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29.07.2021 22:05:00
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Digital Realty Reports Second Quarter 2021 Results
AUSTIN, Texas, July 29, 2021 /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 2021. All per-share results are presented on a fully-diluted share and unit basis.
Highlights
- Reported net income available to common stockholders of $0.45 per share in 2Q21, compared to net income available to common stockholders of $0.20 in 2Q20
- Reported FFO per share of $1.78 in 2Q21, compared to $1.49 in 2Q20
- Reported core FFO per share of $1.54 in 2Q21 – including a $0.12 non-cash charge to reflect the higher corporate tax rate in the UK – compared to $1.54 in 2Q20
- Signed total bookings during 2Q21 expected to generate $113 million of annualized GAAP rental revenue, including a $13 million contribution from interconnection
- Revised core FFO per share outlook from $6.50-$6.55 to $6.45-$6.50, likewise including the $0.12 non-cash charge related to the higher corporate tax rate in the UK
Financial Results
Digital Realty reported revenues for the second quarter of 2021 of $1.1 billion, unchanged from the previous quarter and a 10% increase from the same quarter last year.
The company delivered second quarter of 2021 net income of $126 million, and net income available to common stockholders of $127 million, or $0.45 per diluted share, compared to $1.32 per diluted share in the previous quarter and $0.20 per diluted share in the same quarter last year.
Digital Realty generated second quarter of 2021 Adjusted EBITDA of $603 million, a 2% decrease from the previous quarter and an 8% increase over the same quarter last year.
The company reported second quarter of 2021 funds from operations of $515 million, or $1.78 per share, compared to $1.49 per share in the previous quarter and $1.49 per share in the same quarter last year.
Excluding certain items that do not represent core expenses or revenue streams (but including a $0.12 non-cash charge related to the higher corporate tax rate in the UK), Digital Realty delivered second quarter of 2021 core FFO per share of $1.54, an 8% decrease from $1.67 per share in the previous quarter, and unchanged from $1.54 per share in the same quarter last year.
Leasing Activity
In the second quarter, Digital Realty signed total bookings expected to generate $113 million of annualized GAAP rental revenue, including a $13 million contribution from interconnection.
"Digital Realty's global platform, strong customer relationships, and a healthy demand environment for data center services drove solid second quarter financial results," said Digital Realty Chief Executive Officer A. William Stein. "Bookings in the quarter reflect the continued adoption of PlatformDIGITAL with strong new logo growth and balanced product sales. By investing to support our customers' growth around the world, we are widening our competitive moat which results in sustainable growth for our shareholders."
The weighted-average lag between leases signed during the second quarter of 2021 and the contractual commencement date was seven months.
In addition to new leases signed, Digital Realty also signed renewal leases representing $178 million of annualized GAAP rental revenue during the quarter. Rental rates on renewal leases signed during the second quarter of 2021 rolled up 0.1% on a cash basis and up 2.1% on a GAAP basis.
New leases signed during the second quarter of 2021 are summarized by region as follows:
Annualized GAAP | |||||||||||||
Base Rent | GAAP Base Rent | GAAP Base Rent | |||||||||||
The Americas | (in thousands) | Square Feet | per Square Foot | Megawatts | per Kilowatt | ||||||||
0-1 MW | $10,377 | 39,453 | $263 | 2.9 | $296 | ||||||||
> 1 MW | 45,254 | 333,508 | 136 | 38.9 | 97 | ||||||||
Other (1) | 211 | 8,941 | 24 | — | — | ||||||||
Total | $55,843 | 381,902 | $146 | 41.8 | $111 | ||||||||
EMEA (2) | |||||||||||||
0-1 MW | $19,315 | 69,995 | $276 | 6.8 | $238 | ||||||||
> 1 MW | 4,639 | 42,153 | 110 | 3.3 | 117 | ||||||||
Other (1) | 15 | 339 | 44 | — | — | ||||||||
Total | $23,969 | 112,487 | $213 | 10.1 | $198 | ||||||||
Asia Pacific (2) | |||||||||||||
0-1 MW | $11,489 | 11,734 | $979 | 2.1 | $465 | ||||||||
> 1 MW | 9,095 | 46,848 | 194 | 4.7 | 161 | ||||||||
Other (1) | 365 | 5,028 | 73 | — | — | ||||||||
Total | $20,949 | 63,610 | $329 | 6.8 | $254 | ||||||||
All Regions (2) | |||||||||||||
0-1 MW | $41,181 | 121,182 | $340 | 11.8 | $292 | ||||||||
> 1 MW | 58,988 | 422,509 | 140 | 46.9 | 105 | ||||||||
Other (1) | 591 | 14,308 | 41 | — | — | ||||||||
Total | $100,761 | 558,000 | $181 | 58.7 | $142 | ||||||||
Interconnection | $12,648 | N/A | N/A | N/A | N/A | ||||||||
Grand Total | $113,409 | 558,000 | $181 | 58.7 | $142 | ||||||||
Note: Totals may not foot due to rounding differences. | |
(1) | Other includes Powered Base Building shell capacity as well as storage and office space within fully improved data center facilities. |
(2) | Based on quarterly average exchange rates during the three months ended June 30, 2021. |
Investment Activity
During the second quarter of 2021, Digital Realty closed on the acquisition of a five-acre land parcel in Seoul, South Korea for approximately $66 million, or $13.5 million per acre, and an 18.5-acre land parcel in Sydney, Australia for $65 million, or approximately $3.5 million per acre. The two sites are expected to support the development of approximately 64 megawatts and 97 megawatts of IT load, respectively. Commencement of development on these land parcels will be subject to market demand, and delivery will be phased to meet future growth requirements.
Separately, Digital Realty also closed on the sale of a vacant, 240,000-square foot office and industrial property in Phoenix, AZ during the second quarter of 2021 for $19 million, or approximately $79 per square foot.
Balance Sheet
Digital Realty had approximately $13.9 billion of total debt outstanding as of June 30, 2021, comprised of $13.7 billion of unsecured debt and approximately $0.2 billion of secured debt. At the end of the second quarter of 2021, net debt-to-Adjusted EBITDA was 6.0x, debt plus-preferred-to-total enterprise value was 25.2% and fixed charge coverage was 5.4x.
Digital Realty recently completed the following financing transactions.
- In mid-May, Digital Realty redeemed all $201 million of its 6.625% Series C preferred stock.
- In mid-June, Digital Realty issued approximately 0.5 million shares of common stock under the company's at-the-market equity offering program at a weighted average price of $161.57 per share, generating gross proceeds of approximately $77 million.
- Subsequent to quarter-end, Digital Realty closed an offering of CHF545 million, or approximately $595 million, of Swiss green bonds with a weighted-average maturity of approximately 6.6 years and a weighted-average coupon of approximately 0.37%.
- Likewise subsequent to quarter-end, Digital Realty liquidated its remaining stake in Megaport with the sale of 1.95 million shares at a price of A$17.55 per share, generating gross proceeds of A$34 million, or approximately $26 million.
COVID-19
We are closely monitoring the impact of the COVID-19 pandemic on our global business and operations, including the impact on our customers, suppliers and business partners. Digital Realty data centers have been deemed essential operations, allowing critical personnel to remain in place and to continue to provide services and support for our customers. To date, all our facilities have remained fully operational and continue to operate in accordance with our business continuity and pandemic response plans. While we have not experienced any significant disruptions from the COVID-19 pandemic to date, we cannot predict the impact the COVID-19 pandemic will have on our future financial condition, results of operations and cash flows due to numerous uncertainties.
2021 Outlook
Digital Realty revised its 2021 core FFO per share outlook from $6.50-$6.55 to $6.45-$6.50, including a $0.12 non-cash charge related to the higher corporate tax rate in the UK. The assumptions underlying the outlook are summarized in the following table.
As of | As of | As of | ||||
Top-Line and Cost Structure | February 11, 2021 | April 29, 2021 | July 29, 2021 | |||
Total revenue | $4.250 - $4.350 billion | $4.300 - $4.400 billion | $4.325 - $4.425 billion | |||
Net non-cash rent adjustments (1) | ($10) - ($15) million | ($20) - ($25) million | ($20) - ($25) million | |||
Adjusted EBITDA | $2.300 - $2.350 billion | $2.330 - $2.380 billion | $2.350 - $2.400 billion | |||
G&A | $365 - $375 million | $380 - $390 million | $380 - $390 million | |||
Internal Growth | ||||||
Rental rates on renewal leases | ||||||
Cash basis | Slightly negative | Slightly negative | Slightly negative | |||
GAAP basis | Slightly positive | Slightly positive | Slightly positive | |||
Year-end portfolio occupancy | 84.0% - 85.0% | 84.0% - 85.0% | 84.0% - 85.0% | |||
"Same-capital" cash NOI growth (2) | (2.5%) - (3.5%) | (2.5%) - (3.5%) | (2.5%) - (3.5%) | |||
Foreign Exchange Rates | ||||||
U.S. Dollar / Pound Sterling | $1.25 - $1.30 | $1.30 - $1.38 | $1.30 - $1.38 | |||
U.S. Dollar / Euro | $1.15 - $1.20 | $1.15 - $1.20 | $1.15 - $1.20 | |||
External Growth | ||||||
Dispositions | ||||||
Dollar volume | $0.6 - $1.0 billion | $0.7 - $1.0 billion | $0.7 - $1.0 billion | |||
Cap rate | 0.0% - 12.0% | 0.0% - 12.0% | 0.0% - 12.0% | |||
Development | ||||||
CapEx (3) | $2.0 - $2.3 billion | $2.0 - $2.3 billion | $2.0 - $2.3 billion | |||
Average stabilized yields | 9.0% - 15.0% | 9.0% - 15.0% | 9.0% - 15.0% | |||
Enhancements and other non-recurring CapEx (4) | $5 - $10 million | $5 - $10 million | $5 - $10 million | |||
Recurring CapEx + capitalized leasing costs (5) | $220 - $230 million | $220 - $230 million | $210 - $220 million | |||
Balance Sheet | ||||||
Long-term debt issuance | ||||||
Dollar amount | $1.0 - $1.5 billion | $1.0 - $1.5 billion | $1.8 - $2.0 billion | |||
Pricing | 1.00% | 1.00% | 1.00% | |||
Timing | Early-to-mid 2021 | Early-to-mid 2021 | Early-to-mid 2021 | |||
Net income per diluted share | $1.40 - $1.45 | $2.00 - $2.05 | $2.20 - $2.25 | |||
Real estate depreciation and (gain) / loss on sale | $4.90 - $4.90 | $4.25 - $4.25 | $4.15 - $4.15 | |||
Funds From Operations / share (NAREIT-Defined) | $6.30 - $6.35 | $6.25 - $6.30 | $6.35 - $6.40 | |||
Non-core expenses and revenue streams | $0.10 - $0.15 | $0.25 - $0.25 | $0.10 - $0.10 | |||
Core Funds From Operations / share | $6.40 - $6.50 | $6.50 - $6.55 | $6.45 - $6.50 |
(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., ASC 805 adjustments). |
(2) | The "same-capital" pool includes properties owned as of December 31, 2019 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 2020-2021, 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. |
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 July 29, 2021, 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 2021 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# 0833892 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 29, 2021. 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# 10157227. The webcast replay can be accessed on Digital Realty's website.
About Digital Realty
Digital Realty supports the world's leading enterprises and service providers by delivering the full spectrum of data center, colocation and interconnection solutions. PlatformDIGITAL®, the company's global data center platform, provides customers a trusted foundation and proven Pervasive Datacenter Architecture (PDx™) solution methodology for scaling digital business and efficiently managing data gravity challenges. Digital Realty's global data center footprint gives customers access to the connected communities that matter to them with 291 facilities in 47 metros across 24 countries on six continents. To learn more about Digital Realty, please visit digitalrealty.com or follow us on LinkedIn and Twitter.
Contact Information
Andrew P. Power
Chief Financial Officer
Digital Realty
(415) 738–6500
John J. Stewart / Jim Huseby
Investor Relations
Digital Realty
(415) 738–6500
Consolidated Quarterly Statements of Operations |
Unaudited and Dollars in Thousands, Except Per Share Data |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | ||||||||||||||||
Rental revenues | $768,826 | $754,544 | $754,422 | $726,441 | $698,041 | $1,523,370 | $1,277,815 | |||||||||||||||
Tenant reimbursements - Utilities | 169,743 | 184,973 | 154,937 | 155,111 | 141,576 | 354,716 | 255,096 | |||||||||||||||
Tenant reimbursements - Other | 60,261 | 59,328 | 62,084 | 53,654 | 62,630 | 119,589 | 119,573 | |||||||||||||||
Interconnection & other | 90,565 | 89,061 | 86,424 | 85,725 | 85,428 | 179,626 | 155,263 | |||||||||||||||
Fee income | 3,628 | 2,426 | 4,722 | 3,687 | 4,353 | 6,054 | 6,805 | |||||||||||||||
Other | 165 | 59 | 20 | 50 | 967 | 224 | 1,780 | |||||||||||||||
Total Operating Revenues | $1,093,188 | $1,090,391 | $1,062,609 | $1,024,668 | $992,995 | $2,183,579 | $1,816,332 | |||||||||||||||
Utilities | $185,010 | $176,046 | $169,282 | $177,925 | $160,173 | $361,057 | $289,698 | |||||||||||||||
Rental property operating | 198,207 | 185,733 | 205,177 | 180,755 | 172,474 | 383,940 | 308,656 | |||||||||||||||
Property taxes | 42,795 | 49,005 | 42,442 | 39,732 | 45,071 | 91,800 | 87,194 | |||||||||||||||
Insurance | 5,703 | 3,498 | 3,410 | 2,926 | 3,370 | 9,201 | 6,917 | |||||||||||||||
Depreciation & amortization | 368,981 | 369,733 | 359,915 | 365,842 | 349,165 | 738,714 | 640,622 | |||||||||||||||
General & administration | 94,956 | 97,568 | 101,582 | 90,431 | 90,649 | 192,524 | 152,915 | |||||||||||||||
Severance, equity acceleration, and legal expenses | 2,536 | 2,427 | 606 | 920 | 3,642 | 4,963 | 4,914 | |||||||||||||||
Transaction and integration expenses | 7,075 | 14,120 | 19,290 | 14,953 | 15,618 | 21,195 | 72,419 | |||||||||||||||
Impairment of investments in real estate | — | — | — | 6,482 | — | — | — | |||||||||||||||
Other expenses | 2,298 | (257) | 641 | 297 | 22 | 2,041 | 136 | |||||||||||||||
Total Operating Expenses | $907,561 | $897,873 | $902,345 | $880,263 | $840,184 | $1,805,435 | $1,563,471 | |||||||||||||||
Operating Income | $185,627 | $192,518 | $160,264 | $144,405 | $152,811 | $378,144 | $252,861 | |||||||||||||||
Equity in (loss) earnings of unconsolidated joint ventures | 52,143 | (23,031) | 31,055 | (2,056) | (7,632) | 29,112 | (86,628) | |||||||||||||||
Gain on sale / deconsolidation | 499 | 333,921 | 1,684 | 10,410 | — | 334,420 | 304,801 | |||||||||||||||
Interest and other (expense) income, net | 10,124 | (7,186) | (2,747) | 4,348 | 22,163 | 2,938 | 18,621 | |||||||||||||||
Interest (expense) | (75,014) | (75,653) | (77,848) | (89,499) | (79,874) | (150,667) | (165,674) | |||||||||||||||
Income tax (expense) | (47,582) | (7,547) | (3,322) | (16,053) | (11,490) | (55,129) | (18,672) | |||||||||||||||
Loss from early extinguishment of debt | — | (18,347) | (49,576) | (53,007) | — | (18,347) | (632) | |||||||||||||||
Net Income / (Loss) | $125,797 | $394,675 | $59,510 | ($1,452) | $75,978 | $520,471 | $304,677 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests | (4,544) | (8,756) | (1,818) | 1,316 | (1,147) | (13,300) | (5,831) | |||||||||||||||
Net Income / (Loss) Attributable to Digital Realty Trust, Inc. | $121,253 | $385,919 | $57,692 | ($136) | $74,831 | $507,171 | $298,846 | |||||||||||||||
Preferred stock dividends, including undeclared dividends | (11,885) | (13,514) | (13,514) | (20,712) | (21,155) | (25,399) | (42,310) | |||||||||||||||
Gain on / (Issuance costs associated with) redeemed preferred stock | 18,000 | — | — | (16,520) | — | 18,000 | — | |||||||||||||||
Net Income / (Loss) Available to Common Stockholders | $127,368 | $372,405 | $44,178 | ($37,368) | $53,676 | $499,772 | $256,536 | |||||||||||||||
Weighted-average shares outstanding - basic | 281,791,855 | 281,094,798 | 280,117,213 | 270,214,413 | 267,569,823 | 281,445,252 | 244,866,574 | |||||||||||||||
Weighted-average shares outstanding - diluted | 282,433,857 | 281,928,182 | 281,122,368 | 270,214,413 | 270,744,408 | 282,075,611 | 247,576,014 | |||||||||||||||
Weighted-average fully diluted shares and units | 289,484,805 | 289,210,666 | 288,903,143 | 281,523,515 | 278,719,109 | 289,218,609 | 255,704,473 | |||||||||||||||
Net income / (loss) per share - basic | $0.45 | $1.32 | $0.16 | ($0.14) | $0.20 | $1.78 | $1.05 | |||||||||||||||
Net income / (loss) per share - diluted | $0.45 | $1.32 | $0.16 | ($0.14) | $0.20 | $1.77 | $1.04 | |||||||||||||||
Funds From Operations and Core Funds From Operations |
Unaudited and in Thousands, Except Per Share Data |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
Reconciliation of Net Income to Funds From Operations (FFO) | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | |||||||||||||||
Net Income / (Loss) Available to Common Stockholders | $127,368 | $372,405 | $44,178 | ($37,368) | $53,676 | $499,773 | $256,536 | |||||||||||||||
Adjustments: | ||||||||||||||||||||||
Non-controlling interest in operating partnership | 3,200 | 9,800 | 1,300 | (1,000) | 1,400 | 13,000 | 9,200 | |||||||||||||||
Real estate related depreciation & amortization (1) | 363,640 | 364,697 | 354,366 | 358,619 | 342,334 | 728,337 | 628,851 | |||||||||||||||
Unconsolidated JV real estate related depreciation & amortization | 20,983 | 19,378 | 21,471 | 19,213 | 17,123 | 40,361 | 37,046 | |||||||||||||||
(Gain) on real estate transactions | (499) | (333,921) | (1,684) | (10,410) | - | (334,420) | (304,801) | |||||||||||||||
Impairment of investments in real estate | - | - | - | 6,482 | - | - | - | |||||||||||||||
Funds From Operations - diluted | $514,692 | $432,359 | $419,631 | $335,536 | $414,533 | $947,051 | $626,832 | |||||||||||||||
Weighted-average shares and units outstanding - basic | 288,843 | 288,377 | 287,898 | 278,079 | 275,545 | 288,588 | 252,995 | |||||||||||||||
Weighted-average shares and units outstanding - diluted (2) | 289,485 | 289,211 | 288,903 | 281,524 | 278,719 | 289,219 | 255,704 | |||||||||||||||
Funds From Operations per share - basic | $1.78 | $1.50 | $1.46 | $1.21 | $1.50 | $3.28 | $2.48 | |||||||||||||||
Funds From Operations per share - diluted (2) | $1.78 | $1.49 | $1.45 | $1.19 | $1.49 | $3.27 | $2.45 | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
Reconciliation of FFO to Core FFO | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | |||||||||||||||
Funds From Operations - diluted | $514,692 | $432,359 | $419,631 | $335,536 | $414,533 | $947,051 | $626,832 | |||||||||||||||
Termination fees and other non-core revenues (3) | (11,122) | (59) | (25) | (5,713) | (21,908) | (11,181) | (24,333) | |||||||||||||||
Transaction and integration expenses | 7,075 | 14,120 | 19,290 | 14,953 | 15,618 | 21,195 | 72,419 | |||||||||||||||
Loss from early extinguishment of debt | - | 18,347 | 49,576 | 53,007 | - | 18,347 | 632 | |||||||||||||||
(Gain on) / Issuance costs associated with redeemed preferred stock | (18,000) | - | - | 16,520 | - | (18,000) | - | |||||||||||||||
Severance, equity acceleration, and legal expenses (4) | 2,536 | 2,427 | 606 | 920 | 3,642 | 4,963 | 4,914 | |||||||||||||||
(Gain) / Loss on FX revaluation | (51,649) | 34,072 | (27,190) | 10,312 | 17,526 | (17,577) | 98,814 | |||||||||||||||
Other non-core expense adjustments | 2,298 | (19,240) | 3,353 | 6,697 | 22 | (16,942) | 5,531 | |||||||||||||||
Core Funds From Operations - diluted | $445,830 | $482,026 | $465,241 | $432,232 | $429,433 | $927,856 | $784,809 | |||||||||||||||
Weighted-average shares and units outstanding - diluted (2) | 289,485 | 289,211 | 288,903 | 281,524 | 278,719 | 289,219 | 255,704 | |||||||||||||||
Core Funds From Operations per share - diluted (2) | $1.54 | $1.67 | $1.61 | $1.54 | $1.54 | $3.21 | $3.07 | |||||||||||||||
(1) Real Estate Related Depreciation & Amortization | Three Months Ended | Six Months Ended | ||||||||||||||||||||
30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | ||||||||||||||||
Depreciation & amortization per income statement | $368,981 | $369,733 | $359,915 | $365,842 | $349,165 | 738,714 | 640,622 | |||||||||||||||
Non-real estate depreciation | (5,341) | (5,036) | (5,549) | (7,223) | (6,831) | (10,377) | (11,771) | |||||||||||||||
Real Estate Related Depreciation & Amortization | $363,640 | $364,697 | $354,366 | $358,619 | $342,334 | $728,337 | $628,851 | |||||||||||||||
(2) | For all periods presented, we have excluded the effect of dilutive series C, series G, series I, 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 C, series G, series I, 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. |
(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 | Six Months Ended | |||||||||||||||||||||
Reconciliation of Core FFO to AFFO | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | |||||||||||||||
Core FFO available to common stockholders and unitholders | $445,830 | $482,026 | $465,241 | $432,232 | $429,433 | $927,856 | $784,809 | |||||||||||||||
Adjustments: | ||||||||||||||||||||||
Non-real estate depreciation | 5,341 | 5,036 | 5,549 | 7,223 | 6,831 | 10,377 | 11,771 | |||||||||||||||
Amortization of deferred financing costs | 3,718 | 3,538 | 3,709 | 3,655 | 3,661 | 7,256 | 7,921 | |||||||||||||||
Amortization of debt discount/premium | 1,166 | 1,134 | 1,033 | 987 | 1,011 | 2,300 | 1,953 | |||||||||||||||
Non-cash stock-based compensation expense | 15,579 | 16,097 | 16,315 | 15,969 | 15,060 | 31,676 | 27,213 | |||||||||||||||
Straight-line rental revenue | (16,139) | (18,492) | (14,402) | (10,017) | (10,928) | (34,631) | (26,330) | |||||||||||||||
Straight-line rental expense | 7,175 | 6,709 | 3,629 | 3,934 | 7,373 | 13,884 | 8,833 | |||||||||||||||
Above- and below-market rent amortization | 1,858 | 2,137 | 3,239 | 2,360 | 3,794 | 3,995 | 7,087 | |||||||||||||||
Deferred tax (expense) benefit | 35,522 | (4,509) | (4,226) | 6,421 | (150) | 31,013 | (943) | |||||||||||||||
Leasing compensation & internal lease commissions | 11,078 | 11,042 | 10,506 | 6,052 | 1,739 | 22,120 | 4,533 | |||||||||||||||
Recurring capital expenditures (1) | (39,231) | (39,522) | (83,571) | (53,683) | (38,796) | (78,753) | (73,473) | |||||||||||||||
AFFO available to common stockholders and unitholders (2) | $471,897 | $465,196 | $407,022 | $415,133 | $419,028 | $937,093 | $753,374 | |||||||||||||||
Weighted-average shares and units outstanding - basic | 288,843 | 288,377 | 287,898 | 278,079 | 275,545 | 288,588 | 252,995 | |||||||||||||||
Weighted-average shares and units outstanding - diluted (3) | 289,485 | 289,211 | 288,903 | 281,524 | 278,719 | 289,219 | 255,704 | |||||||||||||||
AFFO per share - diluted (3) | $1.63 | $1.61 | $1.41 | $1.47 | $1.50 | $3.24 | $2.95 | |||||||||||||||
Dividends per share and common unit | $1.16 | $1.16 | $1.12 | $1.12 | $1.12 | $2.32 | $2.24 | |||||||||||||||
Diluted AFFO Payout Ratio | 71.2% | 72.1% | 79.5% | 76.0% | 74.5% | 71.6% | 76.0% | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
Share Count Detail | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | |||||||||||||||
Weighted Average Common Stock and Units Outstanding | 288,843 | 288,377 | 287,898 | 278,079 | 275,545 | 288,588 | 252,995 | |||||||||||||||
Add: Effect of dilutive securities | 642 | 834 | 1,005 | 3,445 | 3,174 | 631 | 2,709 | |||||||||||||||
Weighted Avg. Common Stock and Units Outstanding - diluted | 289,485 | 289,211 | 288,903 | 281,524 | 278,719 | 289,219 | 255,704 | |||||||||||||||
(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 C, series G, series I, 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 C, series G, series I, 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 |
30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | ||||||||||||||||
Assets | ||||||||||||||||||||
Investments in real estate: | ||||||||||||||||||||
Real estate | $23,287,853 | $22,762,279 | $23,142,988 | $22,125,486 | $20,843,273 | |||||||||||||||
Construction in progress | 3,270,570 | 2,904,642 | 2,768,326 | 2,328,654 | 2,514,324 | |||||||||||||||
Land held for future development | 143,575 | 192,896 | 226,862 | 198,536 | 175,209 | |||||||||||||||
Investments in real estate | $26,701,998 | $25,859,817 | $26,138,175 | $24,652,676 | $23,532,806 | |||||||||||||||
Accumulated depreciation and amortization | (5,919,650) | (5,649,019) | (5,555,221) | (5,250,140) | (4,945,534) | |||||||||||||||
Net Investments in Properties | $20,782,348 | $20,210,798 | $20,582,954 | $19,402,536 | $18,587,272 | |||||||||||||||
Investment in unconsolidated joint ventures | 1,119,026 | 970,703 | 1,148,158 | 1,059,978 | 1,033,235 | |||||||||||||||
Net Investments in Real Estate | $21,901,374 | $21,181,501 | $21,731,112 | $20,462,514 | $19,620,507 | |||||||||||||||
Cash and cash equivalents | $120,482 | $221,140 | $108,501 | $971,305 | $505,174 | |||||||||||||||
Accounts and other receivables (1) | 630,086 | 657,096 | 603,111 | 585,506 | 542,750 | |||||||||||||||
Deferred rent | 539,379 | 524,200 | 528,180 | 510,627 | 496,684 | |||||||||||||||
Customer relationship value, deferred leasing costs & other intangibles, net | 2,956,027 | 3,057,245 | 3,122,904 | 3,106,414 | 3,128,140 | |||||||||||||||
Goodwill | 8,185,931 | 8,125,706 | 8,330,996 | 8,012,256 | 7,791,522 | |||||||||||||||
Assets associated with real estate held for sale | — | — | — | — | 10,981 | |||||||||||||||
Operating lease right-of-use assets (2) | 1,452,633 | 1,495,869 | 1,386,959 | 1,363,285 | 1,375,427 | |||||||||||||||
Other assets | 365,308 | 279,734 | 264,528 | 423,426 | 391,451 | |||||||||||||||
Total Assets | $36,151,220 | $35,542,491 | $36,076,291 | $35,435,333 | $33,862,636 | |||||||||||||||
Liabilities and Equity | ||||||||||||||||||||
Global unsecured revolving credit facilities | $1,026,368 | $451,007 | $531,905 | $124,082 | $64,492 | |||||||||||||||
Unsecured term loans | — | — | 536,580 | 512,642 | 799,550 | |||||||||||||||
Unsecured senior notes, net of discount | 12,659,043 | 12,566,198 | 11,997,010 | 11,999,170 | 11,268,753 | |||||||||||||||
Secured debt and other, net of premiums | 242,410 | 239,634 | 239,222 | 238,866 | 238,826 | |||||||||||||||
Operating lease liabilities (2) | 1,545,689 | 1,581,759 | 1,468,712 | 1,444,060 | 1,451,152 | |||||||||||||||
Accounts payable and other accrued liabilities | 1,367,240 | 1,305,921 | 1,420,162 | 1,610,814 | 1,303,337 | |||||||||||||||
Deferred tax liabilities, net | 742,127 | 650,543 | 698,308 | 711,474 | 664,802 | |||||||||||||||
Accrued dividends and distributions | — | — | 324,386 | 571 | — | |||||||||||||||
Security deposits and prepaid rent | 362,606 | 362,008 | 371,659 | 353,902 | 348,253 | |||||||||||||||
Liabilities associated with assets held for sale | — | — | — | — | 238 | |||||||||||||||
Total Liabilities | $17,945,483 | $17,157,070 | $17,587,944 | $16,995,581 | $16,139,403 | |||||||||||||||
Redeemable non-controlling interests - operating partnership | 41,490 | 40,097 | 42,011 | 41,265 | 40,584 | |||||||||||||||
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 | |||||||||||||||
Series G Cumulative Redeemable Preferred Stock (4) | — | — | — | — | 241,468 | |||||||||||||||
Series I Cumulative Redeemable Preferred Stock (5) | — | — | — | — | 242,012 | |||||||||||||||
Series J Cumulative Redeemable Preferred Stock (6) | $193,540 | 193,540 | 193,540 | 193,540 | 193,540 | |||||||||||||||
Series K Cumulative Redeemable Preferred Stock (7) | 203,264 | 203,264 | 203,264 | 203,264 | 203,264 | |||||||||||||||
Series L Cumulative Redeemable Preferred Stock (8) | 334,886 | 334,886 | 334,886 | 334,886 | 334,886 | |||||||||||||||
Common Stock: $0.01 par value per share, 392,000,000 shares authorized (9) | 2,806 | 2,795 | 2,788 | 2,784 | 2,670 | |||||||||||||||
Additional paid-in capital | 20,844,834 | 20,700,282 | 20,626,897 | 20,566,645 | 19,292,311 | |||||||||||||||
Dividends in excess of earnings | (4,153,407) | (3,952,497) | (3,997,938) | (3,726,901) | (3,386,525) | |||||||||||||||
Accumulated other comprehensive income (loss), net | 31,733 | (77,783) | 135,010 | (123,623) | (358,349) | |||||||||||||||
Total Stockholders' Equity | $17,457,656 | $17,623,737 | $17,717,697 | $17,669,845 | $16,984,527 | |||||||||||||||
Noncontrolling Interests | ||||||||||||||||||||
Noncontrolling interest in operating partnership | $513,897 | $571,292 | $608,980 | $620,676 | $633,831 | |||||||||||||||
Noncontrolling interest in consolidated joint ventures | 192,694 | 150,295 | 119,659 | 107,966 | 64,291 | |||||||||||||||
Total Noncontrolling Interests | $706,591 | $721,587 | $728,639 | $728,642 | $698,122 | |||||||||||||||
Total Equity | $18,164,247 | $18,345,324 | $18,446,336 | $18,398,487 | $17,682,649 | |||||||||||||||
Total Liabilities and Equity | $36,151,220 | $35,542,491 | $36,076,291 | $35,435,333 | $33,862,636 | |||||||||||||||
(1) | Net of allowance for doubtful accounts of $20,356 and $18,825 as of June 30, 2021 and December 31, 2020, 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%, $0 and $201,250 liquidation preference, respectively ($25.00 per share), 0 and 8,050,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. |
(4) | Series G Cumulative Redeemable Preferred Stock, 5.875%, $0 liquidation preference (redeemed October 15, 2020, reclassified to accounts payable as of September 30, 2020 for accounting purposes) ($25.00 per share) and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020. |
(5) | Series I Cumulative Redeemable Preferred Stock, 6.350%, $0 liquidation preference ($25.00 per share) and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020. |
(6) | 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, 2021 and December 31, 2020, respectively. |
(7) | 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, 2021 and December 31, 2020, respectively. |
(8) | 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, 2021 and December 31, 2020, respectively. |
(9) | Common Stock: 282,603,152 and 208,900,758 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. |
Reconciliation of Earnings Before Interest, Taxes, Depreciation & |
Unaudited and Dollars in Thousands |
Three Months Ended | |||||||||||||||
Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) (1) | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | ||||||||||
Net Income / (Loss) Available to Common Stockholders | $127,368 | $372,405 | $44,178 | ($37,368) | $53,676 | ||||||||||
Interest | 75,014 | 75,653 | 77,848 | 89,499 | 79,874 | ||||||||||
Loss from early extinguishment of debt | — | 18,347 | 49,576 | 53,007 | — | ||||||||||
Income tax expense (benefit) | 47,582 | 7,547 | 3,322 | 16,053 | 11,490 | ||||||||||
Depreciation & amortization | 368,981 | 369,733 | 359,915 | 365,842 | 349,165 | ||||||||||
EBITDA | $618,945 | $843,685 | $534,839 | $487,033 | $494,205 | ||||||||||
Unconsolidated JV real estate related depreciation & amortization | 20,983 | 19,378 | 21,471 | 19,213 | 17,123 | ||||||||||
Unconsolidated JV interest expense and tax expense | 15,523 | 8,786 | 12,143 | 9,002 | 9,203 | ||||||||||
Severance, equity acceleration, and legal expenses | 2,536 | 2,427 | 606 | 920 | 3,642 | ||||||||||
Transaction and integration expenses | 7,075 | 14,120 | 19,290 | 14,953 | 15,618 | ||||||||||
(Gain) on sale / deconsolidation | (499) | (333,921) | (1,684) | (10,410) | — | ||||||||||
Impairment of investments in real estate | — | — | — | 6,482 | — | ||||||||||
Other non-core adjustments, net | (60,308) | 38,574 | (23,842) | 4,945 | (3,404) | ||||||||||
Non-controlling interests | 4,544 | 8,756 | 1,818 | (1,316) | 1,147 | ||||||||||
Preferred stock dividends, including undeclared dividends | 11,885 | 13,514 | 13,514 | 20,712 | 21,155 | ||||||||||
(Gain on) / Issuance costs associated with redeemed preferred stock | (18,000) | — | — | 16,520 | — | ||||||||||
Adjusted EBITDA | $602,684 | $615,319 | $578,156 | $568,054 | $558,690 | ||||||||||
(1) | For definitions and discussion of EBITDA and Adjusted EBITDA, see the definitions section. |
Three Months Ended | |||||||||||||||
Financial Ratios | 30-Jun-21 | 31-Mar-21 | 31-Dec-20 | 30-Sep-20 | 30-Jun-20 | ||||||||||
Total GAAP interest expense | $75,014 | $75,653 | $77,848 | $89,499 | $79,874 | ||||||||||
Capitalized interest | 11,558 | 11,434 | 11,836 | 12,379 | 13,133 | ||||||||||
Change in accrued interest and other non-cash amounts | (43,604) | 44,620 | (37,182) | 19,718 | (38,478) | ||||||||||
Cash Interest Expense (2) | $42,968 | $131,707 | $52,502 | $121,596 | $54,529 | ||||||||||
Scheduled debt principal payments | — | — | — | — | 57 | ||||||||||
Preferred dividends | 11,885 | 13,514 | 13,514 | 20,712 | 21,155 | ||||||||||
Total Fixed Charges (3) | $98,457 | $100,601 | $103,198 | $122,590 | $114,219 | ||||||||||
Coverage | |||||||||||||||
Interest coverage ratio (4) | 6.1x | 6.6x | 5.8x | 5.2x | 5.6x | ||||||||||
Cash interest coverage ratio (5) | 10.9x | 4.5x | 9.3x | 4.4x | 9.1x | ||||||||||
Fixed charge coverage ratio (6) | 5.4x | 5.8x | 5.1x | 4.4x | 4.6x | ||||||||||
Cash fixed charge coverage ratio (7) | 9.0x | 4.1x | 7.7x | 3.8x | 6.8x | ||||||||||
Leverage | |||||||||||||||
Debt to total enterprise value (8) (9) | 23.9% | 24.1% | 24.4% | 22.8% | 23.3% | ||||||||||
Debt plus preferred stock to total enterprise value (10) | 25.2% | 25.9% | 26.2% | 25.0% | 26.0% | ||||||||||
Pre-tax income to interest expense (11) | 2.7x | 6.2x | 1.8x | 1.0x | 2.0x | ||||||||||
Net Debt to Adjusted EBITDA (12) | 6.0x | 5.6x | 6.0x | 5.5x | 5.6x | ||||||||||
(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, scheduled debt principal payments 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, scheduled debt principal payments 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 of 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. |
Management Statements on Non-GAAP Measures
Unaudited
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) 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 using total debt at balance sheet carrying value, plus capital lease obligations, plus our share of JV debt, less unrestricted cash and cash equivalents (including JV share of cash) 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 June 30, 2021, GAAP interest expense was $75 million, capitalized interest was $12 million and scheduled debt principal payments and preferred dividends was $12 million.
Reconciliation of Net Operating Income (NOI) | Three Months Ended | Six Months Ended | ||||||||||||||
(in thousands) | 30-Jun-21 | 31-Mar-21 | 30-Jun-20 | 30-Jun-21 | 30-Jun-20 | |||||||||||
Operating income | $185,627 | $192,518 | $152,811 | $378,144 | $252,861 | |||||||||||
Fee income | (3,628) | (2,426) | (4,353) | (6,054) | (6,805) | |||||||||||
Other income | (165) | (59) | (967) | (224) | (1,780) | |||||||||||
Depreciation and amortization | 368,981 | 369,733 | 349,165 | 738,714 | 640,622 | |||||||||||
General and administrative | 94,956 | 97,568 | 90,649 | 192,524 | 152,915 | |||||||||||
Severance, equity acceleration, and legal expenses | 2,536 | 2,427 | 3,642 | 4,963 | 4,914 | |||||||||||
Transaction expenses | 7,075 | 14,120 | 15,618 | 21,195 | 72,419 | |||||||||||
Other expenses | 2,298 | (257) | 22 | 2,041 | 136 | |||||||||||
Net Operating Income | $657,680 | $673,624 | $606,587 | $1,331,303 | $1,115,282 | |||||||||||
Cash Net Operating Income (Cash NOI) | ||||||||||||||||
Net Operating Income | $657,680 | $673,624 | $606,587 | $1,331,303 | $1,115,282 | |||||||||||
Straight-line rental revenue | (17,127) | (18,607) | (10,713) | (35,734) | (24,105) | |||||||||||
Straight-line rental expense | 7,069 | 6,750 | 7,296 | 13,819 | 8,791 | |||||||||||
Above- and below-market rent amortization | 1,858 | 2,137 | 3,794 | 3,994 | 7,087 | |||||||||||
Cash Net Operating Income | $649,480 | $663,904 | $606,964 | $1,313,382 | $1,107,055 | |||||||||||
Forward-Looking Statements
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, our redemptions, the COVID-19 pandemic, 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 and net income, 2021 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, 2021 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, 2020 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 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, Powered Base Building, and 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.
View original content:https://www.prnewswire.com/news-releases/digital-realty-reports-second-quarter-2021-results-301344682.html
SOURCE Digital Realty
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