Digital Realty Trust (DLR)
Bienes raíces / REIT de centros de datos
The world's largest data-center REIT by global scale (310 centers in more than 20 countries), with structural cloud and artificial-intelligence demand behind a 770 MW development pipeline (64% pre-leased). But at ~$192 (27× TTM Core FFO) the market already pays much of that growth in advance: 5-year base ~$211 (+2%/yr price, +5% with dividend): Fairly valued — a structurally sound business with little margin at today's price; the incremental accounting return on capital (~0.8%) does not yet validate the premium.
- Price
- $192.38
- Intrinsic value (5y, base)
- $211
- Total annual return (5y)
- 4.5%
- Status (nominal)
- Fairly valued
- Margin of safety
- +0%
The essentials
- The world's largest data-center REIT: 310 data centers across 118 sites in the U.S., 113 in Europe, 36 in Latin America, 16 in Africa, 18 in Asia, and 9 in Australia/Canada — 57.6 million rentable square feet, 84.7% leased. IT capacity in operation of ~2.9 GW, with ~770 MW under construction (64% pre-leased).
- Valued on Core FFO / AFFO, not P/E (accounting depreciation of real estate is not a real cost). TTM Core FFO (year-0 of the rolling grid) is approximated at ~$7.22/share; real AFFO (subtracting recurring capex of $343.9M and non-cash straight-line rent of $119.7M, both FY2025) is ~$5.82 — the current dividend payout ($4.88) is ~84% of AFFO, tighter than the ~69% it appears to be on Core FFO.
- At ~$192 it trades at 27× TTM Core FFO (~34× AFFO) — a marked premium over a REIT's reference band (15-20× P/Core-FFO) and over the EQIX comparable. The growth is real (non-stabilized revenue +16.6% in 2025, renewal rents >1 MW +27%) but the incremental accounting return on capital remains low (~0.8%, assets +$7.9bn since 2022 with EBIT nearly flat) — the gap between growth and profitability is still maturing.
Intrinsic value — two valuation methods
Total return at 5 years: 4.5%/year = 1.9% appreciation + 2.7% dividend. The target price ($211) is ex-dividend; the $27 in dividends collected over 5 years are added separately.
The methods disagree: one places the value today above the price ($192) and the other below.
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $192 trades close to its value discounted to today (~$193); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($211) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$123.
Thesis
The business
Digital Realty is the world's largest data-center REIT by scale: 310 centers in more than 20 countries, 57.6M square feet, with a 770 MW development pipeline (64% pre-leased) responding to structural cloud and artificial-intelligence demand. Interconnection (232,000+ cross connects) and investment-grade access to capital are the pillars of the moat. There's nothing wrong with the business — the question is the price.
The valuation
A REIT is valued on Core FFO / AFFO (not on P/E). TTM Core FFO (rolling grid, year-0) approximates ~$7.22/share (scaled from FY2025 diluted FFO of $6.96 by revenue growth FY25→TTM); real AFFO (subtracting recurring capex and non-cash straight-line rent, both from FY2025) is ~$5.82. At ~$192 it trades at 27× TTM Core FFO — a marked premium over a REIT's reference band (15-20× P/Core-FFO) and over the market comparable EQIX (~19.5× P/AFFO). The base scenario projects Core FFO per share growing ~12% in year 1 (below FY2025's +13.4%, without extrapolating the peak), decelerating to ~6% by year 5, with dilution from equity issuance moderating from ~4.5% to ~2%/yr — the multiple compresses from 27× to ~19× (disciplined, within the method's band, even though the market pays more today) → ~$211/share, a price CAGR of +2%, +5% with the dividend (2.5%).
The margin of safety
It trades close to intrinsic value, far from the required margin of safety. The base return (+5% total) reflects a structurally sound business bought at a full multiple, not a value opportunity: even with a realistic growth path and without punishing the multiple, the gain per share is modest because the starting point (27×) already discounts much of the expected growth. And there is an additional note of caution: the incremental accounting return on invested capital (~0.8%, far below the 10% bar) shows that much of the $7.9bn of assets added since 2022 does not yet earn in operating income — the bullish thesis depends on the non-stabilized capacity finishing its maturation. The Fairly valued verdict reflects that: a real business, funded with material dilution, bought with little margin.
What to watch
Three things. Power capacity constraints: if the power bottleneck worsens, the development pipeline (770 MW, 64% pre-leased) takes longer to convert into Core FFO. Dilution: DLR finances much of its growth with share issuance (~4.9% in 2025) — watch that Core FFO per share keeps growing faster than dilution (it did in 2025: +13.4% vs +4.9%). And the return on incremental capital: if non-stabilized capacity takes longer to mature or development costs rise, the gap between growth (real) and accounting profitability (still low) doesn't close, and the current multiple stops being justified.
Educational / informational. Does not constitute investment advice.