Digital Realty Leases in New Jersey - Analyst Blog

Digital Realty Trust Inc. (DLR), a niche real estate investment trust (REIT), has recently signed a new lease agreement with Logicworks -- a premier provider of cloud computing services that uses the Internet and central remote servers to maintain data and applications -- for an undisclosed amount. The lessee, headquartered in New York City, would occupy Digital Realty's data center facility in Piscataway, New Jersey.

The data center facilities of Digital Realty feature a state-of-the-art power and cooling architecture that has been optimized for green operation. The facilities typically use metered power systems to ensure that clients pay only for the power consumed.

In addition, each data center facility is equipped with Digital Realty's PowerVU software, which enables centralized monitoring and management of data center power consumption, energy efficiency and load analysis to increase client profitability.

Digital Realty operates data centers and digital storage facilities which are primarily used by telecommunication companies to maintain their Internet presence or augment their data networks. Data centers usually incur high costs for building and maintenance, and as such supply is relatively inelastic.

Digital Realty provides flexible and cost effective data center facilities to a wide range of customers, including domestic and international companies across multiple industry verticals. Its portfolio includes 110 properties throughout Europe, Asia, Australia and North America spanning approximately 21.2 million square feet (including 2.2 million square feet of redevelopment space).

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 unfavorable market swing experienced during the recession. This, in turn, has enabled Digital Realty to continue to pay out solid dividends to its shareholders.

The current rating on Digital Realty is Neutral and the stock presently has a Zacks #3 Rank that translates into a short-term Hold recommendation. MPG Office Trust Inc. (MPG), one of the peers of Digital Realty, also has a Neutral recommendation and a Zacks #3 Rank.