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AUSTIN, Texas, April 29, 2021 /PRNewswire/ -- Digital Realty (NYSE: DLR), a leading global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, announced today financial results for the first quarter of 2021.  All per-share results are presented on a fully-diluted share and unit basis. 

Highlights

  • Reported net income available to common stockholders of $1.32 per share in 1Q21, compared to net income available to common stockholders of $0.90 in 1Q20
  • Reported FFO per share of $1.49 in 1Q21, compared to $0.91 in 1Q20
  • Reported core FFO per share of $1.67 in 1Q21, compared to $1.53 in 1Q20
  • Signed total bookings during 1Q21 expected to generate $117 million of annualized GAAP rental revenue, including a $13 million contribution from interconnection
  • Raised core FFO per share outlook from $6.40-$6.50 to $6.50-$6.55

Financial Results

Digital Realty reported revenues for the first quarter of 2021 of $1.1 billion, a 3% increase from the previous quarter and a 32% increase from the same quarter last year. 

The company delivered first quarter of 2021 net income of $395 million, and net income available to common stockholders of $372 million, or $1.32 per diluted share, compared to $0.16 per diluted share in the previous quarter and $0.90 per diluted share in the same quarter last year. 

Digital Realty generated first quarter of 2021 Adjusted EBITDA of $615 million, a 6% increase from the previous quarter and a 28% increase over the same quarter last year. 

The company reported first quarter of 2021 funds from operations of $432 million, or $1.49 per share, compared to $1.45 per share in the previous quarter and $0.91 per share in the same quarter last year. 

Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered first quarter of 2021 core FFO per share of $1.67, a 3% increase from $1.61 per share in the previous quarter, and a 9% increase from $1.53 per share in the same quarter last year. 

Leasing Activity

In the first quarter, Digital Realty signed total bookings expected to generate $117 million of annualized GAAP rental revenue, including a $13 million contribution from interconnection. 

"Digital Realty delivered solid financial results during the first quarter, driven by continued acceleration in digital adoption," said Digital Realty Chief Executive Officer A. William Stein.  "Our first-quarter bookings were very well balanced across products and regions, reflecting the strength of our full-service global platform.  We are investing to support customer growth and to continue to enhance the value of our comprehensive product offerings, and we remain well positioned to continue to deliver sustainable growth for all stakeholders." 

The weighted-average lag between leases signed during the first quarter of 2021 and the contractual commencement date was eight months. 

In addition to new leases signed, Digital Realty also signed renewal leases representing $193 million of annualized GAAP rental revenue during the quarter.  Rental rates on renewal leases signed during the first quarter of 2021 rolled down 2.1% on a cash basis and up 3.2% on a GAAP basis. 

New leases signed during the first quarter of 2021 are summarized by region as follows:

































Annualized GAAP

























Base Rent







GAAP Base Rent







GAAP Base Rent

 The Americas



(in thousands)



Square Feet



per Square Foot



Megawatts



per Kilowatt

 0-1 MW





$10,802



55,535





$195



4.9





$182

 > 1 MW





27,130



284,454





95



22.0





103

 Other (1)





1,562



50,770





31







Total





$39,494



390,759





$101



27.0





$117





























 EMEA (2)



























 0-1 MW





$13,491



50,867





$265



4.0





$284

 > 1 MW





13,382



98,785





135



9.7





115

 Other (1)





77



129





594







Total





$26,949



149,782





$180



13.7





$164





























 Asia Pacific (2)



























 0-1 MW





$8,312



14,843





$560



2.1





$323

 > 1 MW





28,948



79,670





363



14.8





164

 Other (1)





28



3,240





9







Total





$37,287



97,753





$381



16.9





$184





























All Regions (2)



























 0-1 MW





$32,605



121,245





$269



11.0





$246

 > 1 MW





69,459



462,908





150



46.5





125

 Other (1)





1,666



54,139





31







Total





$103,731



638,293





$163



57.5





$148





























Interconnection





$13,323



N/A





N/A



N/A





N/A





























Grand Total





$117,054



638,293





$163



57.5





$148



Note:  Totals may not foot due to rounding differences. 

(1)

Other includes Powered Base Building shell capacity as well as storage and office space within fully improved data center facilities. 

(2)

Based on quarterly average exchange rates during the three months ended March 31, 2021. 

Investment Activity

During the first quarter of 2021, Digital Realty closed on the sale of a portfolio of 11 data centers in Europe for a total of approximately $680 million.  The portfolio is expected to generate 2021 cash net operating income of approximately $45 million, representing a cap rate of approximately 6.7%. 

Separately, during the first quarter, Digital Realty also sold a 6.4-acre land parcel in Ashburn, VA for $12 million and a 30,400-square foot vacant building in Waltham, MA for approximately $2 million

In addition, Digital Realty acquired a 66,400-square foot building and an adjacent 4.7-acre land parcel in Brussels, Belgium that will support the development of 13.6 megawatts of IT capacity for €13 million, or approximately $15 million.  

Subsequent to quarter-end, Digital Realty acquired the freehold interest in 1.76 acres of land and a 76,000-square foot building housing its "CPH1" data center in Copenhagen, Denmark for DKK53 million, or approximately $8 million.  

Balance Sheet

Digital Realty had approximately $13.3 billion of total debt outstanding as of March 31, 2021, comprised of $13.1 billion of unsecured debt and approximately $0.2 billion of secured debt.  At the end of the first quarter of 2021, net debt-to-Adjusted EBITDA was 5.6x, debt plus-preferred-to-total enterprise value was 25.9% and fixed charge coverage was 5.8x. 

Digital Realty completed the following financing transactions during the first quarter of 2021. 

  • In early January, Digital Realty issued €1.0 billion, or approximately $1.2 billion, of 0.625% green Euro bonds due 2031.
  • In mid-January, Digital Realty repaid the entire $537 million outstanding balance on its unsecured term loan.
  • In early February, Digital Realty redeemed all $350 million of its outstanding 2.75% notes due 2023.
  • Subsequent to quarter-end, Digital Realty announced the redemption of all 8.05 million shares of its 6.625% Series C Preferred Stock with a total liquidation value of $201 million.

COVID-19

Throughout the COVID-19 global pandemic, Digital Realty's data centers around the world have remained fully operational in accordance with business continuity and pandemic response plans, prioritizing the health and safety of employees, customers and partners while ensuring service levels are maintained.  Digital Realty data centers have been deemed essential operations, allowing for critical personnel to remain in place and continue to provide services and support for customers.  Construction activity has been somewhat delayed in a few markets due to government restrictions in certain locations and/or limited availability of labor.  In some instances, these delays have impacted scheduled delivery dates.  We are monitoring the situation closely and remain in frequent communication with customers, contractors and suppliers.  We have proactively managed our supply chain, and we believe we have secured the vast majority of the equipment needed to complete our 2021 development activities.  We believe we have ample liquidity to fund our business needs, given the $221 million of cash on the balance sheet and $2.2 billion of availability under our global revolving credit facilities as of March 31, 2021.  While we have not experienced any significant business disruptions from the COVID-19 pandemic to date, we cannot predict what impact the COVID-19 pandemic may have on our future financial condition, results of operations or cash flows due to numerous uncertainties. 

2021 Outlook

Digital Realty raised its 2021 core FFO per share outlook from $6.40-$6.50 to $6.50-$6.55.  The assumptions underlying the outlook are summarized in the following table. 















As of



As of

 Top-Line and Cost Structure



February 11, 2021



April 29, 2021

Total revenue



$4.250 - $4.350 billion



$4.300 - $4.400 billion

Net non-cash rent adjustments (1)



($10) - ($15) million



($20) - ($25) million

Adjusted EBITDA



$2.300 - $2.350 billion



$2.330 - $2.380 billion

G&A



$365 - $375 million



$380 - $390 million











 Internal Growth









Rental rates on renewal leases









Cash basis



Slightly negative



Slightly negative

GAAP basis



Slightly positive



Slightly positive

Year-end portfolio occupancy



84.0% - 85.0%



84.0% - 85.0%

"Same-capital" cash NOI growth (2)



(2.5%) - (3.5%)



(2.5%) - (3.5%)











Foreign Exchange Rates









U.S. Dollar / Pound Sterling



$1.25 - $1.30



$1.30 - $1.38

U.S. Dollar / Euro



$1.15 - $1.20



$1.15 - $1.20











 External Growth









Dispositions









Dollar volume



$0.6 - $1.0 billion



$0.7 - $1.0 billion

Cap rate



0.0% - 12.0%



0.0% - 12.0%

Development









CapEx (3)



$2.0 - $2.3 billion



$2.0 - $2.3 billion

Average stabilized yields



9.0% - 15.0%



9.0% - 15.0%

Enhancements and other non-recurring CapEx (4)



$5 - $10 million



$5 - $10 million

Recurring CapEx + capitalized leasing costs (5)



$220 - $230 million



$220 - $230 million











 Balance Sheet









Long-term debt issuance









Dollar amount



$1.0 - $1.5 billion



$1.0 - $1.5 billion

Pricing



1.00%



1.00%

Timing



Early-to-mid 2021



Early-to-mid 2021











 Net income per diluted share



$1.40 - $1.45



$2.00 - $2.05

Real estate depreciation and (gain) / loss on sale



$4.90 - $4.90



$4.25 - $4.25

 Funds From Operations / share (NAREIT-Defined)



$6.30 - $6.35



$6.25 - $6.30

Non-core expenses and revenue streams



$0.10 - $0.15



$0.25 - $0.25

 Core Funds From Operations / share



$6.40 - $6.50



$6.50 - $6.55





(1)

Net non-cash rent adjustments represent the sum of straight-line rental revenue and straight-line rent expense, as well as the amortization of above- and below-market leases (i.e., ASC 805 adjustments). 

(2)

The "same-capital" pool includes properties owned as of December 31, 2019 with less than 5% of total rentable square feet under development.  It also excludes properties that were undergoing, or were expected to undergo, development activities in 2020-2021, properties classified as held for sale, and properties sold or contributed to joint ventures for all periods presented. 

(3)

Includes land acquisitions. 

(4)

Other non-recurring CapEx represents costs incurred to enhance the capacity or marketability of operating properties, such as network fiber initiatives and software development costs. 

(5)

Recurring CapEx represents non-incremental improvements required to maintain current revenues, including second-generation tenant improvements and 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 April 29, 2021, a presentation will be posted to the Investors section of the company's website at https://investor.digitalrealty.com/.  The presentation is designed to accompany the discussion of the company's First Quarter 2021 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# 6064617 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 https://investor.digitalrealty.com/

Telephone and webcast replays will be available after the call until May 29, 2021.  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# 10153437.  The webcast replay can be accessed on Digital Realty's website. 

About Digital Realty

Digital Realty supports the world's leading enterprises and service providers by delivering the full spectrum of data center, colocation and interconnection solutions.  PlatformDIGITAL®, the company's global data center platform, provides customers a trusted foundation and proven Pervasive Datacenter Architecture (PDx™) solution methodology for scaling digital business and efficiently managing data gravity challenges.  Digital Realty's global data center footprint gives customers access to the connected communities that matter to them with 290 facilities in 47 metros across 24 countries on six continents.  To learn more about Digital Realty, please visit digitalrealty.com or follow us on LinkedIn and Twitter

Contact Information

Andrew P. Power

Chief Financial Officer

Digital Realty

(415) 738–6500

John J. Stewart / Jim Huseby

Investor Relations

Digital Realty

(415) 738–6500

 

 

Consolidated Quarterly Statements of Operations

Unaudited and Dollars in Thousands, Except Per Share Data























































































Three Months Ended







31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

Rental revenues





$754,544





$754,422





$726,441





$698,041





$579,774

Tenant reimbursements - Utilities





184,973





154,937





155,111





141,576





113,520

Tenant reimbursements - Other





59,328





62,084





53,654





62,630





56,943

Interconnection & other





89,061





86,424





85,725





85,428





69,835

Fee income





2,426





4,722





3,687





4,353





2,452

Other





59





20





50





967





813

Total Operating Revenues





$1,090,391





$1,062,609





$1,024,668





$992,995





$823,337

































Utilities





$176,046





$169,282





$177,925





$160,173





$129,526

Rental property operating





185,733





205,177





180,755





172,474





136,182

Property taxes





49,005





42,442





39,732





45,071





42,123

Insurance





3,498





3,410





2,926





3,370





3,547

Depreciation & amortization





369,733





359,915





365,842





349,165





291,457

General & administration





97,568





101,582





90,431





90,649





62,266

Severance, equity acceleration, and legal expenses





2,427





606





920





3,642





1,272

Transaction and integration expenses





14,120





19,290





14,953





15,618





56,801

Impairment of investments in real estate













6,482









Other expenses





(257)





641





297





22





114

Total Operating Expenses





$897,873





$902,345





$880,263





$840,184





$723,288

































Operating Income





$192,518





$160,264





$144,405





$152,811





$100,049

































Equity in (loss) earnings of unconsolidated joint ventures





(23,031)





31,055





(2,056)





(7,632)





(78,996)

Gain on sale / deconsolidation





333,921





1,684





10,410









304,801

Interest and other (expense) income, net





(7,186)





(2,747)





4,348





22,163





(3,542)

Interest (expense)





(75,653)





(77,848)





(89,499)





(79,874)





(85,800)

Income tax (expense)





(7,547)





(3,322)





(16,053)





(11,490)





(7,182)

Loss from early extinguishment of debt





(18,347)





(49,576)





(53,007)









(632)

Net Income / (Loss)





$394,675





$59,510





($1,452)





$75,978





$228,698

































Net (income) loss attributable to noncontrolling interests





(8,756)





(1,818)





1,316





(1,147)





(4,684)

Net Income / (Loss) Attributable to Digital Realty Trust, Inc.





$385,919





$57,692





($136)





$74,831





$224,014

































Preferred stock dividends, including undeclared dividends





(13,514)





(13,514)





(20,712)





(21,155)





(21,155)

Issuance costs associated with redeemed preferred stock













(16,520)









Net Income / (Loss) Available to Common Stockholders





$372,405





$44,178





($37,368)





$53,676





$202,859

































Weighted-average shares outstanding - basic





281,094,798





280,117,213





270,214,413





267,569,823





222,163,324

Weighted-average shares outstanding - diluted





281,928,182





281,122,368





270,214,413





270,744,408





224,474,295

Weighted-average fully diluted shares and units





289,210,666





288,903,143





281,523,515





278,719,109





232,753,630

































Net income / (loss) per share - basic





$1.32





$0.16





($0.14)





$0.20





$0.91

Net income / (loss) per share - diluted





$1.32





$0.16





($0.14)





$0.20





$0.90

 

 

Funds From Operations and Core Funds From Operations

Unaudited and in Thousands, Except Per Share Data



































































































Three Months Ended

Reconciliation of Net Income to Funds From Operations (FFO)





31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































Net (Loss) / Income Available to Common Stockholders





$372,405





$44,178





($37,368)





$53,676





$202,859

Adjustments:































Non-controlling interest in operating partnership





9,800





1,300





(1,000)





1,400





7,800

Real estate related depreciation & amortization (1)





364,697





354,366





358,619





342,334





286,517

Unconsolidated JV real estate related depreciation & amortization





19,378





21,471





19,213





17,123





19,923

(Gain) on real estate transactions





(333,921)





(1,684)





(10,410)





-





(304,801)

Impairment of investments in real estate





-





-





6,482





-





-

Funds From Operations - diluted





$432,359





$419,631





$335,536





$414,533





$212,298

































Weighted-average shares and units outstanding - basic





288,377





287,898





278,079





275,545





230,443

Weighted-average shares and units outstanding - diluted (2)





289,211





288,903





281,524





278,719





232,754

































Funds From Operations per share - basic





$1.50





$1.46





$1.21





$1.50





$0.92

































Funds From Operations per share - diluted (2)





$1.49





$1.45





$1.19





$1.49





$0.91









































































Three Months Ended

Reconciliation of FFO to Core FFO





31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































Funds From Operations - diluted





$432,359





$419,631





$335,536





$414,533





$212,298

Termination fees and other non-core revenues (3)





(59)





(25)





(5,713)





(21,908)





(2,425)

Transaction and integration expenses





14,120





19,290





14,953





15,618





56,801

Loss from early extinguishment of debt





18,347





49,576





53,007





-





632

Issuance costs associated with redeemed preferred stock





-





-





16,520





-





-

Severance, equity acceleration, and legal expenses (4)





2,427





606





920





3,642





1,272

(Gain) / Loss on FX revaluation





34,072





(27,190)





10,312





17,526





81,288

Other non-core expense adjustments





(19,240)





3,353





6,697





22





5,509

Core Funds From Operations - diluted





$482,026





$465,241





$432,232





$429,433





$355,375

































Weighted-average shares and units outstanding - diluted (2)





289,211





288,903





281,524





278,719





232,754

































Core Funds From Operations per share - diluted (2)





$1.67





$1.61





$1.54





$1.54





$1.53







































(1) Real Estate Related Depreciation & Amortization



Three Months Ended







31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































Depreciation & amortization per income statement





$369,733





$359,915





$365,842





$349,165





$291,457

Non-real estate depreciation





(5,036)





(5,549)





(7,223)





(6,831)





(4,940)

Real Estate Related Depreciation & Amortization





$364,697





$354,366





$358,619





$342,334





$286,517





(2)

For all periods presented, we have excluded the effect of dilutive series C, series G, series I, series J, series K and series L 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 G, series I, series J, series K and series L preferred stock, as applicable, which we consider highly improbable. See above for calculations of diluted FFO and the share count detail section that follows the reconciliation of core FFO to AFFO for calculations of weighted average common stock and units outstanding.  For definitions and discussion of FFO and core FFO, see the definitions section.

(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.

 

 

Adjusted Funds From Operations (AFFO)

Unaudited and in Thousands, Except Per Share Data

























































































Three Months Ended

 Reconciliation of Core FFO to AFFO





31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































 Core FFO available to common stockholders and unitholders





$482,026





$465,241





$432,232





$429,433





$355,375

Adjustments:































Non-real estate depreciation





5,036





5,549





7,223





6,831





4,940

Amortization of deferred financing costs





3,538





3,709





3,655





3,661





4,260

Amortization of debt discount/premium





1,134





1,033





987





1,011





943

Non-cash stock-based compensation expense





16,097





16,315





15,969





15,060





12,153

Straight-line rental revenue





(18,492)





(14,402)





(10,017)





(10,928)





(15,404)

Straight-line rental expense





6,709





3,629





3,934





7,373





1,460

Above- and below-market rent amortization





2,137





3,239





2,360





3,794





3,294

Deferred tax (expense) benefit





(4,509)





(4,226)





6,421





(150)





(792)

Leasing compensation & internal lease commissions





11,042





10,506





6,052





1,739





2,793

Recurring capital expenditures (1)





(39,522)





(83,571)





(53,683)





(38,796)





(34,677)

































AFFO available to common stockholders and unitholders (2)





$465,196





$407,022





$415,133





$419,028





$334,345

































Weighted-average shares and units outstanding - basic





288,377





287,898





278,079





275,545





230,443

Weighted-average shares and units outstanding - diluted (3)





289,211





288,903





281,524





278,719





232,754

































AFFO per share - diluted (3)





$1.61





$1.41





$1.47





$1.50





$1.44

































 Dividends per share and common unit





$1.16





$1.12





$1.12





$1.12





$1.12

































Diluted AFFO Payout Ratio





72.1%





79.5%





76.0%





74.5%





78.0%





































































































Three Months Ended

Share Count Detail





31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































Weighted Average Common Stock and Units Outstanding





288,377





287,898





278,079





275,545





230,443

Add: Effect of dilutive securities





834





1,005





3,445





3,174





2,311

Weighted Avg. Common Stock and Units Outstanding - diluted





289,211





288,903





281,524





278,719





232,754





(1)

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.

(2)

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.

(3)

For all periods presented, we have excluded the effect of dilutive series C, series G, series I, series J, series K and series L 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 G, series I, series J, series K and series L 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





















































































































31-Mar-21



31-Dec-20



30-Sep-20



30-Jun-20



31-Mar-20

Assets









































Investments in real estate:































Real estate





$22,762,279





$23,142,988





$22,125,486





$20,843,273





$20,477,290

Construction in progress





2,904,642





2,768,326





2,328,654





2,514,324





2,204,869

Land held for future development





192,896





226,862





198,536





175,209





137,447

Investments in real estate





$25,859,817





$26,138,175





$24,652,676





$23,532,806





$22,819,606

Accumulated depreciation and amortization





(5,649,019)





(5,555,221)





(5,250,140)





(4,945,534)





(4,694,713)

Net Investments in Properties





$20,210,798





$20,582,954





$19,402,536





$18,587,272





$18,124,893

Investment in unconsolidated joint ventures





970,703





1,148,158





1,059,978





1,033,235





1,064,009

Net Investments in Real Estate





$21,181,501





$21,731,112





$20,462,514





$19,620,507





$19,188,902

































Cash and cash equivalents





$221,140





$108,501





$971,305





$505,174





$246,480

Accounts and other receivables (1)





657,096





603,111





585,506





542,750





527,699

Deferred rent





524,200





528,180





510,627





496,684





484,179

Customer relationship value, deferred leasing costs & other intangibles, net





3,057,245





3,122,904





3,106,414





3,128,140





3,500,588

Goodwill





8,125,706





8,330,996





8,012,256





7,791,522





7,466,046

Assets associated with real estate held for sale

















10,981





Operating lease right-of-use assets (2)





1,495,869





1,386,959





1,363,285





1,375,427





1,364,621

Other assets





279,734





264,528





423,426





391,451





334,785

Total Assets





$35,542,491





$36,076,291





$35,435,333





$33,862,636





$33,113,300

































Liabilities and Equity































Global unsecured revolving credit facilities





$451,007





$531,905





$124,082





$64,492





$603,101

Unsecured term loans









536,580





512,642





799,550





771,425

Unsecured senior notes, net of discount





12,566,198





11,997,010





11,999,170





11,268,753





10,637,006

Secured debt and other, net of premiums





239,634





239,222





238,866





238,826





239,800

Operating lease liabilities (2)





1,581,759





1,468,712





1,444,060





1,451,152





1,431,292

Accounts payable and other accrued liabilities





1,305,921





1,420,162





1,610,814





1,303,337





1,192,774

Deferred tax liabilities, net





650,543





698,308





711,474





664,802





684,752

Accrued dividends and distributions









324,386





571









Security deposits and prepaid rent





362,008





371,659





353,902





348,253





336,583

Liabilities associated with assets held for sale

















238





Total Liabilities





$17,157,070





$17,587,944





$16,995,581





$16,139,403





$15,896,733

































Redeemable non-controlling interests - operating partnership





40,097





42,011





41,265





40,584





40,027

































Equity































Preferred Stock:  $0.01 par value per share, 110,000,000 shares authorized:































Series C Cumulative Redeemable Perpetual Preferred Stock (3)





$219,250





$219,250





$219,250





$219,250





$219,250

Series G Cumulative Redeemable Preferred Stock (4)

















241,468





241,468

Series I Cumulative Redeemable Preferred Stock (5)

















242,012





242,012

Series J Cumulative Redeemable Preferred Stock (6)





193,540





193,540





193,540





193,540





193,540

Series K Cumulative Redeemable Preferred Stock (7)





203,264





203,264





203,264





203,264





203,264

Series L Cumulative Redeemable Preferred Stock (8)





334,886





334,886





334,886





334,886





334,886

Common Stock: $0.01 par value per share, 392,000,000 shares authorized (9)





2,795





2,788





2,784





2,670





2,622

Additional paid-in capital





20,700,282





20,626,897





20,566,645





19,292,311





18,606,766

Dividends in excess of earnings





(3,952,497)





(3,997,938)





(3,726,901)





(3,386,525)





(3,139,350)

Accumulated other comprehensive income (loss), net





(77,783)





135,010





(123,623)





(358,349)





(444,222)

Total Stockholders' Equity





$17,623,737





$17,717,697





$17,669,845





$16,984,527





$16,460,236

































Noncontrolling Interests































Noncontrolling interest in operating partnership





$571,292





$608,980





$620,676





$633,831





$656,266

Noncontrolling interest in consolidated joint ventures





150,295





119,659





107,966





64,291





60,038

































Total Noncontrolling Interests





$721,587





$728,639





$728,642





$698,122





$716,304

































Total Equity





$18,345,324





$18,446,336





$18,398,487





$17,682,649





$17,176,540

































Total Liabilities and Equity





$35,542,491





$36,076,291





$35,435,333





$33,862,636





$33,113,300





(1)

Net of allowance for doubtful accounts of $23,975 and $18,825 as of March 31, 2021 and December 31, 2020, respectively.

(2)

Adoption of the new lease accounting standard required that we adjust the consolidated balance sheet to include the recognition of additional right-of-use assets and lease liabilities for operating leases. See our quarterly report on Form 10–Q filed on May 10, 2019 for additional information.

(3)

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 March 31, 2021 and December 31, 2020, respectively.  Subsequent to quarter end, we announced the redemption of the Series C preferred stock, which will occur on May 17, 2021.

(4)

Series G Cumulative Redeemable Preferred Stock, 5.875%, $0 (redeemed October 15, 2020, reclassified to accounts payable as of September 30, 2020 for accounting purposes) and $250,000 liquidation preference, respectively ($25.00 per share), 0 and 10,000,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

(5)

Series I Cumulative Redeemable Preferred Stock, 6.350%, $0 and $250,000 liquidation preference, respectively ($25.00 per share), 0 and 10,000,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020, respectively.

(7)

Series K Cumulative Redeemable Preferred Stock, 5.850%, $210,000 and $210,000 liquidation preference, respectively ($25.00 per share), 8,400,000 and 8,400,000  shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

(8)

Series L Cumulative Redeemable Preferred Stock, 5.200%, $345,000 and $345,000 liquidation preference, respectively ($25.00 per share), 13,800,000 and 13,800,000  shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

(9)

Common Stock: 281,372,310 and 208,900,758 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

 

 

Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization and Financial Ratios

Unaudited and Dollars in Thousands





















































































Three Months Ended

Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) (1)





31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































Net Income / (Loss) Available to Common Stockholders





$372,405





$44,178





($37,368)





$53,676





$202,859

Interest





75,653





77,848





89,499





79,874





85,800

Loss from early extinguishment of debt





18,347





49,576





53,007









632

Income tax expense (benefit)





7,547





3,322





16,053





11,490





7,182

Depreciation & amortization





369,733





359,915





365,842





349,165





291,457

EBITDA





$843,685





$534,839





$487,033





$494,205





$587,930

Unconsolidated JV real estate related depreciation & amortization





19,378





21,471





19,213





17,123





19,923

Unconsolidated JV interest expense and tax expense





8,786





12,143





9,002





9,203





9,944

Severance, equity acceleration, and legal expenses





2,427





606





920





3,642





1,272

Transaction and integration expenses





14,120





19,290





14,953





15,618





56,801

(Gain) on sale / deconsolidation





(333,921)





(1,684)





(10,410)









(304,801)

Impairment of investments in real estate













6,482









Other non-core adjustments, net





38,574





(23,842)





4,945





(3,404)





85,185

Non-controlling interests





8,756





1,818





(1,316)





1,147





4,684

Preferred stock dividends, including undeclared dividends





13,514





13,514





20,712





21,155





21,155

Issuance costs associated with redeemed preferred stock













16,520









Adjusted EBITDA





$615,319





$578,156





$568,054





$558,690





$482,093







(1)     For definitions and discussion of EBITDA and Adjusted EBITDA, see the definitions section.





































































Three Months Ended

Financial Ratios





31-Mar-21





31-Dec-20





30-Sep-20





30-Jun-20





31-Mar-20

































Total GAAP interest expense





$75,653





$77,848





$89,499





$79,874





$85,800

Capitalized interest





11,434





11,836





12,379





13,133





10,480

Change in accrued interest and other non-cash amounts





44,620





(37,182)





19,718





(38,478)





24,321

Cash Interest Expense (2)





$131,707





$52,502





$121,596





$54,529





$120,601

































Scheduled debt principal payments

















57





125

Preferred dividends





13,514





13,514





20,712





21,155





21,155

Total Fixed Charges (3)





$100,601





$103,198





$122,590





$114,219





$117,560

































































Coverage































Interest coverage ratio (4)





 6.6x





 5.8x





 5.2x





 5.6x





 4.6x

Cash interest coverage ratio (5)





 4.5x





 9.3x





 4.4x





 9.1x





 3.7x

Fixed charge coverage ratio (6)





 5.8x





 5.1x





 4.4x





 4.6x





 3.8x

Cash fixed charge coverage ratio (7)





 4.1x





 7.7x





 3.8x





 6.8x





 3.2x

































Leverage































Debt to total enterprise value (8) (9)





24.1%





24.4%





22.8%





23.3%





23.8%

Debt plus preferred stock to total enterprise value (10)





25.9%





26.2%





25.0%





26.0%





26.6%

Pre-tax income to interest expense (11)





 6.2x





 1.8x





 1.0x





 2.0x





 3.7x

Net Debt to Adjusted EBITDA (12)





 5.6x





 6.0x





 5.5x





 5.6x





 6.6x





(2)

Cash interest expense is interest expense less amortization of debt discount and deferred financing fees and includes interest that we capitalized. We consider cash interest expense to be a useful measure of interest as it excludes non-cash based interest expense.

(3)

Fixed charges consist of GAAP interest expense, capitalized interest, scheduled debt principal payments and preferred dividends.

(4)

Adjusted EBITDA divided by GAAP interest expense plus capitalized interest (including our pro rata share of unconsolidated joint venture interest expense).

(5)

Adjusted EBITDA divided by cash interest expense (including our pro rata share of unconsolidated joint venture interest expense). 

(6)

Adjusted EBITDA divided by fixed charges (including our pro rata share of unconsolidated joint venture fixed charges).

(7)

Adjusted EBITDA divided by the sum of cash interest expense, scheduled debt principal payments and preferred dividends (including our pro rata share of unconsolidated joint venture cash fixed charges).

(8)

Mortgage debt and other loans divided by market value of common equity plus debt plus preferred stock.

(9)

Total enterprise value defined as market value of common equity plus debt plus preferred stock.

(10)

Same as (8), except numerator includes preferred stock.

(11)

Calculated as net income plus interest expense divided by GAAP interest expense.

(12)

Calculated as total debt at balance sheet carrying value, plus capital lease obligations, plus Digital Realty's pro rata share of unconsolidated of joint venture debt, less cash and cash equivalents (including Digital Realty's pro rata share of unconsolidated joint venture cash) divided by the product of Adjusted EBITDA (including Digital Realty's pro rata share of unconsolidated joint venture EBITDA), multiplied by four.

 

Management Statements on Non-GAAP Measures

Unaudited

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, in the Nareit Funds From Operations White Paper - 2018 Restatement. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from real estate transactions, 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) loss from early extinguishment of debt, (iv) issuance costs associated with redeemed preferred stock, (v) severance, equity acceleration, and legal expenses, (vi) gain/loss on FX revaluation, and (vii) 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 tax (expense) benefit, (ix) leasing compensation and internal lease commissions, and (x) recurring capital expenditures. 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, and depreciation and amortization, 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, unconsolidated joint venture real estate related depreciation & amortization, unconsolidated joint venture interest expense and tax, severance, equity acceleration, and legal expenses, transaction and integration expenses, gain on sale / deconsolidation, other non-core adjustments, net, non-controlling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. Adjusted EBITDA is EBITDA excluding unconsolidated joint venture real estate related depreciation & amortization, unconsolidated joint venture interest expense and tax, severance, equity acceleration, and legal expenses, transaction and integration expenses, gain on sale / deconsolidation, impairment of investments in real estate, other non-core adjustments, net, non-controlling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. 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 (including JV share of cash) 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 March 31, 2021, GAAP interest expense was $76 million, capitalized interest was $11 million and scheduled debt principal payments and preferred dividends was $14 million.





















Reconciliation of Net Operating Income (NOI)



Three Months Ended

(in thousands)



31-Mar-21



31-Dec-20



31-Mar-20





















Operating income





$192,518





$160,264





$100,049





















 Fee income





(2,426)





(4,722)





(2,452)

 Other income





(59)





(20)





(813)

 Depreciation and amortization





369,733





359,915





291,457

 General and administrative





97,568





101,582





62,266

 Severance, equity acceleration, and legal expenses





2,427





606





1,272

 Transaction expenses





14,120





19,290





56,801

 Other expenses





(257)





641





114





















Net Operating Income





$673,624





$637,556





$508,694









































 Cash Net Operating Income (Cash NOI)







































Net Operating Income





$673,624





$637,556





$508,694





















 Straight-line rental revenue





(18,607)





(15,451)





(13,392)

 Straight-line rental expense





6,583





3,499





1,496

 Above- and below-market rent amortization





2,137





3,239





3,294





















Cash Net Operating Income





$663,737





$628,843





$500,092

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: our expected investment and expansion activity, COVID-19, our liquidity, our joint ventures, 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, 2021 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, 2021 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;
  • increased competition or available supply of data center space;
  • decreased rental rates, increased operating costs or increased vacancy rates;
  • 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;
  • our ability to attract and retain 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;
  • information security and data privacy breaches;
  • difficulty managing an international business and acquiring or operating properties in foreign jurisdictions and unfamiliar metropolitan areas;
  • 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;
  • difficulties in identifying properties to acquire and completing acquisitions;
  • risks related to joint venture investments, 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;
  • our inability to attract and retain talent;
  • impact on our operations and on the operations of our customers, suppliers and business partners during a pandemic, such as COVID-19;
  • environmental liabilities, risks related to natural disasters and our inability to achieve our sustainability goals;
  • 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;
  • 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; and
  • the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance.  Several additional material risks are discussed in our annual report on Form 10–K for the year ended December 31, 2020 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. 

 

 

SOURCE Digital Realty

 
 

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