Boston, MA 05/14/2014 (wallstreetpr) – Digital Realty Trust, Inc. (NYSE:DLR) is considering several tweaks to its business that could see the technology-related real estate company stop building data centers in advance. Instead, the company intends to build data centers on orders.
The company believes it is no longer necessary to have a stockpile of finished data facilities without first securing tenants. The approach is expected to help the company to avoid financial lockup in vacant data centers.
In addition to building data centers only on orders, Digital Realty Trust, Inc. (NYSE:DLR) also intends to divest underperforming data facilities. The divestment of underperforming data centers will be done alongside legacy non-data center assets as the company seeks to expand its technology related-real estate.
Recycling capital
The idea of divesting legacy assets and data centers in underperforming markets are intended to unlock capital to be invested in promising properties. As such, the company plans to offload 5 to 10 percent of its bottom portfolio over the next several years. In addition to unlocking capital, the offloading of bottom assets will enable the company to reduce its financial costs associated with the underperforming properties.
Though Digital Realty Trust, Inc. (NYSE:DLR) intends to offload its bottom portfolio through divestment, the other strategy is contributing the assets to joint ventures. It recently contributed its 110,000 square-foot property in Somerset, New Jersey to a joint venture with Prudential Real Estate Investors. Digital Reality owns 20 percent stake in the joint venture. Its stake carries a valuation of about $40 million.
Permanent CEO
Although Digital Realty Trust, Inc. (NYSE:DLR) is undertaking various portfolio reorganization, the company currently lacks a permanent CEO. The immediate former CEO Michael Foust bolted last March and the position is currently filled in the interim capacity by CFO Bill Stein. There have been concerns, though, that the next CEO might have a different thought in the ongoing property recycling. However, Mr. Stein said the portfolio reorganization is not likely to cause disagreements regardless of who eventually becomes the CEO.
Digital Realty Trust, Inc. (NYSE:DLR) witnessed its revenue growth by 9 percent on a year-over-year basis while funds from operations (FFO) increased 5 percent over the same period.
