Digital Realty Trust, Inc. Reports Full Year 2012 FFO Of $4.44 Per Share And Core FFO Of $4.46 Per Share

Feb 15, 2013, 07:00 ET from Digital Realty Trust, Inc.

SAN FRANCISCO, Feb. 15, 2013 /PRNewswire/ -- Digital Realty Trust, Inc. (NYSE: DLR), a leading global provider of data center solutions, today announced financial results for its fourth quarter and for the full year ended December 31, 2012.  All per share results are on a diluted share and unit basis, except net income per share results are on a diluted share basis.

Highlights:

  • Reported FFO of $4.44 per share for the year ended December 31, 2012, up 9.4% from $4.06 per share for the year ended December 31, 2011.  Excluding certain items that do not represent ongoing expenses or revenue streams in each full year, 2012 core FFO was $4.46 per share, up 9.0% from 2011 core FFO of $4.09 per share;
  • Reported FFO of $1.16 per share for the fourth quarter of 2012, up 13.7% from $1.02 per share for the fourth quarter of 2011.  Excluding certain items that do not represent ongoing expenses or revenue streams in each quarter, fourth quarter 2012 core FFO was $1.19 per share, up 15.5% from fourth quarter 2011 core FFO of $1.03 per share;
  • Reported net income for the year ended December 31, 2012 of $216.0 million and net income available to common stockholders of $171.7 million, or $1.48 per share, up 12.1% from $1.32 per share for the year ended December 31, 2011;
  • Set record for leases commenced during the full year 2012 totaling approximately $134.9 million in annualized GAAP rental revenue;
  • Signed leases during 2012 totaling over $105.7 million in annualized GAAP rental revenue;
  • To date in 2013, signed leases totaling $31.4 million in annualized GAAP rental revenue;
  • Acquired 13 properties totaling approximately 3.3 million square feet for approximately $1.6 billion, and a 164,000 square foot property in Hong Kong acquired through an investment in an unconsolidated joint venture, in 2012;
  • Increased 2013 quarterly common stock dividend by 6.8% to $0.78 per share;
  • In January 2013, closed our inaugural international bond offering with a £400 million 12-year unsecured notes issuance; and
  • Confirming 2013 FFO guidance range of $4.65$4.80 per share, up 6.4% at the midpoint from 2012 FFO of $4.44 per share and 2013 core FFO guidance range of $4.70$4.85 per share, up 7.1% at the midpoint from 2012 core FFO of $4.46 per share.

Funds from operations ("FFO") on a diluted basis was $159.4 million in the fourth quarter of 2012, or $1.16 per share, up 2.7% from $1.13 per share in the previous quarter, and up 13.7% from $1.02 per share in the fourth quarter of 2011.  For the year ended December 31, 2012, FFO on a diluted basis was $583.5 million, or $4.44 per share, up 9.4% from $4.06 per share in 2011.

"Adjusting for items that do not represent ongoing expenses or revenue streams, fourth quarter 2012 core FFO was approximately $4.1 million higher than reported FFO, or $1.19 per share, up 15.5% from fourth quarter 2011 core FFO of $1.03 per share," said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty. "Similarly, full year 2012 core FFO was $4.46 per share after adjusting for non-core items.  This reflects a 9.0% increase over full year 2011 core FFO of $4.09 per share."

FFO is a supplemental non-GAAP performance measure used by the real estate industry to measure the operating performance of real estate investment trusts.  FFO and core FFO should not be considered as substitutes for net income determined in accordance with U.S. GAAP as measures of financial performance.  A reconciliation from U.S. GAAP net income available to common stockholders to FFO and core FFO and definitions of FFO and core FFO are included as an attachment to this press release.

Net income for the fourth quarter of 2012 was $55.9 million, compared to $56.9 million for the third quarter of 2012 and $47.2 million for the fourth quarter of 2011.  Net income available to common stockholders in the fourth quarter of 2012 was $44.8 million, or $0.36 per share, compared to $45.6 million, or $0.37 per share, in the third quarter of 2012, and $36.0 million, or $0.34 per share in the fourth quarter of 2011.  For the year ended December 31, 2012, net income was $216.0 million, up 33.3% over 2011 net income of $162.1 million.  Net income available to common stockholders for the year ended December 31, 2012 was $171.7 million, or $1.48 per share, up 12.1% from $1.32 per share in 2011.

The Company reported total operating revenues of $349.7 million in the fourth quarter of 2012, up 29.2% from $270.6 million in the fourth quarter of 2011, and total operating revenues of $1.3 billion for the year ended December 31, 2012, up 18.2% from $1.1 billion in 2011.

"We are very pleased to deliver another solid year of earnings growth for our shareholders in 2012.  We continued to expand into key high demand global markets while capturing significant demand for data center space in top markets across North America," said Michael F. Foust, Chief Executive Officer of Digital Realty.  "We are very encouraged by the $31.4 million in annualized GAAP rental revenue that we have signed to date in 2013 which already represents our strongest first quarter for lease signings ever."

Acquisitions Activity

In November 2012, the Company acquired a 271,000 square foot space held for development located on 34.31 acres of land in Totowa, New Jersey for a purchase price of $16.8 million. The Company plans to develop the existing building to accommodate 15 megawatts of critical IT load and construct a 50 megawatt onsite substation to support the development of additional data center capacity in future phases.  In December 2012, the Company completed the acquisitions of a fully leased 52,000 square-foot data center in Sydney, Australia for AU$11.75 million and a three-property data center portfolio in the Paris, France metro area for €60.0 million.  Structured as a sale-leaseback transaction, the properties acquired in Paris total approximately 186,000 rentable square feet with nearly five megawatts of IT capacity.

During the full year 2012, the Company acquired 13 properties totaling approximately 3.3 million square feet for approximately $1.6 billion, and a 164,000 square foot property in Hong Kong acquired through an investment in an unconsolidated joint venture.

As of February 15, 2013, the Company's portfolio comprised 117 properties, excluding three properties held in unconsolidated joint ventures, consisting of 168 buildings totaling approximately 21.9 million net rentable square feet, including 2.4 million square feet of space held for development.  The portfolio is strategically located in 32 key technology markets throughout North America, Europe, Asia and Australia.

Balance Sheet Update

Total assets grew to approximately $8.8 billion at December 31, 2012 from $6.1 billion at December 31, 2011.  Total debt increased to $4.3 billion at December 31, 2012 from $2.9 billion at December 31, 2011. Stockholders' equity was approximately $3.5 billion at December 31, 2012, up from over $2.5 billion at December 31, 2011.

In January 2013, the Company closed its inaugural international bond offering with a £400 million 12-year unsecured notes issuance, interest on which is payable semiannually in arrears at a rate of 4.250% per annum. 

2013 Outlook

FFO per share for the year ending December 31, 2013 is projected to be between $4.65 and $4.80. This guidance represents expected FFO growth of 4.7% to 8.1% over 2012 FFO of $4.44 per share.  Core FFO per share for the year ending December 31, 2013, which excludes items that do not represent ongoing expenses or revenue streams, is projected to be between $4.70 and $4.85.  This guidance represents projected core FFO growth of 5.4% to 8.7% over 2012 core FFO of $4.46 per share.  A reconciliation of the range of 2013 projected net income to projected FFO and core FFO follows:

Low - High

Net income available to common stockholders per diluted share    

$1.37 – 1.52

       Add:

Real estate depreciation and amortization

$3.43

       Less:

Dilutive impact of convertible stock

($0.15)

    Projected FFO per diluted share                 

$4.65– 4.80

Adjustments for items that do not represent core expenses and revenue streams

$0.05

    Projected core FFO per diluted share                 

$4.70 – 4.85

The 2013 guidance provided by Digital Realty in this press release is based on the following assumptions as of February 15, 2013:

  • Data center space delivered representing approximately $986 million of investment and generating ROI of 10% - 12%;
  • Digital Design Services revenue of $2$4 million;
  • Acquisitions of income producing properties totaling $300$400 million at an average cap rate of 7.25% - 7.75%;
  • Development and redevelopment capital expenditures of $850 - $950 million;
  • Portfolio capital expenditures (recurring and non-recurring) of $60$75 million;
  • Total G&A expenses of $65$68 million;
  • Transaction expenses of $6$9 million; and
  • FX rates (USD per currency): Euro = 1.30; Pound = 1.57; SGD = 0.81; and AUS = 1.03.

Investor Conference Call Details

Digital Realty will host a conference call on Friday, February 15, 2013 at 10:00 am PT / 1:00 pm ET to discuss its fourth quarter and full year 2012 financial results and operating performance.  The conference call will feature Chief Executive Officer, Michael F. Foust, and Chief Financial Officer and Chief Investment Officer, A. William Stein.  To participate in the live call, investors are invited to dial +1 (888) 701-6680 (domestic callers) or +1 (706) 634-5458 (international callers) and quote the conference ID #88753411 at least five minutes prior to start time.  A live webcast of the call will be available via the Investors section of Digital Realty's website at www.digitalrealty.com.  Please go to the website at least 15 minutes early to register and download and install any necessary audio software. If you are unable to listen to the live conference call, a telephone and webcast replay will be available until 11:59 pm ET on Friday, March 1, 2013. The telephone replay can be accessed two hours after the call by dialing +1 (855) 859-2056 (domestic callers) or +1 (404) 537-3406 (for international callers) and using the conference ID #88753411. The webcast replay can be accessed on Digital Realty's website immediately after the live call has concluded.

About Digital Realty

Digital Realty Trust, Inc. focuses on delivering customer driven data center solutions by providing secure, reliable and cost effective facilities that meet each customer's unique data center needs. Digital Realty's customers include domestic and international companies across multiple industry verticals ranging from information technology and Internet enterprises, to manufacturing and financial services. Digital Realty's 117 properties, excluding three properties held as investments in unconsolidated joint ventures, comprise approximately 21.9 million square feet as of February 15, 2013, including 2.4 million square feet of space held for development. Digital Realty's portfolio is located in 32 markets throughout Europe, North America, Asia and Australia. Additional information about Digital Realty is included in the Company Overview, which is available on the Investors page of Digital Realty's website at http://www.digitalrealty.com.

Safe Harbor Statement

This press release contains forward-looking statements which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially, including statements related to the Company's 2013 guidance and its underlying assumptions, supply and demand for data center space, rent from leases that have been signed but have not yet commenced and other contracted rent to be received in future periods, development and redevelopment plans, and expected timing, size and IT capacity of development and redevelopment projects, and expectations regarding the Company's future growth and success. These risks and uncertainties include, among others, the following: the impact of the recent deterioration in global economic, credit and market conditions, including the downgrade of the U.S. government's credit rating; current local economic conditions in our geographic markets; decreases in information technology spending, including as a result of economic slowdowns or recession; adverse economic or real estate developments in our industry or the industry sectors that we sell to (including risks relating to decreasing real estate valuations and impairment charges); our dependence upon significant tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; defaults on or non-renewal of leases by tenants; our failure to obtain necessary debt and equity financing; increased interest rates and operating costs; risks associated with using debt to fund our business activities, including re-financing and interest rate risks, our failure to repay debt when due, adverse changes in our credit ratings or our breach of covenants or other terms contained in our loan facilities and agreements; financial market fluctuations; changes in foreign currency exchange rates; our inability to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; our failure to successfully integrate and operate acquired or redeveloped properties or businesses; risks related to joint venture investments, including as a result of our lack of control of such investments; delays or unexpected costs in development or redevelopment of properties; decreased rental rates or increased vacancy rates; increased competition or available supply of data center space; our inability to successfully develop and lease new properties and space held for redevelopment; difficulties in identifying properties to acquire and completing acquisitions; our inability to acquire off-market properties; our inability to comply with the rules and regulations applicable to reporting companies; our failure to maintain our status as a REIT; possible adverse changes to tax laws; restrictions on our ability to engage in certain business activities; environmental uncertainties and risks related to natural disasters; losses in excess of our insurance coverage; changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation; and changes in local, state and federal regulatory requirements, including changes in real estate and zoning laws and increases in real property tax rates.  For a further list and description of such risks and uncertainties, see the reports and other filings by the Company with the U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012.  The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For Additional Information:

A. William Stein

Pamela Matthews Garibaldi

Chief Financial Officer and

Vice President, Investor Relations and

Chief Investment Officer

Corporate Marketing

Digital Realty Trust, Inc.

Digital Realty Trust, Inc.

+1 (415) 738-6500

+1 (415) 738-6500

Digital Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Income Statements

(in thousands, except share and per share data)

(unaudited)

Three Months Ended

Year Ended

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Operating Revenues:

Rental

$  272,906

$  214,264

$  990,715

$  820,711

Tenant reimbursements

75,147

52,010

272,309

211,811

Construction management

1,525

4,338

8,428

29,286

Other

158

-

7,615

902

Total operating revenues

349,736

270,612

1,279,067

1,062,710

Operating Expenses:

Rental property operating and maintenance

106,095

81,698

380,176

307,922

Property taxes

19,682

9,458

69,475

49,946

Insurance

2,647

2,014

9,600

8,024

Construction management

184

2,388

1,596

22,715

Depreciation and amortization

107,718

80,612

382,553

310,425

General and administrative

13,441

12,542

57,209

53,624

Transactions

5,331

601

11,120

5,654

Other

-

-

1,260

90

Total operating expenses

255,098

189,313

912,989

758,400

Operating income

94,638

81,299

366,078

304,310

Other Income (Expenses):

Equity in earnings of unconsolidated joint ventures

1,733

1,296

8,135

4,952

Interest and other income

(116)

398

1,892

3,260

Interest expense

(40,350)

(36,856)

(157,108)

(149,350)

Tax (expense) benefit

(10)

1,164

(2,647)

42

Loss from early extinguishment of debt

-

(104)

(303)

(1,088)

Net Income

55,895

47,197

216,047

162,126

Net income attributable to noncontrolling interests

(1,329)

(1,481)

(5,713)

(5,861)

Net Income Attributable to Digital Realty Trust, Inc.

54,566

45,716

210,334

156,265

Preferred stock dividends

(9,751)

(9,726)

(38,672)

(25,397)

Net Income Available to Common Stockholders

$   44,815

$   35,990

$  171,662

$  130,868

Net income per share available to common stockholders:

Basic

$      0.36

$      0.34

$      1.48

$      1.33

Diluted

$      0.36

$      0.34

$      1.48

$      1.32

Weighted average shares outstanding:

Basic

123,824,957

105,134,719

115,717,667

98,405,375

Diluted

124,145,590

105,584,344

116,006,577

99,169,749

Digital Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

December 31, 2012

December 31, 2011

ASSETS

(unaudited)

Investments in real estate

Properties:

Land

$  661,058

$  555,113

Acquired ground leases

13,658

6,214

Buildings and improvements

7,662,973

5,253,754

Tenant improvements

404,830

303,502

Total investments in properties

8,742,519

6,118,583

Accumulated depreciation and amortization

(1,206,017)

(900,044)

Net investments in properties

7,536,502

5,218,539

Investment in unconsolidated joint ventures

66,634

23,976

Net investments in real estate

7,603,136

5,242,515

Cash and cash equivalents

56,281

40,631

Accounts and other receivables, net 

168,286

90,580

Deferred rent

321,715

246,815

Acquired above market leases, net 

65,055

29,701

Acquired in place lease value and deferred leasing costs, net 

495,205

335,381

Deferred financing costs, net 

30,621

29,849

Restricted cash

44,050

55,165

Other assets

34,865

27,929

Total Assets

$ 8,819,214

$ 6,098,566

LIABILITIES AND EQUITY

Global revolving credit facility

$  723,729

$  275,106

Unsecured term loan

757,839

-

Unsecured senior notes, net of discount

1,738,221

1,441,072

Exchangeable senior debentures

266,400

266,400

Mortgage loans, net of premiums

792,376

947,132

Other secured loan

-

10,500

Accounts payable and other accrued liabilities

646,427

315,133

Accrued dividends and distributions

93,434

75,455

Acquired below market leases, net

148,233

85,819

Security deposits and prepaid rents

154,171

101,538

Total Liabilities

5,320,830

3,518,155

Equity:

Stockholders' equity

3,468,305

2,522,917

Noncontrolling interests

30,079

57,494

Total Equity

3,498,384

2,580,411

Total Liabilities and Equity

$ 8,819,214

$ 6,098,566

Digital Realty Trust, Inc. and Subsidiaries

Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO)

(in thousands, except per share and unit data)

(unaudited)

Three Months Ended

Year Ended

December 31, 2012

September 30, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Net income available to common stockholders

$  44,815

$  45,615

$  35,990

$ 171,662

$ 130,868

Adjustments:

Noncontrolling interests in operating partnership

1,336

1,574

1,530

6,157

6,185

Real estate related depreciation and amortization (1)

106,797

100,994

80,086

378,970

308,547

Real estate related depreciation and amortization related to investment in

   unconsolidated joint ventures

727

710

985

3,208

3,688

Gain on sale of assets held in unconsolidated joint venture

-

-

-

(2,325)

-

FFO available to common stockholders and unitholders (2)

$ 153,675

$ 148,893

$ 118,591

$ 557,672

$ 449,288

Basic FFO per share and unit

$       1.21

$       1.18

$       1.08

$       4.65

$       4.36

Diluted FFO per share and unit (2)

$       1.16

$       1.13

$       1.02

$       4.44

$       4.06

Weighted average common stock and units outstanding

Basic

127,515

126,243

109,603

119,861

103,053

Diluted (2)

137,510

137,304

123,875

131,467

119,404

(1) Real estate related depreciation and amortization was computed as follows:

Depreciation and amortization per income statement

107,718

101,840

80,612

382,553

310,425

Non-real estate depreciation

(921)

(846)

(526)

(3,583)

(1,878)

$ 106,797

$ 100,994

$  80,086

$ 378,970

$ 308,547

(2) At December 31, 2012, we had 4,937 series D convertible preferred shares outstanding that were convertible into 3,143 common shares on a weighted average basis for the three months ended December 31, 2012. For the three months ended December 31, 2012, we have excluded the effect of dilutive series E and series F preferred stock, that may be converted upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series E  and series F preferred stock, which we consider highly improbable; if included, the dilutive effect for the three months ended December 31, 2012 would be 7,116 shares. In addition, we had a balance of $266,400 of 5.50% exchangeable senior debentures due 2029 that were exchangeable for 6,531 common shares on a weighted average basis for the three months ended December 31, 2012. See below for calculations of diluted FFO available to common stockholders and unitholders and weighted average common stock and units outstanding.

Three Months Ended

Year Ended

December 31, 2012

September 30, 2012

December 31, 2011

December 31, 2012

December 31, 2011

FFO available to common stockholders and unitholders

$ 153,675

$ 148,893

$ 118,591

$ 557,672

$ 449,288

Add:  Series C convertible preferred dividends

-

-

1,402

1,402

6,077

Add:  Series D convertible preferred dividends

1,697

1,723

2,398

8,212

13,394

Add:  5.50% exchangeable senior debentures interest expense

4,050

4,050

4,050

16,200

16,200

FFO available to common stockholders and unitholders -- diluted

$ 159,422

$ 154,666

$ 126,441

$ 583,486

$ 484,959

Weighted average common stock and units outstanding

127,515

126,243

109,603

119,861

103,053

Add: Effect of dilutive securities (excluding series C and D convertible preferred stock and 5.50% exchangeable senior debentures)

321

327

450

289

764

Add: Effect of dilutive series C convertible preferred stock

-

-

2,778

814

3,017

Add: Effect of dilutive series D convertible preferred stock

3,143

4,219

4,660

4,017

6,242

Add: Effect of dilutive 5.50% exchangeable senior debentures

6,531

6,515

6,384

6,486

6,328

Weighted average common stock and units outstanding -- diluted

137,510

137,304

123,875

131,467

119,404

Digital Realty Trust, Inc. and Subsidiaries

Reconciliation of Funds From Operations (FFO) to Core Funds From Operations (CFFO)

(in thousands, except per share and unit data)

(unaudited)

Three Months Ended

Year Ended

December 31, 2012

September 30, 2012

December 31, 2011

December 31, 2012

December 31, 2011

FFO available to common stockholders and unitholders -- diluted

$ 159,422

$ 154,666

$ 126,441

$ 583,486

$ 484,959

Termination fees and other non-core revenues (3)

(158)

(1,052)

(111)

(9,034)

(2,953)

Significant transaction expenses

5,331

504

601

11,120

5,654

Loss from early extinguishment of debt

-

-

104

303

1,088

Change in fair value of contingent consideration (4)

(1,051)

-

-

(1,051)

-

Other non-core expense adjustments (5)

-

923

-

1,260

174

CFFO available to common stockholders and unitholders -- diluted

$ 163,544

$ 155,041

$ 127,035

$ 586,084

$ 488,922

Diluted CFFO per share and unit

$      1.19

$      1.13

$      1.03

$      4.46

$      4.09

(3) Includes one-time fees, proceeds and certain other adjustments that are not core to our business.

(4) Relates to earn-out contingency in connection with Sentrum Portfolio acquisition.

(5) Includes reversal of accruals and certain other adjustments that are not core to our business.

Note Regarding Funds From Operations

Digital Realty calculates Funds from Operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) available to common stockholders and unitholders (computed in accordance with U.S. GAAP), excluding gains (or losses) from sales of property, impairment charges, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. Digital Realty also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance.

Core Funds from Operations

We present core funds from operations, or CFFO, as a supplemental operating measure because, in excluding certain items that do not reflect ongoing revenue or expense streams, it provides a performance measure that, when compared year over year, captures trends in our core business operating performance. We calculate CFFO by adding to or subtracting from FFO (i) termination fees and other non-core revenues, (ii) significant transaction expenses, (iii) loss from early extinguishment of debt, (iv) costs on redemption of preferred stock, (v) significant property tax adjustments, net, (vi) change in fair value of contingent consideration and (vii) other non-core expense adjustments. Because certain of these adjustments have a real economic impact on our financial condition and results from operations, the utility of CFFO as a measure of our performance is limited. Other REITs may not calculate CFFO in a consistent manner. Accordingly, our CFFO may not be comparable to other REITs' CFFO. CFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

 

SOURCE Digital Realty Trust, Inc.



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