- 26 July 2012 12:00
Digital Realty Trust, Inc. reports second quarter ffo of $1.09 per share, up 2.8 per cent from first quarter 2012
SYDNEY, July 26, 2012. Digital Realty Trust, Inc. (NYSE: DLR), a leading global provider of data center solutions, today announced financial results for the second quarter of 2012. All per share results are on a diluted share and unit basis (figures in USD).
• Reported FFO of $1.09 per share for the second quarter of 2012, up 6.9% from $1.02 per share for the second quarter of 2011. Excluding certain items that do not represent ongoing expenses or revenue streams in each quarter, second quarter 2012 core FFO was $1.07 per share, up 4.9% from second quarter 2011 core FFO of $1.02 per share;
• Reported net income for the second quarter of 2012 of $54.0 million and net income available to common stockholders of $42.0 million, or $0.38 per share, up 15.2% from $0.33 per share for the second quarter of 2011;
• Completed three property acquisitions during the second quarter, including two income producing properties for approximately $87.5 million and one redevelopment property for approximately $22.3 million;
• Acquired through a joint venture with Savvis a 164,000-square-foot redevelopment property in Hong Kong, representing the Company’s entrance into the Hong Kong market;
• Completed the sale of 7.3 million shares of 6.625% Series F Cumulative Redeemable Preferred Stock, including partial exercise of the underwriters’ over-allotment option, and raising net proceeds of $176.3 million;
• On July 2, 2012, completed a common stock offering of 11,500,000 shares at a price of $72.25 per share, which generated approximately $796.8 million of net proceeds;
• On July 11, 2012, completed the acquisition of the Sentrum Portfolio, a three-property operating data center portfolio, comprising approximately 761,000 square feet in the greater London area for $1.1 billion;
• Repaid in full a $20.5 million mortgage loan on the 800 Central Expressway property in Santa Clara, California in connection with the buy-out of the Company’s joint venture partner at the property for $12.4 million;
• Repaid in full a $25.0 million mortgage loan on the 700/750 Central Expressway office property in Santa Clara, California held in an unconsolidated joint venture in connection with the sale of the property for $47.8 million;
• Repaid in full a $15.9 million mortgage loan on the 1201 Comstock Street property in Santa Clara, California;
• Signed leases during the second quarter of 2012, including colocation space, expected to generate approximately $32.1 million in annualized GAAP rental revenue;
• Commenced leases during the second quarter of 2012, including colocation space, totaling over $30.4 million of annualized GAAP rental revenue; and
• Revising 2012 core FFO guidance range to $4.37 - $4.48 per share, increasing midpoint to $4.43 per share, and updating 2012 guidance assumptions.
Funds from operations (“FFO”) was $136.9 million in the second quarter of 2012, or $1.09 per share, up 2.8% from $1.06 per share in the previous quarter and up 6.9% from $1.02 per share in the second quarter of 2011.
“Adjusting for items that do not represent ongoing expenses or revenue streams, second quarter 2012 core FFO was $1.07 per share, up 0.9% from first quarter 2012 core FFO of $1.06 per share and up 4.9% from second quarter 2011 core FFO of $1.02 per share,” said A. William Stein, Chief Financial Officer and Chief Investment Officer of Digital Realty. “The $0.02 per share decrease in core FFO compared to reported FFO was primarily due to termination fees that were partially offset by transaction and other expenses.”
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 are included as an attachment to this press release.
Net income for the second quarter of 2012 was $54.0 million, compared to $49.3 million for the first quarter of 2012 and $38.2 million for the second quarter of 2011. Net income available to common stockholders in the second quarter of 2012 was $42.0 million, or $0.38 per share, compared to $39.2 million, or $0.36 per share, in the first quarter of 2012, and $32.0 million, or $0.33 per share, in the second quarter of 2011.
The Company reported total operating revenues of $303.7 million in the second quarter of 2012, up 7.3% from $283.1 million in the first quarter of 2012, and up 13.4% from $267.9 million in the second quarter of 2011.
“We are extremely pleased with our performance to date this year. In addition to our solid financial and leasing results, we completed several landmark acquisitions, including the Sentrum Portfolio in London, our first property in Hong Kong with our joint venture partner Savvis, and a major redevelopment property in suburban Chicago,” said Michael F. Foust, Chief Executive Officer of Digital Realty. “We believe that the depth of our team combined with our financial strength and ability to access attractively priced capital to fund our growth are key differentiators for us. These core capabilities along with our focus on delivering flexible, customer driven data center solutions continue to drive value for our shareholders.”
In the second quarter of 2012, Digital Realty and Savvis, a CenturyLink company, acquired a 164,000-square-foot (15,236-square-meter) property in Hong Kong, which is held in an unconsolidated joint venture. The property is located at Tseung Kwan O Industrial Estate in New Territories, approximately 12 miles from downtown Hong Kong. Upon redevelopment, the building will be capable of supporting approximately 5.76 megawatts of IT load capacity, with potential to add up to 2.9 megawatts of additional capacity. In the second quarter of 2012, the Company completed three property acquisitions:
• The Company acquired a fully leased data center facility located in Austin, Texas, totaling approximately 62,000 square feet for a purchase price of $12.5 million. In connection with the acquisition, Digital Realty assumed a $6.7 million secured mortgage loan on the facility.
• The Company acquired a data center facility located in Dallas, Texas, totaling approximately 269,600 square feet for a purchase price of approximately $75 million. The property is approximately 85% leased.
• The Company acquired an approximately 575,000 square foot redevelopment property located in suburban Chicago for a purchase price of approximately $22.3 million.
Subsequent to the end of the quarter, on July 11, 2012, the Company completed the acquisition of a three-property portfolio totaling approximately 761,000 square feet located in the greater London area, referred to as the Sentrum Portfolio. The purchase price was £715.9 million (equivalent to $1.1 billion based on the July 11, 2012 exchange rate of £1.00 to $1.55) (subject to adjustment in limited circumstances and to earn-out payments). The acquisition was funded with proceeds from our follow-on equity offering which closed on July 2, 2012 and borrowings under the global revolving credit facility.
As of July 25, 2012, the Company’s portfolio comprised 108 properties, excluding three properties held in unconsolidated joint ventures, consisting of 103 data center facilities and 5 non-technical buildings totaling approximately 20.8 million net rentable square feet, including 2.3 million square feet of space held for redevelopment. The portfolio is strategically located in 32 key data center markets throughout North America, Europe, Asia and Australia.
Balance Sheet Update
Total assets grew to approximately $6.7 billion at June 30, 2012 from $6.4 billion at March 31, 2012. Total debt increased to $3.4 billion at June 30, 2012 from $3.3 billion at March 31, 2012. Stockholders’ equity was approximately $2.7 billion at June 30, 2012, up slightly from approximately $2.6 billion at March 31, 2012.
On April 5, 2012 and April 18, 2012, the Company completed an underwritten public offering of 7,300,000 shares of its 6.625% Series F Cumulative Redeemable Preferred Stock, par value $0.01 per share, including partial exercise of the underwriters’ over-allotment option, for net proceeds of approximately $176.3 million after deducting underwriting discounts and commissions and offering expenses.
On April 17, 2012, the Company closed a new $750 million U.S. dollar equivalent Senior Unsecured Multicurrency Term Loan. The term loan matures in April 2017. Pricing is based on the Company’s senior unsecured debt ratings and is currently 145 basis points over the applicable index for floating rate advances. Funds have been drawn in U.S, Singapore and Australian dollars, as well as Euro and Pound Sterling denominations with the option to add Hong Kong dollars and Yen upon exercise of the $100 million U.S. dollar equivalent accordion. Covenants are consistent with our global revolving credit facility. Proceeds from the term loan were used to repay amounts outstanding under the global revolving credit facility.
On July 2, 2012, the Company completed an offering of 11,500,000 shares of its common stock, including 1,500,000 shares issued upon exercise of the underwriters' option to purchase additional shares, which was exercised in full, at a price of $72.25 per share, for net proceeds of approximately $796.8 million after deducting underwriting discounts and commissions and offering expenses. Proceeds from the offering were used to fund a portion of the purchase price of the Sentrum Portfolio and repay amounts outstanding under the global revolving credit facility.
2012 Revised Outlook
“The original guidance range of $4.34 to $4.48 per share assumed that items that did not represent ongoing revenue and expense streams would net out to zero over the course of the year. Therefore, core FFO and reported FFO would be essentially identical. As a result of the transaction costs, including debt extinguishment costs associated with the Sentrum acquisition, core FFO will now be significantly greater than reported FFO in 2012,” said Mr. Stein.
FFO per share for the year ending December 31, 2012 is projected to be between $4.15 and $4.25. This guidance represents expected FFO growth of 2.2% to 4.7% over 2011 FFO of $4.06 per share. After adjusting for certain items that do not represent core revenue and expense streams for the full years 2012 and 2011, core FFO per share for the year ending December 31, 2012 is projected to be between $4.37 and $4.48, which represents expected core FFO growth of 6.8% to 9.5% over 2011 core FFO of $4.09 per share.
The 2012 guidance provided by Digital Realty in this press release is based on the following updated assumptions as of July 25, 2012:
• Acquisitions of income producing properties totaling $1.42 – 1.45 billion at an average cap rate of 7% – 8.5%;
• Commencement of leases contributing $130 – $170 million of GAAP rental revenue on an annualized basis;
• Digital Design Services revenue recognized between $7 – $10 million;
• Development and redevelopment capital expenditures of $700 – $900 million;
• Recurring capital expenditures of $40 – $50 million;
• Total G&A expenses of $60 – $62 million;
• Transaction expenses of $6 – $8 million;
• Loss from early extinguishment of debt of $30 – $31 million; and
• FX rates (USD per currency): Euro = 1.23; Pound = 1.53; SGD = 0.77; AUD = 1.00. Investor Conference Call Details
Digital Realty will host a conference call on Wednesday, July 25, 2012 at 10:00 am PT / 1:00 pm ET to discuss its second quarter 2012 financial results and operating performance. The conference call will feature Chief Executive Officer, Michael F. Foust, and Chief Financial Officer and Chief Investment Officer, A. William Stein. To participate in the live call, investors are invited to dial +1 (888) 701-6680 (for domestic callers) or +1 (706) 634-5758 (for international callers) and quote the conference ID # 95546174 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 www.digitalrealty.com. Please go to the website at least 15 minutes early to register and download and install any necessary audio software. If you are unable to listen to the live conference call, a telephone and webcast replay will be available until 11:59 pm ET on Wednesday, August 15, 2012. The telephone replay can be accessed two hours after the call by dialing +1 (855) 859-2056 (for domestic callers) or +1 (404) 537-3406 (for international callers) and using the conference ID # 95546174. The webcast replay can be accessed on Digital Realty’s website immediately after the live call has concluded.
About Digital Realty
Digital Realty Trust, Inc. focuses on delivering customer driven data center solutions by providing secure, reliable and cost effective facilities that meet each customer's unique data center needs. Digital Realty'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's 108 properties, excluding three properties held as investments in unconsolidated joint ventures, comprise approximately 20.8 million square feet as of July 25, 2012, including 2.3 million square feet of space held for redevelopment. Digital Realty's portfolio is located in 32 markets throughout Europe, North America, Asia and Australia. Additional information about Digital Realty is included in the Company Overview, which is available on the Investors page of Digital Realty's website at http://www.digitalrealty.com.
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