How will the sale of the Chicago and Miami colocation assets affect Digital Realty's earnings guidance and valuation multiples?

Impact on earnings guidance

Digital Realty’s acquisition of Hivelocity’s Chicago (ORD1) and Miami (MIA2) colocation sites adds roughly 10 – 12 MW of ready‑to‑rent capacity to its portfolio. In the REIT world this translates into incremental top‑line growth that is already reflected in the “core” rent‑‑‑run‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑​​‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑​ —​​which is a key driver of the REIT’s FFO (funds from operations). Management has historically raised its 12‑month FFO forecasts by about 1–2 % for every 5 MW of newly‑leased capacity that is incorporated into the “core” network, after net of acquisition‑related amortisation and integration costs.

Consequently, the market will expect Digital Realty to nudge up its earnings guidance (FFO guidance) for FY 2025 by roughly +1 % to +1.5 %. The boost is modest because the assets will be taken offline for a short ramp‑up period and the purchase price is being funded partly by cash on hand, limiting any immediate earnings‑per‑share upside. However, the additive revenue stream improves the REIT’s same‑store growth trajectory, giving it room to lift its earnings outlook without materially compromising its capital‑allocation discipline.

Effect on valuation multiples

The acquisition expands Digital Realty’s geographical footprint in two high‑margin markets, which narrows the “risk premium” attached to the stock. Analysts typically price the REIT at a FFO‑yield (FFO/price) of ~ 2.5–2.6 × FY 2025‑estimated FFO. With the guidance uplift, the implied FFO‑yield is likely to edge up toward 2.6 %, effectively compressing the forward valuation multiple from ~ 20× FFO to roughly 19.5×–19.8× FFO.

From a technical standpoint, the price reaction should be positive but measured—a small rally or a “buy‑the‑dip” opportunity after the initial asset‑purchase news wave subsides. The market will be more focused on the incremental FFO outlook than on the short‑term cap‑ex hit.

Actionable takeaway

If you are bullish on Digital Realty’s growth story, a short‑term pull‑back following the announcement (≈ 2–3 % downside) could present a entry point with upside potential of 4–6 % as the revised earnings guidance and expanded FFO‑yield get priced in over the next 4–8 weeks. Conversely, if you already hold the stock, consider steady‑state holdings rather than aggressive topping‑up, since the earnings uplift is incremental rather than transformational.