10-QPeriod: Q3 FY2005

DIGITAL REALTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 10, 2005For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported strong growth in its technology-focused real estate portfolio for the nine months ending September 30, 2005, following its IPO in November 2004. The company significantly expanded its property base, acquiring 18 new properties, bringing the total to 38 with approximately 7.9 million net rentable square feet across the U.S. and internationally. This expansion drove substantial revenue growth, with total revenues increasing by 105.8% to $145.9 million for the nine-month period, primarily due to increased rental income and tenant reimbursements. The company maintained a healthy occupancy rate of 93.2% and benefited from long-term leases averaging 12.6 years. Despite increased expenses related to property acquisitions and becoming a public company, DLR's strategy of investing in critical technology infrastructure appears to be driving expansion and revenue growth. The company also bolstered its financial flexibility by amending and increasing its unsecured revolving credit facility to $350 million, with an option to expand to $500 million, to support future acquisitions and capital expenditures.

Key Highlights

  • 1Significant portfolio growth with the acquisition of 18 new technology-related properties in the nine months ending September 30, 2005, bringing the total to 38 properties and 7.9 million net rentable square feet.
  • 2Total revenues surged by 105.8% to $145.9 million for the nine months ended September 30, 2005, driven by rental income and tenant reimbursements from the expanded portfolio.
  • 3Portfolio maintained a high occupancy rate of 93.2% with average lease terms of 12.6 years, indicating stable rental income.
  • 4Increased operating expenses are noted, partly due to the costs associated with being a newly public company and property acquisitions.
  • 5The company amended and increased its unsecured revolving credit facility to $350 million, enhancing liquidity for future growth initiatives.
  • 6DLR declared and paid dividends on Series A and Series B preferred stock, as well as common stock, demonstrating a commitment to returning capital to shareholders while maintaining REIT status.
  • 7The company has a conservative debt-to-market capitalization ratio of approximately 36% as of September 30, 2005, below its stated target of 60%.

Frequently Asked Questions

Digital Realty Trust has experienced significant portfolio expansion, acquiring 18 new technology-related properties in the nine months leading up to September 30, 2005. This brought their total portfolio to 38 properties, encompassing approximately 7.9 million net rentable square feet, including international locations in London and Amsterdam.

Revenue growth is primarily driven by the substantial increase in the company's property portfolio. For the nine months ended September 30, 2005, total revenues grew by 105.8% to $145.9 million, fueled by higher rental income and increased tenant reimbursements resulting from the newly acquired and leased properties.

Digital Realty Trust has a debt-to-market capitalization ratio of approximately 36%, which is well below its 60% target. To support its growth, the company amended and increased its unsecured revolving credit facility to $350 million, with the option to increase it further, which will be used for acquisitions, tenant improvements, and general corporate purposes.

The filing highlights several risks, including adverse economic or real estate developments, challenges in managing growth, tenant defaults or lease non-renewals, increased interest rates and operating costs, difficulties in financing, and potential adverse changes to tax laws. The company also notes specific tenant bankruptcies (VarTec Telecom, Universal Access) but states that tenants are current on obligations or resolutions are pending.