REIT Earnings Press Releases

Digital Realty Reports Third Quarter 2021 Results

AUSTIN, Texas, Oct. 26, 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 third 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 $0.44 per share in 3Q21, compared to a net loss available to common stockholders of ($0.14) in 3Q20
  • Reported FFO per share of $1.54 in 3Q21, compared to $1.19 in 3Q20
  • Reported core FFO per share of $1.65 in 3Q21, compared to $1.54 in 3Q20
  • Signed total bookings during 3Q21 expected to generate $113 million of annualized GAAP rental revenue, including a $12 million contribution from interconnection
  • Raised core FFO per share outlook from $6.45-$6.50 to $6.50-$6.55

Financial Results

Digital Realty reported revenues for the third quarter of 2021 of $1.1 billion, a 4% increase from the previous quarter and an 11% increase from the same quarter last year. 

The company delivered third quarter of 2021 net income of $137 million, and net income available to common stockholders of $124 million, or $0.44 per diluted share, compared to $0.45 per diluted share in the previous quarter and ($0.14) per diluted share in the same quarter last year. 

Digital Realty generated third quarter of 2021 Adjusted EBITDA of $610 million, a 1% increase from the previous quarter and a 7% increase over the same quarter last year. 

The company reported third quarter of 2021 funds from operations of $447 million, or $1.54 per share, compared to $1.78 per share in the previous quarter and $1.19 per share in the same quarter last year. 

Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered third quarter of 2021 core FFO per share of $1.65, a 7% increase from $1.54 per share in the previous quarter, and a 7% increase from $1.54 per share in the same quarter last year. 

Leasing Activity

In the third quarter, Digital Realty signed total bookings expected to generate $113 million of annualized GAAP rental revenue, including a $12 million contribution from interconnection. 

"Digital Realty’s global platform, broad product spectrum, and significant scale underpinned our strong third quarter results," said Digital Realty Chief Executive Officer A. William Stein.  "Record new logo growth and continued strong bookings in the quarter reflect the global adoption of PlatformDIGITAL®, while our robust internal processes enabled us to execute consistently for our growing list of customers." 

The weighted-average lag between new leases signed during the third quarter of 2021 and the contractual commencement date was seven months. 

In addition to new leases signed, Digital Realty also signed renewal leases representing $223 million of annualized GAAP rental revenue during the quarter.  Rental rates on renewal leases signed during the third quarter of 2021 rolled down 5.6% on a cash basis and down 3.3% on a GAAP basis. 

New leases signed during the third 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



$11,685


59,887



$195


4.3



$226

 > 1 MW



37,923


397,759



95


39.5



80

 Other (1)



276


5,991



46




Total



$49,883


463,637



$108


43.8



$94















 EMEA (2)














 0-1 MW



$15,225


68,285



$223


6.5



$196

 > 1 MW



20,988


128,885



163


15.4



114

 Other (1)



21




-




Total



$36,234


197,170



$184


21.9



$138















 Asia Pacific (2)














 0-1 MW



$5,119


10,739



$477


1.4



$296

 > 1 MW



9,850


53,946



183


6.0



137

 Other (1)



123


1,484



83




Total



$15,092


66,168



$228


7.4



$168















All Regions (2)














 0-1 MW



$32,028


138,911



$231


12.2



$218

 > 1 MW



68,761


580,589



118


60.9



94

 Other (1)



420


7,475



56




Total



$101,209


726,975



$139


73.1



$115















Interconnection



$11,636


N/A



N/A


N/A



N/A















Grand Total



$112,845


726,975



$139


73.1



$115


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 September 30, 2021. 

Investment Activity

During the third quarter, the existing joint venture between Digital Realty and PGIM Real Estate, the real estate investment management and advisory business of Prudential Financial, completed the sale of a portfolio of 10 data centers in North America for $581 million, representing an exit cap rate of approximately 4.5% on the seven stabilized assets in the portfolio.  PGIM Real Estate owned an 80% interest and Digital Realty owned a 20% interest in the joint venture.  The transaction generated net proceeds of approximately $347 million, of which Digital Realty’s share was approximately $85 million, including a $19 million promote fee. 

Separately, Digital Realty closed on the sale of a 56-acre land parcel in Mesa, AZ during the third quarter for approximately $17 million. 

Likewise during the third quarter, Digital Realty closed its previously announced joint venture with Brookfield Infrastructure Partners in India.  The joint venture enables the expansion of PlatformDIGITAL®, Digital Realty’s global data center platform, which supports the evolving data, control and networking demands of global service providers as well as global and local enterprises.  Its expansion across India is expected to enable customers to rapidly scale digital transformation by deploying critical infrastructure with a leading global data center provider at the heart of a growing connected data community in India. 

Subsequent to quarter-end, Digital Realty reached an agreement to make a strategic investment in AtlasEdge Data Centres, a leading European edge data center provider. 

Also subsequent to quarter-end, Digital Realty and Pembani Remgro Infrastructure Fund created a new joint venture which acquired a controlling interest in Medallion Communications, Nigeria’s leading colocation and interconnection provider, for approximately $29 million.  In addition, Kenyan data center operator iColo, Digital Realty’s existing joint venture with Pembani Remgro Infrastructure Fund, closed on the acquisition of a land parcel in Maputo, Mozambique during the third quarter for $3 million. 

Balance Sheet

Digital Realty had approximately $14.1 billion of total debt outstanding as of September 30, 2021, comprised of $13.8 billion of unsecured debt and approximately $0.2 billion of secured debt.  At the end of the third quarter of 2021, net debt-to-Adjusted EBITDA was 6.0x, debt plus-preferred-to-total enterprise value was 26.1% and fixed charge coverage was 5.8x.  Pro forma for settlement of the $950 million forward equity offering completed in September, net debt-to-adjusted EBITDA was 5.6x and fixed charge coverage was 6.0x. 

Digital Realty completed the following financing transactions during the third quarter. 

  • In early July, 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%.
  • In early July, 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.
  • In late August, Digital Realty issued approximately 0.6 million shares of common stock under the company’s at-the-market equity offering program at a weighted average price of $162.20 per share, generating gross proceeds of approximately $95 million.
  • In early September, Digital Realty completed an offering of 6,250,000 shares of common stock at a price of $160.50 per share, subject to forward sale agreements. The company expects to receive net proceeds of approximately $950 million (net of fees and estimated expenses) upon full physical settlement of the forward sale agreements, expected to be no later than March 13, 2023.

2021 Outlook

Digital Realty raised its 2021 core FFO per share outlook from $6.45-$6.50 to $6.50-$6.55.  The assumptions underlying the outlook are summarized in the following table. 












As of


As of


As of


As of

 Top-Line and Cost Structure


February 11, 2021


April 29, 2021


July 29, 2021


October 26, 2021

Total revenue


$4.250 - $4.350 billion


$4.300 - $4.400 billion


$4.325 - $4.425 billion


$4.400 - $4.425 billion

Net non-cash rent adjustments (1)


($10) - ($15) million


($20) - ($25) million


($20) - ($25) million


($20) - ($25) million

Adjusted EBITDA


$2.300 - $2.350 billion


$2.330 - $2.380 billion


$2.350 - $2.400 billion


$2.400 - $2.425 billion

G&A


$365 - $375 million


$380 - $390 million


$380 - $390 million


$380 - $390 million










 Internal Growth









Rental rates on renewal leases









Cash basis


Slightly negative


Slightly negative


Slightly negative


Slightly negative

GAAP basis


Slightly positive


Slightly positive


Slightly positive


Slightly positive

Year-end portfolio occupancy


84.0% - 85.0%


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%)


(2.5%) - (3.5%)










Foreign Exchange Rates









U.S. Dollar / Pound Sterling


$1.25 - $1.30


$1.30 - $1.38


$1.30 - $1.38


$1.30 - $1.38

U.S. Dollar / Euro


$1.15 - $1.20


$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


$0.7 - $1.0 billion

Cap rate


0.0% - 12.0%


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


$2.0 - $2.3 billion

Average stabilized yields


9.0% - 15.0%


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


$5 - $10 million

Recurring CapEx + capitalized leasing costs (5)


$220 - $230 million


$220 - $230 million


$210 - $220 million


$190 - $200 million










 Balance Sheet









Long-term debt issuance









Dollar amount


$1.0 - $1.5 billion


$1.0 - $1.5 billion


$1.8 - $2.0 billion


$1.8 - $2.0 billion

Pricing


1.00%


1.00%


1.00%


1.00%

Timing


Early-to-mid 2021


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


$2.45 - $2.50

Real estate depreciation and (gain) / loss on sale


$4.90 - $4.90


$4.25 - $4.25


$4.15 - $4.15


$3.95 - $3.95

 Funds From Operations / share (NAREIT-Defined)


$6.30 - $6.35


$6.25 - $6.30


$6.35 - $6.40


$6.40 - $6.45

Non-core expenses and revenue streams


$0.10 - $0.15


$0.25 - $0.25


$0.10 - $0.10


$0.10 - $0.10

 Core Funds From Operations / share


$6.40 - $6.50


$6.50 - $6.55


$6.45 - $6.50


$6.50 - $6.55



(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 October 26, 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 third 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# 0133975 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 November 23, 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# 10160289.  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 over 280 facilities in 49 metros across 25 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



Nine Months Ended




30-Sep-21



30-Jun-21



31-Mar-21



31-Dec-20



30-Sep-20




30-Sep-21



30-Sep-20

Rental revenues



$773,195



$768,826



$754,544



$754,422



$726,441




$2,296,565



$2,004,256

Tenant reimbursements - Utilities



189,060



169,743



184,973



154,937



155,111




543,776



410,207

Tenant reimbursements - Other



57,666



60,261



59,328



62,084



53,654




177,255



173,227

Interconnection & other



90,983



90,565



89,061



86,424



85,725




270,609



240,988

Fee income



3,255



3,628



2,426



4,722



3,687




9,309



10,492

Other



18,977



165



59



20



50




19,201



1,830

Total Operating Revenues



$1,133,136



$1,093,188



$1,090,391



$1,062,609



$1,024,668




$3,316,715



$2,841,000
























Utilities



$209,585



$185,010



$176,046



$169,282



$177,925




$570,642



$467,623

Rental property operating



196,743



198,207



185,733



205,177



180,755




580,682



489,411

Property taxes



55,915



42,795



49,005



42,442



39,732




147,715



126,926

Insurance



4,718



5,703



3,498



3,410



2,926




13,919



9,843

Depreciation & amortization



369,035



368,981



369,733



359,915



365,842




1,107,749



1,006,464

General & administration



97,082



94,956



97,568



101,582



90,431




289,606



243,346

Severance, equity acceleration, and legal expenses



1,377



2,536



2,427



606



920




6,340



5,834

Transaction and integration expenses



13,804



7,075



14,120



19,290



14,953




34,999



87,372

Impairment of investments in real estate











6,482






6,482

Other expenses



510



2,298



(257)



641



297




2,551



433

Total Operating Expenses



$948,769



$907,561



$897,873



$902,345



$880,263




$2,754,203



$2,443,734
























Operating Income



$184,367



$185,627



$192,518



$160,264



$144,405




$562,512



$397,266
























Equity in (loss) earnings of unconsolidated joint ventures



40,884



52,143



(23,031)



31,055



(2,056)




69,996



(88,684)

Gain on sale / deconsolidation



(635)



499



333,921



1,684



10,410




333,785



315,211

Interest and other (expense) income, net



(2,947)



10,124



(7,186)



(2,747)



4,348




(9)



22,969

Interest (expense)



(71,417)



(75,014)



(75,653)



(77,848)



(89,499)




(222,084)



(255,173)

Income tax (expense)



(13,709)



(47,582)



(7,547)



(3,322)



(16,053)




(68,838)



(34,725)

Loss from early extinguishment of debt







(18,347)



(49,576)



(53,007)




(18,347)



(53,639)

Net Income / (Loss)



$136,543



$125,797



$394,675



$59,510



($1,452)




$657,015



$303,225
























Net (income) loss attributable to noncontrolling interests



(2,266)



(4,544)



(8,756)



(1,818)



1,316




(15,566)



(4,515)

Net Income / (Loss) Attributable to Digital Realty Trust, Inc.



$134,277



$121,253



$385,919



$57,692



($136)




$641,449



$298,710
























Preferred stock dividends, including undeclared dividends



(10,181)



(11,885)



(13,514)



(13,514)



(20,712)




(35,580)



(63,022)

Gain on / (Issuance costs associated with) redeemed preferred stock





18,000







(16,520)




18,000



(16,520)

Net Income / (Loss) Available to Common Stockholders



$124,096



$127,368



$372,405



$44,178



($37,368)




$623,869



$219,168
























Weighted-average shares outstanding - basic



283,105,966



281,791,855



281,094,798



280,117,213



270,214,413




281,445,252



253,377,527

Weighted-average shares outstanding - diluted



283,817,950



282,433,857



281,928,182



281,122,368



270,214,413




282,075,611



256,362,579

Weighted-average fully diluted shares and units



290,253,718



289,484,805



289,210,666



288,903,143



281,523,515




289,218,609



264,401,464
























Net income / (loss) per share - basic



$0.44



$0.45



$1.32



$0.16



($0.14)




$2.22



$0.86

Net income / (loss) per share - diluted



$0.44



$0.45



$1.32



$0.16



($0.14)




$2.21



$0.85

 

Funds From Operations and Core Funds From Operations
Unaudited and in Thousands, Except Per Share Data










































Three Months Ended



Nine Months Ended

Reconciliation of Net Income to Funds From Operations (FFO)



30-Sep-21



30-Jun-21



31-Mar-21



31-Dec-20



30-Sep-20




30-Sep-21



30-Sep-20
























Net Income / (Loss) Available to Common Stockholders



$124,096



$127,368



$372,405



$44,178



($37,368)




$623,869



$219,168

Adjustments:























Non-controlling interest in operating partnership



3,000



3,200



9,800



1,300



(1,000)




16,000



8,200

Real estate related depreciation & amortization (1)



362,728



363,640



364,697



354,366



358,619




1,091,065



987,470

Unconsolidated JV real estate related depreciation & amortization



21,293



20,983



19,378



21,471



19,213




61,654



56,259

(Gain) on real estate transactions (2)



(63,799)



(499)



(333,921)



(1,684)



(10,410)




(398,219)



(315,211)

Impairment of investments in real estate



-



-



-



-



6,482




-



6,482

Funds From Operations - diluted



$447,318



$514,692



$432,359



$419,631



$335,536




$1,394,369



$962,368
























Weighted-average shares and units outstanding - basic



289,542



288,843



288,377



287,898



278,079




288,880



261,416

Weighted-average shares and units outstanding - diluted (3)



290,254



289,485



289,211



288,903



281,524




289,531



264,401
























Funds From Operations per share - basic



$1.54



$1.78



$1.50



$1.46



$1.21




$4.83



$3.68
























Funds From Operations per share - diluted (3)



$1.54



$1.78



$1.50



$1.45



$1.19




$4.82



$3.64


























Three Months Ended



Nine Months Ended

Reconciliation of FFO to Core FFO



30-Sep-21



30-Jun-21



31-Mar-21



31-Dec-20



30-Sep-20




30-Sep-21



30-Sep-20
























Funds From Operations - diluted



$447,318



$514,692



$432,359



$419,631



$335,536




$1,394,369



$962,368

Termination fees and other non-core revenues (4)



(18,066)



(11,122)



(59)



(25)



(5,713)




(29,247)



(30,046)

Transaction and integration expenses



13,804



7,075



14,120



19,290



14,953




34,999



87,372

Loss from early extinguishment of debt



-



-



18,347



49,576



53,007




18,347



53,639

(Gain on) / Issuance costs associated with redeemed preferred stock



-



(18,000)



-



-



16,520




(18,000)



16,520

Severance, equity acceleration, and legal expenses (5)



1,377



2,536



2,427



606



920




6,340



5,834

(Gain) / Loss on FX revaluation



33,774



(51,649)



34,072



(27,190)



10,312




16,197



109,126

Other non-core expense adjustments



1,004



2,298



(19,240)



3,353



6,697




(15,938)



12,228

Core Funds From Operations - diluted



$479,211



$445,830



$482,026



$465,241



$432,232




$1,407,067



$1,217,041
























Weighted-average shares and units outstanding - diluted (3)



290,254



289,485



289,211



288,903



281,524




289,531



264,401
























Core Funds From Operations per share - diluted (3)



$1.65



$1.54



$1.67



$1.61



$1.54




$4.86



$4.60
























(1) Real Estate Related Depreciation & Amortization


Three Months Ended



Nine Months Ended




30-Sep-21



30-Jun-21



31-Mar-21



31-Dec-20



30-Sep-20




30-Sep-21



30-Sep-20
























Depreciation & amortization per income statement



$369,035



$368,981



$369,733



$359,915



$365,842




1,107,749



1,006,464

Non-real estate depreciation



(6,307)



(5,341)



(5,036)



(5,549)



(7,223)




(16,684)



(18,994)

Real Estate Related Depreciation & Amortization



$362,728



$363,640



$364,697



$354,366



$358,619




$1,091,065



$987,470



(2)

For the third quarter 2021, includes a $64 million gain that represents Digital Realty’s share from a sale of a portfolio of assets within an unconsolidated joint venture. The gain is included in equity in earnings of unconsolidated joint ventures in our consolidated income statement.

(3)

For all periods presented, we have excluded the effect of dilutive series C, 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 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)

Includes lease termination fees and certain other adjustments that are not core to our business. For the third quarter 2021, includes a $19 million promote received related to a sale of portfolio of assets within an unconsolidated joint venture. The promote is included in Other revenue in our consolidated income statement.

(5)

Relates to severance and other charges related to the departure of company executives and integration-related severance. 

 

Adjusted Funds From Operations (AFFO)
Unaudited and in Thousands, Except Per Share Data






































Three Months Ended



Nine Months Ended

 Reconciliation of Core FFO to AFFO



30-Sep-21



30-Jun-21



31-Mar-21



31-Dec-20



30-Sep-20




30-Sep-21



30-Sep-20
























 Core FFO available to common stockholders and unitholders



$479,211



$445,830



$482,026



$465,241



$432,232




$1,407,067



$1,217,041

Adjustments:























Non-real estate depreciation



6,307



5,341



5,036



5,549



7,223




16,684



18,994

Amortization of deferred financing costs



3,625



3,718



3,538



3,709



3,655




10,881



11,576

Amortization of debt discount/premium



1,138



1,166



1,134



1,033



987




3,438



2,941

Non-cash stock-based compensation expense



15,082



15,579



16,097



16,315



15,969




46,758



43,182

Straight-line rental revenue



(11,969)



(16,139)



(18,492)



(14,402)



(10,017)




(46,600)



(36,349)

Straight-line rental expense



7,862



7,175



6,709



3,629



3,934




21,746



12,767

Above- and below-market rent amortization



1,165



1,858



2,137



3,239



2,360




5,160



9,448

Deferred tax (expense) benefit



2,112



35,522



(4,509)



(4,226)



6,421




33,125



5,479

Leasing compensation & internal lease commissions



11,142



11,078



11,042



10,506



6,052




33,262



10,584

Recurring capital expenditures (1)