Data Center REIT Digital Realty Trust, Inc. (DLR - Free Report) recently commenced the construction of a new data center development in Western Sydney, in turn expanding its presence in Australia. This is a notable step because the nation serves as a crucial market for not only the company’s Asia-Pacific business but also its global operations as well.
The new data center — SYD11 — will spread over a total of 16,360 square meters and have a capacity of 14 megawatt on being fully operational. Construction of the facility is likely to complete in around a year. Moreover, the company already has an existing SYD10 Erskine Park facility. The new data centre will be connected to the current facility, offering a Connected Campus environment to customers.
Data center REITs are experiencing a boom with the growing popularity of cloud computing, Internet of Things and big data as well as the use of third-party IT infrastructure by several companies. In fact, demand has been outpacing supply in top tier data center markets. Notably, these markets are absorbing new construction at an accelerated pace despite enjoying high occupancy.
Further, Digital Realty remains well poised to meet the demands of its widening customer base in Australia on the back of its expansion initiatives as well as two data centers in Sydney and two other in Melbourne. In fact, the company enjoys ownership and operation of 145 properties across 33 global metropolitan areas. Specifically, the company has a meaningful presence in the Asia Pacific region, operating a network of data centers situated in Singapore, Hong Kong, Osaka, Melbourne and Sydney.
Digital Realty is also making diligent efforts to ride on the growth curve backed by strategic acquisitions. Early this June, the company announced that it is set to acquire DuPont Fabros Technology, Inc. . This transaction will likely enhance Digital Realty’s portfolio in the top U.S. data center metro areas across Northern Virginia, Chicago and Silicon Valley. It is also anticipated to be immediately accretive to financial metrics. (Read more: Digital Realty to Acquire DuPont Fabros in $7.6 Billion Deal)
Moreover, the company acquired Telx in October 2015 and a portfolio of eight high-quality, carrier-neutral data centers in Europe (Amsterdam, Frankfurt and London) from Equinix in July 2016. Such acquisitions offered a leading colocation and inter-connection platform, a superior connectivity infrastructure and better growth scope in attractive locations. We believe such expansion efforts would drive the company’s top and bottom lines in the years ahead.
Currently, Digital Realty carries a Zacks Rank #3 (Hold). Further, the company’s shares have gained 23.6% year to date, significantly outperforming the industry’s rally of 5.5%.
Stocks to Consider
Better-ranked stocks in the real estate space include InfraREIT Inc. and Communications Sales & Leasing, Inc. (UNIT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While InfraREIT has expected long-term growth rate of 8%, the same for Communications Sales & Leasing is currently pegged at around 7.5%.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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