Digital Realty Trust, Inc. (NYSE:DLR), a $60.37 billion market cap REIT specializing in data center properties, has amended its charter to increase the number of authorized shares of common stock from 392 million to 502 million, effective today, Monday.
The company's stock has shown strong momentum with a 36.85% return year-to-date, although InvestingPro analysis indicates it's currently trading above its Fair Value. The company, headquartered in Austin, Texas, also entered into an At-The-Market (ATM) Equity Offering Sales Agreement potentially worth up to $3 billion, as disclosed in a recent SEC filing.
The ATM Equity Offering Sales Agreement, dated today, involves a consortium of financial institutions, including BofA Securities, Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC), among others. The agreement allows Digital Realty to offer and sell shares of its common stock through these agents or as principals. This move follows the termination of the company's previous at-the-market program, which had raised approximately $923.2 million by issuing around 5 million common shares at an average price of $184.21 per share since September 30, 2024.
Digital Realty has not initially received proceeds from the sale of borrowed shares by Forward Sellers in connection with forward sale agreements. These arrangements are designed to hedge the Forward Purchaser's exposure. However, the company expects to receive cash proceeds upon the full physical settlement of these agreements.
The net proceeds from this equity offering are intended to be contributed to Digital Realty's operating partnership, which plans to use the funds for various purposes. These include repaying borrowings under global revolving credit facilities, acquiring additional properties or businesses, funding development opportunities, and general corporate purposes, which may involve repaying other debts or repurchasing, redeeming, or retiring outstanding debt securities.
The company maintains a solid financial position with a current ratio of 1.6x, indicating strong liquidity. InvestingPro subscribers can access detailed analysis of the company's debt structure and 8 additional key insights about Digital Realty's financial health.
This strategic financial maneuver by Digital Realty Trust, Inc. is aimed at enhancing the company's financial flexibility and supporting its growth initiatives. The company has demonstrated its commitment to shareholder returns through 21 consecutive years of dividend payments, currently offering a 2.73% yield. The details of the ATM Equity Offering and the amended charter are based on information from the company's SEC filing.
For comprehensive analysis and detailed metrics, investors can access the full Pro Research Report available on InvestingPro, which provides deep-dive analysis of Digital Realty's financial health, valuation, and growth prospects.
In other recent news, Digital Realty Trust has seen several significant financial developments. The company's revenue is expected to grow by 10% in FY25 and FY26 due to steady occupancy gains and favorable leasing spreads, according to Mizuho (NYSE:MFG)'s revised forecasts. The data center REIT also issued $1.15 billion in 1.875% Exchangeable Senior Notes due in 2029, a strategic move in line with their broader financial strategy.
Analysts have responded to these developments with varied outlooks. Citi maintained a Buy rating on Digital Realty Trust and increased the price target to $212. Deutsche Bank (ETR:DBKGn) maintained a Hold rating but lowered its price target to $159. Mizuho reaffirmed its Outperform rating with a steady price target of $170, while RBC Capital Markets increased its price target to $207.
In the third quarter of 2024, Digital Realty Trust's new leasing volume reached $521 million and a backlog of leases set to commence increased to nearly $860 million. The company's Funds From Operations (FFO) of $1.67 slightly surpassed the consensus estimate of $1.66. Following these results, the company raised its guidance midpoint to $6.70, slightly above the Street's expectation of $6.66.
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