10-QPeriod: Q3 FY2013

DIGITAL REALTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 12, 2013For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported solid financial performance for the nine months ending September 30, 2013, demonstrating growth in total operating revenues, which increased to $1.101 billion from $929.3 million in the prior year period. This growth was primarily driven by a significant increase in rental and tenant reimbursement revenues, reflecting both acquisitions and leasing activity within their existing "same store" properties. The company continues to expand its global data center portfolio, with 130 properties owned as of September 30, 2013, comprising approximately 24.0 million rentable square feet, including significant space under development. DLR has strategically grown its footprint through acquisitions and development, aiming to capture the ongoing demand for technology-related real estate. The company maintains a healthy balance sheet with a debt-to-enterprise value ratio of approximately 38%, indicating prudent financial management. DLR's focus on long-term growth in earnings and funds from operations per share remains a core objective.

Financial Highlights

31 data points
Beta

Revenue

$379.46M

Net Income

$150.60M

39.7% Net Margin

EPS (Diluted)

$1.06

Total Assets

$9.43B

Cash & Equivalents

$55.12M

Free Cash Flow

$178.57M

Financial Statements
Beta
Revenue$379.46M
Operating Expenses$294.28M
Operating Income$85.18M
Interest Expense$47.74M
Net Income$150.60M
EPS (Basic)$1.08
EPS (Diluted)$1.06
Shares Outstanding (Basic)128.43M
Shares Outstanding (Diluted)135.30M

Key Highlights

  • 1Total operating revenues increased by 18.5% year-over-year for the nine months ended September 30, 2013, reaching $1.101 billion.
  • 2The company's portfolio expanded to 130 properties with 24.0 million rentable square feet, including 2.8 million square feet held for development.
  • 3Leasing activity remained robust, with 846,000 square feet of new leases and 1,127,000 square feet of renewal leases signed during the nine months.
  • 4Rental rates on renewed space showed positive increases, with Turn-Key FlexSM up 2.7% and Powered Base Building up 38.9% on a GAAP basis.
  • 5The company maintained a conservative leverage profile, with a debt-to-total enterprise value ratio of approximately 38% as of September 30, 2013.
  • 6Significant investments continue in development projects, with $836.6 million in capital expenditures (cash basis) for the nine months ended September 30, 2013, up from $557.6 million in the prior year.
  • 7The company successfully refinanced its global revolving credit facility and term loan, increasing borrowing capacity and extending maturities.

Frequently Asked Questions

The primary driver of revenue growth for Digital Realty Trust is the expansion of its data center portfolio through acquisitions and development, coupled with successful leasing activities in both new and existing properties. Increased rental income and tenant reimbursements from a growing and occupied portfolio are key contributors.

Digital Realty Trust maintains a conservative approach to its capital structure, aiming to limit indebtedness to 60% of its total enterprise value. As of September 30, 2013, their debt-to-enterprise value ratio was approximately 38%. They utilize a mix of debt and equity financing, including a significant revolving credit facility and unsecured term loan, and have recently refinanced these facilities to enhance borrowing capacity and extend maturities. The company also actively manages its debt by issuing notes and potentially repurchasing debt.

Key risks identified include adverse global market and economic conditions, potential decreases in IT spending, tenant bankruptcy or defaults, increased interest rates and operating costs, difficulties in acquiring or operating properties in foreign jurisdictions, competition, and regulatory changes. The company also highlights risks related to the demand for data center space, particularly in specific markets like Silicon Valley, and the potential impact of climate change legislation on energy costs.

Digital Realty Trust's strategy focuses on investing in and developing technology-related real estate, particularly data centers. They target high-quality, strategically located properties critical to corporate operations. Growth is pursued through the development of existing space held for development, acquisition of new assets, and aggressive management and leasing of their portfolio. They aim to build out their development portfolio when anticipated returns are justified.