Business Context and Reporting Period
Company: Digital Realty Trust, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 8, 2010
Reporting Period: Specific event date of July 8, 2010, with references to equity activity through June 25, 2010, and lease data as of March 31, 2010.
Key Financial Metrics and Transaction Details
- Debt Issuance: Issued $375.0 million aggregate principal amount of 4.50% Notes due 2015.
- Interest Rate: 4.50% per annum, payable semi-annually starting January 15, 2011.
- Purchase Price: 99.697% of principal amount.
- Equity Proceeds (Jan 1 - June 25, 2010): Approximately $67.5 million net proceeds from the issuance of approximately 1.3 million common shares.
- Related Party Leases (as of March 31, 2010):
- Morgan Stanley affiliates: ~121,494 sq. ft. with ~$17.2 million annualized rent.
- J.P. Morgan affiliates: ~149,935 sq. ft. with ~$14.6 million annualized rent.
Material Changes and Use of Proceeds
The primary material change is the entry into a material definitive agreement to issue senior unsecured notes. The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the period versus prior periods as this is a transaction-specific report.
Intended Use of Proceeds:
- Fund a portion of the $725.0 million purchase price for the Rockwood Capital/365 Main Portfolio acquisition.
- Acquire additional properties.
- Fund development and redevelopment opportunities.
- General working capital, including potential repurchase or retirement of outstanding debt or preferred securities.
Guidance, Risks, and Contingencies
Registration Rights: The company agreed to file a registration statement within 90 days to register exchange notes with nearly identical terms. Failure to fulfill obligations under the registration rights agreement may result in liquidated damages to note holders.
Covenants and Restrictions: The indenture includes restrictive covenants limiting the ability to incur additional indebtedness and requiring the maintenance of a pool of unencumbered assets.
Events of Default: Includes failure to pay interest or principal, breach of agreements (with 60-day cure period), failure to pay other significant indebtedness (>$50 million), and bankruptcy/insolvency events.
Redemption: Notes are redeemable at the company's option at 100% of principal plus accrued interest and a make-whole premium, except if redeemed within 90 days of maturity.
Investor Verification Checklist
- Verify the closing status and funding of the $725.0 million Rockwood Capital/365 Main Portfolio acquisition.
- Confirm the filing of the registration statement for exchange notes within the 90-day deadline to avoid liquidated damages.
- Review the impact of the new $375.0 million debt on the company's leverage ratios and unencumbered asset pool requirements.
- Assess the extent of related-party transactions with Citigroup, Morgan Stanley, and J.P. Morgan, including their roles as lenders, sales agents, and tenants.