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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (51514)	5/9/2013 12:55:20 PM
From: Spekulatius	2 Recommendations Respond to of 78752

Re DLR- When looking at BV which was one of his concerns (selling 3x book), I believe his valuation does not include all those upgrade costs. Several of the properties bought were retrofitted at some "significant" expense to make them "cloud centric". This includes special power and cable runs, air conditioning and such. This is why the higher rents are obtained Long lived assets like building upgrades are always capitalized, which means they should show up in the book value. I have not looked into DLR accounting specifically but I cannot think it would be otherwise. Since the bulk of DLR assets were recently acquired, the current book value should reflect the acquisition or build cost (not necessarily replacement cost, which could be higher or lower). Do think that the short seller has a point, 3x book for a a REIT with "young" assets is pricy and there is a risk of technical obsolescence. For me, the case is not strong enough for a short but I wouldn't want to be long either.