Digital Realty Trust, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on June 3, 2005, reporting events occurring on May 27, 2005, and May 31, 2005. Digital Realty Trust, Inc., a real estate investment trust, executed multiple material agreements regarding the acquisition of data center assets and related financing.
Key Financial Metrics and Transactions
- Lakeside Technology Center Acquisition: Completed purchase of an 8-story historic building in Chicago, IL, totaling approximately 1,095,540 square feet. The purchase price was approximately $140 million, with a potential contingent fee of up to $20 million payable to the seller for tax classification changes by December 31, 2006.
- Lakeside Financing: Secured a $100.0 million mortgage from Morgan Stanley Mortgage Capital, Inc. The loan carries a weighted average variable interest rate of LIBOR plus 2.20%, matures on June 9, 2008, and includes two one-year extension options. A prepayment fee of 0.75% applies for prepayments prior to November 9, 2006.
- Lakeside Funding Mix: The acquisition was funded by the $100 million mortgage, $35 million in borrowings under the unsecured revolving credit facility, and working capital.
- Savvis Data Center Portfolio: Entered into agreements to acquire five properties (four data centers, one office) totaling approximately 560,000 net rentable square feet in Santa Clara and El Segundo, California. The properties are 100% leased to Savvis, Inc. The purchase price is approximately $92.5 million, to be funded via the credit facility.
- Ameriquest Data Center: Entered into agreements to acquire a single-story data center in Englewood, Colorado, totaling approximately 82,000 net rentable square feet, 100% leased to Ameriquest Mortgage Company. The purchase price is $16.5 million, to be funded via the credit facility.
Material Changes and Related Party Transactions
The Ameriquest Data Center acquisition involves a related party transaction. The seller, Global Concord Operating Company, LLC, is a subsidiary of Global Innovation Partners, LLC ("GI Partners"). GI Partners holds 24,699,359 partnership units in the Operating Partnership. Key executives, including Executive Chairman Richard Magnuson, CEO Michael Foust, and SVP Scott Peterson, are minority investors in GI Partners. The transaction was approved by the independent members of the board of directors. The purchase price of $16.5 million was noted as being less than the value determined by an independent third-party appraiser.
Outlook, Risks, and Contingencies
- Due Diligence Conditions: The Savvis acquisition is subject to a due diligence period ending June 12, 2005. The company has the right to terminate the agreement for any reason during this period. A $500,000 deposit has been made, with an additional $500,000 required upon expiration of the due diligence period.
- Contingent Fees: The Lakeside acquisition includes a contingent fee structure where the seller may earn up to $20 million additional if specific real estate tax classifications are obtained by December 31, 2006.
- Financial Reporting: Financial statements and pro forma information for the Lakeside Technology Center will be filed by amendment within 71 days of this report.
Investor Verification Checklist
- Verify the successful completion of the Savvis Data Center portfolio acquisition following the June 12, 2005 due diligence deadline.
- Monitor the status of the real estate tax classification for the Lakeside Technology Center to assess the potential $20 million contingent liability.
- Review the upcoming amendment filing for financial statements and pro forma data regarding the Lakeside Technology Center.
- Confirm the utilization of the unsecured revolving credit facility for the Savvis and Ameriquest acquisitions and its impact on liquidity.