10-QPeriod: Q2 FY2005

DIGITAL REALTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2005

Filed August 12, 2005For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported its financial results for the quarterly period ended June 30, 2005. The company demonstrated significant growth in total revenues, increasing by 118.0% year-over-year to $49.7 million. This growth was primarily driven by the acquisition of 15 new properties, expanding the portfolio to 33 properties totaling 7.8 million net rentable square feet. The occupancy rate remained strong at 89.7% for the period. Financially, the company saw a substantial increase in total expenses, up 113.1% due to the expanded portfolio and increased public company costs. Despite higher expenses, net income available to common stockholders was $2.1 million for the quarter. The company also successfully raised capital through a preferred stock offering in February 2005 and a subsequent common and preferred stock offering in July 2005, using the proceeds to reduce debt and fund acquisitions. DLR continues to focus on acquiring and managing technology-related real estate, anticipating continued growth in the sector.

Key Highlights

  • 1Total revenues surged by 118.0% to $49.7 million in Q2 2005, driven by portfolio expansion.
  • 2Acquired 15 new properties in the past year, growing the portfolio to 33 properties and 7.8 million net rentable square feet.
  • 3Maintained a strong occupancy rate of 89.7% across its technology-focused real estate portfolio.
  • 4Net income available to common stockholders was $2.1 million for the quarter, with a basic EPS of $0.10.
  • 5Completed a Series A Preferred Stock offering in February 2005, raising $99.3 million in net proceeds.
  • 6Executed a follow-on common and Series B Preferred Stock offering in July 2005, raising approximately $159.6 million in net proceeds.
  • 7Total debt increased, with outstanding indebtedness at $764.8 million as of June 30, 2005, though the company aimed to manage leverage.

Frequently Asked Questions

The primary driver of Digital Realty Trust's revenue growth is the significant expansion of its real estate portfolio through acquisitions. In the twelve months leading up to June 30, 2005, the company acquired 15 new properties, nearly doubling its portfolio size and consequently increasing rental income and tenant reimbursements.

Digital Realty Trust is actively managing its debt through a combination of strategies. The company completed two significant equity offerings in February and July 2005, raising substantial capital that was used to pay down borrowings under its unsecured credit facility. Furthermore, the company states its intention to limit indebtedness to 60% of its total market capitalization and monitors its leverage ratios.

The report highlights several risks including adverse economic or real estate developments in its markets or the technology industry, difficulties in managing growth effectively, tenant defaults or lease non-renewals, increased interest rates and operating costs, challenges in securing financing, and the potential failure to maintain its REIT status. Changes in foreign currency exchange rates are also a consideration, particularly with its international properties.

Digital Realty Trust focuses on acquiring high-quality, strategically located properties essential for technology companies. Its strategy involves targeting regional, national, and international tenants that are leaders in their respective fields. The company also adapts its leasing approach by subdividing some data center space for multi-tenant colocation, offering a cost-effective solution for smaller tenants and enabling premium leasing rates.