8-KOther Events

DIGITAL REALTY TRUST, INC. 8-K Report, Corporate Update (Jul 29, 2011)

Filed July 29, 2011For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) reported its second quarter 2011 financial results, highlighting continued revenue growth and strategic acquisitions. Total operating revenues increased by 35.6% year-over-year to $267.9 million, driven by new leasing activity. Funds from Operations (FFO) remained stable quarter-over-quarter at $1.02 per diluted share and unit, but showed significant annual growth of 34.2%. The company also expanded its global footprint with key acquisitions in Ashburn, Virginia; Richardson, Texas; Sydney, Australia; and London, U.K., indicating a focus on strengthening its data center portfolio to meet growing demand. Financially, DLR reported net income available to common stockholders of $32.0 million, or $0.33 per diluted share. The company successfully raised capital through its At-the-Market equity program, generating approximately $171.2 million in net proceeds during the quarter, with a new program initiated to support future growth. Significant deleveraging occurred with the repayment of approximately $80 million in secured debt and $25 million in unsecured notes. The company also saw substantial conversions of convertible preferred stock and exchangeable senior debentures into common stock, reducing preferred obligations and increasing the common equity base.

Key Highlights

  • 1Total operating revenues for Q2 2011 increased by 35.6% year-over-year to $267.9 million, driven by new leasing.
  • 2Funds From Operations (FFO) per diluted share and unit was $1.02, up 34.2% year-over-year, demonstrating strong operational performance.
  • 3Completed several strategic acquisitions, including a 38.8-acre development site in Ashburn, VA; full ownership of Datacenter Park Dallas; and international sites in Sydney, Australia, and London, U.K., expanding global reach.
  • 4Signed leases totaling approximately $42.9 million of annualized GAAP rental revenue during the quarter.
  • 5Successfully raised approximately $171.2 million in net proceeds from its At-the-Market equity program and initiated a new $400 million program to fund growth.
  • 6Reduced debt through repayment of $80 million in secured debt and $25 million in unsecured notes.
  • 7Significant conversions of convertible preferred stock and exchangeable senior debentures into common stock, strengthening the balance sheet.

Frequently Asked Questions

The substantial year-over-year increase in net income was primarily driven by an increase in operating income, partially offset by higher interest expense from the issuance of new senior notes in March 2011. The conversion of convertible preferred stock also reduced preferred stock dividends, further boosting net income available to common stockholders.

Digital Realty Trust expanded its global presence significantly through several strategic acquisitions. This included acquiring a large development site in Ashburn, Virginia for future data center expansion, gaining full ownership of a 797,000 sq ft development property in Richardson, Texas, and marking its entry into Australia and the UK with acquisitions in Sydney and London, respectively. These moves underscore a strategy to acquire land and properties in key technology markets to meet anticipated demand for data center space.

The conversions of convertible preferred stock and exchangeable senior debentures into Digital Realty Trust's common stock are significant as they reduce the company's outstanding preferred equity obligations and increase the number of common shares outstanding. This deleverages the balance sheet, reduces future dividend/interest payments on preferred securities, and strengthens the equity base, which can be beneficial for common shareholders.

Digital Realty Trust is employing a multi-faceted approach to funding its growth. This includes utilizing proceeds from its At-the-Market equity distribution programs, which generated significant capital. The company also has an active revolving credit facility and has been strategically repaying debt. The newly initiated At-the-Market program of up to $400 million is designated for acquiring properties, funding development and redevelopment, and general working capital, including debt and preferred equity retirement.