Digital Realty Trust, Inc. Reports First Quarter 2010 Results

SAN FRANCISCO, April 29 /PRNewswire-FirstCall/ -- Digital Realty Trust, Inc. (NYSE: DLR), the leading owner and manager of corporate and Internet gateway datacenter facilities, today announced financial results for the first quarter of 2010.  Funds from operations ("FFO") on a diluted basis was $84.4 million in the first quarter of 2010, or $0.81 per diluted share and unit, up 2.5% from $0.79 per diluted share and unit in the previous quarter, and up 15.7% from $0.70 per diluted share and unit in the first quarter of 2009.  

"The FFO of $0.81 per diluted share and unit for the first quarter of 2010 includes less than $0.02 of additional FFO from certain items that do not represent core revenue streams and the FFO of $0.79 per diluted share and unit for the fourth quarter of 2009 includes approximately $0.01 of additional FFO from certain items that do not represent core revenue streams," said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty Trust.  "There was no additional FFO from items that do not represent core revenue streams in the first quarter of 2009."

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.

Net income for the first quarter of 2010 was $25.6 million, up 2.8% from $24.9 million in the fourth quarter of 2009 and up 20.8% from $21.2 million in the first quarter of 2009.  Net income available to common stockholders in the first quarter was $14.7 million, or $0.18 per diluted share, compared to $14.3 million, or $0.18 per diluted share, in the fourth quarter of 2009, and up from $10.3 million, or $0.14 per diluted share, in the first quarter of 2009.

The Company reported total operating revenues of $191.8 million in the first quarter of 2010, up 13.0% from $169.8 million in the fourth quarter of 2009 and up 28.6% from $149.1 million in the first quarter of 2009.  

"The Company delivered another strong performance in the first quarter, driven primarily by the acquisition of the New England Portfolio and strong leasing," commented Michael F. Foust, Chief Executive Officer of Digital Realty Trust.  "We continued to see increasing demand for datacenter space in the first quarter from corporate enterprises and IT service providers, particularly for our Turn-Key product.  This acceleration in leasing activity resulted in the strongest quarter of lease signings on record for our Turn-Key product."

Acquisitions and Leasing Activity

For the quarter ended March 31, 2010, the Company commenced leases totaling approximately 116,000 square feet of space. This includes approximately 108,000 square feet of Turn-Key Datacenter® space leased at an average annual GAAP rental rate of $139.00 per square foot and approximately 7,500 square feet of non-technical space leased at an average annual GAAP rental rate of $37.00 per square foot.

The Company signed leases during the first quarter of 2010 totaling approximately 241,000 square feet of space. This includes over 171,000 square feet of Turn-Key Datacenter® space leased at an average annual GAAP rental rate of $141.00 per square foot, and more than 69,000 square feet of non-technical space leased at an average annual GAAP rental rate of $25.00 per square foot.

As of April 29, 2010, the Company's portfolio comprises 84 properties, excluding one property held in an unconsolidated joint venture, consisting of 118 buildings totaling approximately 15.0 million rentable square feet, including 1.8 million square feet of space held for redevelopment.  The portfolio is strategically located in 27 key technology markets throughout North America and Europe.

Balance Sheet Update

Total assets grew to approximately $4.1 billion at March 31, 2010, up from approximately $3.7 billion at December 31, 2009.  Total debt at March 31, 2010 was approximately $2.2 billion, up from approximately $1.8 billion at December 31, 2009.  Stockholders' equity was approximately $1.6 billion at both March 31, 2010 and December 31, 2009.

On January 28, 2010, the Company closed the issuance of $500.0 million in aggregate principal amount of 10-year senior unsecured notes with an interest rate of 5.875% per annum yielding 6.105%.  

In separate transactions, the Company closed the sale of $100.0 million on January 20, 2010 and $17.0 million on February 3, 2010 in aggregate principal amounts of its senior unsecured term notes under its Prudential shelf facility. The notes sold in January were issued in two series referred to as the series D and series E notes. The series D notes have an aggregate principal amount of $50.0 million, an interest-only rate of 4.57% per annum and a five-year maturity, and the series E notes have a principal amount of $50.0 million, an interest-only rate of 5.73% per annum and a seven-year maturity. The notes sold in February are referred to as the series F notes and have an interest-only rate of 4.50% per annum and a five-year maturity.  

In December 2009 and January 2010, the Company entered into equity distribution agreements referred to as its At-the-Market equity distribution program under which it can, subject to market conditions, issue and sell up to $400.0 million of its common stock.  For the quarter ended March 31, 2010, the Company generated net proceeds of approximately $54.8 million after payment of approximately $0.8 million of commissions to the sales agents from the issuance of approximately 1.1 million shares of common stock at an average price of $50.56 per share.  

The Company has used and intends to use the proceeds from these capital markets activities to temporarily repay borrowings under its revolving credit facility, to acquire additional properties, to fund development and redevelopment opportunities and for general corporate purposes.  

"Currently, we have approximately $784 million of immediate liquidity through short-term investments and funds that can be drawn on our revolving credit facility," added Mr. Stein. "As a result of our strong first quarter performance, we are increasing 2010 FFO guidance by $0.08 to between 3.26 and $3.38 per diluted share and unit."

2010 Revised Outlook

FFO per diluted share and unit for the year ending December 31, 2010 is projected to be between $3.26 and $3.38. This guidance represents expected FFO growth of 11.3% to 15.4% over the 2009 FFO of $2.93 per diluted share and unit.  A reconciliation of the range of 2010 projected net income to projected FFO follows:

Investor Conference Call Details

Digital Realty Trust will host a conference call on Thursday, April 29, 2010 at 1:00 pm ET/10:00 am PT to discuss its first quarter 2010 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 +1 (877) 941-9205 (for domestic callers) or +1 (480) 629-9835 (for international callers) and enter the passcode #4276649 at least five minutes prior to start time.  A live webcast of the call will be available via the Investors 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 after 12:00 pm PT on Thursday, April 29, 2010 until 11:59 pm PT on Thursday, May 13, 2010.  The telephone replay can be accessed by dialing +1 (800) 406-7325 (for domestic callers) or +1 (303) 590-3030 (for international callers) and using reservation code #4276649.  A replay of the webcast will also be archived on Digital Realty Trust's website.

About Digital Realty Trust, Inc.

Digital Realty Trust 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 84 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 15.0 million square feet as of April 29, 2010, including 1.8 million square feet of space held for redevelopment, Digital Realty Trust's portfolio is located in 27 markets throughout Europe and North America. Digital Realty Trust calculates occupancy and leased square footage for some of its properties based on factors in addition to contractually leased square feet, including available power, required support space and common area. 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 2010 guidance and its underlying assumptions, as well as statements related to the signing and commencement of leases.  These risks and uncertainties include, among others, the following:  the impact of the recent deterioration in global economic, credit and market conditions;  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; our failure to repay debt when due 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 ability to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; our failure to successfully operate acquired or redeveloped properties; 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 datacenter 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 public companies; our failure to maintain our status as a REIT; potential adverse changes to tax laws; restrictions on our ability to engage in certain business activities; environmental uncertainties and risks related to natural disasters; 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 U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2009 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.

Turn-Key Datacenter and Powered Base Building are registered trademarks of Digital Realty Trust.

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.