Digital Realty Trust's Q1 2011 FFO rose 4.1% to US$117.6M year-over-year; net income of US$39M was up 52.3% from year-ago period
Michelle Rivera
SAN FRANCISCO
,
April 28, 2011
(press release)
–
Digital Realty Trust, Inc. (NYSE: DLR), a global wholesale datacenter provider, today announced financial results for the first quarter of 2011.
Highlights:
* Reported FFO of $1.02 per diluted share and unit for the quarter ended March 31, 2011, up 25.9% from $0.81 per diluted share and unit in the first quarter of 2010. Excluding certain items that do not represent ongoing expenses or revenue streams in each quarter, first quarter 2011 FFO was $1.03 per diluted share and unit, up 28.8% from first quarter 2010 FFO of $0.80 per diluted share and unit.
* Reported net income for the quarter ended March 31, 2011 of $39.0 million and net income available to common stockholders of $31.0 million, or $0.33 per diluted share;
* Signed leases during the quarter ended March 31, 2011 totaling approximately 320,000 square feet of space at an average annual GAAP rental rate of approximately $58.00 per square foot, including non-technical space;
* Commenced leases totaling approximately 221,000 square feet during the first quarter of 2011 at an average annual GAAP rental rate of approximately $102.00 per square foot, including non-technical space;
* Completed a $400.0 million unsecured 10-year notes offering with an interest rate of 5.250% per annum yielding 5.279%;
* Issued approximately 98,000 shares under the Company's At-the-Market equity distribution program for net proceeds totaling $5.6 million at an average price of $58.44 per share;
* Exchanged approximately $35.9 million aggregate principal amount of the 4.125% Exchangeable Senior Debentures due 2026 for approximately $47.6 million in cash and 303,000 shares of common stock at the request of holders pursuant to the terms of such Debentures;
* Converted approximately 300,000 shares of the Series C Convertible Preferred stock with a liquidation preference value of $7.5 million, which comprise approximately 4% of the Series C Convertible Preferred stock outstanding at December 31, 2010, into 159,000 newly issued shares of common stock at the request of holders pursuant to the terms of such preferred stock;
* Converted approximately 143,000 shares of the Series D Convertible Preferred stock with a liquidation preference value of $3.6 million, which comprise approximately 1% of the Series D Convertible Preferred stock outstanding at December 31, 2010, into 87,000 newly issued shares of common stock at the request of holders pursuant to the terms of such preferred stock;
* Subsequent to quarter end, completed the acquisition of a 38.8 acre site, located along the northern border of the Company's existing datacenter campus in Ashburn, Virginia, for a purchase price of $17.3 million; and
* Increased 2011 FFO guidance by $0.125 at the midpoint to between $3.95 and $4.05 per diluted share and unit.
Funds from operations ("FFO") on a diluted basis was $117.6 million in the first quarter of 2011, or $1.02 per diluted share and unit, up 4.1% from $0.98 per diluted share and unit in the fourth quarter of 2010, and up 25.9% from $0.81 per diluted share and unit in the first quarter of 2010.
"Core FFO is FFO adjusted for certain items that we believe do not represent ongoing expenses or revenue streams of our core business. First quarter 2011 core FFO was $1.03 per diluted share and unit, up 7.3% from fourth quarter 2010 core FFO of $0.96 per diluted share and unit, and up 28.8% from first quarter 2010 core FFO of approximately $0.80 per diluted share and unit," said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty Trust.
FFO is a supplemental non-GAAP performance measure used by the real estate industry to measure the operating performance of real estate investment trusts. FFO and core FFO should not be considered as substitutes for net income determined in accordance with U.S. GAAP as measures of financial performance. A reconciliation from U.S. GAAP net income available to common stockholders to FFO, a definition of FFO, a reconciliation from FFO to core FFO, and a definition of core FFO is included as an attachment to this press release.
Net income for the first quarter of 2011 was $39.0 million, up 7.4% from $36.3 million in the fourth quarter of 2010 and up 52.3% from $25.6 million in the first quarter of 2010. Net income available to common stockholders in the first quarter of 2011 was $31.0 million, or $0.33 per diluted share, compared to $24.9 million, or $0.27 per diluted share, in the fourth quarter of 2010, and up from $14.7 million, or $0.18 per diluted share, in the first quarter of 2010.
The Company reported total operating revenues of $250.7 million in the first quarter of 2011, up 5.0% from $238.7 million in the fourth quarter of 2010 and up 30.7% from $191.8 million in the first quarter of 2010.
"We recognize that each customer looking for new data center facilities has a unique set of requirements. Data center solutions that offer flexibility and reliability, and are cost effective, are essential to successfully addressing those requirements. Our ability to provide customers with a variety of data center solutions, including customized build-to-suit facilities, Turn-Key Datacenter® and Powered Base Building® space, has continued to distinguish us in the market and drive our positive performance for our shareholders quarter after quarter," said Michael F. Foust, Chief Executive Officer of Digital Realty Trust.
Acquisitions and Leasing Activity
Subsequent to the end of the first quarter of 2011, on April 15, 2011 the Company completed the acquisition of a 38.8 acre development site located contiguous to its datacenter campus in Ashburn, Virginia. The purchase price was $17.3 million. The site was acquired for the development of additional datacenter facilities to meet future demand for Turn-Key Datacenter® and Powered Base Building® space in the Northern Virginia market. Up to 300,000 square feet is planned for the initial phase of development at the site. The timing and commencement of construction is subject to a number of factors, including the successful leasing of available space at the existing campus.
The Company signed leases during the quarter ended March 31, 2011 totaling approximately 320,000 square feet of space. This includes over 57,000 square feet of Turn-Key Datacenter® space leased at an average annual GAAP rental rate of $177.00 per square foot, approximately 186,000 square feet of Powered Base Building® space leased at an average annual GAAP rental rate of $23.00 per square foot, and approximately 42,000 square feet of non-technical space leased at an average annual GAAP rental rate of $25.00 per square foot. Also included in leases signed during the quarter were datacenter master leases at two Midwest properties with separate managed service/colocation providers that will assume the management of approximately 34,000 square feet of colocation space that was previously managed by Digital Realty Trust.
The Company commenced leases during the quarter ended March 31, 2011 totaling approximately 221,000 square feet of space. This includes approximately 97,000 square feet of Turn-Key Datacenter® space leased at an average annual GAAP rental rate of $196.00 per square foot, and approximately 120,000 square feet of non-technical space leased at an average annual GAAP rental rate of $23.00 per square foot. Also included in leases commenced during the quarter were datacenter master leases, described above, totaling approximately 4,400 square feet.
As of April 28, 2011, the Company's portfolio comprises 96 properties, excluding two properties held in unconsolidated joint ventures, consisting of 133 buildings totaling approximately 16.9 million rentable square feet, including 2.2 million square feet of space held for redevelopment. The portfolio is strategically located in 28 key technology markets throughout North America, Europe and Singapore.
Balance Sheet Update
Total assets grew to approximately $5.5 billion at March 31, 2011, up from approximately $5.3 billion at December 31, 2010. Total debt at March 31, 2011 was approximately $3.1 billion, up from approximately $2.8 billion at December 31, 2010. Stockholders' equity was approximately $1.9 billion at March 31, 2011, relatively unchanged from December 31, 2010.
On March 8, 2011, the Company closed the issuance of $400.0 million in aggregate principal amount of 10-year senior unsecured notes with an interest rate of 5.250% per annum yielding 5.279%.
During the first quarter of 2011, the Company generated approximately $5.6 million of net proceeds under its At- the-Market equity distribution program from the issuance of approximately 98,000 shares at an average price of $58.44 per share.
The Company has used and intends to use the proceeds from these capital markets activities to temporarily repay borrowings under its revolving credit facility, to acquire additional properties, to fund development and redevelopment opportunities and for general corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt securities.
During the same period, holders of the Company's 4.125% Exchangeable Senior Debentures due 2026 exchanged approximately $35.9 million aggregate principal amount of such Debentures for approximately $47.6 million in cash and 303,000 shares of common stock. Holders of the Company's Series C Convertible Preferred stock also converted approximately 300,000 shares of such preferred stock with a liquidation preference value of $7.5 million, which comprise approximately 4% of the Series C Convertible Preferred stock outstanding at December 31, 2010, into approximately 159,000 newly issued shares of common stock. In addition, holders of the Company's Series D Convertible Preferred stock converted approximately 143,000 shares of such preferred stock with a liquidation preference value of $3.6 million, which comprise approximately 1% of the Series D Convertible Preferred stock outstanding at December 31, 2010, into approximately 87,000 newly issued shares of common stock.
"As a result of this quarter's performance and lower than projected financing costs, we are raising our 2011 FFO guidance range to between $3.95 and $4.05 per diluted share and unit," added Mr. Stein. "The improved outlook takes into consideration the full impact from the issuance of the $400 million notes and reflects incremental non-reimbursed operating expenses, including personnel costs, required to operate and maintain the growth of our portfolio."
About Digital Realty Trust, Inc.
Digital Realty Trust, Inc. enables customers to deliver critical business applications by providing secure, reliable and cost effective datacenter facilities. Digital Realty Trust's customers include domestic and international companies across multiple industry verticals ranging from information technology and Internet enterprises, to manufacturing and financial services. Digital Realty Trust's 96 properties, excluding two properties held as investments in unconsolidated joint ventures, comprise approximately 16.9 million square feet as of April 28, 2011, including 2.2 million square feet of space held for redevelopment. Digital Realty Trust's portfolio is located in 28 markets throughout Europe, North America and Singapore. Additional information about Digital Realty Trust is included in the Company Overview, which is available on the Investors page of Digital Realty Trust's website at http://www.digitalrealtytrust.com.
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