10-QPeriod: Q2 FY2009

DIGITAL REALTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 6, 2009For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported solid revenue growth in the second quarter and first half of 2009 compared to the prior year, driven by increased leasing activity and recent property acquisitions. Despite the challenging global economic environment, the company maintained a high occupancy rate of 94.8% (excluding redevelopment space) and demonstrated its ability to secure new leases, particularly for its specialized datacenter facilities. The company also managed its debt effectively, maintaining a debt-to-market capitalization ratio of approximately 30% as of June 30, 2009, indicating financial stability in a tight credit market. The company's strategic focus on technology-related real estate, including datacenter development and redevelopment, positions it to benefit from long-term growth trends in corporate IT infrastructure. While acknowledging potential risks from economic downturns and shifts in technology, DLR's operational performance and proactive capital management suggest resilience. Investors should note the company's continued investment in redevelopment and acquisitions, aimed at expanding its portfolio and enhancing long-term earnings and cash flow.

Financial Highlights

22 data points
Beta

Revenue

$155.01M

Net Income

$20.37M

13.1% Net Margin

EPS (Diluted)

$0.13

Cash & Equivalents

$69.32M

Free Cash Flow

$143.48M

Financial Statements
Beta
Revenue$155.01M
Operating Expenses$112.16M
Operating Income$42.85M
Interest Expense$22.50M
Net Income$20.37M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)76.12M
Shares Outstanding (Diluted)76.85M

Key Highlights

  • 1Total operating revenues increased by 25% year-over-year for the three months ended June 30, 2009, reaching $155.0 million, and by 27% for the six months ended June 30, 2009, reaching $304.1 million.
  • 2The portfolio maintained a high occupancy rate of 94.8% as of June 30, 2009, excluding 1.1 million square feet of space held for redevelopment.
  • 3Rental revenue growth was strong, with same-store rental revenues up by $24.5 million and $47.8 million for the three and six-month periods, respectively, driven by new leasing and completed redevelopment space.
  • 4The company maintained a healthy debt-to-total market capitalization ratio of approximately 30% as of June 30, 2009, indicating a manageable debt load.
  • 5Significant investments continue in redevelopment and acquisitions, with anticipated capital expenditures for the redevelopment program between $150-$160 million for the second half of 2009 and expected acquisitions of $120-$200 million.
  • 6The company's revolving credit facility remained largely available, with $673.5 million available for use as of June 30, 2009, providing significant liquidity.
  • 7Operating income increased by 47% year-over-year for the three months ended June 30, 2009, to $42.8 million, and by 51% for the six months ended June 30, 2009, to $82.0 million, demonstrating improved profitability.

Frequently Asked Questions

As of June 30, 2009, Digital Realty Trust had $69.3 million in cash and cash equivalents and $30.7 million in restricted cash. The company has a revolving credit facility with $673.5 million available for use, providing substantial liquidity. Its debt-to-total market capitalization ratio was approximately 30%, indicating a conservative leverage level. The company expects to meet its short-term liquidity needs through operations, restricted cash, and revolving credit facility draws.

Despite challenging global economic and market conditions, DLR reported significant year-over-year increases in operating revenues and operating income for both the second quarter and the first half of 2009. This growth was primarily driven by new leasing at existing properties and the acquisition of new properties. The company's high occupancy rate of 94.8% (excluding redevelopment space) demonstrates resilience in its core business.

DLR's growth strategy focuses on investing in and redeveloping technology-related real estate, particularly datacenter properties. The company plans to continue developing its existing space held for redevelopment and acquiring additional assets. For the second half of 2009, DLR anticipates capital expenditures for its redevelopment program to be between $150 million and $160 million, and expects acquisitions to range from $120 million to $200 million, signaling continued investment in portfolio expansion.

DLR faces risks related to the cyclical nature of IT spending, potential decreases in demand for datacenter space due to technological advancements like virtualization, tenant bankruptcies (e.g., Lyondell Chemical Company is noted as a tenant in bankruptcy), increased operating costs (especially utilities and taxes), rising interest rates, and adverse global market and economic conditions. Its concentration in specific geographic markets also presents a risk if those regional economies falter.