10-QPeriod: Q2 FY2015

DIGITAL REALTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 6, 2015For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported solid revenue growth for the six months ending June 30, 2015, with total operating revenues increasing to $826.9 million, up from $792.0 million in the prior year period. This growth was primarily driven by an increase in rental income and tenant reimbursements. The company continues to expand its global data center footprint, owning 132 properties, including those in joint ventures, with approximately 24.2 million rentable square feet. Despite a challenging economic environment with concerns around global market conditions and currency fluctuations, DLR maintained a strong occupancy rate of 93.5% across its portfolio. The company also demonstrated proactive capital management, including the sale of non-strategic assets for approximately $204 million, generating significant gains. DLR issued $500 million in new debt with a 3.950% interest rate due 2022 and repaid existing debt, resulting in a decrease in interest expense for the period. The company's debt-to-enterprise value ratio remained healthy at approximately 33%, indicating a well-managed leverage position. The ongoing development pipeline remains a key focus for future growth.

Financial Highlights

33 data points
Beta

Revenue

$420.30M

Net Income

$135.51M

32.2% Net Margin

EPS (Diluted)

$0.86

Total Assets

$9.59B

Cash & Equivalents

$59.15M

Free Cash Flow

$216.23M

Financial Statements
Beta
Revenue$420.30M
Operating Expenses$313.24M
Operating Income$107.05M
Interest Expense$46.11M
Net Income$135.51M
EPS (Basic)$0.86
EPS (Diluted)$0.86
Shares Outstanding (Basic)135.81M
Shares Outstanding (Diluted)136.50M

Key Highlights

  • 1Total operating revenues increased by $34.9 million to $826.9 million for the six months ended June 30, 2015, compared to the same period in 2014.
  • 2The company maintained a strong portfolio occupancy rate of 93.5% as of June 30, 2015.
  • 3DLR sold three properties (100 Quannapowitt, 3300 East Birch Street, and 833 Chestnut Street) generating approximately $204 million in net proceeds and a net gain of $94.5 million during the first six months of 2015.
  • 4The company issued $500 million of 3.950% notes due 2022, demonstrating access to debt capital markets.
  • 5Debt-to-total enterprise value ratio was approximately 33% as of June 30, 2015, indicating a conservative leverage profile.
  • 6Interest expense decreased by $4.9 million to $91.6 million for the six months ended June 30, 2015, primarily due to debt redemptions.
  • 7The company has a significant development pipeline with approximately 1.2 million square feet under active development and 1.3 million square feet held for future development.

Frequently Asked Questions

As of June 30, 2015, DLR demonstrated solid revenue growth, with total operating revenues reaching $826.9 million for the first six months of the year. The company maintained a high occupancy rate of 93.5% and a healthy debt-to-enterprise value ratio of 33%. While the company faces global economic uncertainties and currency risks, its strategic property sales, debt management, and ongoing development pipeline indicate a focus on financial stability and future growth.

DLR owns 132 properties globally, with a total of 24.2 million rentable square feet, including space under active development and held for future development. The company actively manages its portfolio by selling non-strategic assets and investing in new development projects to enhance its offerings, such as Turn-Key Flex® and Powered Base Building® solutions. The development pipeline includes approximately 1.2 million square feet under construction, demonstrating a commitment to expanding its data center capacity.

DLR faces several risks, including global economic and market conditions which could impact IT spending and demand for data center space. Currency exchange rate fluctuations, particularly with the British pound sterling, Euro, and Singapore dollar, can affect revenues and operating margins. The company also notes risks associated with its upcoming Telx acquisition, potential tenant defaults, and the capital-intensive nature of its development projects. Additionally, interest rate changes could impact borrowing costs.

DLR primarily finances its operations and growth through a combination of cash flow from operations, debt issuance, and equity offerings. The company recently issued $500 million in new debt and has a significant global revolving credit facility available. Proceeds from property sales are also utilized. The company's REIT status necessitates distributing 90% of its taxable income, which influences its need for ongoing capital raising to fund operations, development, and acquisitions.