Datacenter REIT Digital Realty sells $1.5 billion worth of stock

By Tomi Kilgore

The offering of 10.5 million shares was priced at a discount of more than 3%

Shares of Digital Realty Trust Inc. were set to drop Wednesday, after the data-center real-estate investment trust announced the sale of roughly $1.5 billion worth of stock.

The REIT's stock (DLR) fell 3.4% in premarket trading.

The company said late Tuesday that it had launched a public offering of 10.5 million common shares, representing 3.4% of the 312.4 million shares outstanding as of May 1.

Early Wednesday, the company said it expected proceeds of $1.47 billion from the offering. That implies a pricing for the offering of $140 a share, which is 3.2% below the stock's Tuesday's closing price of $144.63.

Digital Realty said it plans to use the proceeds to pay down debt under its revolving credit facilities, acquire additional properties, take advantage of development opportunities and use for working capital.

The company said it was also granting the underwriters, which include BofA Securities, Citigroup Global Markets and J.P. Morgan Securities, a 30-day option to buy an additional 1.575 million shares to cover overallotments.

Digital Realty had reported last week first-quarter net income that beat expectations by a wide margin, and core funds from operations that also beat forecasts, amid an 11.8% increase in rental rates on renewal leases.

As of Tuesday's close, Digital Realty had a market capitalization of $45.19 billion and the stock's dividend yield was 3.37%. That compares with the yield for the Real Estate Select Sector SPDR ETF XLRE of 3.56% and the implied yield for the S&P 500 index SPX of 1.42%.

The stock has gained 7.5% year to date, while the S&P 500 has advanced 8.8%.

-Tomi Kilgore

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05-08-24 0721ET

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