EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

 

 

FOR IMMEDIATE RELEASE

For Additional Information:

 

A. William Stein      Pamela Matthews
Chief Financial Officer and      Investor/Analyst Information
    Chief Investment Officer      Digital Realty Trust, Inc.
Digital Realty Trust, Inc.      +1 (415) 738-6532
+1 (415) 738-6520     

DIGITAL REALTY TRUST, INC. REPORTS SECOND QUARTER 2009 RESULTS

Strong performance yields 22% year-over-year growth in FFO per diluted share and unit

Highlights:

 

   

Reported FFO of $0.71 per diluted share and unit for the quarter ended June 30, 2009, up 22.4% from the second quarter of 2008;

 

   

Reported net income for the quarter ended June 30, 2009 of $21.2 million and net income available to common stockholders of $10.3 million, or $0.13 per diluted share;

 

   

Increased quarterly common stock dividend by 9.1% to $0.36 per share;

 

   

Commenced leases on approximately 115,000 square feet during the second quarter at an average annualized GAAP rent of approximately $139 per square foot, including non technical space;

 

   

Acquired four contiguous parcels of land, including an utility substation, totaling 34.2 acres located adjacent to its existing datacenter facilities in Ashburn, Virginia; commenced construction of a 135,000 square foot datacenter facility on the first parcel;

 

   

Completed an $18.1 million secured mortgage financing;

 

   

Received a preliminary $30 million commitment from a new lender, which will bring the total commitments under the Revolving Credit Facility to $750 million upon closing;

 

   

Issued $266.4 million of 5.50% Exchangeable Senior Debentures due 2029;

 

   

Updated 2009 annual FFO per diluted share and unit guidance range to $2.80 to $2.90 and net income available to common stockholders per diluted share and unit guidance range to $0.80 to $0.90; and

 

   

Added acquisitions guidance range for income producing properties of $120 million to $200 million at average cap rates between 10% and 12%.

 

 

560 MISSION STREET, SUITE 2900
SAN FRANCISCO, CA 94105
415-738-6500

 

Page 1


San Francisco, Calif. (July 30, 2009) – Digital Realty Trust, Inc. (NYSE: DLR), the leading owner and manager of corporate and Internet gateway datacenter facilities, today announced financial results for the second quarter of 2009. The Company reported total operating revenues of $155.0 million in the second quarter of 2009, up 4.0% from $149.1 million in the first quarter of 2009 and up 25.2% from $123.8 million in the second quarter of 2008.

“There were no material non-recurring items impacting FFO or net income in the quarters ended June 30 and March 31, 2009 and June 30, 2008. Our strong financial performance is the result of operations,” said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty Trust. “In addition, our board of directors approved an increase to our common stock dividend by 9.1%, or $0.03 to $0.36 per quarter. The decision to increase the dividend a quarter earlier than we have in previous years was in anticipation of increasing REIT taxable income and distribution requirements for 2009.”

Funds from operations (“FFO”) on a diluted basis was $70.4 million in the second quarter of 2009, or $0.71 on a diluted per share and unit basis, up 1.4% from $0.70 per diluted share and unit in the previous quarter, and up 22.4% from $0.58 per diluted share and unit in the second quarter of 2008.

Net income for the second quarter was $21.2 million, unchanged from first quarter of 2009 and up 55.9% from $13.6 million in the second quarter of 2008. Net income available to common stockholders in the second quarter was $10.3 million, or $0.13 per diluted share, compared to $10.3 million, or $0.14 per diluted share in the first quarter of 2009, and up from $3.1 million, or $0.05 per diluted share in the second quarter of 2008.

“We are pleased to report that the Company delivered another strong performance in the second quarter. The ongoing demand for datacenter space combined with our business model and strong balance sheet continued to produce positive results for our shareholders,” commented Michael F. Foust, Chief Executive Officer of Digital Realty Trust. “We are well-positioned to meet our expectations for the year and we remain focused on continuing our growth into 2010.”

On January 1, 2009, the Company adopted FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement), which was required to be applied retrospectively. Accordingly, net income for all historical periods since the issuance of the 4.125% Senior Exchangeable Debentures in August 2006 has been retrospectively adjusted. For example, the quarter ended June 30, 2008 has been adjusted to include $0.6 million of additional noncash interest expense, net of capitalized interest and allocation to noncontrolling interests. The effect is a decrease in FFO on a diluted share and unit basis by $0.01 for the quarter ended June 30, 2008.

 

Page 2


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

Acquisitions and Leasing Activity

In May, the Company acquired four contiguous parcels of land, one of which includes an important utility substation, totaling 34.2 acres located adjacent to its existing datacenter facilities in Ashburn, Virginia. The new parcels increase the potential capacity of the campus by more than 400,000 square feet. In June, construction of a 135,000 square foot datacenter facility commenced on the first parcel. Designed to meet Digital Realty Trust’s specifications, the facility will ultimately support four 2250 kW Turn-Key DatacenterSM pods totaling 68,000 square feet of raised floor and approximately 7,500 square feet of office space.

For the quarter ended June 30, 2009, the Company commenced leases totaling approximately 115,000 square feet of space. This includes approximately 93,000 square feet of Turn-Key Datacenter SM space leased at an average annual GAAP rental rate of $166.00 per square foot and approximately 22,000 square feet of non-technical space leased at an average annual GAAP rental rate of $24.00 per square foot. In addition, approximately $627,000 of additional incremental annualized GAAP rental revenue commenced during the quarter for rooftop infrastructure associated with existing Powered Base BuildingSM leases.

Balance Sheet Update

Total assets grew to approximately $3.4 billion at June 30, 2009, from $3.3 billion at December 31, 2008. Total debt at June 30, 2009 was approximately $1.5 billion and at December 31, 2008 was approximately $1.4 billion. Stockholders’ equity was approximately $1.6 billion at June 30, 2009, up from $1.5 billion at December 31, 2008.

In July, the Company received a preliminary $30.0 million commitment under its revolving credit facility from a new lender. The transaction is expected to close in August subject to satisfaction of specified conditions, and will increase total commitments from $720.0 million to $750.0 million, the maximum amount available under the terms of the revolving credit facility. Concurrently, the sub-facility for multicurrency advances will increase from $485.0 million to $515.0 million.

 

Page 3


On June 24, the Company completed the financing of 1201 Comstock Street in Santa Clara, California. The new loan for $18.1 million has a three-year maturity with a one-year extension. The loan has a variable rate of LIBOR plus 3.5% and is subject to a 4.0% LIBOR interest rate cap. At July 30, 2009, the all-in variable interest rate was 3.785%.

On April 20, the Company issued $266.4 million of its 5.50% Exchangeable Senior Debentures due 2029, resulting in $258.6 million in net proceeds that will be used to temporarily repay borrowings under the revolving credit facility, to fund development and redevelopment activities, and for general corporate purposes.

“We have continued to improve our liquidity with additional capital, including a secured mortgage debt financing and the new commitment to our revolving credit facility. This commitment will maximize the facility’s accordion feature, bringing full capacity on the revolver to $750 million upon closing. Of equal importance to the Company are the relationships with two new lenders, which we look forward to expanding in the future,” said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty Trust. “Based on our performance to date and greater visibility towards the year end, we are narrowing the annual guidance range of FFO per diluted share and unit to $2.80 to $2.90. This revision is based on our existing assumptions and an additional assumption that we will close acquisitions of income producing properties in the range of $120 million to $200 million at average cap rates between 10% and 12%.”

2009 Revised Outlook

FFO per diluted share and unit for the year ending December 31, 2009 is projected to be between $2.80 and $2.90, compared to the previous 2009 FFO guidance of between $2.75 and $2.90 per diluted share and unit. This revised guidance represents projected FFO growth of 7.7% to 11.5% over FFO per diluted share and unit of $2.60 for the year ended December 31, 2008 (adjusted to give retrospective effect to FASB Staff Position No. APB 14-1 as described above). A reconciliation of the range of 2009 projected net income to projected FFO follows:

 

     (Low - High)

Net income available to common stockholders per diluted share

   $ 0.80 - 0.90

Add:

  

Real estate depreciation and amortization as adjusted for noncontrolling interests

   $ 2.00
      

Projected FFO per diluted share

   $ 2.80 - 2.90

 

Page 4


Investor Conference Call Details

Digital Realty Trust will host a conference call on Thursday, July 30, 2009 at 1:00 pm ET/10:00 am PT to discuss its second quarter 2009 financial results and operating performance. The conference call will feature Chief Executive Officer, Michael Foust and Chief Financial Officer and Chief Investment Officer, A. William Stein. To participate in the live call, investors are invited to dial 877-941-2333 (for domestic callers) or 480-629-9724 (for international callers) and quote the conference ID #4096189 at least five minutes prior to start time. A live webcast of the call will be available via the Investor Relations section of Digital Realty Trust’s website at www.digitalrealtytrust.com. Please go to the website at least 15 minutes early to register and download and install any necessary audio software. If you are unable to listen to the live conference call, a telephone and webcast replay will be available after 12:00 pm PT on Thursday, July 30, 2009 until 11:59 pm PT on Thursday, August 6, 2009. The telephone replay can be accessed by dialing 800-405-7325 (for domestic callers) or 303-590-3030 (for international callers) and using reservation code 4096189#. A replay of the webcast will also be archived on Digital Realty Trust’s website.

About Digital Realty Trust, Inc.

Digital Realty Trust, Inc. owns, acquires, redevelops, develops and manages technology-related real estate. The Company is focused on providing Turn-Key DatacenterSM and Powered Base BuildingSM datacenter solutions for domestic and international tenants across a variety of industry verticals ranging from information technology and Internet enterprises, to manufacturing and financial services. Digital Realty Trust’s 75 properties, excluding one property held as an investment in an unconsolidated joint venture, contain applications and operations critical to the day-to-day operations of technology industry tenants and corporate enterprise datacenter tenants. Comprising approximately 13.0 million rentable square feet as of July 30, 2009, including 1.1 million square feet of space held for redevelopment, Digital Realty Trust’s portfolio is located in 27 markets throughout North America and Europe. For additional information, please visit Digital Realty Trust’s website at http://www.digitalrealtytrust.com.

Safe Harbor Statement

This press release contains forward-looking statements which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Such forward looking statements include statements related to the Company’s expected future financial and other results. These risks and uncertainties include the impact of the current deterioration in global economic and market conditions; adverse economic or real estate developments in our markets or the industry sectors that we sell to; decreases in information technology spending; our dependence upon significant tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; downturn of local economic conditions in our geographic markets; our inability to comply with the rules and regulations applicable to public

 

Page 5


companies or to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; defaults on or non-renewal of leases by tenants; increased interest rates and operating costs; our failure to obtain necessary outside financing; restrictions on our ability to engage in certain business activities; risks related to joint venture investments; decreased rental rates or increased vacancy rates; inability to successfully develop and lease new properties and space held for redevelopment; difficulties in identifying properties to acquire and completing acquisitions; increased competition or available supply of data center space; our failure to successfully operate acquired properties; our inability to acquire off-market properties; delays or unexpected costs in development or redevelopment of properties; our failure to maintain our status as a REIT; possible adverse changes to tax laws; environmental uncertainties and risks related to natural disasters; financial market fluctuations; changes in foreign currency exchange rates; changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation; and changes in real estate and zoning laws and increases in real property tax rates. For a further list and description of such risks and uncertainties, see the reports and other filings by the Company with the United States Securities and Exchange Commission, including the Company’s annual report on Form 10-K for the year ended December 31, 2008 and subsequent reports on Form 10-Q and Form 8-K. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Page 6


Digital Realty Trust, Inc.

Condensed Consolidated Income Statements

(in thousands, except share data)

(unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30, 2009     June 30, 2008     June 30, 2009     June 30, 2008  
           (adjusted)           (adjusted)  

Operating Revenues:

        

Rental

   $ 125,380      $ 97,966      $ 243,469      $ 190,712   

Tenant reimbursements

     29,544        25,698        60,571        47,485   

Other

     83        112        101        126   
                                

Total operating revenues

     155,007        123,776        304,141        238,323   
                                

Operating Expenses:

        

Rental property operating and maintenance

     42,301        35,943        84,874        67,624   

Property taxes

     9,149        8,522        18,360        16,646   

Insurance

     1,488        1,198        2,944        2,403   

Depreciation and amortization

     49,183        39,591        95,487        78,744   

General and administrative

     10,040        9,686        20,142        18,469   

Other

     —          2        285        309   
                                

Total operating expenses

     112,161        94,942        222,092        184,195   
                                

Operating income

     42,846        28,834        82,049        54,128   

Other Income (Expenses):

        

Equity in earnings of unconsolidated joint venture

     741        173        1,857        331   

Interest and other income

     403        407        646        1,062   

Interest expense

     (22,495     (14,956     (41,432     (30,158

Income tax expense

     (292     (726     (728     (815

Loss from early extinguishment of debt

     —          (182     —          (182
                                

Net Income

     21,203        13,550        42,392        24,366   

Net income attributable to noncontrolling interests

     (831     (354     (1,624     (593
                                

Net Income Attributable to Digital Realty Trust, Inc.

     20,372        13,196        40,768        23,773   

Preferred stock dividends

     (10,101     (10,102     (20,202     (18,360
                                

Net Income Available to Common Stockholders

   $ 10,271      $ 3,094      $ 20,566      $ 5,413   
                                

Net income per share available to common stockholders:

        

Basic

   $ 0.13      $ 0.05      $ 0.27      $ 0.08   

Diluted

   $ 0.13      $ 0.05      $ 0.27      $ 0.08   

Weighted average shares outstanding:

        

Basic

     76,121,380        65,889,122        75,416,483        65,660,354   

Diluted

     76,851,202        68,068,600        75,806,481        67,563,963   

 

Page 7


Digital Realty Trust

Consolidated Balance Sheets

(in thousands)

 

     June 30, 2009     December 31, 2008  
     (unaudited)        

ASSETS

    

Investments in real estate

    

Properties:

    

Land

   $ 341,719      $ 316,318   

Acquired ground leases

     2,742        2,733   

Buildings and improvements

     2,666,148        2,467,830   

Tenant improvements

     264,927        255,818   
                

Investments in properties

     3,275,536        3,042,699   

Accumulated depreciation and amortization

     (378,523     (302,960
                

Net investments in properties

     2,897,013        2,739,739   

Investment in unconsolidated joint venture

     8,338        8,481   
                

Net investments in real estate

     2,905,351        2,748,220   

Cash and cash equivalents

     69,316        73,334   

Accounts and other receivables, net

     40,195        39,108   

Deferred rent

     122,823        99,957   

Acquired above market leases, net

     28,503        31,352   

Acquired in place lease value and deferred leasing costs, net

     215,597        222,389   

Deferred financing costs, net

     21,938        16,275   

Restricted cash

     30,676        45,470   

Other assets

     10,309        4,940   
                

Total Assets

   $ 3,444,708      $ 3,281,045   
                

LIABILITIES AND EQUITY

    

Revolving credit facility

   $ 32,668      $ 138,579   

Unsecured senior notes

     83,000        58,000   

Mortgage loans

     973,604        1,026,594   

4.125% exchangeable senior debentures due 2026, net of discount

     163,834        161,901   

5.50% exchangeable senior debentures due 2029

     266,400        —     

Accounts payable and other accrued liabilities

     127,279        171,176   

Accrued dividends and distributions

     —          26,092   

Acquired below market leases, net

     69,840        76,660   

Security deposits and prepaid rents

     56,719        46,967   
                

Total Liabilities

     1,773,344        1,705,969   
                

Equity:

    

Stockholders’ equity

     1,584,948        1,503,921   

Noncontrolling interests

     86,416        71,155   
                

Total Equity

     1,671,364        1,575,076   
                

Total Liabilities and Equity

   $ 3,444,708      $ 3,281,045   
                

 

Page 8


Digital Realty Trust, Inc.

Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO) (1)

(in thousands, except per share and unit data)

(unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30, 2009     March 31, 2009     June 30, 2008     June 30, 2009     June 30, 2008  
                 (adjusted)           (adjusted)  

Net income available to common stockholders

   $ 10,271      $ 10,295      $ 3,094      $ 20,566      $ 5,413   

Adjustments:

          

Noncontrolling interests

     831        793        354        1,624        593   

Real estate related depreciation and amortization (2)

     48,900        46,087        39,414        94,987        78,408   

Real estate related depreciation and amortization related to investment in unconsolidated joint venture

     858        646        872        1,504        1,766   
                                        

FFO available to common stockholders and unitholders (3)

   $ 60,860      $ 57,821      $ 43,734      $ 118,681      $ 86,180   
                                        

Basic FFO per share and unit

   $ 0.74      $ 0.72      $ 0.60      $ 1.46      $ 1.19   

Diluted FFO per share and unit (3)

   $ 0.71      $ 0.70      $ 0.58      $ 1.41      $ 1.16   

Weighted average common stock and units outstanding

          

Basic

     81,999        80,550        72,354        81,278        72,265   

Diluted (3)

     99,461        92,571        86,366        95,962        84,412   

 

(1)    Financial information for prior periods has been adjusted for the retroactive application of the following new accounting guidance adopted by the Company effective January 1, 2009: FASB Staff Position APB 14-1 “Accounting for Convertible Debt Instruments That May be Settled Upon Conversion (Including Partial Cash Settlement)”; Statement of Financial Accounting Standard No. 160 “Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51”.

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

          

       

Depreciation and amortization per income statement

     49,183        46,304        39,591        95,487        78,744   

Non real estate depreciation

     (283     (217     (177     (500     (336
                                        
   $ 48,900      $ 46,087      $ 39,414      $ 94,987      $ 78,408   
                                        

 

(3) At June 30, 2009, we had 6,999,955 series C convertible preferred shares and 13,795,500 series D convertible preferred shares outstanding that were convertible into 3,614,777 common shares and 8,215,221 common shares, respectively. In addition, we had a balance of $266,400 of 5.50% exchangeable senior debentures that were exchangeable for 4,901,812 and 2,464,447 common shares on a weighted average basis for the three and six months ended June 30, 2009, respectively. See below for calculations of diluted FFO available to common stockholders and unitholders and weighted average common stock and units outstanding.

 

     Three Months Ended    Six Months Ended
     June 30, 2009    March 31, 2009    June 30, 2008    June 30, 2009    June 30, 2008

FFO available to common stockholders and unitholders

   $ 60,860    $ 57,821    $ 43,734    $ 118,681    $ 86,180

Add: Series C convertible preferred dividends

     1,914      1,914      1,914      3,828      3,828

Add: Series D convertible preferred dividends

     4,742      4,742      4,744      9,484      7,643

Add: 5.50% exchangeable senior debentures interest

     2,890      —        —        2,890      —  
                                  

FFO available to common stockholders and unitholders — diluted

   $ 70,406    $ 64,477    $ 50,392    $ 134,883    $ 97,651
                                  

Weighted average common stock and units outstanding

     81,999      80,550      72,354      81,278      72,265

Add: Effect of dilutive securities (excluding series C and D convertible preferred stock)

     730      191      2,179      390      1,904

Add: Effect of dilutive series C convertible preferred stock

     3,615      3,615      3,615      3,615      3,615

Add: Effect of dilutive series D convertible preferred stock

     8,215      8,215      8,218      8,215      6,628

Add: Effect of dilutive 5.50% exchangeable senior debentures

     4,902      —        —        2,464      —  
                                  

Weighted average common stock and units outstanding — diluted

     99,461      92,571      86,366      95,962      84,412
                                  

 

Page 9


Note Regarding Funds From Operations

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

 

Page 10