SAN FRANCISCO, Oct. 25, 2018 /PRNewswire/ -- Digital
Realty (NYSE: DLR), a leading global provider of data center,
colocation and interconnection solutions, announced today financial
results for the third quarter of 2018. All per-share results
are presented on a fully-diluted share and unit basis.
Highlights
- Reported net income available to common stockholders of
$0.33 per share in 3Q18, compared to
($0.02) in 3Q17
- Reported FFO per share of $1.57
in 3Q18, compared to $1.23 in
3Q17
- Reported core FFO per share of $1.63 in 3Q18, compared to $1.51 in 3Q17
- Signed total bookings during 3Q18 expected to generate
$69 million of annualized GAAP rental
revenue, including an $8 million
contribution from interconnection
- Reiterated 2018 core FFO per share outlook of $6.55 - $6.65
Financial Results
Digital Realty reported revenues for the third quarter of 2018
of $769 million, a 2% increase from
the previous quarter and a 26% increase from the same quarter last
year.
The company delivered third quarter of 2018 net income of
$90 million, and net income available
to common stockholders of $67
million, or $0.33 per diluted
share, compared to $0.32 per diluted
share in the previous quarter and ($0.02) per diluted share in the same quarter
last year.
Digital Realty generated third quarter of 2018 adjusted EBITDA
of $453 million, a 1% decrease from
the previous quarter and a 29% increase over the same quarter last
year.
The company reported third quarter of 2018 funds from operations
of $338 million, or $1.57 per share, compared to $1.64 per share in the previous quarter and
$1.23 per share in the same quarter
last year.
Excluding certain items that do not represent core expenses or
revenue streams, Digital Realty delivered third quarter of 2018
core FFO of $1.63 per share, a 2%
decrease from $1.66 per share in the
previous quarter, and an 8% increase from $1.51 per share in the same quarter last
year.
Leasing Activity
"In the third quarter, we signed total bookings expected to
generate $69 million of annualized
GAAP rental revenue, including an $8
million contribution from interconnection," said Chief
Executive Officer A. William
Stein. "This represents the second-highest bookings in
the company's history, close on the heels of our record in the
prior quarter. We also announced our entry into the rapidly
growing Brazilian market, and we took proactive steps to secure our
supply chain and further strengthen our balance sheet. We
look forward to building on this momentum in the months ahead,
setting the stage for sustainable growth into 2019 and beyond."
The weighted-average lag between leases signed during the third
quarter of 2018 and the contractual commencement date was five
months.
In addition to new leases signed, Digital Realty also signed
renewal leases representing $61
million of annualized GAAP rental revenue during the
quarter. Rental rates on renewal leases signed during the
third quarter of 2018 rolled up 0.2% on a cash basis and up 1.6% on
a GAAP basis.
New leases signed during the third quarter of 2018 by region and
product type are summarized as follows:
|
|
Annualized
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
Base
Rent
|
|
|
|
GAAP Base
Rent
|
|
|
|
|
GAAP Base
Rent
|
North
America
|
|
(in
thousands)
|
|
Square
Feet
|
|
per Square
Foot
|
|
Megawatts
|
|
per
Kilowatt
|
Turn-Key
Flex
|
|
$40,958
|
|
|
330,137
|
|
|
$124
|
|
|
33.3
|
|
|
|
$103
|
|
Colocation
|
|
8,527
|
|
|
45,081
|
|
|
189
|
|
|
2.4
|
|
|
|
294
|
|
Non-Technical
|
|
978
|
|
|
53,916
|
|
|
18
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$50,463
|
|
|
429,134
|
|
|
$118
|
|
|
35.7
|
|
|
|
$116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Turn-Key
Flex
|
|
$5,076
|
|
|
32,431
|
|
|
$157
|
|
|
3.3
|
|
|
|
$130
|
|
Colocation
|
|
1,800
|
|
|
1,869
|
|
|
963
|
|
|
0.4
|
|
|
|
353
|
|
Non-Technical
|
|
51
|
|
|
1,715
|
|
|
30
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$6,927
|
|
|
36,015
|
|
|
$192
|
|
|
3.7
|
|
|
|
$155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Turn-Key
Flex
|
|
$4,163
|
|
|
23,300
|
|
|
$179
|
|
|
2.4
|
|
|
|
$146
|
|
Total
|
|
$4,163
|
|
|
23,300
|
|
|
$179
|
|
|
2.4
|
|
|
|
$146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interconnection
|
|
$7,610
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand
Total
|
|
$69,163
|
|
|
488,449
|
|
|
$126
|
|
|
41.7
|
|
|
|
$121
|
|
|
Note: Totals
may not foot due to rounding differences.
|
(1)
|
Based on quarterly
average exchange rates during the three months ended
September 30, 2018.
|
Investment Activity
During the third quarter of 2018, Digital Realty closed on the
sale of 360 Spear Street, a 155,000 square foot data center in
San Francisco, California, for
$92 million. The facility was
39% leased and was expected to generate cash net operating income
of approximately $2 million in 2018,
representing a nominal exit cap rate of 1.9%. The sale
generated net proceeds of $91
million, and Digital Realty recognized a gain on the sale of
approximately $27 million in the
third quarter of 2018.
Likewise during the third quarter of 2018, Digital Realty
acquired three separate sites in Manassas, Virginia, Sterling, Virginia and Sydney, Australia, totaling 51.5 acres for a
combined investment of $40 million,
or approximately $773,000 per
acre. The three sites are expected to support the development
of approximately 138 megawatts of critical power. Digital
Realty also entered into an agreement to acquire 424 acres of
undeveloped land in Loudoun County,
Virginia for a purchase price of $236.5 million, or approximately $558,000 per acre. The site is adjacent to
Washington Dulles International Airport and located near bulk
transmission lines as well as a major fiber path. The site is
also located less than four miles from Digital Realty's existing
data center campuses in Ashburn,
Virginia. Commencement of development on these various land
parcels will be subject to market demand, and delivery will be
phased to meet future growth requirements upon build-out and
lease-up of the company's existing campuses in Northern Virginia and Sydney, Australia.
Likewise during the third quarter of 2018, Digital Realty
entered into a definitive agreement to acquire Ascenty, the leading
data center provider in Brazil,
from private equity firm Great Hill Partners in a transaction
valued at approximately $1.8
billion. Digital Realty separately entered into an
independent bilateral equity commitment letter with Brookfield
Infrastructure, an affiliate of Brookfield Asset Management, one of
the largest owners and operators of infrastructure assets globally,
under which Brookfield has committed to fund half of the required
initial equity investment, currently estimated to be approximately
$613 million, excluding Brookfield's
share of the transaction costs, in exchange for 49% of the total
equity interests in a joint venture entity expected to ultimately
own Ascenty. The transaction is subject to customary closing
conditions and is expected to close in the fourth quarter of
2018.
Balance Sheet
Digital Realty had approximately $9.2
billion of total debt outstanding as of September 30,
2018, comprised of $9.1 billion of
unsecured debt and approximately $0.1
billion of secured debt. At the end of the third
quarter of 2018, net debt-to-adjusted EBITDA was 5.2x,
debt-plus-preferred-to-total enterprise value was 30.2% and fixed
charge coverage was 4.1x.
During the third quarter, Digital Realty executed an offering of
9,775,000 shares of common stock (including 1,275,000 shares from
the exercise in full of the underwriters' over-allotment option) at
a price of $113.00 per share, subject
to forward sale agreements. The company expects to receive
net proceeds of approximately $1.1
billion (net of fees and estimated expenses) upon full
physical settlement of the forward sale agreements, expected to be
no later than September 27, 2019.
Subsequent to quarter-end, Digital Realty closed a £400 million
pound sterling-denominated bond offering of 12-year senior
unsecured notes at 3.750% per annum.
Likewise subsequent to quarter-end, Digital Realty completed the
refinancing of its global credit facilities. The combined
facilities total $3.3 billion,
comprised of a $2.35 billion global
revolving credit facility and approximately $916 million of multi-currency term loans.
The company also completed a five-year, ¥33.3 billion
(approximately $300 million) Japanese
yen-denominated revolving credit facility. In conjunction
with the refinancing, pricing for the global revolving credit
facility was tightened by 10 basis points at the company's BBB /
Baa2 senior unsecured debt rating, the maturity date was extended
by three years and total availability was expanded by $350 million. The refinancing provides
funds for acquisitions, development, debt repayment, working
capital and general corporate purposes.
2018 Outlook
Digital Realty reiterated its 2018 core FFO per share outlook of
$6.55 - $6.65. The assumptions underlying this
guidance are summarized in the following table.
|
As
of
|
As
of
|
As
of
|
As
of
|
As
of
|
Top-Line and Cost
Structure
|
January 8,
2018
|
February 15,
2018
|
April 26,
2018
|
July 26,
2018
|
October 25,
2018
|
2018
total revenue
|
$3.0 - $3.2
billion
|
$3.0 - $3.2
billion
|
$3.0 - $3.2
billion
|
$3.0 - $3.2
billion
|
$3.0 - $3.2
billion
|
2018 net
non-cash rent adjustments (1)
|
($5 - $15
million)
|
($5 - $15
million)
|
($5 - $15
million)
|
($5 - $15
million)
|
($5 - $15
million)
|
2018
Adjusted EBITDA margin
|
58.0% -
60.0%
|
58.0% -
60.0%
|
58.0% -
60.0%
|
58.0% -
60.0%
|
58.0% -
60.0%
|
2018
G&A margin
|
5.5% -
6.5%
|
5.5% -
6.5%
|
5.5% -
6.5%
|
5.5% -
6.5%
|
5.5% -
6.5%
|
|
|
|
|
|
|
Internal
Growth
|
|
|
|
|
|
Rental
rates on renewal leases
|
|
|
|
|
|
Cash basis
|
Slightly
negative
|
Slightly
negative
|
Slightly
negative
|
Slightly
negative
|
Slightly
negative
|
GAAP basis
|
Up
mid-single-digits
|
Up
mid-single-digits
|
Up
mid-single-digits
|
Up
mid-single-digits
|
Up
mid-single-digits
|
Year-end
portfolio occupancy
|
+/- 50 bps
|
+/- 50 bps
|
+/- 50 bps
|
+/- 50 bps
|
+/- 50 bps
|
"Same-capital" cash NOI growth (2)
|
0% - 3.0%
|
0% - 3.0%
|
1.0% -
3.0%
|
1.0% -
3.0%
|
1.0% -
3.0%
|
|
|
|
|
|
|
Foreign
Exchange Rates
|
|
|
|
|
|
U.S. Dollar / Pound
Sterling
|
$1.28 -
$1.32
|
$1.28 -
$1.32
|
$1.35 -
$1.40
|
$1.30 -
$1.35
|
$1.30 -
$1.35
|
U.S. Dollar /
Euro
|
$1.10 -
$1.20
|
$1.10 -
$1.20
|
$1.18 -
$1.22
|
$1.15 -
$1.20
|
$1.15 -
$1.20
|
|
|
|
|
|
|
External
Growth
|
|
|
|
|
|
Dispositions
|
|
|
|
|
|
Dollar
volume
|
$0 - $200
million
|
$88 - $200
million
|
$187 - $300
million
|
$199 - $300
million
|
$292
million
|
Cap
rate
|
0.0% -
10.0%
|
0.0% -
10.0%
|
0.0% -
10.0%
|
0.0% -
10.0%
|
0.0% -
10.0%
|
Development
|
|
|
|
|
|
CapEx
|
$0.9 - $1.1
billion
|
$0.9 - $1.1
billion
|
$0.9 - $1.1
billion
|
$1.0 - $1.2
billion
|
$1.2 - $1.4
billion
|
Average
stabilized yields
|
10.0% -
12.0%
|
10.0% -
12.0%
|
10.0% -
12.0%
|
10.0% -
12.0%
|
10.0% -
12.0%
|
Enhancements and other non-recurring CapEx (3)
|
$25 - $30
million
|
$25 - $30
million
|
$25 - $30
million
|
$25 - $30
million
|
$25 - $30
million
|
Recurring CapEx + capitalized leasing costs (4)
|
$160 - $170
million
|
$160 - $170
million
|
$160 - $170
million
|
$160 - $170
million
|
$160 - $170
million
|
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
|
Long-term debt issuance
|
|
|
|
|
|
Dollar
amount
|
$0 - $500
million
|
$0 - $500
million
|
$0 - $500
million
|
$650 million - $1
billion
|
$1.2 - $1.8
billion
|
Pricing
|
3.25% -
4.25%
|
3.25% -
4.25%
|
3.25% -
4.25%
|
3.25% -
4.50%
|
3.25% -
4.50%
|
Timing
|
Mid-to-late
2018
|
Mid-to-late
2018
|
Mid-to-late
2018
|
Mid-to-late
2018
|
Mid-to-late
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
diluted share
|
$1.50 -
$1.55
|
$1.50 -
$1.55
|
$1.55 -
$1.55
|
$1.55 -
$1.60
|
$1.55 -
$1.60
|
Real estate
depreciation and (gain)/loss on sale
|
$4.90 -
$4.95
|
$4.90 -
$4.95
|
$4.90 -
$4.95
|
$4.95 -
$4.95
|
$4.95 -
$4.95
|
Funds From
Operations / share (NAREIT-Defined)
|
$6.40 -
$6.50
|
$6.40 -
$6.50
|
$6.45 -
$6.50
|
$6.50 -
$6.55
|
$6.50 -
$6.55
|
Non-core expenses and
revenue streams
|
$0.05 -
$0.10
|
$0.05 -
$0.10
|
$0.05 -
$0.10
|
$0.05 -
$0.10
|
$0.05 -
$0.10
|
Core Funds From
Operations / share
|
$6.45 -
$6.60
|
$6.45 -
$6.60
|
$6.50 -
$6.60
|
$6.55 -
$6.65
|
$6.55 -
$6.65
|
|
|
(1)
|
Net non-cash rent
adjustments represent the sum of straight-line rental revenue,
straight-line rent expense as well as the amortization of above-
and below-market leases (i.e., FAS 141
adjustments).
|
(2)
|
The "same-capital"
pool includes buildings owned as of December 31, 2016 with less
than 5% of the total rentable square feet under development.
It also excludes buildings that were undergoing, or were expected
to undergo, development activities in 2017-2018, buildings
classified as held for sale, and buildings sold or contributed to
joint ventures for all periods presented.
|
(3)
|
Other non-recurring
CapEx represents costs incurred to enhance the capacity or
marketability of operating data centers, such as network fiber
initiatives and software development costs.
|
(4)
|
Recurring CapEx
represents non-incremental improvements required to maintain
current revenues, including second-generation tenant improvements
and leasing commissions. Capitalized leasing costs include
capitalized leasing compensation as well as capitalized internal
leasing commissions.
|
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures,
including FFO, core FFO, and Adjusted EBITDA. A
reconciliation from U.S. GAAP net income available to common
stockholders to FFO, a reconciliation from FFO to core FFO, and
definitions of FFO, and core FFO are included as an attachment to
this document. A reconciliation from U.S. GAAP net income
available to common stockholders to Adjusted EBITDA, a definition
of Adjusted EBITDA and definitions of net debt-to-Adjusted EBITDA,
debt-plus-preferred-to-total enterprise value, cash NOI, and fixed
charge coverage ratio are included as an attachment to this
document.
Investor Conference Call
Prior to Digital Realty's investor conference call at
5:30 p.m. EDT / 2:30 p.m. PDT on October
25, 2018, a presentation will be posted to the Investors
section of the company's website at
http://investor.digitalrealty.com. The presentation is
designed to accompany the discussion of the company's third quarter
2018 financial results and operating performance. The
conference call will feature Chief Executive Officer A. William Stein and Chief Financial Officer
Andrew P. Power.
To participate in the live call, investors are invited to dial
(888) 317-6003 (for domestic callers) or (412) 317-6061 (for
international callers) and reference the conference ID# 0813657 at
least five minutes prior to start time. A live webcast of the
call will be available via the Investors section of Digital
Realty's website at http://investor.digitalrealty.com.
Telephone and webcast replays will be available after the call
until November 27, 2018. The
telephone replay can be accessed by dialing (877) 344-7529 (for
domestic callers) or (412) 317-0088 (for international callers) and
providing the conference ID# 10124567. The webcast replay can
be accessed on Digital Realty's website.
About Digital Realty
Digital Realty supports the data center, colocation and
interconnection strategies of more than 2,300 firms across its
secure, network-rich portfolio of data centers located throughout
North America, Europe, Asia
and Australia. Digital Realty's clients include domestic and
international companies of all sizes, ranging from cloud and
information technology services, communications and social
networking to financial services, manufacturing, energy,
healthcare, and consumer products.
Contact Information
Andrew P. Power
Chief Financial Officer
Digital Realty
(415) 738-6500
John J. Stewart / Maria S. Lukens
Investor Relations
Digital Realty
(415) 738-6500
Consolidated
Quarterly Statements of Operations
|
Unaudited and in
Thousands, Except Share and Per Share Data
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
Rental
revenues
|
$541,073
|
|
$534,556
|
|
$530,925
|
|
$517,356
|
|
$440,591
|
|
|
$1,606,554
|
|
$1,257,293
|
|
Tenant reimbursements
- Utilities
|
105,822
|
|
100,084
|
|
98,576
|
|
97,657
|
|
78,134
|
|
|
304,482
|
|
209,939
|
|
Tenant reimbursements
- Other
|
57,282
|
|
55,639
|
|
51,503
|
|
54,324
|
|
29,479
|
|
|
164,424
|
|
78,304
|
|
Interconnection &
other
|
62,760
|
|
61,770
|
|
61,373
|
|
60,275
|
|
59,851
|
|
|
185,903
|
|
175,377
|
|
Fee income
|
1,469
|
|
2,343
|
|
1,133
|
|
1,386
|
|
1,662
|
|
|
4,945
|
|
4,986
|
|
Other
|
518
|
|
527
|
|
858
|
|
447
|
|
208
|
|
|
1,903
|
|
584
|
|
Total Operating
Revenues
|
$768,924
|
|
$754,919
|
|
$744,368
|
|
$731,445
|
|
$609,925
|
|
|
$2,268,211
|
|
$1,726,483
|
|
|
|
|
|
|
|
|
|
|
Utilities
|
$127,239
|
|
$115,470
|
|
$112,230
|
|
$112,055
|
|
$95,619
|
|
|
$354,939
|
|
$255,556
|
|
Rental property
operating
|
118,732
|
|
114,852
|
|
113,410
|
|
113,445
|
|
94,442
|
|
|
346,994
|
|
278,560
|
|
Property
taxes
|
34,871
|
|
27,284
|
|
35,263
|
|
36,348
|
|
32,586
|
|
|
97,418
|
|
87,666
|
|
Insurance
|
2,653
|
|
2,606
|
|
3,731
|
|
3,223
|
|
2,590
|
|
|
8,990
|
|
7,758
|
|
Depreciation &
amortization
|
293,957
|
|
298,788
|
|
294,789
|
|
287,973
|
|
199,914
|
|
|
887,534
|
|
554,491
|
|
General &
administration
|
40,997
|
|
44,277
|
|
36,289
|
|
44,311
|
|
41,477
|
|
|
121,563
|
|
112,399
|
|
Severance, equity
acceleration, and legal expenses
|
645
|
|
1,822
|
|
234
|
|
1,209
|
|
2,288
|
|
|
2,701
|
|
3,522
|
|
Transaction and
integration expenses
|
9,626
|
|
5,606
|
|
4,178
|
|
15,681
|
|
42,809
|
|
|
19,410
|
|
60,367
|
|
Impairment of
investments in real estate
|
—
|
|
—
|
|
—
|
|
—
|
|
28,992
|
|
|
—
|
|
28,992
|
|
Other
expenses
|
1,139
|
|
152
|
|
431
|
|
2
|
|
3,051
|
|
|
1,722
|
|
3,075
|
|
Total Operating
Expenses
|
$629,859
|
|
$610,857
|
|
$600,555
|
|
$614,247
|
|
$543,768
|
|
|
$1,841,271
|
|
$1,392,386
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
$139,065
|
|
$144,062
|
|
$143,813
|
|
$117,198
|
|
$66,157
|
|
|
$426,940
|
|
$334,097
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated joint venture
|
$8,886
|
|
$7,438
|
|
$7,410
|
|
$5,924
|
|
$5,880
|
|
|
$23,734
|
|
$19,592
|
|
Gain on real estate
transactions
|
26,577
|
|
14,192
|
|
39,273
|
|
30,746
|
|
9,751
|
|
|
80,042
|
|
9,609
|
|
Interest and other
income
|
(981)
|
|
3,398
|
|
(42)
|
|
324
|
|
2,813
|
|
|
2,375
|
|
3,331
|
|
Interest
(expense)
|
(80,851)
|
|
(78,810)
|
|
(76,985)
|
|
(73,989)
|
|
(71,621)
|
|
|
(236,646)
|
|
(184,653)
|
|
Tax
(expense)
|
(2,432)
|
|
(2,121)
|
|
(3,374)
|
|
(545)
|
|
(2,494)
|
|
|
(7,927)
|
|
(7,356)
|
|
Gain from early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
—
|
|
1,990
|
|
|
—
|
|
1,990
|
|
Net
Income
|
$90,264
|
|
$88,159
|
|
$110,095
|
|
$79,658
|
|
$12,476
|
|
|
$288,518
|
|
$176,610
|
|
|
|
|
|
|
|
|
|
|
Net (income)
attributable to noncontrolling interests
|
(2,667)
|
|
(2,696)
|
|
(3,468)
|
|
(6,023)
|
|
(40)
|
|
|
(8,831)
|
|
(1,985)
|
|
Net Income
Attributable to Digital Realty Trust, Inc.
|
$87,597
|
|
$85,463
|
|
$106,627
|
|
$73,635
|
|
$12,436
|
|
|
$279,687
|
|
$174,625
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividends, including undeclared dividends
|
(20,329)
|
|
(20,329)
|
|
(20,329)
|
|
(20,329)
|
|
(16,575)
|
|
|
(60,987)
|
|
(48,473)
|
|
Issuance costs
associated with redeemed preferred stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
(6,309)
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
Available to Common Stockholders
|
$67,268
|
|
$65,134
|
|
$86,298
|
|
$53,306
|
|
($4,139)
|
|
|
$218,700
|
|
$119,843
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding - basic
|
206,118,472
|
|
205,956,005
|
|
205,714,173
|
|
205,448,689
|
|
170,194,254
|
|
|
205,931,031
|
|
163,481,306
|
|
Weighted-average
shares outstanding - diluted
|
206,766,256
|
|
206,563,079
|
|
206,507,476
|
|
206,185,084
|
|
170,194,254
|
|
|
206,555,627
|
|
164,371,096
|
|
Weighted-average
fully diluted shares and units
|
214,937,168
|
|
214,895,273
|
|
214,802,763
|
|
214,424,363
|
|
174,169,511
|
|
|
214,824,010
|
|
166,937,862
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - basic
|
$0.33
|
|
$0.32
|
|
$0.42
|
|
$0.26
|
|
($0.02)
|
|
|
$1.06
|
|
$0.73
|
|
Net income (loss) per
share - diluted
|
$0.33
|
|
$0.32
|
|
$0.42
|
|
$0.26
|
|
($0.02)
|
|
|
$1.06
|
|
$0.73
|
|
Funds From
Operations and Core Funds From Operations
|
Unaudited and in
Thousands, Except Per Share Data
|
|
|
|
|
Reconciliation of
Net Income to Funds From Operations (FFO)
|
Three Months
Ended
|
|
Nine Months
Ended
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
Available to Common Stockholders
|
$67,268
|
|
$65,134
|
|
$86,298
|
|
$53,306
|
|
($4,139)
|
|
|
$218,700
|
|
$119,843
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non-controlling
interests in operating partnership
|
2,700
|
|
2,700
|
|
3,480
|
|
2,138
|
|
(79)
|
|
|
8,880
|
|
1,632
|
|
Real estate related
depreciation & amortization (1)
|
290,757
|
|
295,750
|
|
291,686
|
|
284,924
|
|
196,871
|
|
|
878,193
|
|
545,328
|
|
Unconsolidated JV
real estate related depreciation & amortization
|
3,775
|
|
3,722
|
|
3,476
|
|
3,323
|
|
2,732
|
|
|
10,973
|
|
8,243
|
|
(Gain) on real estate
transactions
|
(26,577)
|
|
(14,192)
|
|
(39,273)
|
|
(30,746)
|
|
(9,751)
|
|
|
(80,042)
|
|
(9,609)
|
|
Non-controlling
interests share of gain on sale of property
|
—
|
|
—
|
|
—
|
|
3,900
|
|
—
|
|
|
—
|
|
—
|
|
Impairment of
investments in real estate
|
—
|
|
—
|
|
—
|
|
—
|
|
28,992
|
|
|
—
|
|
28,992
|
|
Funds From
Operations
|
$337,923
|
|
$353,114
|
|
$345,667
|
|
$316,845
|
|
$214,626
|
|
|
$1,036,704
|
|
$694,429
|
|
|
|
|
|
|
|
|
|
|
Funds From
Operations - diluted
|
$337,923
|
|
$353,114
|
|
$345,667
|
|
$316,845
|
|
$214,626
|
|
|
$1,036,704
|
|
$694,429
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares and units outstanding - basic
|
214,289
|
|
214,288
|
|
214,009
|
|
213,688
|
|
173,461
|
|
|
214,199
|
|
166,048
|
|
Weighted-average
shares and units outstanding - diluted (2)
|
214,937
|
|
214,895
|
|
214,803
|
|
214,424
|
|
174,170
|
|
|
214,824
|
|
166,938
|
|
|
|
|
|
|
|
|
|
|
Funds From
Operations per share - basic
|
$1.58
|
$1.65
|
$1.62
|
$1.48
|
$1.24
|
|
$4.84
|
$4.18
|
|
|
|
|
|
|
|
|
|
Funds From
Operations per share - diluted (2)
|
$1.57
|
$1.64
|
$1.61
|
$1.48
|
$1.23
|
|
$4.83
|
$4.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Reconciliation of
FFO to Core FFO
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
|
|
|
|
|
|
|
|
|
Funds From
Operations - diluted
|
$337,923
|
|
$353,114
|
|
$345,667
|
|
$316,845
|
|
$214,626
|
|
|
$1,036,704
|
|
$694,429
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Termination fees and
other non-core revenues (3)
|
(518)
|
|
(3,663)
|
|
(858)
|
|
(447)
|
|
(208)
|
|
|
(5,039)
|
|
(584)
|
Transaction and
integration expenses
|
9,626
|
|
5,606
|
|
4,178
|
|
15,681
|
|
42,809
|
|
|
19,410
|
|
60,367
|
|
Gain from early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,990)
|
|
|
—
|
|
(1,990)
|
|
Issuance costs
associated with redeemed preferred stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
6,309
|
|
Equity in earnings
adjustment for non-core items
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
(3,285)
|
|
Severance, equity
acceleration, and legal expenses (4)
|
645
|
|
1,822
|
|
234
|
|
1,209
|
|
2,288
|
|
|
2,701
|
|
3,522
|
|
Bridge facility fees
(5)
|
—
|
|
—
|
|
—
|
|
—
|
|
3,182
|
|
|
—
|
|
3,182
|
|
Other non-core
expense adjustments
|
2,269
|
|
152
|
|
431
|
|
2
|
|
3,051
|
|
|
2,852
|
|
3,075
|
|
Core Funds From
Operations - diluted
|
$349,945
|
|
$357,031
|
|
$349,652
|
|
$333,290
|
|
$263,758
|
|
|
$1,056,628
|
|
$765,025
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares and units outstanding - diluted (2)
|
214,937
|
|
214,895
|
|
214,803
|
|
214,424
|
|
174,170
|
|
|
214,824
|
|
166,938
|
|
|
|
|
|
|
|
|
|
|
Core Funds From
Operations per share - diluted (2)
|
$1.63
|
$1.66
|
$1.63
|
$1.55
|
$1.51
|
|
$4.92
|
$4.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Real
Estate Related Depreciation & Amortization:
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
|
|
|
|
|
|
|
|
|
Depreciation &
amortization per income statement
|
$293,957
|
|
$298,788
|
|
$294,789
|
|
$287,973
|
|
$199,914
|
|
|
$887,534
|
|
$554,491
|
|
Non-real estate
depreciation
|
(3,200)
|
|
(3,038)
|
|
(3,103)
|
|
(3,049)
|
|
(3,043)
|
|
|
(9,341)
|
|
(9,163)
|
|
|
|
|
|
|
|
|
|
|
Real Estate
Related Depreciation & Amortization
|
$290,757
|
|
$295,750
|
|
$291,686
|
|
$284,924
|
|
$196,871
|
|
|
$878,193
|
|
$545,328
|
|
|
|
(2)
|
For all periods
presented, we have excluded the effect of dilutive series C, series
F, series G, series H, series I and series J preferred stock, as
applicable, that may be converted into common stock upon the
occurrence of specified change in control transactions as described
in the articles supplementary governing the series C, series F,
series G, series H, series I, and series J preferred stock, as
applicable, which we consider highly improbable. See above
for calculations of diluted FFO available to common stockholders
and unitholders and the share count detail section of the
reconciliation of core FFO to AFFO for calculations of weighted
average common stock and units outstanding.
|
|
|
(3)
|
Includes lease
termination fees and certain other adjustments that are not core to
our business.
|
|
|
(4)
|
Relates to severance
and other charges related to the departure of company executives
and integration-related severance.
|
|
|
(5)
|
Bridge facility fees
are included in interest expense.
|
Adjusted Funds
From Operations (AFFO)
|
Unaudited and in
Thousands, Except Per Share Data
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Reconciliation of
Core FFO to AFFO
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
|
|
|
|
|
|
|
|
|
Core FFO available
to common stockholders and unitholders
|
$349,945
|
|
$357,031
|
|
$349,652
|
|
$333,290
|
|
$263,758
|
|
|
$1,056,628
|
|
$765,025
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non-real estate
depreciation
|
3,200
|
|
3,038
|
|
3,103
|
|
3,049
|
|
3,043
|
|
|
9,341
|
|
9,163
|
|
Amortization of
deferred financing costs
|
3,066
|
|
2,953
|
|
3,060
|
|
3,092
|
|
2,611
|
|
|
9,079
|
|
7,572
|
|
Amortization of debt
discount/premium
|
902
|
|
882
|
|
875
|
|
858
|
|
816
|
|
|
2,659
|
|
2,226
|
|
Non-cash stock-based
compensation expense
|
5,823
|
|
8,419
|
|
5,497
|
|
3,923
|
|
4,636
|
|
|
19,741
|
|
13,977
|
|
Straight-line rental
revenue
|
(10,511)
|
|
(8,489)
|
|
(10,266)
|
|
(8,705)
|
|
(1,692)
|
|
|
(29,266)
|
|
(7,860)
|
|
Straight-line rental
expense
|
2,482
|
|
2,669
|
|
2,547
|
|
(635)
|
|
4,212
|
|
|
7,698
|
|
12,742
|
|
Above- and
below-market rent amortization
|
6,552
|
|
6,794
|
|
6,666
|
|
6,562
|
|
(873)
|
|
|
20,012
|
|
(4,792)
|
|
Deferred non-cash tax
expense
|
(1,783)
|
|
(1,137)
|
|
(216)
|
|
(1,100)
|
|
284
|
|
|
(3,135)
|
|
(1,812)
|
|
Capitalized leasing
compensation (1)
|
(2,606)
|
|
(2,825)
|
|
(2,998)
|
|
(3,567)
|
|
(2,945)
|
|
|
(8,429)
|
|
(8,319)
|
|
Recurring capital
expenditures (2)
|
(22,500)
|
|
(34,447)
|
|
(27,328)
|
|
(45,298)
|
|
(34,664)
|
|
|
(84,275)
|
|
(90,992)
|
|
Capitalized internal
leasing commissions (1)
|
(2,547)
|
|
(2,822)
|
|
(2,049)
|
|
(1,217)
|
|
(1,225)
|
|
|
(7,418)
|
|
(4,073)
|
|
|
|
|
|
|
|
|
|
|
AFFO available to
common stockholders and unitholders (3)
|
$332,023
|
|
$332,066
|
|
$328,543
|
|
$290,252
|
|
$237,961
|
|
|
$992,635
|
|
$692,857
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares and units outstanding - basic
|
214,289
|
|
214,288
|
|
214,009
|
|
213,688
|
|
173,461
|
|
|
214,199
|
|
166,048
|
|
Weighted-average
shares and units outstanding - diluted (4)
|
214,937
|
|
214,895
|
|
214,803
|
|
214,424
|
|
174,170
|
|
|
214,824
|
|
166,938
|
|
|
|
|
|
|
|
|
|
|
AFFO per share -
diluted (4)
|
$1.54
|
|
$1.55
|
|
$1.53
|
|
$1.35
|
|
$1.37
|
|
|
$4.62
|
|
$4.15
|
|
|
|
|
|
|
|
|
|
|
Dividends per share
and common unit
|
$1.01
|
|
$1.01
|
|
$1.01
|
|
$0.93
|
|
$0.93
|
|
|
$3.03
|
|
$2.79
|
|
|
|
|
|
|
|
|
|
|
Diluted AFFO
Payout Ratio
|
65.4
|
%
|
65.4
|
%
|
66.0
|
%
|
68.7
|
%
|
68.1
|
%
|
|
65.6
|
%
|
67.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Share Count
Detail
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Stock and Units Outstanding
|
214,289
|
|
214,288
|
|
214,009
|
|
213,688
|
|
173,461
|
|
|
214,199
|
|
166,048
|
|
Add: Effect of
dilutive securities (excludes 5.50% debentures)
|
648
|
|
607
|
|
794
|
|
736
|
|
709
|
|
|
625
|
|
890
|
|
|
|
|
|
|
|
|
|
|
Weighted Avg.
Common Stock and Units Outstanding - diluted
|
214,937
|
|
214,895
|
|
214,803
|
|
214,424
|
|
174,170
|
|
|
214,824
|
|
166,938
|
|
|
|
(1)
|
Includes only
second-generation leasing costs.
|
|
|
(2)
|
Recurring capital
expenditures represent non-incremental building improvements
required to maintain current revenues, including second-generation
tenant improvements and external leasing commissions.
Recurring capital expenditures do not include acquisition costs
contemplated when underwriting the purchase of a building, costs
which are incurred to bring a building up to Digital Realty's
operating standards, or internal leasing commissions.
|
|
|
(3)
|
For a definition and
discussion of AFFO, see the definitions section. For a
reconciliation of net income available to common stockholders to
FFO and core FFO, see above.
|
|
|
(4)
|
For all periods
presented, we have excluded the effect of dilutive series C, series
F, series G, series H, series I and series J preferred stock, as
applicable, that may be converted into common stock upon the
occurrence of specified change in control transactions as described
in the articles supplementary governing the series C, series F,
series G, series H, series I, and series J preferred stock, as
applicable, which we consider highly improbable. See above for
calculations of diluted FFO available to common stockholders and
unitholders and for calculations of weighted average common stock
and units outstanding.
|
Consolidated
Balance Sheets
|
Unaudited and in
Thousands, Except Share and Per Share Data
|
|
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
Assets
|
|
|
|
|
|
Investments in real
estate:
|
|
|
|
|
|
Real
estate
|
$16,062,402
|
|
$15,969,938
|
|
$15,654,932
|
|
$15,163,846
|
|
$14,693,479
|
|
Construction in
progress
|
1,464,010
|
|
1,323,998
|
|
1,470,065
|
|
1,399,684
|
|
1,405,740
|
|
Land held for future
development
|
284,962
|
|
261,368
|
|
236,415
|
|
352,406
|
|
330,101
|
|
Investments in
real estate
|
$17,811,374
|
|
$17,555,304
|
|
$17,361,412
|
|
$16,915,936
|
|
$16,429,320
|
|
Accumulated
depreciation and amortization
|
(3,755,596)
|
|
(3,588,124)
|
|
(3,439,050)
|
|
(3,238,227)
|
|
(3,075,294)
|
|
Net Investments in
Properties
|
$14,055,778
|
|
$13,967,180
|
|
$13,922,362
|
|
$13,677,709
|
|
$13,354,026
|
|
Investment in
unconsolidated joint ventures
|
169,919
|
|
167,306
|
|
167,564
|
|
163,477
|
|
106,374
|
|
Net Investments in
Real Estate
|
$14,225,697
|
|
$14,134,486
|
|
$14,089,926
|
|
$13,841,186
|
|
$13,460,400
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$46,242
|
|
$17,589
|
|
$22,370
|
|
$51
|
|
$192,578
|
|
Accounts and other
receivables (1)
|
308,709
|
|
282,287
|
|
309,328
|
|
276,347
|
|
258,490
|
|
Deferred
rent
|
454,412
|
|
445,766
|
|
442,887
|
|
430,026
|
|
420,348
|
|
Acquired in-place
lease value, deferred leasing costs and other real estate
intangibles, net
|
2,734,158
|
|
2,823,275
|
|
2,928,566
|
|
2,998,806
|
|
3,052,277
|
|
Acquired above-market
leases, net
|
135,127
|
|
150,084
|
|
165,568
|
|
184,375
|
|
178,190
|
|
Goodwill
|
3,373,342
|
|
3,378,325
|
|
3,405,110
|
|
3,389,595
|
|
3,384,394
|
|
Restricted
cash
|
8,068
|
|
9,443
|
|
7,330
|
|
13,130
|
|
17,753
|
|
Assets associated
with real estate held for sale
|
—
|
|
—
|
|
41,707
|
|
139,538
|
|
132,818
|
|
Other
assets
|
176,355
|
|
170,168
|
|
169,125
|
|
131,291
|
|
135,250
|
|
|
|
|
|
|
|
Total
Assets
|
$21,462,110
|
|
$21,411,423
|
|
$21,581,917
|
|
$21,404,345
|
|
$21,232,498
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
Global unsecured
revolving credit facility
|
$590,289
|
|
$466,971
|
|
$952,121
|
|
$550,946
|
|
$138,477
|
|
Unsecured term
loans
|
1,352,969
|
|
1,376,784
|
|
1,428,498
|
|
1,420,333
|
|
1,432,659
|
|
Unsecured senior
notes, net of discount
|
7,130,541
|
|
7,156,084
|
|
6,660,727
|
|
6,570,757
|
|
6,806,333
|
|
Mortgage loans, net
of premiums
|
106,072
|
|
106,245
|
|
106,366
|
|
106,582
|
|
106,775
|
|
Accounts payable and
other accrued liabilities
|
1,059,355
|
|
1,031,794
|
|
1,012,490
|
|
980,218
|
|
1,024,394
|
|
Accrued dividends and
distributions
|
—
|
|
—
|
|
—
|
|
199,761
|
|
—
|
|
Acquired below-market
leases
|
208,202
|
|
216,520
|
|
225,674
|
|
249,465
|
|
257,732
|
|
Security deposits and
prepaid rent
|
233,667
|
|
207,292
|
|
207,859
|
|
217,898
|
|
223,536
|
|
Liabilities
associated with assets held for sale
|
—
|
|
—
|
|
1,767
|
|
5,033
|
|
4,660
|
|
Total
Liabilities
|
$10,681,095
|
|
$10,561,690
|
|
$10,595,502
|
|
$10,300,993
|
|
$9,994,566
|
|
|
|
|
|
|
|
Redeemable
non-controlling interests - operating partnership
|
17,553
|
|
52,805
|
|
49,871
|
|
53,902
|
|
64,509
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Preferred
Stock: $0.01 par value per share, 110,000,000 shares
authorized:
|
|
|
|
|
|
Series C Cumulative
Redeemable Preferred Stock (2)
|
$219,250
|
|
$219,250
|
|
$219,250
|
|
$219,250
|
|
$219,250
|
|
Series G Cumulative
Redeemable Preferred Stock (3)
|
241,468
|
|
241,468
|
|
241,468
|
|
241,468
|
|
241,468
|
|
Series H Cumulative
Redeemable Preferred Stock (4)
|
353,290
|
|
353,290
|
|
353,290
|
|
353,290
|
|
353,290
|
|
Series I Cumulative
Redeemable Preferred Stock (5)
|
242,012
|
|
242,012
|
|
242,012
|
|
242,012
|
|
242,012
|
|
Series J Cumulative
Redeemable Preferred Stock (6)
|
193,540
|
|
193,540
|
|
193,540
|
|
193,540
|
|
193,667
|
|
Common Stock: $0.01
par value per share, 315,000,000 shares authorized (7)
|
2,049
|
|
2,047
|
|
2,045
|
|
2,044
|
|
2,043
|
|
Additional paid-in
capital
|
11,333,035
|
|
11,310,132
|
|
11,285,611
|
|
11,261,462
|
|
11,250,322
|
|
Dividends in excess
of earnings
|
(2,455,189)
|
|
(2,314,291)
|
|
(2,177,269)
|
|
(2,055,552)
|
|
(1,917,791)
|
|
Accumulated other
comprehensive (loss), net
|
(103,201)
|
|
(107,070)
|
|
(106,096)
|
|
(108,432)
|
|
(116,732)
|
|
Total
Stockholders' Equity
|
$10,026,254
|
|
$10,140,378
|
|
$10,253,851
|
|
$10,349,082
|
|
$10,467,529
|
|
|
|
|
|
|
|
Noncontrolling
Interests
|
|
|
|
|
|
Noncontrolling
interest in operating partnership
|
$671,269
|
|
$654,261
|
|
$680,400
|
|
$698,125
|
|
$699,308
|
|
Noncontrolling
interest in consolidated joint ventures
|
65,939
|
|
2,289
|
|
2,293
|
|
2,243
|
|
6,586
|
|
|
|
|
|
|
|
Total
Noncontrolling Interests
|
$737,208
|
|
$656,550
|
|
$682,693
|
|
$700,368
|
|
$705,894
|
|
|
|
|
|
|
|
Total
Equity
|
$10,763,462
|
|
$10,796,928
|
|
$10,936,544
|
|
$11,049,450
|
|
$11,173,423
|
|
|
|
|
|
|
|
Total Liabilities
and Equity
|
$21,462,110
|
|
$21,411,423
|
|
$21,581,917
|
|
$21,404,345
|
|
$21,232,498
|
|
|
|
(1)
|
Net of allowance for
doubtful accounts of $9,060 and $6,737, as of September 30,
2018 and December 31, 2017, respectively.
|
|
|
(2)
|
Series C Cumulative
Redeemable Perpetual Preferred Stock, 6.625%, $201,250 and $201,250
liquidation preference, respectively ($25.00 per share), 8,050,000
and 8,050,000 shares issued and outstanding as of
September 30, 2018 and December 31, 2017,
respectively.
|
|
|
(3)
|
Series G Cumulative
Redeemable Preferred Stock, 5.875%, $250,000 and $250,000
liquidation preference, respectively ($25.00 per share), 10,000,000
and 10,000,000 shares issued and outstanding as of
September 30, 2018 and December 31, 2017,
respectively.
|
|
|
(4)
|
Series H Cumulative
Redeemable Preferred Stock, 7.375%, $365,000 and $365,000
liquidation preference, respectively ($25.00 per share), 14,600,000
and 14,600,000 shares issued and outstanding as of
September 30, 2018 and December 31, 2017,
respectively.
|
|
|
(5)
|
Series I Cumulative
Redeemable Preferred Stock, 6.350%, $250,000 and $250,000
liquidation preference, respectively ($25.00 per share), 10,000,000
and 10,000,000 shares issued and outstanding as of
September 30, 2018 and December 31, 2017,
respectively.
|
|
|
(6)
|
Series J Cumulative
Redeemable Preferred Stock, 5.250%, $200,000 and $200,000
liquidation preference, respectively ($25.00 per share), 8,000,000
and 8,000,000 shares issued and outstanding as of
September 30, 2018 and December 31, 2017,
respectively.
|
|
|
(7)
|
Common Stock:
206,267,055 and 205,470,300 shares issued and outstanding as of
September 30, 2018 and December 31, 2017,
respectively.
|
Reconciliation of
Earnings Before Interest, Taxes, Depreciation & Amortization
and Financial Ratios
|
Unaudited and in
Thousands
|
|
Reconciliation of
Earnings Before Interest, Taxes,
Depreciation & Amortization (EBITDA)
(1)
|
Three Months
Ended
|
30-Sep-18
|
30-Jun-18
|
31-Mar-18
|
31-Dec-17
|
30-Sep-17
|
|
|
|
|
|
|
Net Income (Loss)
Available to Common Stockholders
|
$67,268
|
$65,134
|
|
$86,298
|
|
$53,306
|
|
($4,139)
|
|
Interest
|
80,851
|
|
78,810
|
|
76,985
|
|
73,989
|
|
71,621
|
|
(Gain) from early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,990)
|
|
Tax
expense
|
2,432
|
|
2,121
|
|
3,374
|
|
545
|
|
2,494
|
|
Depreciation &
amortization
|
293,957
|
|
298,788
|
|
294,789
|
|
287,973
|
|
199,914
|
|
Impairment of
investments in real estate
|
—
|
|
—
|
|
—
|
|
—
|
|
28,992
|
|
EBITDA
|
$444,508
|
|
$444,853
|
|
$461,446
|
|
$415,813
|
|
$296,892
|
|
Severance, equity
acceleration, and legal expenses
|
645
|
|
1,822
|
|
234
|
|
1,209
|
|
2,288
|
|
Transaction and
integration expenses
|
9,626
|
|
5,606
|
|
4,178
|
|
15,681
|
|
42,809
|
|
(Gain) on real estate
transactions
|
(26,577)
|
|
(14,192)
|
|
(39,273)
|
|
(30,746)
|
|
(9,751)
|
|
Other non-core
adjustments, net
|
2,269
|
|
(2,984)
|
|
431
|
|
2
|
|
3,051
|
|
Non-controlling
interests
|
2,667
|
|
2,696
|
|
3,468
|
|
6,023
|
|
40
|
|
Preferred stock
dividends, including undeclared dividends
|
20,329
|
|
20,329
|
|
20,329
|
|
20,329
|
|
16,575
|
|
Adjusted
EBITDA
|
$453,467
|
|
$458,130
|
|
$450,813
|
|
$428,311
|
|
$351,904
|
|
|
|
(1)
|
For definitions and
discussion of EBITDA and Adjusted EBITDA, see the definitions
section.
|
Definitions
Funds From Operations (FFO):
We calculate funds
from operations, or FFO, in accordance with the standards
established by the National Association of Real Estate Investment
Trusts, or NAREIT. FFO represents net income (loss) (computed
in accordance with GAAP), excluding gains (or losses) from real
estate transactions, non-controlling interests share of gain on
sale of property, impairment of investment in real estate, real
estate related depreciation and amortization (excluding
amortization of deferred financing costs), unconsolidated JV real
estate related depreciation & amortization, non-controlling
interests in operating partnership and after adjustments for
unconsolidated partnerships and joint ventures. Management
uses FFO as a supplemental performance measure because, in
excluding real estate related depreciation and amortization and
gains and losses from property dispositions and after adjustments
for unconsolidated partnerships and joint ventures, it provides a
performance measure that, when compared year over year, captures
trends in occupancy rates, rental rates and operating costs.
We also believe that, as a widely recognized measure of the
performance of REITs, FFO will be used by investors as a basis to
compare our operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and
captures neither the changes in the value of our data centers that
result from use or market conditions, nor the level of capital
expenditures and capitalized leasing commissions necessary to
maintain the operating performance of our data centers, all of
which have real economic effect and could materially impact our
financial condition and results from operations, the utility of FFO
as a measure of our performance is limited. Other REITs may
not calculate FFO in accordance with the NAREIT definition and,
accordingly, our FFO may not be comparable to other REITs' FFO. FFO
should be considered only as a supplement to net income computed in
accordance with GAAP as a measure of our performance.
Core Funds from Operations (Core FFO):
We
present core funds from operations, or core FFO, as a supplemental
operating measure because, in excluding certain items that do not
reflect core revenue or expense streams, it provides a performance
measure that, when compared year over year, captures trends in our
core business operating performance. We calculate core FFO by
adding to or subtracting from FFO (i) termination fees and other
non-core revenues, (ii) transaction and integration expenses, (iii)
gain from early extinguishment of debt, (iv) issuance costs
associated with redeemed preferred stock, (v) equity in earnings
adjustment for non-core items, (vi) severance, equity acceleration,
and legal expenses, (vii) bridge facility fees and (viii) other
non-core expense adjustments. Because certain of these adjustments
have a real economic impact on our financial condition and results
from operations, the utility of core FFO as a measure of our
performance is limited. Other REITs may calculate core FFO
differently than we do and accordingly, our core FFO may not be
comparable to other REITs' core FFO. Core FFO should be considered
only as a supplement to net income computed in accordance with GAAP
as a measure of our performance.
Adjusted Funds from Operations (AFFO):
We
present adjusted funds from operations, or AFFO, as a supplemental
operating measure because, when compared year over year, it
assesses our ability to fund dividend and distribution requirements
from our operating activities. We also believe that, as a widely
recognized measure of the operations of REITs, AFFO will be used by
investors as a basis to assess our ability to fund dividend
payments in comparison to other REITs, including on a per share and
unit basis. We calculate AFFO by adding to or subtracting from core
FFO (i) non-real estate depreciation, (ii) amortization of deferred
financing costs, (iii) amortization of debt discount/premium, (iv)
non-cash stock-based compensation expense, (v) straight-line rental
revenue, (vi) straight-line rental expense, (vii) above- and
below-market rent amortization, (viii) deferred non-cash tax
expense, (ix) capitalized leasing compensation, (x) recurring
capital expenditures and (xi) capitalized internal leasing
commissions. Other REITs may calculate AFFO differently than we do
and accordingly, our AFFO may not be comparable to other REITs'
AFFO. AFFO should be considered only as a supplement to net income
computed in accordance with GAAP as a measure of our
performance.
EBITDA and Adjusted EBITDA:
We believe that
earnings before interest, loss from early extinguishment of debt,
income taxes, depreciation and amortization, and impairment of
investments in real estate, or EBITDA, and Adjusted EBITDA (as
defined below), are useful supplemental performance measures
because they allow investors to view our performance without the
impact of non-cash depreciation and amortization or the cost of
debt and, with respect to Adjusted EBITDA, severance, equity
acceleration, and legal expenses, transaction and integration
expenses, (gain) loss on real estate transactions, equity in
earnings adjustment for non-core items, other non-core adjustments,
net, noncontrolling interests, preferred stock dividends, including
undeclared dividends, and issuance costs associated with redeemed
preferred stock. Adjusted EBITDA is EBITDA excluding severance,
equity acceleration, and legal expenses, transaction and
integration expenses, (gain) on real estate transactions, other
non-core adjustments, net, non-controlling interests,
and preferred stock dividends, including undeclared dividends.
In addition, we believe EBITDA and Adjusted EBITDA are frequently
used by securities analysts, investors and other interested parties
in the evaluation of REITs. Because EBITDA and Adjusted EBITDA are
calculated before recurring cash charges including interest expense
and income taxes, exclude capitalized costs, such as leasing
commissions, and are not adjusted for capital expenditures or other
recurring cash requirements of our business, their utility as a
measure of our performance is limited. Other REITs may
calculate EBITDA and Adjusted EBITDA differently than we do and
accordingly, our EBITDA and Adjusted EBITDA may not be comparable
to other REITs' EBITDA and Adjusted EBITDA. Accordingly,
EBITDA and Adjusted EBITDA should be considered only as supplements
to net income computed in accordance with GAAP as a measure of our
financial performance.
Net Operating Income (NOI) and Cash NOI:
Net
operating income, or NOI, represents rental revenue, tenant
reimbursement revenue and interconnection revenue less utilities
expense, rental property operating expenses, property taxes and
insurance expenses (as reflected in the statement of operations).
NOI is commonly used by stockholders, company management and
industry analysts as a measurement of operating performance of the
company's rental portfolio. Cash NOI is NOI less straight-line
rents and above- and below-market rent amortization. Cash NOI is
commonly used by stockholders, company management and industry
analysts as a measure of property operating performance on a cash
basis. However, because NOI and cash NOI exclude depreciation and
amortization and capture neither the changes in the value of our
data centers that result from use or market conditions, nor the
level of capital expenditures and capitalized leasing commissions
necessary to maintain the operating performance of our data
centers, all of which have real economic effect and could
materially impact our results from operations, the utility of NOI
and cash NOI as measures of our performance is limited. Other REITs
may calculate NOI and cash NOI differently than we do and,
accordingly, our NOI and cash NOI may not be comparable to other
REITs' NOI and cash NOI. NOI and cash NOI should be considered only
as supplements to net income computed in accordance with GAAP as
measures of our performance.
Additional Definitions
Net debt-to-Adjusted EBITDA
ratio is calculated using total debt at balance sheet carrying
value, plus capital lease obligations, plus our share of JV debt,
less unrestricted cash and cash equivalents divided by the product
of Adjusted EBITDA (inclusive of our share of JV EBITDA) multiplied
by four.
Debt-plus-preferred-to-total enterprise value is mortgage debt
and other loans plus preferred stock divided by mortgage debt and
other loans plus the liquidation value of preferred stock and the
market value of outstanding Digital Realty Trust, Inc. common stock
and Digital Realty Trust, L.P. units, assuming the redemption of
Digital Realty Trust, L.P. units for shares of Digital Realty
Trust, Inc. common stock.
Fixed charge coverage ratio is Adjusted EBITDA divided by the
sum of GAAP interest expense, capitalized interest, scheduled debt
principal payments and preferred dividends. For the quarter ended
September 30, 2018, GAAP interest expense was $81
million, capitalized interest was $10
million and scheduled debt principal payments and preferred
dividends was $20 million.
|
Three Months
Ended
|
|
Nine Months
Ended
|
Reconciliation of
Net Operating Income (NOI) (in thousands)
|
30-Sep-18
|
30-Jun-18
|
30-Sep-17
|
|
30-Sep-18
|
30-Sep-17
|
|
|
|
|
|
|
|
Operating
income
|
$139,065
|
|
$144,062
|
|
$66,157
|
|
|
$426,940
|
|
$334,097
|
|
|
|
|
|
|
|
|
Fee income
|
(1,469)
|
|
(2,343)
|
|
(1,662)
|
|
|
(4,945)
|
|
(4,986)
|
|
Other
income
|
(518)
|
|
(527)
|
|
(208)
|
|
|
(1,903)
|
|
(584)
|
|
Depreciation and
amortization
|
293,957
|
|
298,788
|
|
199,914
|
|
|
887,534
|
|
554,491
|
|
General and
administrative
|
40,997
|
|
44,277
|
|
41,477
|
|
|
121,563
|
|
112,399
|
|
Severance, equity
acceleration, and legal expenses
|
645
|
|
1,822
|
|
2,288
|
|
|
2,701
|
|
3,522
|
|
Transaction
expenses
|
9,626
|
|
5,606
|
|
42,809
|
|
|
19,410
|
|
60,367
|
|
Impairment in
investments in real estate
|
—
|
|
—
|
|
28,992
|
|
|
—
|
|
28,992
|
|
Other
expenses
|
1,139
|
|
152
|
|
3,051
|
|
|
1,722
|
|
3,075
|
|
|
|
|
|
|
|
|
Net Operating
Income
|
$483,442
|
|
$491,837
|
|
$382,818
|
|
|
$1,453,022
|
|
$1,091,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Net Operating
Income (Cash NOI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating
Income
|
$483,442
|
|
$491,837
|
|
$382,818
|
|
|
$1,453,022
|
|
$1,091,373
|
|
|
|
|
|
|
|
|
Straight-line rental
revenue
|
(10,511)
|
|
(8,489)
|
|
(1,692)
|
|
|
(29,266)
|
|
(7,859)
|
|
Straight-line rental
expense
|
2,479
|
|
2,691
|
|
4,128
|
|
|
7,770
|
|
12,701
|
|
Above- and
below-market rent amortization
|
6,552
|
|
6,794
|
|
(873)
|
|
|
20,012
|
|
(4,792)
|
|
|
|
|
|
|
|
|
Cash Net Operating
Income
|
$481,962
|
|
$492,833
|
|
$384,381
|
|
|
$1,451,538
|
|
$1,091,423
|
|
Forward-Looking Statements
This document contains forward-looking statements within the
meaning of the federal securities laws, which are based on current
expectations, forecasts and assumptions that involve risks and
uncertainties that could cause actual outcomes and results to
differ materially. Such forward-looking statements include
statements relating to: the Ascenty acquisition and related
financings, the proposed joint venture with Brookfield, expected
physical settlement of the forward sale agreements and use of
proceeds from any such settlement, our expected investment and
expansion activity, supply and demand for data center and
colocation space, our acquisition and disposition activity, pricing
and net effective leasing economics, market dynamics and data
center fundamentals, our strategic priorities, rent from leases
that have been signed but have not yet commenced and other
contracted rent to be received in future periods, rental rates on
future leases, lag between signing and commencement, cap rates and
yields, investment activity, the company's FFO, core FFO and net
income 2018 outlook and underlying assumptions, information related
to trends, our strategy and plans, leasing expectations, weighted
average lease terms, the exercise of lease extensions, lease
expirations, debt maturities, annualized rent at expiration of
leases, the effect new leases and increases in rental rates will
have on our rental revenue, our credit ratings, construction and
development activity and plans, projected construction costs,
estimated yields on investment, expected occupancy, expected square
footage and IT load capacity upon completion of development
projects, 2018 backlog NOI, NAV components, and other
forward-looking financial data. Such statements are based on
management's beliefs and assumptions made based on information
currently available to management. Such statements are
subject to risks, uncertainties and assumptions and are not
guarantees of future performance and may be affected by known and
unknown risks, trends, uncertainties and factors that are beyond
our control. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those
anticipated, estimated or projected. Some of the risks and
uncertainties that may cause our actual results, performance or
achievements to differ materially from those expressed or implied
by forward-looking statements include, among others, the
following:
- reduced demand for data centers or decreases in information
technology spending;
- decreased rental rates, increased operating costs or increased
vacancy rates;
- increased competition or available supply of data center
space;
- the suitability of our data centers and data center
infrastructure, delays or disruptions in connectivity or
availability of power, or failures or breaches of our physical and
information security infrastructure or services;
- our dependence upon significant customers, bankruptcy or
insolvency of a major customer or a significant number of smaller
customers, or defaults on or non-renewal of leases by
customers;
- breaches of our obligations or restrictions under our contracts
with our customers;
- our inability to successfully develop and lease new properties
and development space, and delays or unexpected costs in
development of properties;
- the impact of current global and local economic, credit and
market conditions;
- our inability to retain data center space that we lease or
sublease from third parties;
- difficulty acquiring or operating properties in foreign
jurisdictions;
- our failure to realize the intended benefits from, or
disruptions to our plans and operations or unknown or contingent
liabilities related to, our recent acquisitions;
- our failure to successfully integrate and operate acquired or
developed properties or businesses, including Ascenty;
- difficulties in identifying properties to acquire and
completing acquisitions;
- risks related to joint venture investments (including the
proposed joint venture with Brookfield), including as a result of
our lack of control of such investments;
- risks associated with using debt to fund our business
activities, including re-financing and interest rate risks, our
failure to repay debt when due, adverse changes in our credit
ratings or our breach of covenants or other terms contained in our
loan facilities and agreements;
- our failure to obtain necessary debt and equity financing, and
our dependence on external sources of capital;
- financial market fluctuations and changes in foreign currency
exchange rates;
- adverse economic or real estate developments in our industry or
the industry sectors that we sell to, including risks relating to
decreasing real estate valuations and impairment charges and
goodwill and other intangible asset impairment charges;
- our inability to manage our growth effectively;
- losses in excess of our insurance coverage;
- environmental liabilities and risks related to natural
disasters;
- our inability to comply with rules and regulations applicable
to our company;
- Digital Realty Trust, Inc.'s failure to maintain its status as
a REIT for federal income tax purposes;
- Digital Realty Trust, L.P.'s failure to qualify as a
partnership for federal income tax purposes;
- restrictions on our ability to engage in certain business
activities; and
- changes in local, state, federal and international laws and
regulations, including related to taxation, real estate and zoning
laws, and increases in real property tax rates.
The risks included here are not exhaustive, and additional
factors could adversely affect our business and financial
performance. We discussed a number of additional material
risks in our annual report on Form 10-K for the year ended
December 31, 2017, our current report
on Form 8-K filed on September 24,
2018 and other filings with the Securities and Exchange
Commission. Those risks continue to be relevant to our
performance and financial condition. Moreover, we operate in
a very competitive and rapidly changing environment. New risk
factors emerge from time to time and it is not possible for
management to predict all such risk factors, nor can it assess the
impact of all such risk factors on the business or the extent to
which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any
forward-looking statements. We expressly disclaim any
responsibility to update forward-looking statements, whether as a
result of new information, future events or otherwise.
Digital Realty, Digital Realty Trust, the Digital Realty logo,
Turn-Key Flex and Powered Base Building are registered trademarks
and service marks of Digital Realty Trust, Inc. in the United
States and/or other countries.
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SOURCE Digital Realty