10-QPeriod: Q1 FY2010

DIGITAL REALTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 6, 2010For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported solid operational and financial performance for the quarter ended March 31, 2010, demonstrating resilience despite prevailing global economic challenges. The company's strategy of focusing on technology-related real estate, particularly data centers, continues to drive growth. Significant investments in new properties and ongoing redevelopment projects contributed to a substantial increase in total operating revenues, up 28.6% year-over-year, to $191.8 million. Despite rising operating expenses and interest costs, driven partly by portfolio expansion and increased depreciation, DLR maintained a strong balance sheet with a debt-to-market capitalization ratio of approximately 29% as of March 31, 2010. The company's proactive capital management, including the issuance of new debt and equity, alongside a healthy liquidity position supported by a substantial revolving credit facility, positions it well for continued growth. The high occupancy rate of 95.2% (excluding redevelopment space) underscores the sustained demand for its specialized real estate offerings.

Key Highlights

  • 1Total operating revenues increased by 28.6% to $191.8 million for the first quarter of 2010 compared to the prior year, driven by new property acquisitions and leasing activity.
  • 2The company's portfolio expanded to 84 properties totaling 15.0 million net rentable square feet, up from 75 properties and 13.0 million square feet in the prior year's period.
  • 3Occupancy remained strong at 95.2% for the portfolio, excluding approximately 1.8 million square feet held for redevelopment, indicating robust demand for data center space.
  • 4DLR maintained a conservative leverage profile, with a debt-to-total market capitalization ratio of approximately 29% as of March 31, 2010.
  • 5The company successfully raised capital through the issuance of $500.0 million in 5.875% senior unsecured notes due 2020 and the sale of common stock, enhancing liquidity.
  • 6Operating income grew by 40.8% year-over-year to $55.2 million, reflecting effective management and revenue growth.
  • 7The company continues to invest in redevelopment, with approximately $1.8 million square feet dedicated to this purpose, anticipating future demand for specialized datacenter facilities.

Frequently Asked Questions

DLR reported a significant increase in total operating revenues, growing 28.6% to $191.8 million for the three months ended March 31, 2010, compared to $149.1 million in the same period of 2009. This growth was primarily attributed to new property acquisitions and increased leasing activity within its existing portfolio.

As of March 31, 2010, DLR's properties were approximately 95.2% leased, excluding approximately 1.8 million square feet held for redevelopment. This is a slight improvement from the 94.9% occupancy rate reported at the end of 2008 for its 75 properties.

DLR maintained a healthy leverage ratio, with its debt-to-total market capitalization at approximately 29% as of March 31, 2010. The company actively managed its capital structure by issuing $500 million in senior notes and utilizing its equity distribution agreements to raise additional capital, ensuring sufficient liquidity for operations, acquisitions, and development activities.

The report highlights several risks, including the impact of global economic and credit market conditions on demand for data center space and the availability of capital, potential increases in interest rates, competition from other data center providers, and tenant-specific risks such as bankruptcy or lease defaults. The company also notes risks associated with regulatory changes related to greenhouse gas emissions and energy use.