Digital Realty Trust Inc. (DLR), a niche real estate investment trust (REIT), has recently expanded its portfolio by acquiring two fully-leased datacenter facilities for $50.3 million. With the acquisition, the company has strengthened its footprint in two top-tier datacenter markets, forging ties with high-quality tenants at attractive yields.
 
Digital Realty acquired a 69,700 square foot space in San Jose, California. The property is currently 100% leased on a long-term basis to a leading telecommunications company. Although Digital Realty did not specify the name of the lessee, JetBlue Airways Corporation (JBLU) and Verizon Communications Inc. (VZ) each operate facilities in the building.
 
Digital Realty also acquired a 56,000 square foot property in Richardson, Texas, which is in close proximity to its redevelopment project, Datacenter Park Dallas. The asset is presently 100% leased on a long-term basis to AT&T Inc. (T), which provides telecommunication products and services under the AT&T brand worldwide.
 
Digital Realty primarily operates datacenters and digital storage facilities, which are used by telecommunication companies to maintain their internet presence or augment their data networks. Datacenters usually incur high costs for building and maintenance, and as such supply is relatively inelastic.
 
With demand for digital storage facilities increasing in recent years, Digital Realty has benefited greatly by negotiating favorable lease terms and maintaining strong occupancy rates. The long-term lease agreements have also insulated the company from short-term volatility and market swings experienced during the recession. This has enabled Digital Realty to continue to pay out solid dividends to its shareholders.
 
The rating on Digital Realty is currently “Neutral” with a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1−3 months.
 
DIGITAL RLTY TR (DLR): Free Stock Analysis Report
 
JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report
 
AT&T INC (T): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
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