Digital Realty Reports Second Quarter 2023 Results

Rhea-AI Summary

Digital Realty (NYSE: DLR) Announces Strong Financial Results for Q2 2023, Adjusts 2023 Core FFO Outlook. The company reported net income available to common stockholders of $0.37 per share, FFO per share of $1.52, and Core FFO per share of $1.68 in Q2 2023. Financial results showed a 2% increase in revenues from the previous quarter and a 20% increase from the same quarter last year. The company also announced an adjusted 2023 Core FFO per share outlook of $6.55 - $6.65.

Positive

• Strong financial results with significant increases in net income, FFO, and Core FFO per share.
• Positive momentum in operating business highlighted by strong enterprise leasing activity and robust renewal spreads.
• Successful completion of capital recycling transactions generating over $2 billion in gross proceeds.

Negative

• Net debt-to-Adjusted EBITDA was 6.8x at the end of Q2 2023, which may raise concerns about the company's leverage.
• Adjusted 2023 Core FFO per share outlook was lowered from previous estimates.

AUSTIN, Texas, July 27, 2023 /PRNewswire/ -- Digital Realty (NYSE: DLR), the largest global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, announced today financial results for the second quarter of 2023. All per share results are presented on a fully diluted basis. 

Highlights

• Reported net income available to common stockholders of $0.37 per share in 2Q23, compared to $0.19 in 2Q22
• Reported FFO per share of $1.52 in 2Q23, compared to $1.55 in 2Q22
• Reported Core FFO per share of $1.68 in 2Q23, compared to $1.72 in 2Q22
• Reported Constant-Currency Core FFO per share of $1.69 in 2Q23 and $3.38 per share for the six months ended June 30, 2023
• Reported "Same-Capital" cash NOI growth of 5.6% in 2Q23
• Reported rental rate increases on renewal leases of 6.9% on a cash basis in 2Q23
• Signed total bookings during 2Q23 that are expected to generate $114 million of annualized GAAP rental revenue, including a $37 million contribution from the 0–1 megawatt category and a $13 million contribution from interconnection
• Adjusted 2023 Core FFO per share outlook to $6.55 - $6.65

Financial Results

Digital Realty reported revenues for the second quarter of 2023 of $1.4 billion, a 2% increase from the previous quarter and a 20% increase from the same quarter last year. 

The company delivered second quarter of 2023 net income of $116 million, and net income available to common stockholders of $108 million, or $0.37 per diluted share, compared to $0.19 per diluted share in the previous quarter and $0.19 per diluted share in the same quarter last year. 

Digital Realty generated second quarter of 2023 Adjusted EBITDA of $697 million, a 4% increase from the previous quarter and a 14% increase over the same quarter last year. 

The company reported second quarter of 2023 funds from operations (FFO) of $466 million, or $1.52 per share, compared to $1.60 per share in the previous quarter and $1.55 per share in the same quarter last year. 

Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered second quarter of 2023 Core FFO per share of $1.68, compared to $1.66 per share in the previous quarter and $1.72 per share in the same quarter last year. Digital Realty delivered Constant-Currency Core FFO per share of $1.69 for the second quarter of 2023 and $3.38 per share for the six-month period ended June 30, 2023.

"Digital Realty's second-quarter results demonstrate the positive momentum in our operating business, with improving fundamentals highlighted by strong enterprise leasing activity along with robust renewal spreads and healthy organic growth," said Digital Realty President & Chief Executive Officer Andy Power. "We advanced our funding plan by completing two capital recycling transactions that generated more than $2 billion in gross proceeds, helping to position Digital Realty for the opportunity that lies ahead."

Leasing Activity

In the second quarter, Digital Realty signed total bookings that are expected to generate $114 million of annualized GAAP rental revenue, including a $37 million contribution from the 0–1 megawatt category and a $13 million contribution from interconnection.

The weighted-average lag between new leases signed during the second quarter of 2023 and the contractual commencement date was eleven months. 

In addition to new leases signed, Digital Realty also signed renewal leases representing $211 million of annualized GAAP rental revenue during the quarter. Rental rates on renewal leases signed during the second quarter of 2023 rolled up 6.9% on a cash basis and up 14.6% on a GAAP basis. 

New leases signed during the second quarter of 2023 are summarized by region as follows:

 

		Annualized GAAP
		Base Rent			Square Feet		GAAP Base Rent					GAAP Base Rent
The Americas		(in thousands)			(in thousands)		per Square Foot			Megawatts		per Kilowatt
0-1 MW			$15,019		65			$232		5.6			$225
> 1 MW (1)			11,506		30			387		3.2			300
Other (2)			2,915		41			71		—			—
Total			$29,441		136			$217		8.8			$252
EMEA (3)
0-1 MW			$15,427		60			$259		4.0			$319
> 1 MW			47,329		477			99		31.7			124
Other (2)			18		1			27		—			—
Total			$62,774		537			$117		35.8			$146
Asia Pacific (3)
0-1 MW			$6,235		15			$404		1.4			$377
> 1 MW			2,640		12			217		1.5			149
Other (2)			87		1			96		—			—
Total			$8,962		29			$314		2.9			$259
All Regions (3)
0-1 MW			$36,682		140			$263		11.0			$278
> 1 MW			61,475		519			118		36.4			141
Other (2)			3,020		43			70		—			—
Total			$101,177		701			$144		47.4			$173
Interconnection			$12,653		N/A			N/A		N/A			N/A
Grand Total			$113,830		701			$144		47.4			$173

 

Note:  Totals may not foot due to rounding differences.
(1)	>1 MW Base Rent includes the net uplift related to an eight-megawatt lease replacement which resulted in an increased rate for the same capacity.  GAAP Base Rent per Square Foot and per Kilowatt metrics reflect the incremental additional Base Rent with no incremental capacity added.
(2)	Other includes Powered Base Building® shell capacity as well as storage and office space within fully improved data center facilities.
(3)	Based on quarterly average exchange rates during the three months ended June 30, 2023.

 

Investment Activity

During the second quarter, Digital Realty sold a non‐core data center in Texas realizing approximately $150 million of net proceeds. The property was sold at a 4.4% cap rate, based on in-place net operating income (NOI), and generated a capital gain of approximately $88 million.

In Amsterdam during the second quarter, Digital Realty acquired the land and building shell of a previously leased 15 megawatts data center (AMS7) for €17 million or $18 million. This was a contractual purchase obligation which was a part of the Interxion transaction, and the asset was acquired at an 8.3% cap rate.

Digital Realty also acquired a nine‐acre land parcel located nearby AMS7 on its existing Amsterdam Schiphol campus for €26 million or $28 million. The Schiphol campus is one of the most highly connected data center campuses in the Netherlands. The parcel has the capacity to support a data center with a total IT load in excess of 40 megawatts and will be interconnected with Digital Realty's existing Schiphol data centers.

After the close of the second quarter, Digital Realty partnered with GI Partners to establish a joint venture for the sale of a 65% interest in two stabilized hyperscale data center buildings in the Chicago metropolitan area. Digital received approximately $743 million of gross proceeds related to the joint venture and the associated financing and maintains a 35% interest in the joint venture while continuing to manage the day‐to‐day operations of the assets. Based on annualized in‐place cash NOI at June 30, 2023 and the benefit of leases signed but not yet commenced, the transaction values the two facilities at approximately a 6.5% cap rate. Digital Realty also granted GI Partners an option to purchase an interest in the third facility on the same data center campus.

In July, Digital Realty partnered with TPG Real Estate to establish a joint venture for the sale of an 80% interest in three stabilized hyperscale data center buildings in Northern Virginia. Digital Realty will receive approximately $1.3 billion of gross proceeds related to the joint venture and the associated financing and will maintain a 20% interest in the joint venture while continuing to manage the day‐to‐day operations of the assets. Based on annualized in‐place cash NOI on June 30, 2023, net of signed leases and known move-out, the transaction values the three facilities at approximately a 6.0% cap rate.

Also in July, Digital Realty announced the expansion of its joint venture in India with Brookfield Infrastructure through the addition of Jio, a Reliance Industries, Ltd. company. The new joint venture, 'Digital Connexion: A Brookfield, Jio and Digital Realty Company', succeeds BAM Digital Realty.

Balance Sheet

Digital Realty had approximately $17.7 billion of total debt outstanding as of June 30, 2023, comprised of $17.2 billion of unsecured debt and approximately $0.5 billion of secured debt and other. At the end of the second quarter of 2023, net debt-to-Adjusted EBITDA was 6.8x, debt-plus-preferred-to-total enterprise value was 34.7% and fixed charge coverage was 4.2x. Pro forma for the completion of the two stabilized hyperscale joint ventures completed in July 2023 and full physical settlement of the outstanding amount under the 2Q23 forward equity sales agreements, net debt-to-adjusted EBITDA was 6.3x and fixed charge coverage ratio was 4.6x.

During the second quarter, Digital Realty sold 7.8 million shares of its common stock at a weighted average price of $95.96 per share through its ATM program, realizing approximately $743 million of net proceeds. In addition, the company entered into forward sale agreements under its ATM program with respect to 3.5 million shares of its common stock at approximately $97.68 per share. Subsequent to quarter end, the company settled the outstanding forward sales for net proceeds of approximately $336 million.

2023 Outlook

Digital Realty adjusted its 2023 Core FFO per share and constant-currency Core FFO per share outlook to $6.55 - $6.65. The assumptions underlying the outlook are summarized in the following table. 

		As of		As of		As of
Top-Line and Cost Structure		February 16, 2023		April 27, 2023		July 27, 2023
Total revenue		$5.700 - $5.800 billion		$5.500 - $5.600 billion		$5.500 - $5.600 billion
Net non-cash rent adjustments (1)		($55 - $60 million)		($55 - $60 million)		($55 - $60 million)
Adjusted EBITDA		$2.675 - $2.725 billion		$2.675 - $2.725 billion		$2.675 - $2.725 billion
G&A		$425 - $435 million		$425 - $435 million		$425 - $435 million
Internal Growth
Rental rates on renewal leases
Cash basis		Greater than 3.0%		Greater than 3.0%		Greater than 4.0%
GAAP basis		Greater than 3.0%		Greater than 3.0%		Greater than 8.0%
Year-end portfolio occupancy		85.0% - 86.0%		85.0% - 86.0%		84.0% - 85.0%
"Same-capital" cash NOI growth (2)		3.0% - 4.0%		3.0% - 4.0%		4.0% - 5.0%
Foreign Exchange Rates
U.S. Dollar / Pound Sterling		$1.20 - $1.25		$1.20 - $1.25		$1.20 - $1.25
U.S. Dollar / Euro		$1.00 - $1.05		$1.05 - $1.10		$1.05 - $1.10
External Growth
Dispositions / Joint Venture Capital
Dollar volume		$1.5 - $2.5 billion		$1.5 - $2.5 billion		$2.2 - $3.0 billion
Cap rate		0.0% - 10.0%		0.0% - 10.0%		0.0% - 10.0%
Development
CapEx (3)		$2.3 - $2.5 billion		$2.3 - $2.5 billion		$2.3 - $2.5 billion
Average stabilized yields		9.0% - 15.0%		9.0% - 15.0%		9.0% - 15.0%
Enhancements and other non-recurring CapEx (4)		$15 - $20 million		$15 - $20 million		$15 - $20 million
Recurring CapEx + capitalized leasing costs (5)		$230 - $240 million		$230 - $240 million		$230 - $240 million
Balance Sheet
Long-term debt issuance
Dollar amount		$1.0 - $1.5 billion		$1.0 - $1.5 billion		$740 million
Pricing		4.5% - 5.5%		5.5% - 6.0%		5.5 %
Timing		First Half 2023		First Half 2023		Completed
Net income per diluted share		$1.15 - $1.25		$1.15 - $1.25		$1.05 - $1.15
Real estate depreciation and (gain) / loss on sale		$5.25 - $5.25		$5.25 - $5.25		$5.25 - $5.25
Funds From Operations / share (NAREIT-Defined)		$6.40 - $6.50		$6.40 - $6.50		$6.30 - $6.40
Non-core expenses and revenue streams		$0.25 - $0.25		$0.25 - $0.25		$0.25 - $0.25
Core Funds From Operations / share		$6.65 - $6.75		$6.65 - $6.75		$6.55 - $6.65
Foreign currency translation adjustments		$0.00 - $0.00		$0.00 - $0.00		$0.00 - $0.00
Constant-Currency Core Funds From Operations / share		$6.65 - $6.75		$6.65 - $6.75		$6.55 - $6.65

 

(1)	Net non-cash rent adjustments represent the sum of straight-line rental revenue and straight-line rental expense, as well as the amortization of above- and below-market leases (i.e., ASC 805 adjustments).
(2)	The "same-capital" pool includes properties owned as of December 31, 2021 with less than 5% of total rentable square feet under development. It excludes properties that were undergoing, or were expected to undergo, development activities in 2022-2023, properties classified as held for sale, and properties sold or contributed to joint ventures for all periods presented.
(3)	Includes land acquisitions.
(4)	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.
(5)	Recurring CapEx represents non-incremental improvements required to maintain current revenues, including second-generation tenant improvements and leasing commissions.
Note: The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. Please see Non-GAAP Financial Measures in this document for further discussion.

 

Non-GAAP Financial Measures

This document contains non-GAAP financial measures, including FFO, Core FFO, Adjusted FFO, Net Operating Income (NOI), "Same-Capital" Cash NOI and Adjusted EBITDA. A reconciliation from U.S. GAAP net income available to common stockholders to FFO, a reconciliation from FFO to Core FFO, a reconciliation from Core FFO to Adjusted FFO, reconciliation from NOI to Cash NOI, and definitions of FFO, Core FFO, Adjusted FFO, NOI and "Same-Capital" Cash NOI 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.

The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact net income attributable to common stockholders per diluted share, which is the most directly comparable forward-looking GAAP financial measure. This includes, for example, external growth factors, such as dispositions, and balance sheet items, that have not yet occurred, are out of the Company's control and/or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

Investor Conference Call

Prior to Digital Realty's investor conference call at 5:00 p.m. ET / 4:00 p.m. CT on July 27, 2023, a presentation will be posted to the Investors section of the company's website at https://investor.digitalrealty.com/. The presentation is designed to accompany the discussion of the company's second quarter 2023 financial results and operating performance. The conference call will feature President & Chief Executive Officer Andy Power and Chief Financial Officer Matt Mercier.

To participate in the live call, investors are invited to dial +1 (888) 317-6003 (for domestic callers) or +1 (412) 317-6061 (for international callers) and reference the conference ID# 5098292 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 https://investor.digitalrealty.com/.

Telephone and webcast replays will be available after the call until August 27, 2023. The telephone replay can be accessed by dialing +1 (877) 344-7529 (for domestic callers) or +1 (412) 317-0088 (for international callers) and providing the conference ID# 3348387. The webcast replay can be accessed on Digital Realty's website. 

About Digital Realty

Digital Realty brings companies and data together by delivering the full spectrum of data center, colocation, and interconnection solutions. PlatformDIGITAL®, the company's global data center platform, provides customers with a secure data "meeting place" and a proven Pervasive Datacenter Architecture (PDx®) solution methodology for powering innovation and efficiently managing Data Gravity challenges. Digital Realty gives its customers access to the connected communities that matter to them with a global data center footprint of 300+ facilities in 50+ metros across 27 countries on six continents. To learn more about Digital Realty, please visit digitalrealty.com or follow us on LinkedIn and Twitter.

Contact Information

Matt Mercier
Chief Financial Officer
Digital Realty
(737) 281-0101

Jordan Sadler / Jim Huseby
Investor Relations
Digital Realty
(737) 281-0101

 

Consolidated Quarterly Statements of Operations
Unaudited and Dollars in Thousands, Except Per Share Data											Second Quarter 2023
			Three Months Ended																	Six Months Ended
			30-Jun-23				31-Mar-23			31-Dec-22				30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Rental revenues			$869,298				$870,975			$834,374				$787,839			$767,313				$1,740,273			$1,519,275
Tenant reimbursements - Utilities			330,416				317,148			247,725				251,420			218,198				647,565			442,745
Tenant reimbursements - Other			46,192				40,150			46,045				49,419			52,688				86,342			104,198
Interconnection & other			104,521				101,695			97,286				95,486			93,338				206,216			186,868
Fee income			14,908				7,868			7,508				6,169			5,072				22,777			10,829
Other			932				887			168				1,749			2,713				1,819			2,728
Total Operating Revenues			$1,366,267				$1,338,724			$1,233,108				$1,192,082			$1,139,321				$2,704,991			$2,266,644
Utilities			$374,934				$346,364			$268,561				$271,844			$223,426				$721,298			$464,665
Rental property operating			224,762				224,861			222,430				205,886			198,076				449,623			392,430
Property taxes			46,718				40,424			42,032				39,860			47,213				87,141			93,738
Insurance			4,385				4,355			4,578				4,002			3,836				8,739			7,534
Depreciation & amortization			432,573				421,198			430,130				388,704			376,967				853,771			759,099
General & administration			105,964				107,766			104,452				95,792			101,991				213,730			198,426
Severance, equity acceleration, and legal expenses			3,652				4,155			15,980				1,655			3,786				7,807			5,863
Transaction and integration expenses			17,764				12,267			17,350				25,862			13,586				30,031			25,554
Impairment of investments in real estate			—				—			3,000				—			—				—			—
Other expenses			655				—			3,615				1,096			70				655			7,727
Total Operating Expenses			$1,211,407				$1,161,388			$1,112,127				$1,034,701			$968,950				$2,372,795			$1,955,037
Operating Income			$154,860				$177,335			$120,981				$157,381			$170,371				$332,196			$311,607
Equity in earnings / (loss) of unconsolidated joint ventures			5,059				14,897			(28,112)				(12,254)			(34,088)				19,957			26,870
Gain / (loss) on sale of investments			89,946				—			(6)				173,990			—				89,946			2,770
Interest and other income / (expense), net			(6,930)				280			(22,894)				15,752			13,008				(6,650)			16,059
Interest (expense)			(111,116)				(102,220)			(86,882)				(76,502)			(69,023)				(213,336)			(135,748)
Income tax benefit / (expense)			(16,173)				(21,454)			17,676				(19,576)			(16,406)				(37,627)			(29,650)
Loss from early extinguishment of debt			—				—			—				—			—				—			(51,135)
Net Income			$115,647				$68,839			$763				$238,791			$63,862				$184,486			$140,773
Net income / (loss) attributable to noncontrolling interests			2,538				(111)			3,326				(1,716)			(436)				2,427			(4,065)
Net Income Attributable to Digital Realty Trust, Inc.			$118,185				$68,728			$4,089				$237,075			$63,426				$186,913			$136,708
Preferred stock dividends, including undeclared dividends			(10,181)				(10,181)			(10,181)				(10,181)			(10,181)				(20,363)			(20,363)
Net Income / (Loss) Available to Common Stockholders			$108,003				$58,547			($6,093)				$226,894			$53,245				$166,550			$116,346
Weighted-average shares outstanding - basic			295,390,446				291,218,549			289,364,739				286,693,071			284,694,064				293,316,022			284,610,492
Weighted-average shares outstanding - diluted			306,818,538				303,064,832			301,712,082				296,414,726			285,109,903				304,453,040			284,979,709
Weighted-average fully diluted shares and units			313,020,947				309,026,076			307,546,353				302,257,518			290,944,163				310,589,141			290,716,197
Net income / (loss) per share - basic			$0.37				$0.20			($0.02)				$0.79			$0.19				$0.57			$0.41
Net income / (loss) per share - diluted			$0.37				$0.19			($0.02)				$0.75			$0.19				$0.57			$0.41

 

Funds From Operations and Core Funds From Operations
Unaudited and in Thousands, Except Per Share Data											Second Quarter 2023
		Three Months Ended																		Six Months Ended
Reconciliation of Net Income to Funds From Operations (FFO)			30-Jun-23				31-Mar-23			31-Dec-22				30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Net Income / (Loss) Available to Common Stockholders			$108,003				$58,547			($6,093)				$226,894			$53,245				$166,550			$116,346
Adjustments:
Non-controlling interest in operating partnership			2,500				1,500			(586)				5,400			1,500				4,000			3,100
Real estate related depreciation & amortization (1)			424,044				412,192			422,951				381,425			369,327				836,236			743,489
Depreciation related to non-controlling interests			(14,144)				(13,388)			(13,856)				(8,254)			-				(27,532)			-
Unconsolidated JV real estate related depreciation & amortization			35,386				33,719			33,927				30,831			29,022				69,105			58,341
(Gain) / loss on real estate transactions			(89,946)				(7,825)			572				(173,990)			(1,144)				(97,771)			(3,914)
Impairment of investments in real estate			-				-			3,000				-			-				-			-
Funds From Operations - diluted			$465,844				$484,745			$439,915				$462,306			$451,949				$950,589			$917,362
Weighted-average shares and units outstanding - basic			301,593				297,180			295,199				292,536			290,528				299,452			290,346
Weighted-average shares and units outstanding - diluted (2)(3)			313,021				309,026			307,546				302,258			290,944				310,589			290,716
Funds From Operations per share - basic			$1.54				$1.63			$1.49				$1.58			$1.56				$3.17			$3.16
Funds From Operations per share - diluted (2)(3)			$1.52				$1.60			$1.45				$1.55			$1.55				$3.13			$3.16
		Three Months Ended																		Six Months Ended
Reconciliation of FFO to Core FFO			30-Jun-23				31-Mar-23			31-Dec-22				30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Funds From Operations - diluted			$465,844				$484,745			$439,915				$462,306			$451,949				$950,589			$917,362
Other non-core revenue adjustments			27,454				(887)			(3,786)				(1,818)			456				26,566			14,372
Transaction and integration expenses			17,764				12,267			17,350				25,862			13,586				30,031			25,554
Loss from early extinguishment of debt			-				-			-				-			-				-			51,135
Severance, equity acceleration, and legal expenses (4)			3,652				4,155			15,980				1,655			3,786				7,807			5,863
(Gain) / Loss on FX revaluation			(7,868)				(6,778)			14,564				(1,120)			29,539				(14,647)			(38,137)
Other non-core expense adjustments			655				-			3,615				1,046			70				655			7,727
Core Funds From Operations - diluted			$507,501				$493,500			$487,638				$487,931			$499,386				$1,001,001			$983,875
Weighted-average shares and units outstanding - diluted (2)(3)			301,806				297,382			295,519				292,830			290,944				299,730			290,716
Core Funds From Operations per share - diluted (2)			$1.68				$1.66			$1.65				$1.67			$1.72				$3.34			$3.38
(1)          Real Estate Related Depreciation & Amortization		Three Months Ended																		Six Months Ended
			30-Jun-23				31-Mar-23			31-Dec-22				30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Depreciation & amortization per income statement			$432,573				$421,198			$430,130				$388,704			$376,967				$853,771			$759,099
Non-real estate depreciation			(8,529)				(9,006)			(7,179)				(7,279)			(7,640)				(17,535)			(15,610)
Real Estate Related Depreciation & Amortization			$424,044				$412,192			$422,951				$381,425			$369,327				$836,236			$743,489

 

(2)

Certain of Teraco's minority indirect shareholders have the right to put their shares in an upstream parent company of Teraco to Digital Realty in exchange for cash or the equivalent value of shares of Digital Realty common stock, or a combination thereof. US GAAP requires Digital Realty to assume the put right is settled in shares for purposes of calculating diluted EPS. This same approach was utilized to calculate FFO/share. The potential future dilutive impact associated with this put right will be excluded from Core FFO and AFFO until settlement occurs – causing diluted share count to be higher for FFO than for Core FFO and AFFO. When calculating diluted FFO, Teraco related minority interest is added back to the FFO numerator as the denominator assumes all shares have been put back to Digital Realty.

 

		Three Months Ended																Six Months Ended
			30-Jun-23			31-Mar-23			31-Dec-22			30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Teraco noncontrolling share of FFO			$9,645			$11,069			$7,213			$4,706			-				$20,714			-
Teraco related minority interest			$9,645			$11,069			$7,213			$4,706			-				$20,714			-

 

(3)

For all periods presented, we have excluded the effect of dilutive series J, series K and series L 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 J, series K and series L preferred stock, as applicable, which we consider highly improbable. See above for calculations of diluted FFO and the share count detail section that follows the reconciliation of Core FFO to AFFO for calculations of weighted average common stock and units outstanding. For definitions and discussion of FFO and Core FFO, see the definitions section.

(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											Second Quarter 2023
		Three Months Ended																		Six Months Ended
Reconciliation of Core FFO to AFFO			30-Jun-23				31-Mar-23			31-Dec-22				30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Core FFO available to common stockholders and unitholders			$507,501				$493,500			$487,638				$487,931			$499,386				$1,001,001			$983,875
Adjustments:
Non-real estate depreciation			8,529				9,006			7,179				7,279			7,640				17,535			15,610
Amortization of deferred financing costs			5,984				4,072			3,753				3,270			3,330				10,056			6,964
Amortization of debt discount/premium			1,339				1,301			1,276				1,146			1,193				2,640			2,407
Non-cash stock-based compensation expense			13,893				13,056			16,042				15,948			15,799				26,949			30,253
Straight-line rental revenue			(16,151)				(16,194)			(29,392)				(18,123)			(17,278)				(32,344)			(36,089)
Straight-line rental expense			520				(515)			(208)				2,679			(2,237)				5			1,931
Above- and below-market rent amortization			(1,195)				(1,226)			(762)				(465)			196				(2,421)			531
Deferred tax (benefit) / expense			1,339				(9,795)			(4,885)				(5,233)			(769)				(8,456)			(2,372)
Leasing compensation & internal lease commissions			11,611				11,067			9,578				9,866			9,411				22,678			22,672
Recurring capital expenditures (1)			(53,498)				(40,465)			(109,999)				(66,200)			(43,497)				(93,963)			(90,267)
AFFO available to common stockholders and unitholders (2)			$479,873				$463,807			$380,220				$438,097			$473,173				$943,679			$935,514
Weighted-average shares and units outstanding - basic			301,593				297,180			295,199				292,536			290,528				299,452			290,346
Weighted-average shares and units outstanding - diluted (3)			301,806				297,382			295,519				292,830			290,944				299,730			290,716
AFFO per share - diluted (3)			$1.59				$1.56			$1.29				$1.50			$1.63				$3.15			$3.22
Dividends per share and common unit			$1.22				$1.22			$1.22				$1.22			$1.22				$2.44			$2.44
																					.
Diluted AFFO Payout Ratio			76.7 %				78.2 %			94.8 %				81.5 %			75.0 %				77.5 %			75.8 %

		Three Months Ended																Six Months Ended
Share Count Detail			30-Jun-23			31-Mar-23			31-Dec-22			30-Sep-22			30-Jun-22				30-Jun-23			30-Jun-22
Weighted Average Common Stock and Units Outstanding			301,593			297,180			295,199			292,536			290,528				299,452			290,346
Add: Effect of dilutive securities			213			202			320			294			416				278			370
Weighted Avg. Common Stock and Units Outstanding - diluted			301,806			297,382			295,519			292,830			290,944				299,730			290,716

 

(1)	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.
(2)	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.
(3)	For all periods presented, we have excluded the effect of dilutive series J, series K and series L 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 J, series K and series L 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								Second Quarter 2023
		30-Jun-23				31-Mar-23				31-Dec-22			30-Sep-22			30-Jun-22
Assets
Investments in real estate:
Real estate			$27,087,769				$27,052,022				$26,136,057			$24,876,600			$24,065,933
Construction in progress			4,635,939				4,563,578				4,789,134			4,222,142			3,362,114
Land held for future development			193,936				194,564				118,452			34,713			37,460
Investments in real estate			$31,917,644				$31,810,164				$31,043,643			$29,133,455			$27,465,507
Accumulated depreciation and amortization			(7,739,462)				(7,600,559)				(7,268,981)			(6,826,918)			(6,665,118)
Net Investments in Properties			$24,178,182				$24,209,605				$23,774,662			$22,306,537			$20,800,389
Investment in unconsolidated joint ventures			2,040,452				1,995,576				1,991,426			1,912,958			1,942,549
Net Investments in Real Estate			$26,218,634				$26,205,180				$25,766,088			$24,219,495			$22,742,937
Cash and cash equivalents			$124,519				$131,406				$141,773			$176,969			$99,226
Accounts and other receivables (1)			1,158,383				1,070,066				969,292			861,117			797,208
Deferred rent			613,796				627,700				601,590			556,198			554,016
Customer relationship value, deferred leasing costs & other intangibles, net			2,825,596				3,015,291				3,092,627			3,035,861			2,521,390
Goodwill			9,148,603				9,199,636				9,208,497			8,728,105			7,545,107
Assets held for sale			593,892				—				—			—			—
Operating lease right-of-use assets			1,291,233				1,317,293				1,351,329			1,253,393			1,310,970
Other assets			414,078				386,495				353,802			384,079			385,202
Total Assets			$42,388,735				$41,953,068				$41,484,998			$39,215,217			$35,956,057
Liabilities and Equity
Global unsecured revolving credit facilities			$2,242,258				$2,514,202				$2,150,451			$2,255,139			$1,440,040
Unsecured term loans			1,548,780				1,542,275				797,449			729,976			—
Unsecured senior notes, net of discount			13,383,819				13,258,079				13,120,033			12,281,410			12,695,568
Secured debt and other, net of premiums			554,594				560,955				528,870			491,984			158,699
Operating lease liabilities			1,420,239				1,443,994				1,471,044			1,363,712			1,418,540
Accounts payable and other accrued liabilities			2,214,820				1,923,819				1,868,884			1,621,406			1,619,222
Deferred tax liabilities, net			1,128,961				1,164,276				1,192,752			1,145,097			611,582
Accrued dividends and distributions			—				—				363,716			—			—
Security deposits and prepaid rent			417,693				392,021				369,654			341,552			341,140
Liabilities associated with assets held for sale			4,990				—				—			—			—
Total Liabilities			$22,916,155				$22,799,620				$21,862,853			$20,230,276			$18,284,791
Redeemable non-controlling interests			1,367,422				1,448,772				1,514,680			1,429,920			41,047
Equity
Preferred Stock: $0.01 par value per share, 110,000,000 shares authorized:
Series J Cumulative Redeemable Preferred Stock (2)			$193,540				$193,540				$193,540			$193,540			$193,540
Series K Cumulative Redeemable Preferred Stock (3)			203,264				203,264				203,264			203,264			203,264
Series L Cumulative Redeemable Preferred Stock (4)			334,886				334,886				334,886			334,886			334,886
Common Stock: $0.01 par value per share, 392,000,000 shares authorized (5)			2,967				2,888				2,887			2,851			2,824
Additional paid-in capital			22,882,200				22,126,379				22,142,868			21,528,384			21,091,364
Dividends in excess of earnings			(5,253,915)				(4,995,982)				(4,698,313)			(4,336,201)			(4,211,685)
Accumulated other comprehensive (loss), net			(741,484)				(652,486)				(595,798)			(862,804)			(475,561)
Total Stockholders' Equity			$17,621,456				$17,212,490				$17,583,334			$17,063,920			$17,138,632
Noncontrolling Interests
Noncontrolling interest in operating partnership			$436,099				$444,843				$419,317			$421,484			$432,213
Noncontrolling interest in consolidated joint ventures			47,603				47,342				104,814			69,617			59,374
Total Noncontrolling Interests			$483,702				$492,185				$524,131			$491,101			$491,587
Total Equity			$18,105,158				$17,704,675				$18,107,465			$17,555,021			$17,630,219
Total Liabilities and Equity			$42,388,735				$41,953,068				$41,484,998			$39,215,217			$35,956,057

 

(1)	Net of allowance for doubtful accounts of $42,624 and $33,048 as of June 30, 2023 and December 31, 2022, respectively.
(2)	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 June 30, 2023 and December 31, 2022, respectively.
(3)	Series K Cumulative Redeemable Preferred Stock, 5.850%, $210,000 and $210,000 liquidation preference, respectively ($25.00 per share), 8,400,000 and 8,400,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.
(4)	Series L Cumulative Redeemable Preferred Stock, 5.200%, $345,000 and $345,000 liquidation preference, respectively ($25.00 per share), 13,800,000 and 13,800,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.
(5)	Common Stock: 299,240,366 and 291,148,222 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

 

Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization and Financial Ratios
Unaudited and Dollars in Thousands					Second Quarter 2023
			Three Months Ended
Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) (1)				30-Jun-23				31-Mar-23			31-Dec-22			30-Sep-22			30-Jun-22
Net Income / (Loss) Available to Common Stockholders				$108,003				$58,547			($6,093)			$226,894			$53,245
Interest				111,116				102,220			86,882			76,502			69,023
Income tax expense (benefit)				16,173				21,454			(17,676)			19,576			16,406
Depreciation & amortization				432,573				421,198			430,130			388,704			376,967
EBITDA				$667,866				$603,419			$493,244			$711,676			$515,642
Unconsolidated JV real estate related depreciation & amortization				35,386				33,719			33,927			30,831			29,023
Unconsolidated JV interest expense and tax expense				32,105				18,556			53,481			11,948			6,708
Severance, equity acceleration, and legal expenses				3,652				4,155			15,980			1,655			3,786
Transaction and integration expenses				17,764				12,267			17,350			25,862			13,586
(Gain) / loss on sale of investments				(89,946)				—			6			(173,990)			—
Impairment of investments in real estate				—				—			3,000			—			—
Other non-core adjustments, net				22,132				(14,604)			15,127			(94)			31,633
Non-controlling interests				(2,538)				111			(3,326)			1,716			436
Preferred stock dividends, including undeclared dividends				10,181				10,181			10,181			10,181			10,181
Adjusted EBITDA				$696,604				$667,804			$638,969			$619,786			$610,994

 

(1)	For definitions and discussion of EBITDA and Adjusted EBITDA, see the definitions section.

 

		Three Months Ended
Financial Ratios			30-Jun-23			31-Mar-23			31-Dec-22			30-Sep-22			30-Jun-22
Total GAAP interest expense			$111,116			$102,220			$86,882			$76,502			$69,023
Capitalized interest			27,883			26,771			24,581			17,304			14,131
Change in accrued interest and other non-cash amounts			(60,612)			38,137			(67,909)			31,860			(43,952)
Cash Interest Expense (2)			$78,387			$167,128			$43,554			$125,666			$39,202
Preferred dividends			10,181			10,181			10,181			10,181			10,181
Total Fixed Charges (3)			$149,181			$139,172			$121,645			$103,987			$93,335
Coverage
Interest coverage ratio (4)			4.5x			4.7x			5.3x			6.1x			6.6x
Cash interest coverage ratio (5)			7.4x			3.7x			11.9x			4.6x			12.6x
Fixed charge coverage ratio (6)			4.2x			4.4x			4.9x			5.5x			6.0x
Cash fixed charge coverage ratio (7)			6.6x			3.5x			10.0x			4.3x			10.4x
Leverage
Debt to total enterprise value (8)(9)			33.3 %			37.3 %			35.2 %			34.5 %			27.1 %
Debt plus preferred stock to total enterprise value (9)(10)			34.7 %			38.9 %			36.8 %			36.2 %			28.5 %
Pre-tax income to interest expense (11)			2.0x			1.7x			1.0x			4.1x			1.9x
Net Debt to Adjusted EBITDA (12)			6.8x			7.1x			6.9x			6.7x			6.2x

 

(2)	Cash interest expense is interest expense less amortization of debt discount and deferred financing fees and includes interest that we capitalized. We consider cash interest expense to be a useful measure of interest as it excludes non-cash-based interest expense.
(3)	Fixed charges consist of GAAP interest expense, capitalized interest, and preferred dividends.
(4)	Adjusted EBITDA divided by GAAP interest expense plus capitalized interest (including our pro rata share of unconsolidated joint venture interest expense).
(5)	Adjusted EBITDA divided by cash interest expense (including our pro rata share of unconsolidated joint venture interest expense).
(6)	Adjusted EBITDA divided by fixed charges (including our pro rata share of unconsolidated joint venture fixed charges).
(7)	Adjusted EBITDA divided by the sum of cash interest expense, and preferred dividends (including our pro rata share of unconsolidated joint venture cash fixed charges).
(8)	Mortgage debt and other loans divided by market value of common equity plus debt plus preferred stock.
(9)	Total enterprise value defined as market value of common equity plus debt plus preferred stock.
(10)	Same as (8), except numerator includes preferred stock.
(11)	Calculated as net income plus interest expense divided by GAAP interest expense.
(12)	Calculated as total debt at balance sheet carrying value, plus capital lease obligations, plus Digital Realty's pro rata share of unconsolidated joint venture debt, less cash, and cash equivalents (including Digital Realty's pro rata share of unconsolidated joint venture cash) divided by the product of Adjusted EBITDA (including Digital Realty's pro rata share of unconsolidated joint venture EBITDA), multiplied by four

 

Definition

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, depreciation related to non-controlling interests 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) other non-core revenue adjustments, (ii) transaction and integration expenses, (iii) loss from early extinguishment of debt, (iv) gain on / issuance costs associated with redeemed preferred stock, (v) severance, equity acceleration, and legal expenses, (vi) gain/loss on FX revaluation, and (vii) other non-core expense adjustments. Because certain of these adjustments have a real economic impact on our financial condition and results from operations, the utility of 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 / (benefit), (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, unconsolidated joint venture real estate related depreciation & amortization, unconsolidated joint venture interest expense and tax, 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. Adjusted EBITDA is EBITDA excluding unconsolidated joint venture real estate related depreciation & amortization, unconsolidated joint venture interest expense and tax, 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 gain on / 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 as total debt at balance sheet carrying value, plus capital lease obligations, plus Digital Realty's pro rata share of unconsolidated joint venture debt, less cash, and cash equivalents (including Digital Realty's pro rata share of unconsolidated joint venture cash) divided by the product of Adjusted EBITDA (including Digital Realty's pro rata share of unconsolidated joint venture 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 June 30, 2023, GAAP interest expense was $111 million, capitalized interest was $28 million and scheduled debt principal payments and preferred dividends was $10 million.

Reconciliation of Net Operating Income (NOI)		Three Months Ended										Six Months Ended
(in thousands)		30-Jun-23			31-Mar-23			30-Jun-22				30-Jun-23			30-Jun-22
Operating income			$154,860			$177,335			$170,371				$332,196			$311,607
Fee income			(14,908)			(7,868)			(5,072)				(22,777)			(10,829)
Other income			(932)			(887)			(2,713)				(1,819)			(2,728)
Depreciation and amortization			432,573			421,198			376,967				853,771			759,099
General and administrative			105,964			107,766			101,991				213,730			198,426
Severance, equity acceleration, and legal expenses			3,652			4,155			3,786				7,807			5,863
Transaction expenses			17,764			12,267			13,586				30,031			25,554
Other expenses			655			—			70				655			7,727
Net Operating Income			$699,629			$713,965			$658,986				$1,413,594			$1,294,720
Cash Net Operating Income (Cash NOI)
Net Operating Income			$699,629			$713,965			$658,986				$1,413,594			$1,294,720
Straight-line rental revenue			12,116			(16,327)			(14,134)				(4,211)			(20,664)
Straight-line rental expense			722			(510)			(2,609)				212			1,037
Above- and below-market rent amortization			(1,195)			(1,226)			196				(2,421)			531
Cash Net Operating Income			$711,272			$695,902			$642,439				$1,407,174			$1,275,624
Constant Currency CFFO Reconciliation		Three Months Ended										Six Months Ended
(in thousands)		30-Jun-23			31-Mar-23			30-Jun-22				30-Jun-23			30-Jun-22
Core FFO (1)			$507,501						$499,386				$1,001,001			$983,875
Core FFO impact of holding '22 Exchange Rates Constant (2)			1,870						—				11,416			—
Constant Currency Core FFO			$509,371						$499,386				$1,012,417			$983,875
Weighted-average shares and units outstanding - diluted			301,806						290,944				299,730			290,716
Constant Currency CFFO Per Share			$1.69						$1.72				$3.38			$3.38

 

1)	As reconciled to net income above.
2)	Adjustment calculated by holding currency translation rates for 2023 constant with average currency translation rates that were applicable to the same periods in 2022.

 

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: our economic outlook, our expected investment and expansion activity, anticipated continued demand for our products and service, our liquidity, 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, our product offerings, available inventory, 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, constant currency Core FFO, adjusted FFO, and net income, 2023 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, 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;
• increased competition or available supply of data center space;
• decreased rental rates, increased operating costs or increased vacancy rates;
• 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;
• our ability to attract and retain 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;
• global supply chain or procurement disruptions, or increased supply chain costs;
• information security and data privacy breaches;
• 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;
• our inability to attract and retain talent;
• impact on our operations and on the operations of our customers, suppliers and business partners during a pandemic, such as COVID-19;
• environmental liabilities, risks related to natural disasters and our inability to achieve our sustainability goals;
• 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;
• 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; 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. Several additional material risks are discussed in our annual report on Form 10‑K for the year ended December 31, 2022, and other filings with the U.S. Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a 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, Interxion, Turn-Key Flex, Powered Base Building, ServiceFabric, AnyScale Colo, Pervasive Data Center Architecture, PlatformDIGITAL, Data Gravity Index and Data Gravity Index DGx are registered trademarks and service marks of Digital Realty Trust, Inc. in the United States and/or other countries. All other names, trademarks and service marks are the property of their respective owners.

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SOURCE Digital Realty

FAQ

What were Digital Realty's financial results for Q2 2023?

Digital Realty reported net income available to common stockholders of $0.37 per share, FFO per share of $1.52, and Core FFO per share of $1.68 in Q2 2023.

What is Digital Realty's adjusted 2023 Core FFO per share outlook?

Digital Realty adjusted its 2023 Core FFO per share outlook to $6.55 - $6.65.

What were the key highlights of Digital Realty's Q2 2023 financial results?

The company showed a 2% increase in revenues from the previous quarter and a 20% increase from the same quarter last year. It also demonstrated strong enterprise leasing activity and robust renewal spreads.

What were the negative points in Digital Realty's Q2 2023 financial results?

The net debt-to-Adjusted EBITDA was 6.8x at the end of Q2 2023, which may raise concerns about the company's leverage. Additionally, the adjusted 2023 Core FFO per share outlook was lowered from previous estimates.