Digital Realty Reports Third Quarter 2019 Results
SAN FRANCISCO, Oct. 29, 2019 /PRNewswire/ -- Digital Realty (NYSE: DLR), a leading global provider of data center, colocation and interconnection solutions, announced today financial results for the third quarter of 2019. All per-share results are presented on a fully-diluted share and unit basis.
Highlights
- Reported net income available to common stockholders of $0.24 per share in 3Q19, compared to $0.33 in 3Q18
- Reported FFO per share of $1.59 in 3Q19, compared to $1.57 in 3Q18
- Reported core FFO per share of $1.67 in 3Q19, compared to $1.63 in 3Q18
- Signed total bookings during 3Q19 expected to generate $69 million of annualized GAAP rental revenue, including an $8 million contribution from interconnection
- Revised 2019 core FFO per share outlook from $6.60 - $6.70 to $6.55 - $6.65, reflecting the expected closing of the $1.0 billion joint venture with Mapletree in early November
Financial Results
Digital Realty reported revenues for the third quarter of 2019 of $806 million, a 1% increase from the previous quarter and a 5% increase from the same quarter last year.
The company delivered third quarter of 2019 net income of $68 million, and net income available to common stockholders of $50 million, or $0.24 per diluted share, compared to $0.15 per diluted share in the previous quarter and $0.33 per diluted share in the same quarter last year.
Digital Realty generated third quarter of 2019 adjusted EBITDA of $473 million, a 1% increase from the previous quarter and a 4% increase over the same quarter last year (reflecting the January 1, 2019 adoption of FASB Accounting Standard Codification Topic 842, Leases).
The company reported third quarter of 2019 funds from operations of $349 million, or $1.59 per share, compared to $1.53 per share in the previous quarter and $1.57 per share in the same quarter last year.
Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered third quarter of 2019 core FFO per share of $1.67, a 2% increase from $1.64 per share in the previous quarter, and a 2% increase from $1.63 per share in the same quarter last year.
Leasing Activity
"In the third quarter, we signed total bookings expected to generate $69 million of annualized GAAP rental revenue, including an $8 million contribution from interconnection," said Chief Executive Officer A. William Stein. "We continued to execute well, with record new logos and the third-best bookings in the company's history, close on the heels of our second-highest in the prior quarter. We also made progress on key strategic priorities, extending our global footprint, expanding our sustainability initiatives and optimizing the portfolio while advancing our private capital program and further strengthening our balance sheet. Looking ahead, we are confident that our global, multi-product platform will continue to deliver sustainable growth for all stakeholders."
The weighted-average lag between leases signed during the third quarter of 2019 and the contractual commencement date was five months.
In addition to new leases signed, Digital Realty also signed renewal leases representing $152 million of annualized GAAP rental revenue during the quarter. Rental rates on renewal leases signed during the third quarter of 2019 rolled up 7.2% on a cash basis and up 10.1% on a GAAP basis.
New leases signed during the third quarter of 2019 are summarized by region and product type as follows:
Annualized GAAP | |||||||||||||||
Base Rent | GAAP Base Rent | GAAP Base Rent | |||||||||||||
The Americas | (in thousands) | Square Feet | per Square Foot | Megawatts | per Kilowatt | ||||||||||
Turn-Key Flex | $40,097 | 356,759 | $112 | 34.8 | $96 | ||||||||||
Powered Base Building | 72 | — | — | — | — | ||||||||||
Colocation | 5,987 | 17,260 | 347 | 1.8 | 276 | ||||||||||
Non-Technical | 154 | 7,346 | 21 | — | — | ||||||||||
Total | $46,310 | 381,365 | $121 | 36.6 | $105 | ||||||||||
Europe (1) | |||||||||||||||
Turn-Key Flex | $5,094 | 40,811 | $125 | 3.5 | $123 | ||||||||||
Colocation | 1,236 | 4,460 | 277 | 0.3 | 333 | ||||||||||
Non-Technical | 120 | 2,815 | 42 | — | — | ||||||||||
Total | $6,450 | 48,086 | $134 | 3.8 | $140 | ||||||||||
Asia Pacific (1) | |||||||||||||||
Turn-Key Flex | $7,536 | 36,225 | $208 | 3.9 | $161 | ||||||||||
Colocation | 210 | 235 | 893 | — | 426 | ||||||||||
Non-Technical | 101 | 1,766 | 57 | — | — | ||||||||||
Total | $7,847 | 38,226 | $205 | 3.9 | $164 | ||||||||||
Interconnection | $8,009 | N/A | N/A | N/A | N/A | ||||||||||
Grand Total | $68,616 | 467,677 | $130 | 44.3 | $113 | ||||||||||
Note: | Totals may not foot due to rounding differences. |
(1) | Based on quarterly average exchange rates during the three months ended September 30, 2019. |
Investment Activity
During the third quarter of 2019, Digital Realty closed on the acquisition of a 22,000 square foot land parcel located in Seoul, South Korea for approximately $15 million. The site is located within the Sangam Digital Media City in northwest Seoul, a newly developed urban planning zone focused on technology and media companies, designed to promote South Korea's digital economy. Upon completion, the new facility is expected to support up to 12 megawatts of critical IT capacity. Construction is expected to commence within the coming months and to be complete in 2021.
During the third quarter of 2019, Digital Realty entered into definitive agreements with affiliates of Mapletree Investments Pte Ltd and Mapletree Industrial Trust for the sale of ten Powered Base Buildings® and the establishment of a joint venture on three existing data centers. The Powered Base Buildings® will be sold for a total purchase price of approximately $557 million, representing a 6.6% cap rate on expected 2020 net operating income of $37 million. Separately, an entity jointly owned by Mapletree Investments and Mapletree Industrial Trust will purchase an 80% interest, and Digital Realty will retain a 20% interest, in a joint venture on three fully stabilized hyper-scale facilities located in Ashburn, Virginia. Mapletree Investments and Mapletree Industrial Trust will acquire its 80% stake for approximately $811 million, valuing these three assets at approximately $1.0 billion. These three facilities are fully leased and are expected to generate 2020 cash net operating income of approximately $61 million, representing a 6.0% cap rate. Digital Realty will continue to operate and manage these facilities, and the transaction will be completely seamless from a customer perspective. The transactions are expected to close in late 2019 or early 2020 and are subject to customary closing conditions.
Balance Sheet
Digital Realty had approximately $10.9 billion of total debt outstanding as of September 30, 2019, comprised of $10.8 billion of unsecured debt and approximately $0.1 billion of secured debt. At the end of the third quarter of 2019, net debt-to-adjusted EBITDA was 6.1x, debt-plus-preferred-to-total enterprise value was 29.9% and fixed charge coverage was 4.3x. Pro forma for settlement of the $1.1 billion forward equity offering and $1.4 billion of proceeds from the Mapletree transaction, net debt-to-adjusted EBITDA was 5.0x and fixed charge coverage was 4.4x.
Subsequent to the end of the quarter, Digital Realty closed an offering of 13,800,000 shares of 5.20% Series L Cumulative Redeemable Preferred Stock (including 1,800,000 shares from the exercise of the underwriters' over-allotment option) at a price of $25.00 per share, generating gross proceeds of approximately $345 million.
Subsequent to quarter-end, Digital Realty also closed a €500 million (approximately $550 million) Euro-denominated offering of 8.5-year senior unsecured notes due 2028 at 1.125%.
2019 Outlook
Digital Realty revised its 2019 core FFO per share outlook from $6.60 - $6.70 to $6.55 - $6.65. The assumptions underlying this guidance are summarized in the following table.
As of | As of | As of | As of | As of | |
Top-Line and Cost Structure | January 8, 2019 | February 5, 2019 | April 25, 2019 | July 30, 2019 | October 29, 2019 |
Total revenue | $3.2 - $3.3 billion | $3.2 - $3.3 billion | $3.2 - $3.3 billion | $3.2 - $3.3 billion | $3.2 billion |
Net non-cash rent adjustments (1) | ($5 - $15 million) | ($5 - $15 million) | ($5 - $15 million) | ($5 - $15 million) | ($25 - $30 million) |
Adjusted EBITDA margin | 57.0% - 59.0% | 57.0% - 59.0% | 57.0% - 59.0% | 57.0% - 59.0% | 58.0% - 59.0% |
G&A margin | 6.0% - 7.0% | 6.0% - 7.0% | 6.0% - 7.0% | 6.0% - 7.0% | 6.0% - 7.0% |
Internal Growth | |||||
Rental rates on renewal leases | |||||
Cash basis | Down high-single-digits | Down high-single-digits | Down high-single-digits | Down mid-single-digits | Slightly negative |
GAAP basis | Slightly positive | Slightly positive | Slightly positive | Slightly positive | Up mid-single-digits |
Year-end portfolio occupancy | +/- 50 bps | +/- 50 bps | +/- 50 bps | +/- 50 bps | - 150 bps |
"Same-capital" cash NOI growth (2) | +/- 2.0% | +/- 2.0% | -2.0% to -4.0% | -2.0% to -4.0% | -2.0% to -4.0% |
Foreign Exchange Rates | |||||
U.S. Dollar / Pound Sterling | $1.20 - $1.30 | $1.20 - $1.30 | $1.20 - $1.30 | $1.20 - $1.30 | $1.20 - $1.30 |
U.S. Dollar / Euro | $1.10 - $1.20 | $1.10 - $1.20 | $1.10 - $1.20 | $1.10 - $1.20 | $1.10 - $1.20 |
External Growth | |||||
Dispositions | |||||
Dollar volume | N/A | N/A | N/A | N/A | $811 million |
Cap rate | N/A | N/A | N/A | N/A | 6.0% |
Development | |||||
CapEx | $1.2 - $1.4 billion | $1.2 - $1.4 billion | $1.2 - $1.4 billion | $1.2 - $1.4 billion | $1.2 - $1.4 billion |
Average stabilized yields | 9.0% - 12.0% | 9.0% - 12.0% | 9.0% - 12.0% | 9.0% - 12.0% | 9.0% - 12.0% |
Enhancements and other non-recurring CapEx (3) | $30 - $40 million | $30 - $40 million | $30 - $40 million | $30 - $40 million | $5 - $10 million |
Recurring CapEx + capitalized leasing costs (4) | $145 - $155 million | $145 - $155 million | $145 - $155 million | $160 - $170 million | $160 - $170 million |
Balance Sheet | |||||
Long-term debt issuance | |||||
Dollar amount | $0.5 - $1.0 billion | $1.0 - $1.5 billion | $1.5 - $2.0 billion | $2.3 billion | $2.9 billion |
Pricing | 3.50% - 5.00% | 2.50% - 5.00% | 2.75% - 3.75% | 3.03% | 2.67% |
Timing | Early-to-mid 2019 | Early-to-mid 2019 | Early-to-mid 2019 | Early-to-mid 2019 | Early-to-mid 2019 |
Preferred equity issuance | |||||
Dollar amount | N/A | N/A | N/A | N/A | $555 million |
Pricing | N/A | N/A | N/A | N/A | 5.45% |
Timing | N/A | N/A | N/A | N/A | Mid-2019 |
Net income per diluted share | $1.40 - $1.45 | $1.40 - $1.45 | $1.65 - $1.70 | $1.50 - $1.55 | $2.40 - $2.45 |
Real estate depreciation and (gain) / loss on sale | $5.15 - $5.15 | $5.15 - $5.15 | $5.00 - $5.10 | $5.10 - $5.10 | $4.15 - $4.15 |
Funds From Operations / share (NAREIT-Defined) | $6.55 - $6.60 | $6.55 - $6.60 | $6.65 - $6.80 | $6.60 - $6.65 | $6.55 - $6.60 |
Non-core expenses and revenue streams | $0.05 - $0.10 | $0.05 - $0.10 | ($0.05 - $0.10) | $0.00 - $0.05 | $0.00 - $0.05 |
Core Funds From Operations / share | $6.60 - $6.70 | $6.60 - $6.70 | $6.60 - $6.70 | $6.60 - $6.70 | $6.55 - $6.65 |
Foreign currency translation adjustments | $0.05 - $0.15 | $0.05 - $0.15 | $0.05 - $0.15 | $0.05 - $0.15 | $0.05 - $0.15 |
Constant-Currency Core FFO / share | $6.65 - $6.85 | $6.65 - $6.85 | $6.65 - $6.85 | $6.65 - $6.85 | $6.60 - $6.80 |
(1) | Net non-cash rent adjustments represent the sum of straight-line rental revenue and straight-line rent expense, as well as the amortization of above- and below-market leases (i.e., FAS 141 adjustments). |
(2) | The "same-capital" pool includes properties owned as of December 31, 2017 with less than 5% of total rentable square feet under development. It also excludes properties that were undergoing, or were expected to undergo, development activities in 2018-2019, properties classified as held for sale, and properties sold or contributed to joint ventures for all periods presented. |
(3) | Other non-recurring CapEx represents costs incurred to enhance the capacity or marketability of operating properties, such as network fiber initiatives and software development costs. |
(4) | Recurring CapEx represents non-incremental improvements required to maintain current revenues, including second-generation tenant improvements and leasing commissions. |
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, including FFO, core FFO, and Adjusted EBITDA. A reconciliation from U.S. GAAP net income available to common stockholders to FFO, a reconciliation from FFO to core FFO, and definitions of FFO, and core FFO are included as an attachment to this document. A reconciliation from U.S. GAAP net income available to common stockholders to Adjusted EBITDA, a definition of Adjusted EBITDA and definitions of net debt-to-Adjusted EBITDA, debt-plus-preferred-to-total enterprise value, cash NOI, and fixed charge coverage ratio are included as an attachment to this document.
Investor Conference Call
Prior to Digital Realty's investor conference call at 5:30 p.m. EDT / 2:30 p.m. PDT on October 29, 2019, a presentation will be posted to the Investors section of the company's website at http://investor.digitalrealty.com. The presentation is designed to accompany the discussion of the company's third quarter 2019 financial results and operating performance. The conference call will feature Chief Executive Officer A. William Stein and Chief Financial Officer Andrew P. Power.
To participate in the live call, investors are invited to dial (888) 317-6003 (for domestic callers) or (412) 317-6061 (for international callers) and reference the conference ID# 3707672 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 http://investor.digitalrealty.com.
Telephone and webcast replays will be available after the call until November 29, 2019. The telephone replay can be accessed by dialing (877) 344-7529 (for domestic callers) or (412) 317-0088 (for international callers) and providing the conference ID# 10135281. The webcast replay can be accessed on Digital Realty's website.
About Digital Realty
Digital Realty supports the data center, colocation and interconnection strategies of more than 2,000 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Latin America, Asia and Australia. Digital Realty's clients include domestic and international companies of all sizes, ranging from cloud and information technology services, communications and social networking to financial services, manufacturing, energy, healthcare, and consumer products.
Contact Information
Andrew P. Power
Chief Financial Officer
Digital Realty
(415) 738-6500
John J. Stewart
Investor Relations
Digital Realty
(415) 738-6500
Consolidated Quarterly Statements of Operations | |||||||||||||||
Unaudited and in Thousands, Except Share and Per Share Data | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | |||||||||
Rental revenues | $564,975 | $565,925 | $585,425 | $555,816 | $541,073 | $1,716,325 | $1,606,554 | ||||||||
Tenant reimbursements - Utilities | 114,719 | 106,409 | 102,569 | 102,641 | 105,822 | 323,697 | 304,482 | ||||||||
Tenant reimbursements - Other | 57,466 | 62,820 | 55,868 | 53,090 | 57,282 | 176,154 | 164,424 | ||||||||
Interconnection & other | 65,312 | 64,232 | 68,168 | 63,803 | 62,760 | 197,712 | 185,903 | ||||||||
Fee income | 3,994 | 925 | 1,921 | 2,896 | 1,469 | 6,840 | 4,945 | ||||||||
Other | — | 486 | 564 | 21 | 518 | 1,050 | 1,903 | ||||||||
Total Operating Revenues | $806,466 | $800,797 | $814,515 | $778,267 | $768,924 | $2,421,778 | $2,268,211 | ||||||||
Utilities | $132,565 | $123,398 | $124,334 | $122,108 | $127,239 | $380,297 | $354,939 | ||||||||
Rental property operating | 126,866 | 128,634 | 130,620 | 133,024 | 118,732 | 386,120 | 346,994 | ||||||||
Property taxes | 38,255 | 41,482 | 37,315 | 32,098 | 34,871 | 117,052 | 97,418 | ||||||||
Insurance | 3,103 | 3,441 | 2,991 | 2,412 | 2,653 | 9,535 | 8,990 | ||||||||
Depreciation & amortization | 286,718 | 290,562 | 311,486 | 299,362 | 293,957 | 888,766 | 887,534 | ||||||||
General & administration | 49,862 | 52,318 | 51,976 | 38,801 | 40,997 | 154,156 | 121,563 | ||||||||
Severance, equity acceleration, and legal expenses | 123 | 665 | 1,483 | 602 | 645 | 2,271 | 2,701 | ||||||||
Transaction and integration expenses | 4,115 | 4,210 | 2,494 | 25,917 | 9,626 | 10,819 | 19,410 | ||||||||
Impairment of investments in real estate | — | — | 5,351 | — | — | 5,351 | — | ||||||||
Other expenses | 92 | 7,115 | 4,922 | 1,096 | 1,139 | 12,129 | 1,722 | ||||||||
Total Operating Expenses | $641,699 | $651,825 | $672,972 | $655,420 | $629,859 | $1,966,496 | $1,841,271 | ||||||||
Operating Income | $164,767 | $148,972 | $141,543 | $122,847 | $139,065 | $455,282 | $426,940 | ||||||||
Equity in earnings of unconsolidated joint ventures | ($19,269) | $6,962 | $9,217 | $9,245 | $8,886 | ($3,090) | $23,734 | ||||||||
Gain on sale / deconsolidation | — | — | 67,497 | 7 | 26,577 | 67,497 | 80,042 | ||||||||
Interest and other income | 16,842 | 16,980 | 21,444 | 1,106 | (981) | 55,266 | 2,375 | ||||||||
Interest (expense) | (84,574) | (86,051) | (101,552) | (84,883) | (80,851) | (272,177) | (236,646) | ||||||||
Tax benefit (expense) | (4,826) | (4,634) | (4,266) | 5,843 | (2,432) | (13,726) | (7,927) | ||||||||
Loss from early extinguishment of debt | (5,366) | (20,905) | (12,886) | (1,568) | — | (39,157) | — | ||||||||
Net Income | $67,574 | $61,324 | $120,997 | $52,597 | $90,264 | $249,895 | $288,518 | ||||||||
Net (income) loss attributable to noncontrolling interests | (1,077) | (1,156) | (4,185) | (1,038) | (2,667) | (6,418) | (8,831) | ||||||||
Net Income Attributable to Digital Realty Trust, Inc. | $66,497 | $60,168 | $116,812 | $51,559 | $87,597 | $243,477 | $279,687 | ||||||||
Preferred stock dividends, including undeclared dividends | (16,670) | (16,670) | (20,943) | (20,329) | (20,329) | (54,283) | (60,987) | ||||||||
Issuance costs associated with redeemed preferred stock | — | (11,760) | — | — | — | (11,760) | — | ||||||||
Net Income Available to Common Stockholders | $49,827 | $31,738 | $95,869 | $31,230 | $67,268 | $177,434 | $218,700 | ||||||||
Weighted-average shares outstanding - basic | 208,421,470 | 208,284,407 | 207,809,383 | 206,345,138 | 206,118,472 | 208,173,995 | 205,931,031 | ||||||||
Weighted-average shares outstanding - diluted | 209,801,771 | 209,435,572 | 208,526,249 | 207,113,100 | 206,766,256 | 209,199,535 | 206,555,627 | ||||||||
Weighted-average fully diluted shares and units | 218,755,597 | 218,497,318 | 217,756,161 | 215,417,085 | 214,937,168 | 218,280,351 | 214,824,010 | ||||||||
Net income per share - basic | $0.24 | $0.15 | $0.46 | $0.15 | $0.33 | $0.85 | $1.06 | ||||||||
Net income per share - diluted | $0.24 | $0.15 | $0.46 | $0.15 | $0.33 | $0.85 | $1.06 | ||||||||
Funds From Operations and Core Funds From Operations | |||||||||||||||
Unaudited and in Thousands, Except Per Share Data | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
Reconciliation of Net Income to Funds From Operations (FFO) | 30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | ||||||||
Net Income Available to Common Stockholders | $49,827 | $31,738 | $95,869 | $31,230 | $67,268 | $177,434 | $218,700 | ||||||||
Adjustments: | |||||||||||||||
Non-controlling interests in operating partnership | 2,300 | 1,400 | 4,300 | 1,300 | 2,700 | 8,000 | 8,880 | ||||||||
Real estate related depreciation & amortization (1) | 283,090 | 286,915 | 307,864 | 295,724 | 290,757 | 877,869 | 878,193 | ||||||||
Unconsolidated JV real estate related depreciation & amortization | 13,612 | 13,623 | 3,851 | 3,615 | 3,775 | 31,086 | 10,973 | ||||||||
(Gain) on real estate transactions | — | — | — | (7) | (26,577) | — | (80,042) | ||||||||
Impairment of investments in real estate | — | — | 5,351 | — | — | 5,351 | — | ||||||||
Funds From Operations | $348,829 | $333,676 | $417,235 | $331,862 | $337,923 | $1,099,740 | $1,036,704 | ||||||||
Funds From Operations - diluted | $348,829 | $333,676 | $417,235 | $331,862 | $337,923 | $1,099,740 | $1,036,704 | ||||||||
Weighted-average shares and units outstanding - basic | 217,375 | 217,346 | 217,039 | 214,649 | 214,289 | 217,255 | 214,199 | ||||||||
Weighted-average shares and units outstanding - diluted (2) | 218,756 | 218,497 | 217,756 | 215,417 | 214,937 | 218,280 | 214,824 | ||||||||
Funds From Operations per share - basic | $1.60 | $1.54 | $1.92 | $1.55 | $1.58 | $5.06 | $4.84 | ||||||||
Funds From Operations per share - diluted (2) | $1.59 | $1.53 | $1.92 | $1.54 | $1.57 | $5.04 | $4.83 | ||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
Reconciliation of FFO to Core FFO | 30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | ||||||||
Funds From Operations - diluted | $348,829 | $333,676 | $417,235 | $331,862 | $337,923 | $1,099,740 | $1,036,704 | ||||||||
Adjustments: | |||||||||||||||
Termination fees and other non-core revenues (3) | (16,792) | (16,826) | (14,445) | (21) | (518) | (48,063) | (5,039) | ||||||||
Transaction and integration expenses | 4,115 | 4,210 | 2,494 | 25,917 | 9,626 | 10,819 | 19,410 | ||||||||
Loss from early extinguishment of debt | 5,366 | 20,905 | 12,886 | 1,568 | — | 39,157 | — | ||||||||
Issuance costs associated with redeemed preferred stock | — | 11,760 | — | — | — | 11,760 | — | ||||||||
Severance, equity acceleration, and legal expenses (4) | 123 | 665 | 1,483 | 602 | 645 | 2,271 | 2,701 | ||||||||
(Gain) / Loss on FX revaluation | 23,136 | (4,251) | 9,604 | — | — | 28,489 | — | ||||||||
(Gain) on contribution to unconsolidated joint venture, net of related tax | — | — | (58,497) | — | — | (58,497) | — | ||||||||
Other non-core expense adjustments | 92 | 7,115 | 4,922 | 1,471 | 2,269 | 12,129 | 2,852 | ||||||||
Core Funds From Operations - diluted | $364,869 | $357,254 | $375,682 | $361,399 | $349,945 | $1,097,805 | $1,056,628 | ||||||||
Weighted-average shares and units outstanding - diluted (2) | 218,756 | 218,497 | 217,756 | 215,417 | 214,937 | 218,280 | 214,824 | ||||||||
Core Funds From Operations per share - diluted (2) | $1.67 | $1.64 | $1.73 | $1.68 | $1.63 | $5.03 | $4.92 | ||||||||
(1) Real Estate Related Depreciation & Amortization: | Three Months Ended | Nine Months Ended | |||||||||||||
30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | |||||||||
Depreciation & amortization per income statement | $286,718 | $290,562 | $311,486 | $299,362 | $293,957 | $888,766 | $887,534 | ||||||||
Non-real estate depreciation | (3,628) | (3,647) | (3,622) | (3,638) | (3,200) | (10,897) | (9,341) | ||||||||
Real Estate Related Depreciation & Amortization | $283,090 | $286,915 | $307,864 | $295,724 | $290,757 | $877,869 | $878,193 | ||||||||
(2) | For all periods presented, we have excluded the effect of dilutive series C, series G, series H, series I, series J, and series K preferred stock, as applicable, that may be converted into common stock upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series C, series G, series H, series I, series J, and series K preferred stock, as applicable, which we consider highly improbable. See above for calculations of diluted FFO available to common stockholders and unitholders and the share count detail section of the reconciliation of core FFO to AFFO for calculations of weighted average common stock and units outstanding. |
(3) | Includes lease termination fees and certain other adjustments that are not core to our business. |
(4) | Relates to severance and other charges related to the departure of company executives and integration-related severance. |
Adjusted Funds From Operations (AFFO) | |||||||||||||||
Unaudited and in Thousands, Except Per Share Data | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
Reconciliation of Core FFO to AFFO | 30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | ||||||||
Core FFO available to common stockholders and unitholders | $364,869 | $357,254 | $375,682 | $361,399 | $349,945 | $1,097,805 | $1,056,628 | ||||||||
Adjustments: | |||||||||||||||
Non-real estate depreciation | 3,628 | 3,647 | 3,622 | 3,638 | 3,200 | 10,897 | 9,341 | ||||||||
Amortization of deferred financing costs | 2,900 | 2,905 | 4,493 | 3,128 | 3,066 | 10,298 | 9,079 | ||||||||
Amortization of debt discount/premium | 466 | 515 | 760 | 971 | 902 | 1,741 | 2,659 | ||||||||
Non-cash stock-based compensation expense | 8,906 | 9,468 | 7,592 | 5,609 | 5,823 | 25,966 | 19,741 | ||||||||
Straight-line rental revenue | (12,764) | (13,033) | (15,979) | (11,157) | (10,511) | (41,776) | (29,266) | ||||||||
Straight-line rental expense | (209) | 318 | 1,235 | 2,052 | 2,482 | 1,342 | 7,698 | ||||||||
Above- and below-market rent amortization | 2,824 | 3,954 | 6,210 | 6,521 | 6,552 | 12,988 | 20,012 | ||||||||
Deferred tax expense | (1,418) | (979) | (15,397) | (8,835) | (1,783) | (17,794) | (3,135) | ||||||||
Leasing compensation & internal lease commissions (1) | 3,254 | 4,025 | 3,581 | (5,160) | (5,153) | 10,860 | (15,847) | ||||||||
Recurring capital expenditures (2) | (48,408) | (39,515) | (38,059) | (47,951) | (22,500) | (125,982) | (84,275) | ||||||||
AFFO available to common stockholders and unitholders (3) | $324,048 | $328,559 | $333,740 | $310,215 | $332,023 | $986,345 | $992,635 | ||||||||
Weighted-average shares and units outstanding - basic | 217,375 | 217,346 | 217,039 | 214,649 | 214,289 | 217,255 | 214,199 | ||||||||
Weighted-average shares and units outstanding - diluted (4) | 218,756 | 218,497 | 217,756 | 215,417 | 214,937 | 218,280 | 214,824 | ||||||||
AFFO per share - diluted (4) | $1.48 | $1.50 | $1.53 | $1.44 | $1.54 | $4.52 | $4.62 | ||||||||
Dividends per share and common unit | $1.08 | $1.08 | $1.08 | $1.01 | $1.01 | $3.24 | $3.03 | ||||||||
Diluted AFFO Payout Ratio | 72.9 | % | 71.8 | % | 70.5 | % | 70.1 | % | 65.4 | % | 71.7 | % | 65.6 | % | |
Three Months Ended | Nine Months Ended | ||||||||||||||
Share Count Detail | 30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | ||||||||
Weighted Average Common Stock and Units Outstanding | 217,375 | 217,346 | 217,039 | 214,649 | 214,289 | 217,255 | 214,199 | ||||||||
Add: Effect of dilutive securities | 1,381 | 1,151 | 717 | 768 | 648 | 1,025 | 625 | ||||||||
Weighted Avg. Common Stock and Units Outstanding - diluted | 218,756 | 218,497 | 217,756 | 215,417 | 214,937 | 218,280 | 214,824 | ||||||||
(1) | The company adopted ASC 842 in the first quarter of 2019. |
(2) | Recurring capital expenditures represent non-incremental building improvements required to maintain current revenues, including second-generation tenant improvements and external leasing commissions. Recurring capital expenditures do not include acquisition costs contemplated when underwriting the purchase of a building, costs which are incurred to bring a building up to Digital Realty's operating standards, or internal leasing commissions. |
(3) | For a definition and discussion of AFFO, see the definitions section. For a reconciliation of net income available to common stockholders to FFO and core FFO, see above. |
(4) | For all periods presented, we have excluded the effect of dilutive series C, series G, series H, series I, series J, and series K preferred stock, as applicable, that may be converted into common stock upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series C, series G, series H, series I, series J, and series K preferred stock, as applicable, which we consider highly improbable. See above for calculations of diluted FFO available to common stockholders and unitholders and for calculations of weighted average common stock and units outstanding. |
Consolidated Balance Sheets | ||||||||||
Unaudited and in Thousands, Except Share and Per Share Data | ||||||||||
30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | ||||||
Assets | ||||||||||
Investments in real estate: | ||||||||||
Real estate | $16,407,080 | $17,324,416 | $16,988,322 | $17,055,017 | $16,062,402 | |||||
Construction in progress | 1,647,130 | 1,685,056 | 1,584,327 | 1,621,927 | 1,464,010 | |||||
Land held for future development | 150,265 | 152,368 | 163,081 | 162,941 | 284,962 | |||||
Investments in real estate | $18,204,475 | $19,161,840 | $18,735,730 | $18,839,885 | $17,811,374 | |||||
Accumulated depreciation and amortization | (4,298,629) | (4,312,357) | (4,124,002) | (3,935,267) | (3,755,596) | |||||
Net Investments in Properties | $13,905,846 | $14,849,483 | $14,611,728 | $14,904,618 | $14,055,778 | |||||
Investment in unconsolidated joint ventures | 1,035,861 | 979,350 | 930,326 | 175,108 | 169,919 | |||||
Net Investments in Real Estate | $14,941,707 | $15,828,833 | $15,542,054 | $15,079,726 | $14,225,697 | |||||
Cash and cash equivalents | $7,190 | $33,536 | $123,879 | $126,700 | $46,242 | |||||
Accounts and other receivables (1) | 304,712 | 320,938 | 328,009 | 299,621 | 308,709 | |||||
Deferred rent | 471,516 | 491,486 | 479,640 | 463,248 | 454,412 | |||||
Acquired in-place lease value, deferred leasing costs and other real estate intangibles, net | 2,245,017 | 2,499,564 | 2,580,624 | 3,144,395 | 2,734,158 | |||||
Acquired above-market leases, net | 84,315 | 94,474 | 106,044 | 119,759 | 135,127 | |||||
Goodwill | 3,338,168 | 3,353,538 | 3,358,463 | 4,348,007 | 3,373,342 | |||||
Assets associated with real estate held for sale | 967,527 | — | — | — | — | |||||
Operating lease right-of-use assets (2) | 634,085 | 648,952 | 660,586 | — | — | |||||
Other assets | 178,528 | 158,770 | 162,768 | 185,239 | 184,423 | |||||
Total Assets | $23,172,765 | $23,430,091 | $23,342,067 | $23,766,695 | $21,462,110 | |||||
Liabilities and Equity | ||||||||||
Global unsecured revolving credit facilities | $1,833,512 | $1,417,675 | $842,975 | $1,647,735 | $590,289 | |||||
Unsecured term loans | 796,232 | 807,922 | 807,726 | 1,178,904 | 1,352,969 | |||||
Unsecured senior notes, net of discount | 8,189,138 | 8,511,656 | 8,523,462 | 7,589,126 | 7,130,541 | |||||
Secured debt, net of premiums | 105,153 | 105,325 | 105,493 | 685,714 | 106,072 | |||||
Operating lease liabilities (2) | 699,381 | 714,256 | 725,470 | — | — | |||||
Accounts payable and other accrued liabilities | 938,740 | 984,812 | 922,571 | 1,164,509 | 1,059,355 | |||||
Accrued dividends and distributions | — | — | — | 217,241 | — | |||||
Acquired below-market leases | 153,422 | 183,832 | 192,667 | 200,113 | 208,202 | |||||
Security deposits and prepaid rent | 203,708 | 213,549 | 221,526 | 209,311 | 233,667 | |||||
Liabilities associated with assets held for sale | 23,534 | — | — | — | — | |||||
Total Liabilities | $12,942,820 | $12,939,027 | $12,341,890 | $12,892,653 | $10,681,095 | |||||
Redeemable non-controlling interests - operating partnership | 19,090 | 17,344 | 17,678 | 15,832 | 17,553 | |||||
Equity | ||||||||||
Preferred Stock: $0.01 par value per share, 110,000,000 shares authorized: | ||||||||||
Series C Cumulative Redeemable Perpetual Preferred Stock (3) | $219,250 | $219,250 | $219,250 | $219,250 | $219,250 | |||||
Series G Cumulative Redeemable Preferred Stock (4) | 241,468 | 241,468 | 241,468 | 241,468 | 241,468 | |||||
Series H Cumulative Redeemable Preferred Stock (5) | — | — | 353,290 | 353,290 | 353,290 | |||||
Series I Cumulative Redeemable Preferred Stock (6) | 242,012 | 242,012 | 242,012 | 242,012 | 242,012 | |||||
Series J Cumulative Redeemable Preferred Stock (7) | 193,540 | 193,540 | 193,540 | 193,540 | 193,540 | |||||
Series K Cumulative Redeemable Preferred Stock (8) | 203,264 | 203,264 | 203,423 | — | — | |||||
Common Stock: $0.01 par value per share, 315,000,000 shares authorized (9) | 2,069 | 2,067 | 2,066 | 2,051 | 2,049 | |||||
Additional paid-in capital | 11,540,980 | 11,511,519 | 11,492,766 | 11,355,751 | 11,333,035 | |||||
Dividends in excess of earnings | (3,136,668) | (2,961,307) | (2,767,708) | (2,633,071) | (2,455,189) | |||||
Accumulated other comprehensive (loss), net | (68,625) | (89,588) | (91,699) | (115,647) | (103,201) | |||||
Total Stockholders' Equity | $9,437,290 | $9,562,225 | $10,088,408 | $9,858,644 | $10,026,254 | |||||
Noncontrolling Interests | ||||||||||
Noncontrolling interest in operating partnership | $732,314 | $756,050 | $772,931 | $906,510 | $671,269 | |||||
Noncontrolling interest in consolidated joint ventures | 41,251 | 155,445 | 121,160 | 93,056 | 65,939 | |||||
Total Noncontrolling Interests | $773,565 | $911,495 | $894,091 | $999,566 | $737,208 | |||||
Total Equity | $10,210,855 | $10,473,720 | $10,982,499 | $10,858,210 | $10,763,462 | |||||
Total Liabilities and Equity | $23,172,765 | $23,430,091 | $23,342,067 | $23,766,695 | $21,462,110 | |||||
(1) | Net of allowance for doubtful accounts of $13,239 and $11,554, as of September 30, 2019 and December 31, 2018, respectively. |
(2) | Adoption of the new lease accounting standard required that we adjust the consolidated balance sheet to include the recognition of additional right-of-use assets and lease liabilities for operating leases. See our quarterly report on Form 10-Q filed on May 10, 2019 for additional information. |
(3) | Series C Cumulative Redeemable Perpetual Preferred Stock, 6.625%, $201,250 and $201,250 liquidation preference, respectively ($25.00 per share), 8,050,000 and 8,050,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. |
(4) | Series G Cumulative Redeemable Preferred Stock, 5.875%, $250,000 and $250,000 liquidation preference, respectively ($25.00 per share), 10,000,000 and 10,000,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. |
(5) | Series H Cumulative Redeemable Preferred Stock, 7.375%, $0 and $365,000 liquidation preference, respectively ($25.00 per share), 0 and 14,600,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. Redeemed on April 1, 2019. |
(6) | Series I Cumulative Redeemable Preferred Stock, 6.350%, $250,000 and $250,000 liquidation preference, respectively ($25.00 per share), 10,000,000 and 10,000,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. |
(7) | Series J Cumulative Redeemable Preferred Stock, 5.250%, $200,000 and $200,000 liquidation preference, respectively ($25.00 per share), 8,000,000 and 8,000,000 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. |
(8) | Series K Cumulative Redeemable Preferred Stock, 5.850%, $210,000 and $0 liquidation preference, respectively ($25.00 per share), 8,400,000 and 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. |
(9) | Common Stock: 208,583,244 and 206,425,656 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. |
Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization and Financial Ratios | ||||||||||
Unaudited and in Thousands | ||||||||||
Three Months Ended | ||||||||||
Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) (1) | 30-Sep-19 | 30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | |||||
Net Income Available to Common Stockholders | $49,827 | $31,738 | $95,869 | $31,230 | $67,268 | |||||
Interest | 84,574 | 86,051 | 101,552 | 84,883 | 80,851 | |||||
Loss from early extinguishment of debt | 5,366 | 20,905 | 12,886 | 1,568 | — | |||||
Tax (benefit) expense | 4,826 | 4,634 | 4,266 | (5,843) | 2,432 | |||||
Depreciation & amortization | 286,718 | 290,562 | 311,486 | 299,362 | 293,957 | |||||
EBITDA | $431,311 | $433,890 | $526,059 | $411,200 | $444,508 | |||||
Unconsolidated JV real estate related depreciation & amortization | 13,612 | 13,623 | 3,851 | 3,615 | 3,775 | |||||
Severance, equity acceleration, and legal expenses | 123 | 665 | 1,483 | 602 | 645 | |||||
Transaction and integration expenses | 4,115 | 4,210 | 2,494 | 25,917 | 9,626 | |||||
(Gain) on sale / deconsolidation | — | — | (67,497) | (7) | (26,577) | |||||
Impairment of investments in real estate | — | — | 5,351 | — | — | |||||
Other non-core adjustments, net | 6,436 | (13,476) | (13,806) | 1,471 | 2,269 | |||||
Non-controlling interests | 1,077 | 1,156 | 4,185 | 1,038 | 2,667 | |||||
Preferred stock dividends, including undeclared dividends | 16,670 | 16,670 | 20,943 | 20,329 | 20,329 | |||||
Issuance costs associated with redeemed preferred stock | — | 11,760 | — | — | — | |||||
Adjusted EBITDA | $473,344 | $468,498 | $483,063 | $464,165 | $457,242 | |||||
(1) | For definitions and discussion of EBITDA and Adjusted EBITDA, see the definitions section. |
Definitions
Funds From Operations (FFO) :
We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or Nareit, in the Nareit Funds From Operations White Paper - 2018 Restatement. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from real estate transactions, impairment of investment in real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs), unconsolidated JV real estate related depreciation & amortization, non-controlling interests in operating partnership 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 and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe 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 data centers that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our data centers, 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 other REITs' FFO. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
Core Funds from Operations (Core FFO) :
We present core funds from operations, or core FFO, as a supplemental operating measure because, in excluding certain items that do not reflect core 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 core FFO by adding to or subtracting from FFO (i) termination fees and other non-core revenues, (ii) transaction and integration expenses, (iii) loss from early extinguishment of debt, (iv) issuance costs associated with redeemed preferred stock, (v) severance, equity acceleration, and legal expenses, (vi) gain/loss on FX revaluation, (vii) gain on contribution to unconsolidated joint venture, net of related tax, and (viii) 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 core FFO as a measure of our performance is limited. Other REITs may calculate core FFO differently than we do and accordingly, our core FFO may not be comparable to other REITs' core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
Adjusted Funds from Operations (AFFO) :
We present adjusted funds from operations, or AFFO, as a supplemental operating measure because, when compared year over year, it assesses our ability to fund dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the operations of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs, including on a per share and unit basis. We calculate AFFO by adding to or subtracting from core FFO (i) non-real estate depreciation, (ii) amortization of deferred financing costs, (iii) amortization of debt discount/premium, (iv) non-cash stock-based compensation expense, (v) straight-line rental revenue, (vi) straight-line rental expense, (vii) above- and below-market rent amortization, (viii) deferred tax expense, (ix) leasing compensation and internal lease commissions, and (x) recurring capital expenditures. Other REITs may calculate AFFO differently than we do and accordingly, our AFFO may not be comparable to other REITs' AFFO. AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
EBITDA and Adjusted EBITDA :
We believe that earnings before interest, loss from early extinguishment of debt, income taxes, and depreciation and amortization, or EBITDA, and Adjusted EBITDA (as defined below), are useful supplemental performance measures because they allow investors to view our performance without the impact of non-cash depreciation and amortization or the cost of debt and, with respect to Adjusted EBITDA, severance, equity acceleration, and legal expenses, transaction and integration expenses, (gain) loss on real estate transactions, equity in earnings adjustment for non-core items, other non-core adjustments, net, noncontrolling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. Adjusted EBITDA is EBITDA excluding unconsolidated joint venture real estate related depreciation & amortization, severance, equity acceleration, and legal expenses, transaction and integration expenses, gain on sale / deconsolidation, impairment of investments in real estate, other non-core adjustments, net, non-controlling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. In addition, we believe EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Because EBITDA and Adjusted EBITDA are calculated before recurring cash charges including interest expense and income taxes, exclude capitalized costs, such as leasing commissions, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utility as a measure of our performance is limited. Other REITs may calculate EBITDA and Adjusted EBITDA differently than we do and accordingly, our EBITDA and Adjusted EBITDA may not be comparable to other REITs' EBITDA and Adjusted EBITDA. Accordingly, EBITDA and Adjusted EBITDA should be considered only as supplements to net income computed in accordance with GAAP as a measure of our financial performance.
Net Operating Income (NOI) and Cash NOI :
Net operating income, or NOI, represents rental revenue, tenant reimbursement revenue and interconnection revenue less utilities expense, rental property operating expenses, property taxes and insurance expenses (as reflected in the statement of operations). NOI is commonly used by stockholders, company management and industry analysts as a measurement of operating performance of the company's rental portfolio. Cash NOI is NOI less straight-line rents and above- and below-market rent amortization. Cash NOI is commonly used by stockholders, company management and industry analysts as a measure of property operating performance on a cash basis. However, because NOI and cash NOI exclude depreciation and amortization and capture neither the changes in the value of our data centers that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our data centers, all of which have real economic effect and could materially impact our results from operations, the utility of NOI and cash NOI as measures of our performance is limited. Other REITs may calculate NOI and cash NOI differently than we do and, accordingly, our NOI and cash NOI may not be comparable to other REITs' NOI and cash NOI. NOI and cash NOI should be considered only as supplements to net income computed in accordance with GAAP as measures of our performance.
Additional Definitions
Net debt-to-Adjusted EBITDA ratio is calculated using total debt at balance sheet carrying value, plus capital lease obligations, plus our share of JV debt, less unrestricted cash and cash equivalents divided by the product of Adjusted EBITDA (inclusive of our share of JV EBITDA) multiplied by four.
Debt-plus-preferred-to-total enterprise value is mortgage debt and other loans plus preferred stock divided by mortgage debt and other loans plus the liquidation value of preferred stock and the market value of outstanding Digital Realty Trust, Inc. common stock and Digital Realty Trust, L.P. units, assuming the redemption of Digital Realty Trust, L.P. units for shares of Digital Realty Trust, Inc. common stock.
Fixed charge coverage ratio is Adjusted EBITDA divided by the sum of GAAP interest expense, capitalized interest, scheduled debt principal payments and preferred dividends. For the quarter ended September 30, 2019, GAAP interest expense was $85 million, capitalized interest was $10 million and scheduled debt principal payments and preferred dividends was $17 million.
Three Months Ended | Nine Months Ended | ||||||||||
Reconciliation of Net Operating Income (NOI) (in thousands) | 30-Sep-19 | 30-Jun-19 | 30-Sep-18 | 30-Sep-19 | 30-Sep-18 | ||||||
Operating income | $164,767 | $148,972 | $139,065 | $455,282 | $426,940 | ||||||
Fee income | (3,994) | (925) | (1,469) | (6,840) | (4,945) | ||||||
Other income | — | (486) | (518) | (1,050) | (1,903) | ||||||
Depreciation and amortization | 286,718 | 290,562 | 293,957 | 888,766 | 887,534 | ||||||
General and administrative | 49,862 | 52,318 | 40,997 | 154,156 | 121,563 | ||||||
Severance, equity acceleration, and legal expenses | 123 | 665 | 645 | 2,271 | 2,701 | ||||||
Transaction expenses | 4,115 | 4,210 | 9,626 | 10,819 | 19,410 | ||||||
Impairment in investments in real estate | — | — | — | 5,351 | — | ||||||
Other expenses | 92 | 7,115 | 1,139 | 12,129 | 1,722 | ||||||
Net Operating Income | $501,683 | $502,431 | $483,442 | $1,520,884 | $1,453,022 | ||||||
Cash Net Operating Income (Cash NOI) | |||||||||||
Net Operating Income | $501,683 | $502,431 | $483,442 | $1,520,884 | $1,453,022 | ||||||
Straight-line rental revenue | (12,764) | (13,033) | (10,511) | (41,776) | (29,266) | ||||||
Straight-line rental expense | (192) | 396 | 2,479 | 1,381 | 7,770 | ||||||
Above- and below-market rent amortization | 2,824 | 3,954 | 6,552 | 12,988 | 20,012 | ||||||
Cash Net Operating Income | $491,551 | $493,748 | $481,962 | $1,493,477 | $1,451,538 | ||||||
This document contains forward-looking statements within the meaning of the federal securities laws, 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 relating to: expected physical settlement of the forward sale agreements and use of proceeds from any such settlement, our expected investment and expansion activity, our joint ventures, supply and demand for data center and colocation space, our acquisition and disposition activity, pricing and net effective leasing economics, market dynamics and data center fundamentals, our strategic priorities, rent from leases that have been signed but have not yet commenced and other contracted rent to be received in future periods, rental rates on future leases, lag between signing and commencement, cap rates and yields, investment activity, the company's FFO, core FFO and net income, 2019 outlook and underlying assumptions, information related to trends, our strategy and plans, leasing expectations, weighted average lease terms, the exercise of lease extensions, lease expirations, debt maturities, annualized rent at expiration of leases, the effect new leases and increases in rental rates will have on our rental revenue, our credit ratings, construction and development activity and plans, projected construction costs, estimated yields on investment, expected occupancy, expected square footage and IT load capacity upon completion of development projects, 2019 backlog NOI, NAV components, and other forward-looking financial data. Such statements are based on management's beliefs and assumptions made based on information currently available to management. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
- reduced demand for data centers or decreases in information technology spending;
- the competitive environment in which we operate;
- decreased rental rates, increased operating costs or increased vacancy rates;
- increased competition or available supply of data center space;
- the suitability of our data centers and data center infrastructure, delays or disruptions in connectivity or availability of power, or failures or breaches of our physical and information security infrastructure or services;
- our dependence upon significant customers, bankruptcy or insolvency of a major customer or a significant number of smaller customers, or defaults on or non-renewal of leases by customers;
- breaches of our obligations or restrictions under our contracts with our customers;
- our inability to successfully develop and lease new properties and development space, and delays or unexpected costs in development of properties;
- the impact of current global and local economic, credit and market conditions;
- our inability to retain data center space that we lease or sublease from third parties;
- difficulty managing an international business and acquiring or operating properties in foreign jurisdictions and unfamiliar metropolitan areas;
- our failure to realize the intended benefits from, or disruptions to our plans and operations or unknown or contingent liabilities related to, our recent acquisitions;
- our failure to successfully integrate and operate acquired or developed properties or businesses;
- difficulties in identifying properties to acquire and completing acquisitions;
- risks related to joint venture investments, including as a result of our lack of control of such investments;
- 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;
- our failure to obtain necessary debt and equity financing, and our dependence on external sources of capital;
- financial market fluctuations and changes in foreign currency exchange rates;
- 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 and goodwill and other intangible asset impairment charges;
- our inability to manage our growth effectively;
- losses in excess of our insurance coverage;
- environmental liabilities and risks related to natural disasters;
- our inability to comply with rules and regulations applicable to our company;
- Digital Realty Trust, Inc.'s failure to maintain its status as a REIT for federal income tax purposes;
- Digital Realty Trust, L.P.'s failure to qualify as a partnership for federal income tax purposes;
- restrictions on our ability to engage in certain business activities; and
- changes in local, state, federal and international laws and regulations, including related to taxation, real estate and zoning laws, and increases in real property tax rates;
- our ability to attract and retain qualified personnel and to attract and retain customers; and
- the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us.
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance. We discussed a number of additional material risks in our annual report on Form 10-K for the year ended December 31, 2018 and other filings with the Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Digital Realty, Digital Realty Trust, the Digital Realty logo, Turn-Key Flex and Powered Base Building are registered trademarks and service marks of Digital Realty Trust, Inc. in the United States and/or other countries.
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SOURCE Digital Realty