Digital Realty Trust (DLR 115.92, -5.00, -4.13%) shed more than 4% on Monday after news of a few deals and a common stock offering.
DLR’s Brazilian subsidiary, Stellar Participações Ltda.,
will acquire Ascenty from private equity firm Great Hill Partners in a
transaction valued at approximately $1.8 bln.
Separately, DLR entered into an independent bilateral equity commitment letter with Brookfield Infrastructure, an affiliate of Brookfield Asset Management (BAM 44.12, -0.12, -0.27%), under which Brookfield has committed to fund half of the required initial equity investment, currently estimated to be approximately $613 mln, excluding Brookfield's share of the transaction costs, in exchange for 49% of the total equity interests in a joint venture entity expected to ultimately own Ascenty.
The gross purchase price for Ascenty is approximately $1.8 bln, in addition to approximately $425 mln of capital expenditures to fund the completion of data center development currently under construction and to build out additional capacity to meet near-term customer demand. The $2.25 bln of total estimated capital invested represents a multiple of approximately 15.0 – 15.5 times underwritten forward stabilized EBITDA.
The transaction is expected to close in the fourth quarter of 2018 and is subject to customary closing conditions. Upon consummation of the transaction, Ascenty will enter into a $50.0 mln senior secured first lien revolving credit facility, a senior secured first lien term loan facility of up to $650.0 mln, and a $75.0 mln senior secured first lien delayed draw term loan facility.
Loudoun County Deal:
Also, DLR has reached an agreement to acquire 424 acres of undeveloped land in Loudoun County, Virginia for a total purchase price of $236.5 mln, or approximately $558,000 per acre. The site is adjacent to Washington Dulles International Airport and located near bulk transmission lines as well as a major fiber path.
The site is also located less than four miles from DLR’s existing data center campuses in Ashburn, Virginia. The transaction is expected to close in the fourth quarter of 2018 and is subject to customary closing conditions.
8.5 Million Share Offering:
DLR also announced the commencement of an underwritten registered public offering of 8,500,000 shares of its common stock. BofA Merrill Lynch and Citigroup are the joint book-running managers for the offering.
The company expects to enter into forward sale agreements with Bank of America, N.A. and Citibank, N.A., with respect to 8,500,000 shares of its common stock. In connection with the forward sale agreements, the forward purchasers or their affiliates are expected to borrow and sell to the underwriters an aggregate of 8,500,000 shares of the common stock that will be delivered in this offering .
The company will not initially receive any proceeds from the sale of shares of its common stock by the forward sellers. The company intends to contribute the net proceeds, if any, it receives upon the future settlement of the forward sale agreements to its operating partnership, which intends to subsequently use a portion of such net proceeds to fund its portion of the previously-announced pending acquisition of Ascenty.
After Friday giving up its 50-day simple moving average (121.24), shares of DLR fall further following this morning's batch of M&A and offering headlines. DLR, a constituent in both the ICF -2.14% and XLRE -1.96%, still holds a gain on the year.