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Digital Realty Expands in Europe With Frankfurt Facility


Digital Realty Trust, Inc. DLR recently unveiled its second data center in Frankfurt, further expanding its presence in Europe. The latest nine-megawatt facility is, in fact, one of the three buildings slated to be constructed on this new campus in Sossenheim, Germany, situated about three miles to the west of downtown Frankfurt.

Notably, in terms of size, Frankfurt occupies the second position in the European region, right after London. Cloud adoption and data-sovereignty laws are significantly increasing demand for data centers in Frankfurt, pushing back market vacancies to record lows. Frankfurt offers bright prospects for Digital Realty backed by its position as a key network interconnection center. In addition to this, it is the commercial and financial capital of Germany, in turn opening up a number of opportunities for the company.

In fact, Digital Realty’s Wilhelm-Fay-Strasse site in Sossenheim is estimated to support a 27-megawatt data-center campus. It will be connected through dark fiber to Digital Realty's current facility on Lyoner Strasse. This would help create a carrier-neutral and fiber-rich connectivity hub having access to key carriers, Internet service and exchange providers, in addition to global cloud-service providers.

Digital Realty is well poised for growth, backed by robust fundamentals of the data-center market. Accretive acquisitions, development efforts and a solid balance sheet augur well for long-term growth. Recently, the company announced a 50/50 joint venture for offering data-center solutions in Japan. Also, in September, the company announced the completion of a merger with DuPont Fabros. However, intense competition in the industry and interest rate hike remains concerns.

Digital Realty currently has a Zacks Rank #3 (Hold).

Also, the stock has gained 24.9% year to date, outperforming 6.2% growth recorded by the industry it belongs to.

Stocks to Consider

Better-ranked stocks in the REIT space include CareTrust REIT, Inc. CTRE, Extra Space Storage Inc. EXR and DCT Industrial Trust Inc. DCT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for full-year 2017 earnings of CareTrust REIT remained unchanged at $1.17 in a month’s time.

The 2017 Zacks Consensus Estimate for Extra Space Storage is pegged at $4.31, indicating 0.2% rise in the past month.

The current-year Zacks Consensus Estimate for DCT Industrial Trust is pegged at $2.44 and has inched up 0.4% over the last month.

Note: All EPS numbers presented in this report represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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