Can't create new geodatabase on database server

I can't create a new geodatabase on a database server. When attempting to create the new geodatabase, the new geodatabase appears to be created and shows up in the ArcCatalog contents pane. However, when I attempt to connect to the geodatabase in ArcCatalog, I get the following error:
When I refresh ArcCatalog, the geodatabase no longer appears in the ArcCatalog contents pane.

Looking at SQL Server Manager, the new geodatabase does not appear in the list of databases. The log file doesn't give any indication of an error in creating the database (see attached -- error is when attempting to connect to the database that doesn't exist).

Using ArcGIS for Server 10.1 on Windows Server 2012 with SQL Server Express 2012.

Ideas on what's happening?

Thanks,

Jon.

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