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Digital Realty Trust Expands Portfolio

Digital Realty Trust announces two new datacenter property acquisitions.



) --

Digital Realty Trust

(DLR) - Get Digital Realty Trust Inc. Report

, a niche real estate investment trust, is expanding its portfolio of digital information storage facilities.

Digital Realty Trust said Monday it acquired two fully leased datacenter properties for $50.3 million.

Its newly acquired properties include a 69,700 square foot space in San Jose, Calif., 100% of which is leased on a long-term basis to a major telecommunications company.

The REIT did not specify which companies occupy the fully-leased space, but

JetBlue Airways

(JBLU) - Get JetBlue Airways Corporation Report


Verizon Communications

(VZ) - Get Verizon Communications Inc. Report

each operate facilities at the given address.

The other totals more than 56,000 square feet in Richardson, Texas, near Digital Realty's redevelopment project, Datacenter Park Dallas. The new Texas property is also 100% leased on a long-term basis to another major telecommunications company, likely

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, according to data center trade publication

Data Center Knowledge


"The addition of these facilities to our operating portfolio expands our footprint in two top-tier datacenter markets and further demonstrates our ability to source and complete the acquisition of high quality assets with credit tenants at attractive yields," said Scott Peterson, senior vice president of acquisitions.

Digital Realty's primary property holdings are datacenters, digital storage facilities which are used by companies to maintain their internet presence or beef up their data networks. Datacenters are expensive to build and maintain, and as such supply is relatively inelastic.

With demand creeping up in recent years, Digital Realty has benefited greatly by negotiating favorable lease terms and maintaining strong occupancy rates. Thanks to high switching costs, most of those leases continued to perform during the real estate market's faltering in 2008.

Strong occupancy rates and increasing demand for digital storage space should help Digital Realty to continue to pay out solid dividends to its shareholders, according to Jonas Elmerraji, portfolio manager of the Rhino

Stock Report

and frequent contributor to



>> Dividend Stocks: Kellogg, Digital Realty

Among Digital Realty's shareholders is the

CGM Realty Fund

(CGMRX), a fund with Morningstar's 5-star rating. Other CGM holdings include

Simon Property Group

(SPG) - Get Simon Property Group Inc. Report


Public Storage

(PSA) - Get Public Storage Report


In late July, Digital Realty announced a

10.4% dividend increase to 53 cents per share


Still, earlier this month analysts at Credit Suisse

issued a downgrade

for Digital Realty's stock to neutral from outperform on the view that its growth rate may contract in the medium term.

Digital Realty's shares were unable to hold early gains and the stock closed down 0.3% to $58.01.

-- Reported by Miriam Marcus Reimer from New York.


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