Digital Realty Could See Pressure after Dupont Fabros Poor Guidance

Yesterday, technology-related real estate company Dupont Fabros

reported fourth quarter earnings, which was in-line with analyst estimates. However, all is not well as the company announced guidance, which did not live up to analysts' expectations. For the first quarter of 2012, Dupont Fabros guided funds from operations [FFO] between $0.31 and $0.35 per share versus estimates of $0.40. The company also guided full year 2012 FFO lower than expectations. Dupont anticipates to earn between $1.31 and $1.51 per share, versus estimates of $1.79. The $0.20 per share difference between the company's full year 2011 FFO of $1.61 and the expected mid-point of the company's guidance range for full year 2012 is primarily due to a positive impact of $0.32 per share primarily from new leases commencing, a negative impact of $0.12 per share related to unreimbursed property operating expenses, real estate taxes and insurance, and a negative impact of $0.02 per share from expensing the compensation of all development personnel who were capitalized in 2011. Dupont Fabros also stated the lowered guidance is because of a negative impact of $0.31 per share from lower capitalized interest expense as no new development starts are budgeted for 2012 and a negative impact of $0.07 per share from higher preferred dividends. After the poor guidance, a few ratings firms downgraded the shares of Dupont Fabros. Similar technology-related real estate company, Digital Realty Trust

could see lower than expected profits going forward for the same reasons as Dupont Fabros, as both companies are competitors in the same industry, and are really the only two significant players. Currently, shares of Dupont Fabros are trading down about 8.5% at $23.33, and shares of Digital Realty Trust are trading about 1% lower at $70.09.