from its 52-week high of $8.43, which occurred on July 12.Including a 2.2 million share 7.87% preferred stock offering at $25 per share and underwriter options for both the common and preferred stock, Digital Realty is expecting proceeds of just under $168 million. Prior to the expanded common stock offering, the expected proceeds were closer to $143 million. Citigroup and Merrill Lynch & Co. are the joint book-running managers for the common stock offering, and together with UBS Investment Bank, are the book-running managers for the 7.875% series B cumulative redeemable preferred stock offering. The concurrent offerings are expected to close on July 26, 2005. The proceeds will be used to repay borrowings under its unsecured credit facility. At June 30, the outstanding balance on the unsecured credit facility was $188 million, according to SEC filings. The facility is bearing interest at Libor plus 1.625% per annum, which equaled a rate of 4.97% at the end of June. The credit facility expires in November 2007, subject to a one-year extension option.Digital Realty went public in November, selling 20 million shares at $12 per share for gross proceeds of $240 million. The company went public with 23 properties that were part of a private equity fund established in 2001 by CalPERS (95%) and CB Richard Ellis Investors (5%), and CalPERS continues to own 40% of the company’s operating partnership. The company has since acquired 10 additional operating properties–giving it a total operating portfolio of about 7.3 million sf.Generally speaking, the company’s properties are located in markets where technology tenants are concentrated, including the Atlanta, Boston, Dallas, Denver, Los Angeles, Miami, New York, Phoenix, Sacramento, San Francisco and Silicon Valley metropolitan areas. The portfolio consists of telecommunications infrastructure properties, information technology properties, technology-manufacturing properties and regional or national headquarters of technology companies. According to Digital Realty CFO William Stein, the company buys its properties for between $200 and $225 per sf. The properties it purchases typically were improved at a cost of between $500 and $1,000 per sf, he says, and its acquisitions are made with maximum 60% leverage, per agreements related to its revolving credit facility.