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Digital Realty Trust, Inc. Reports Third Quarter 2009 Results
Strong performance drives FFO increase of 4.2% in the third quarter
SAN FRANCISCO, Oct. 29 /PRNewswire-FirstCall/ --
Highlights:
- Reported FFO of $0.74 per diluted share and unit for the quarter ended September 30, 2009;
- Reported net income for the quarter ended September 30, 2009 of $23.9 million and net income available to common stockholders of $12.4 million, or $0.16 per diluted share;
- Commenced leases on approximately 101,000 square feet during the third quarter at an average annualized GAAP rent of approximately $170 per square foot, including non technical space;
- Completed three acquisitions, including a controlling interest in a joint venture redevelopment project in suburban Dallas, a fully leased facility in Silicon Valley, and the remaining noncontrolling ownership interest in a fully leased facility in Silicon Valley from the Company's joint venture partner;
- Completed a pounds Sterling 23.8 million secured mortgage financing in October;
- Received a $30.0 million commitment under the revolving credit facility from a new lender;
- Completed a euro 30.0 million secured mortgage financing scheduled to fund in December 2009;
- Announced initial quarterly common stock dividend increase of 9.1% to $0.36 per share paid September 30, 2009;
- Announced second quarterly common stock dividend increase of 25.0% to $0.45 per share payable January 15, 2010; and
- Raised the low end of 2009 annual FFO guidance range to $2.88 per diluted share and unit.
Digital Realty Trust, Inc. (NYSE: DLR), the leading owner and manager of corporate and Internet gateway datacenter facilities, today announced financial results for the third quarter of 2009. The Company reported total operating revenues of $163.2 million in the third quarter of 2009, up 5.3% from $155.0 million in the second quarter of 2009 and up 14.9% from $142.0 million in the third quarter of 2008.
Funds from operations ("FFO") on a diluted basis was $74.7 million in the third quarter of 2009, or $0.74 on a diluted per share and unit basis, up 4.2% from $0.71 per diluted share and unit in the previous quarter, and up 8.8% from $0.68 per diluted share and unit in the third quarter of 2008.
"There were no material non-recurring items impacting FFO or net income in the quarters ended September 30 and June 30, 2009. For the quarter ended September 30, 2008, the FFO of $0.68 per diluted share and unit included additional FFO from certain significant items that do not represent ongoing revenue streams (primarily lease termination fees). After adjusting for these items, FFO would have been $0.62 per diluted share and unit. This represents an FFO increase of 19.4% over the same period last year after adjusting for these items," said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty Trust.
Net income for the third quarter was $23.9 million, up 12.7% from $21.2 million in the second quarter of 2009 and up 29.9% from $18.4 million in the third quarter of 2008. Net income available to common stockholders in the third quarter was $12.4 million, or $0.16 per diluted share, compared to $10.3 million, or $0.13 per diluted share in the second quarter of 2009, and up from $7.5 million, or $0.10 per diluted share in the third quarter of 2008.
"We are pleased to report another strong performance in the third quarter," commented Michael F. Foust, Chief Executive Officer of Digital Realty Trust. "Our strong balance sheet, leading global market position in the wholesale datacenter space and unmatched technical expertise continue to provide us with opportunities to expand our business. We expect income producing acquisitions will take a larger role in our investment strategy, contributing external earnings growth to complement internal growth from our ongoing development and leasing activities."
FFO is a supplemental non-GAAP financial measure used by the real estate industry to measure the operating performance of real estate companies. FFO should not be considered as a substitute for net income determined in accordance with U.S. GAAP as a measure of financial performance. A reconciliation of U.S. GAAP net income available to common stockholders to FFO and a definition of FFO are included as an attachment to this press release.
Acquisitions and Leasing Activity
In September, the Company acquired a controlling interest in a joint venture redevelopment project. Digital Realty Trust Datacenter Park - Dallas, formerly known as Collins Technology Park, consists of seven buildings totaling approximately 796,000 square feet, ranging in size from 15,000 square feet to 250,000 square feet. The 69-acre property also contains several developable land sites and a private substation with 40 MW of immediate availability, which is expandable up to 125 MW. Concurrent with the acquisition, the joint venture assumed a $17 million secured loan on the property at an interest-only rate of 5.0%. Additionally, the Company acquired 444 Toyama Drive, a 42,000 square foot fully leased operating datacenter located in Sunnyvale, California, as well as the remaining noncontrolling ownership interest in 1525 Comstock Street, a 42,000 square foot property located in Santa Clara, California from its joint venture partner.
For the quarter ended September 30, 2009, the Company commenced leases totaling approximately 101,000 square feet of space. This includes approximately 90,000 square feet of Turn-Key Datacenter® space leased at an average annual GAAP rental rate of $187.00 per square foot and approximately 11,000 square feet of non-technical space leased at an average annual GAAP rental rate of $25.00 per square foot.
Balance Sheet Update
Total assets grew to approximately $3.5 billion at September 30, 2009, from $3.3 billion at December 31, 2008. Total debt at September 30, 2009 was approximately $1.6 billion and at December 31, 2008 was approximately $1.4 billion. Stockholders' equity was approximately $1.6 billion at September 30, 2009, up from $1.5 billion at December 31, 2008.
In August, the Company received a $30.0 million commitment under its revolving credit facility from a new lender, increasing total commitments from $720.0 million to $750.0 million, the maximum amount available under the terms of the revolving credit facility. Concurrently, the sub-facility for multicurrency advances increased from $485.0 million to $515.0 million.
In September the Company completed and executed documents for a five-year, euro 30.0 million interest-only secured mortgage financing for Clonshaugh Industrial Estate II located in Dublin, Ireland. The loan is scheduled to fund in early December 2009. Based on the current swap rate, the all-in interest rate is approximately 7.37%.
Subsequent to the end of the quarter, the Company closed a five-year pounds Sterling 23.8 million loan secured by two properties located in the United Kingdom, Cressex 1 in suburban London and Manchester Technopark in Manchester. The interest rate is 5.68%.
"Our strong liquidity position and conservative capital structure provide us with a solid platform to further expand our business in the coming year," said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty Trust. "As we approach the end of the year, we are raising the low end of our 2009 annual FFO guidance to $2.88 per diluted share and unit. We plan to provide 2010 guidance in November."
2009 Revised Outlook
FFO per diluted share and unit for the year ending December 31, 2009 is projected to be between $2.88 and $2.90, compared to the previous 2009 FFO guidance of between $2.80 and $2.90 per diluted share and unit. This revised guidance represents projected FFO growth of 11.2% to 12.0% over FFO per diluted share and unit of $2.59 for the year ended December 31, 2008. A reconciliation of the range of 2009 projected net income to projected FFO follows:
(Low - High)
------------
Net income available to common stockholders per share $0.58 - 0.60
Add:
Real estate depreciation and amortization as adjusted for
noncontrolling interests $2.41
Less:
Dilutive impact of convertible stock and exchangeable
Debentures $(0.11)
Projected FFO per diluted share and unit $2.88 - 2.90
Investor Conference Call Details
Digital Realty Trust will host a conference call on Thursday, October 29, 2009 at 1:00 pm ET/10:00 am PT to discuss its third quarter 2009 financial results and operating performance. The conference call will feature Chief Executive Officer, Michael Foust and Chief Financial Officer and Chief Investment Officer, A. William Stein. To participate in the live call, investors are invited to dial 877-941-8609 (for domestic callers) or 480-629-9818 (for international callers) and quote the conference ID #4159375 at least five minutes prior to start time. A live webcast of the call will be available via the Investor Relations section of Digital Realty Trust's website at www.digitalrealtytrust.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 November 4, 2009. The telephone replay can be accessed by dialing 800-406-7325 (for domestic callers) or 303-590-3030 (for international callers) and using reservation code 4159375#. A replay of the webcast will also be archived on Digital Realty Trust's website.
About Digital Realty Trust, Inc.
Digital Realty Trust, Inc. owns, acquires, redevelops, develops and manages technology-related real estate. The Company is focused on providing Turn-Key Datacenter® and Powered Base Building® datacenter solutions for domestic and international tenants across a variety of industry verticals ranging from information technology and Internet enterprises, to manufacturing and financial services. Digital Realty Trust's 78 properties, excluding one property held as an investment in an unconsolidated joint venture, contain applications and operations critical to the day-to-day operations of technology industry tenants and corporate enterprise datacenter tenants. Comprising approximately 13.8 million rentable square feet as of September 30, 2009, including 1.9 million square feet of space held for redevelopment, Digital Realty Trust's portfolio is located in 27 markets throughout North America and Europe. For additional information, please visit Digital Realty Trust's website at http://www.digitalrealtytrust.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. Such forward looking statements include statements related to the Company's expected future financial and other results, and the assumptions underlying such results, as well as statements related to the company's future acquisitions, leasing and financing plans. These risks and uncertainties include the impact of the current deterioration in global economic and market conditions; adverse economic or real estate developments in our markets or the industry sectors that we sell to; decreases in information technology spending; our dependence upon significant tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; downturn of local economic conditions in our geographic markets; our inability to comply with the rules and regulations applicable to public companies or to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; defaults on or non-renewal of leases by tenants; increased interest rates and operating costs; our failure to obtain necessary outside financing; restrictions on our ability to engage in certain business activities; risks related to joint venture investments; decreased rental rates or increased vacancy rates; inability to successfully develop and lease new properties and space held for redevelopment; difficulties in identifying properties to acquire and completing acquisitions; increased competition or available supply of data center space; our failure to successfully operate acquired properties; our inability to acquire off-market properties; delays or unexpected costs in development or redevelopment of properties; our failure to maintain our status as a REIT; possible adverse changes to tax laws; environmental uncertainties and risks related to natural disasters; financial market fluctuations; changes in foreign currency exchange rates; changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation; and 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 United States Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2008 and subsequent reports on Form 10-Q and Form 8-K. 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
Chief Financial Officer and Director of Investor Relations
Chief Investment Officer Digital Realty Trust, Inc.
Digital Realty Trust, Inc. +1 (415) 738-6532
+1 (415) 738-6520
Digital Realty Trust, Inc.
Condensed Consolidated Income Statements
(in thousands, except share data)
(unaudited)
Three Months Ended Nine Months Ended
---------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Operating Revenues: (adjusted) (adjusted)
Rental $130,878 $102,449 $374,347 $293,161
Tenant
reimbursements 32,236 29,882 92,807 77,367
Other 113 9,685 214 9,811
---------------------------- ---------------------------
Total operating
revenues 163,227 142,016 467,368 380,339
---------------------------- ---------------------------
Operating Expenses:
Rental property
operating
and maintenance 45,278 39,859 130,152 107,483
Property taxes 9,295 8,689 27,655 25,335
Insurance 1,495 1,252 4,439 3,655
Depreciation and
amortization 50,439 46,548 145,926 125,292
General and
administrative 10,660 11,261 30,802 29,730
Other 404 749 689 1,058
---------------------------- ---------------------------
Total operating
expenses 117,571 108,358 339,663 292,553
---------------------------- ---------------------------
Operating income 45,656 33,658 127,705 87,786
Other Income (Expenses):
Equity in earnings
of unconsolidated
joint venture 1,091 178 2,948 509
Interest and other
income 90 453 736 1,515
Interest
expense (22,559) (15,716) (63,991) (45,874)
Income tax expense (333) (154) (1,061) (969)
Loss from early
extinguishment
of debt - - - (182)
Net Income 23,945 18,419 66,337 42,785
Net income
attributable
to noncontrolling
interests (1,438) (833) (3,062) (1,426)
Net Income
Attributable
to Digital Realty
Trust, Inc. 22,507 17,586 63,275 41,359
Preferred stock
dividends (10,101) (10,102) (30,303) (28,462)
---------------------------- ---------------------------
Net Income
Available to
Common
Stockholders $12,406 $7,484 $32,972 $12,897
============================ ===========================
Net income per
share available
to common
stockholders:
Basic $0.16 $0.11 $0.44 $0.19
Diluted $0.16 $0.10 $0.43 $0.19
Weighted average
shares
outstanding:
Basic 76,301,577 70,916,019 75,714,757 67,425,030
Diluted 77,674,137 73,338,871 76,450,131 69,440,812
Digital Realty Trust
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
------------- ------------
ASSETS (unaudited)
Investments in real estate
Properties:
Land $364,010 $316,318
Acquired ground leases 2,795 2,733
Buildings and improvements 2,770,434 2,467,830
Tenant improvements 270,490 255,818
------------- ------------
Investments in properties 3,407,729 3,042,699
Accumulated depreciation and
amortization (418,794) (302,960)
------------- ------------
Net investments in properties 2,988,935 2,739,739
Investment in unconsolidated joint
venture 8,354 8,481
------------- ------------
Net investments in real estate 2,997,289 2,748,220
Cash and cash equivalents 41,152 73,334
Accounts and other receivables, net 45,404 39,108
Deferred rent 134,458 99,957
Acquired above market leases, net 27,255 31,352
Acquired in place lease value and
deferred leasing costs, net 213,239 222,389
Deferred financing costs, net 21,357 16,275
Restricted cash 36,813 45,470
Other assets 15,451 4,940
------------- ------------
Total Assets $3,532,418 $3,281,045
============= ============
LIABILITIES AND EQUITY
Revolving credit facility $149,838 $138,579
Unsecured senior notes 83,000 58,000
Mortgage loans 935,206 1,026,594
4.125% exchangeable senior debentures
due 2026, net of discount 164,826 161,901
5.50% exchangeable senior debentures
due 2029 266,400 -
Accounts payable and other accrued
liabilities 153,072 171,176
Accrued dividends and distributions - 26,092
Acquired below market leases, net 67,099 76,660
Security deposits and prepaid rents 58,818 46,967
------------- ------------
Total Liabilities 1,878,259 1,705,969
------------- ------------
Equity:
Stockholders' equity 1,573,859 1,503,921
Noncontrolling interests 80,300 71,155
------------- ------------
Total Equity 1,654,159 1,575,076
------------- ------------
Total Liabilities and Equity $3,532,418 $3,281,045
============= ============
Digital Realty Trust, Inc.
Reconciliation of Net Income Available to Common Stockholders to Funds
From Operations (FFO) (1)
(in thousands, except per share and unit data)
(unaudited)
Three Months Ended Nine Months Ended
------------------------------------ ---------------------------
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
------------------------------------ ---------------------------
(adjusted) (adjusted)
Net income
available to
common
stockholders $12,406 $10,271 $7,484 $32,972 $12,897
Adjustments:
Noncontrolling
interests in
operating
partnership 898 757 637 2,448 1,180
Real estate
related
depreciation
and
amortization
(2) 50,163 48,900 46,359 145,150 124,767
Real estate
related
depreciation
and
amortization
related
to
investment
in
unconsolidated
joint
venture 543 858 859 2,047 2,625
------------------------------------ ---------------------------
FFO available
to common
stockholders
and
unit-
holders (3) $64,010 $60,786 $55,339 $182,617 $141,469
==================================== ===========================
Basic FFO per
share and
unit $0.78 $0.74 $ 0.72 $2.24 $1.92
Diluted FFO
per share
and unit (3) $0.74 $0.71 $ 0.68 $2.14 $1.84
Weighted average
common stock
and units
outstanding
Basic 82,094 81,999 76,953 81,553 73,839
Diluted (3) 101,492 99,461 91,209 97,840 86,634
(1) Financial information for prior periods has been adjusted for the
retroactive application of the following new accounting guidance adopted
by the Company effective January 1, 2009: FASB ASC Subtopic 470-20,
formerly Staff Position APB 14-1 "Accounting for Convertible Debt
Instruments That May be Settled Upon Conversion (Including Partial Cash
Settlement)"; FASB ASC Subtopic 810-10, formerly Statement of Financial
Accounting Standard No. 160 "Noncontrolling Interests in Consolidated
Financial Statements - An Amendment of ARB No. 51".
(2) Real estate depreciation and amortization was computed as follows:
Depreciation
and
amortization
per income
statement 50,439 49,183 46,548 145,926 125,292
Non real
estate
depreciation (276) (283) (189) (776) (525)
------------------------------------ ---------------------------
$50,163 $48,900 $46,359 $145,150 $124,767
==================================== ===========================
(3) At September 30, 2009, we had 7,000 series C convertible preferred
shares and 13,796 series D convertible preferred shares outstanding that
were convertible into 3,615 common shares and 8,215 common shares,
respectively. In addition, we had a balance of $266,400 of 5.50%
exchangeable senior debentures that were exchangeable for 6,195 and
3,722 common shares on a weighted average basis for the three and nine
months ended September 30, 2009, respectively. See below for calculations
of diluted FFO available to common stockholders and unitholders and
weighted average common stock and units outstanding.
Three Months Ended Nine Months Ended
------------------------------------ ---------------------------
September 30, June 30, September 30, September 30, September 30,
------------------------------------ ---------------------------
2009 2009 2008 2009 2008
FFO available
to common
stockholders
and
unitholders $64,010 $60,786 $55,339 $182,617 $141,469
Add: Series C
convertible
preferred
dividends 1,914 1,914 1,914 5,742 5,742
Add: Series D
convertible
preferred
dividends 4,742 4,742 4,744 14,226 12,387
Add: 5.50%
exchangeable
senior
debentures
interest
expense 4,050 3,148 - 7,198 -
------------------------------------ ---------------------------
FFO available
to common
stockholders
and
unitholders
-- diluted $74,716 $70,590 $61,997 $209,783 $159,598
==================================== ===========================
Weighted average
common stock
and units
outstanding 82,094 81,999 76,953 81,553 73,839
Add: Effect
of dilutive
securities
(excluding
series C
and D
convertible
preferred
stock) 1,373 730 2,423 735 2,016
Add: Effect
of dilutive
series C
convertible
preferred
stock 3,615 3,615 3,615 3,615 3,615
Add: Effect
of dilutive
series D
convertible
preferred
stock 8,215 8,215 8,218 8,215 7,164
Add: Effect
of dilutive
5.50%
exchangeable
senior
debentures 6,195 4,902 - 3,722 -
------------------------------------ ---------------------------
Weighted average
common stock
and units
outstanding
-- diluted 101,492 99,461 91,209 97,840 86,634
==================================== ===========================
Note Regarding Funds From Operations
Digital Realty Trust 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, 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 Trust 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.
SOURCE Digital Realty Trust, Inc.
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