The newly formed REIT Digital Realty Trust, Inc. filed on Aug. 2 with the SEC for an initial public offering (IPO). Digital Realty Trust plans on purchasing technology-related real estate properties from GI Partners, a joint venture formed by The California Public Employees' Retirement System (CalPERS) and CB Richard Ellis.

As primary investors in Digital Realty, CalPERS is slated to receive a significant portion of proceeds raised in the IPO. In the joint venture, CalPERS invested $500 million in equity into GI Partners. Digital Realty Trust will buy a portion of GI Partners' technology-related real estate portfolio and in turn, GI Partners will give investors (CalPERS, CB Richard Ellis, et al.) operating partnership units (OP units). A portion of those OP units will be sold to Digital Realty Trust and CalPERS will receive $134.4 million from the proceeds of the stock sale, according to the SEC filing.

The REIT market has seen a surge in IPO activity in 2004 (see chart below). Nine equity and hybrid REIT offerings took place in the first three quarters alone (not including mortgage REITs), topping the total seen in all of 2003. The four companies that went public in the third quarter of 2004 raised nearly $1.2 billion combined.

Equity REIT IPOs Since 2002

Source: SNL Financial

[FAST FACT] GOOD ADVICE In a survey of 124 investment advisors, conducted by S&P Select SPDRs, 70 percent of the advisors polled said they plan to use REITs and REIT funds as the vehicle to produce the returns their clients are expecting, according to PlanSponsor.com.