How has the challenging global economic environment affected DLR's operations and financial condition?

DLR acknowledges the unprecedented and challenging global market and economic conditions, including tighter credit, market volatility, and declining real estate markets. However, the company has demonstrated resilience, with strong revenue growth driven by property acquisitions and leasing. While access to credit is a concern for both DLR and its tenants, the company's conservative leverage (23% debt-to-market cap) and proactive capital raising have helped mitigate immediate risks. The company continues to monitor these conditions closely and has outlined strategies, including potentially curtailing development or disposing of properties, if necessary.

What is DLR's strategy for future growth, and how is it being funded?

DLR's primary growth strategy centers on investing in and redeveloping technology-related real estate, particularly data centers. This includes developing existing space held for redevelopment and acquiring new properties. Future funding is expected to come from net cash from operations, long-term debt, equity issuances, and its revolving credit facility. In 2008, DLR successfully raised significant capital through preferred and common stock offerings, and has secured various credit facilities and debt refinancings to support its development and acquisition plans.

What are the key risks DLR faces, particularly in light of the current economic climate?

Key risks for DLR include the continuation or intensification of adverse global market and economic conditions, which could impact its liquidity, financial condition, and that of its tenants. Specific concerns include tighter credit availability, potential tenant bankruptcies, decreased IT spending, and increased operating costs. DLR is also exposed to risks related to its significant redevelopment pipeline, potential increases in interest rates, and competition within the data center space. The company's disclosures emphasize the uncertainty surrounding future economic developments and their potential material impact on its business.

How is DLR managing its debt and interest rate exposure?

As of September 30, 2008, DLR had approximately $1.3 billion in consolidated debt, with 85.7% being fixed-rate or hedged by interest rate swaps. The company actively uses interest rate swaps and fixed-rate debt to mitigate exposure to interest rate fluctuations. Variable rate debt is subject to various LIBOR, EURIBOR, and GBP LIBOR rates. DLR also maintains an interest rate cap on a portion of its variable rate debt and recently entered into a swap to fix certain floating rate payments. Despite the volatile interest rate environment, DLR's effective interest rate on its total debt was 5.76%.

DIGITAL REALTY TRUST, INC. 10-Q Quarterly Report Q3 FY2008

Summary

Digital Realty Trust, Inc. (DLR) reported strong revenue growth in the third quarter and first nine months of 2008, driven by new property acquisitions and increased leasing activity. Total operating revenues rose to $142.0 million for the quarter and $380.3 million for the nine-month period, up from $104.8 million and $289.3 million in the prior year, respectively. This growth reflects the company's successful expansion, with 74 properties owned as of September 30, 2008, totaling 12.9 million rentable square feet. The company maintained a high occupancy rate of 95.2% for its leased space, excluding areas held for redevelopment. Despite the challenging macroeconomic environment characterized by tighter credit conditions and economic uncertainty, DLR demonstrated resilience. The company's strategy of focusing on technology-related real estate, particularly data centers, has supported demand. DLR's financial position appears solid, with a debt-to-market capitalization ratio of approximately 23% as of September 30, 2008. While the company faces risks related to global economic conditions and credit market volatility, its proactive capital management, including recent equity and debt financings, and a well-leased portfolio position it to navigate these challenges. The company highlighted ongoing development and redevelopment activities as key components of its future growth strategy.

Key Highlights

1Total operating revenues increased significantly, reaching $142.0 million for Q3 2008 and $380.3 million for the first nine months of 2008, indicating robust top-line growth.
2The company's portfolio expanded to 74 properties with 12.9 million rentable square feet by September 30, 2008, a growth of 7 properties in the last 12 months.
3Occupancy remained strong at 95.2% for leased space (excluding redevelopment areas), demonstrating consistent tenant demand for DLR's technology-focused real estate.
4Despite a challenging economic climate, DLR maintained a conservative debt-to-market capitalization ratio of approximately 23% as of September 30, 2008.
5The company successfully raised capital through preferred and common stock offerings in 2008, bolstering its liquidity and financial flexibility.
6Significant investment in redevelopment projects continues, with $306.1 million in work in progress as of September 30, 2008, signaling a commitment to future growth and value creation.
7DLR is actively managing its debt, with a substantial portion (85.7%) being fixed-rate or hedged, mitigating interest rate risk in the current volatile market.

DIGITAL REALTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2008

Summary

Key Highlights

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