10-QPeriod: Q3 FY2004

DIGITAL REALTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2004

Filed December 13, 2004For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) filed its quarterly report for the period ending September 30, 2004. The filing highlights the company's recent completion of its Initial Public Offering (IPO) on November 3, 2004, which generated significant capital. The company focuses on owning, acquiring, and managing technology-related real estate, with a portfolio concentrated in key technology hubs across the United States and London. Financially, the company experienced substantial revenue growth, driven by the acquisition of new properties. However, this growth was accompanied by a significant increase in expenses, particularly interest expenses due to higher debt levels. Despite the increased operational scale, the company's net income for the nine months ended September 30, 2004, was lower than the prior year, primarily due to lower other revenue and increased expenses. The company is positioning itself to operate as a Real Estate Investment Trust (REIT) starting in its 2004 taxable year.

Key Highlights

  • 1Digital Realty Trust, Inc. successfully completed its Initial Public Offering (IPO) on November 3, 2004, raising approximately $214.2 million in net proceeds, with an additional $15.9 million from the over-allotment option.
  • 2The company's real estate portfolio expanded significantly, with 20 properties as of September 30, 2004, compared to 13 properties in the prior year, leading to a substantial increase in total revenues.
  • 3Total revenues for the nine months ended September 30, 2004, increased by 58% to $70.9 million, primarily driven by a 72% increase in rental revenue to $59.1 million.
  • 4Total expenses also rose significantly, increasing by 91% to $61.0 million for the nine months ended September 30, 2004, largely due to increased interest expenses and property operating costs associated with the expanded portfolio.
  • 5As of September 30, 2004, the company's debt stood at approximately $547.3 million, with 80.6% being variable rate debt, indicating exposure to interest rate fluctuations.
  • 6The company is structured to qualify as a REIT for the taxable year ending December 31, 2004, which would allow for potential tax benefits through dividend distributions.
  • 7Recent property acquisitions during the nine months ended September 30, 2004, included Webb at LBJ and AboveNet Data Center, further expanding the company's technology-focused real estate holdings.

Frequently Asked Questions

The most significant event is the company's recent completion of its Initial Public Offering (IPO) on November 3, 2004. This event provided substantial capital and marked its transition to a publicly traded entity.

The company has experienced significant growth in its real estate portfolio. As of September 30, 2004, it owned 20 properties compared to 13 in the prior year. This expansion is a key driver of its increased revenues.

As of September 30, 2004, the company had approximately $547.3 million in secured debt. A significant portion, 80.6%, was variable rate debt. This exposes the company to the risk of increased interest expenses if market interest rates rise.

The company focuses on owning, acquiring, repositioning, and managing technology-related real estate. Its strategy includes acquiring additional assets in key technology markets and potentially converting existing data center space to multi-tenant collocation use to maximize leasing revenue.