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Digital Realty Upsizes Revolving Credit Facilities, Boosts Flexibility

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Digital Realty (DLR - Free Report) recently announced that it has refinanced and upsized its revolving credit facilities to $4.5 billion. This move strengthens the data center REIT’s strong financial flexibility.

DLR has amended, restated and extended its present $3.75 billion multi-currency global unsecured revolving credit facility to $4.2 billion, reflecting an expansion of $450 million.

The $4.2 billion credit facility is set to mature in January 2029, with the possibility of a one-year extension to January 2030. DLR can extend its global revolving credit facility by $1.8 billion, including incremental term loan capacity.

DLR also amended, restated and extended its present ¥33.285 billion Japanese yen-denominated senior unsecured revolving credit facility to ¥42.511 billion (approximately $297 million). Given the current credit ratings of the company, the interest rate for this facility will be 50 basis points over the applicable index for floating rate advances.

The aforementioned credit facility is set to mature in January 2029, with the possibility of a one-year extension to January 2030. DLR can extend this revolving credit facility by ¥60 billion (approximately $418 million) through a term loan facility.

As per Matt Mercier, Digital Realty's CFO, "The refinancing demonstrates the institutional lender community's continued confidence in our balance sheet and renewed sponsorship of our global data center platform, while providing us with increased financial flexibility as we continue to prudently invest in the growth of our global portfolio."

DLR’s Solid Balance Sheet

Digital Realty has a solid balance sheet with ample liquidity and diversified sources of capital. Its capital-recycling efforts aimed at bolstering balance sheet strength and driving long-term growth are encouraging. The latest refinancing and upsizing of its revolving credit facilities to $4.5 billion also augur well for its long-term growth.

As a result of its proactive balance-sheet management, Digital Realty exited the second quarter of 2024 with cash and cash equivalents of $2.82 billion. Its debt maturity schedule is well-laddered, with a weighted average maturity of 4.0 years and a 2.9% weighted average coupon as of June 30, 2024.

Shares of DLR have risen 19.2% year to date, outperforming the industry's upside of 9.8%.

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Digital Realty: In a Nutshell

With the growth in cloud computing, the Internet of Things and Big Data and an increasing number of companies opting for third-party IT infrastructure, data center REITs are experiencing a booming market.

Digital Realty is well-poised to ride on this demand growth curve, given its accretive acquisitions, development efforts and balance-sheet strength.

DLR, carrying a Zacks Rank #3 (Hold) at present, has a high-quality, diversified investment-grade customer base comprising tenants from the cloud, content, information technology, network, and other enterprise and financial industries, assuring stable revenue generation for the company.

Stocks to Consider

Some better-ranked stocks from the REIT sector are Cousins Properties Incorporated (CUZ - Free Report) and Lamar Advertising (LAMR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Cousins Properties’ ongoing year’s funds from operations (FFO) per share has increased marginally over the past month to $2.67.

The Zacks Consensus Estimate for Lamar Advertising’s 2024 FFO per share has moved marginally northward in the past two months to $8.09.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.


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