Digital Realty Reports Third Quarter 2024 Results.
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 2024. All per share results are presented on a fully diluted basis.
Highlights
- Reported net income available to common stockholders of $0.09 per share in 3Q24, compared to $2.31 in 3Q23
- Reported FFO per share of $1.55 in 3Q24, compared to $1.55 in 3Q23
- Reported Core FFO per share of $1.67 in 3Q24, compared to $1.62 in 3Q23
- Reported rental rate increases on renewal leases of 15.2% on a cash basis in 3Q24
- Signed total bookings during 3Q24 that are expected to generate $521 million of annualized GAAP rental revenue, including a $50 million contribution from the 0–1 megawatt category and $16 million contribution from interconnection
- Reported backlog of $859 million of annualized GAAP base rent at the end of 3Q24
- Raised 2024 Core FFO per share outlook to $6.65 – $6.75
Financial Results
Digital Realty reported revenues of $1.4 billion in the third quarter of 2024, a 5% increase from the previous quarter and a 2% increase from the same quarter last year.
The company delivered net income of $40 million in the third quarter of 2024, and net income available to common stockholders of $41 million, or $0.09 per diluted share, compared to $0.20 per diluted share in the previous quarter and $2.31 per diluted share in the same quarter last year.
Digital Realty generated Adjusted EBITDA of $758 million in the third quarter of 2024, a 4% increase from the previous quarter and a 11% increase over the same quarter last year.
The company reported Funds From Operations (FFO) of $520 million in the third quarter of 2024, or $1.55 per share, compared to $1.57 per share in the previous quarter and $1.55 per share in the same quarter last year.
Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered Core FFO per share of $1.67 in the third quarter of 2024, compared to $1.65 per share in the previous quarter and $1.62 per share in the same quarter last year. Digital Realty delivered Constant-Currency Core FFO per share of $1.66 for the third quarter of 2024 and $4.99 per share for the nine-month period ended September 30, 2024.
Andy Power, Digital Realty President & Chief Executive Officer, said:
In the third quarter, Digital Realty posted over $520 million of new leasing, more than double the record set in the first quarter.
“Record leasing across both the greater-than-a-megawatt and 0-1 MW plus interconnection segments drove the backlog up nearly 60% above our prior record,”
“Our backlog now represents over 20% of annualized in-place data center revenue, enhancing our visibility and positioning Digital Realty for accelerating longer-term growth.”
Leasing Activity
In the third quarter, Digital Realty signed total bookings that are expected to generate $521 million of annualized GAAP rental revenue, including a $50 million contribution from the 0–1 megawatt category and a $16 million contribution from interconnection.
The weighted-average lag between new leases signed during the third quarter of 2024 and the contractual commencement date was 15 months. The backlog of signed-but-not-commenced leases at quarter-end increased to $859 million of annualized GAAP base rent at Digital Realty’s share.
In addition to new leases signed, Digital Realty also signed renewal leases representing $258 million of annualized cash rental revenue during the quarter. Rental rates on renewal leases signed during the third quarter of 2024 increased 15.2% on a cash basis and 27.5% on a GAAP basis.
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New leases signed during the third quarter of 2024 are summarized by region and product as follows:
| Annualized GAAP | |||||||||||||
| Base Rent | Square Feet | GAAP Base Rent | GAAP Base Rent | ||||||||||
| Americas | (in thousands) | (in thousands) | per Square Foot | Megawatts | per Kilowatt | ||||||||
| 0-1 MW | $23,394 | 83 | $282 | 7.5 | $262 | ||||||||
| > 1 MW | 425,641 | 1,102 | 386 | 158.8 | 223 | ||||||||
| Other (1) | 4,684 | 66 | 71 | — | — | ||||||||
| Total | $453,719 | 1,251 | $363 | 166.2 | $225 | ||||||||
| EMEA (2) | |||||||||||||
| 0-1 MW | $20,406 | 66 | $308 | 7.5 | $228 | ||||||||
| > 1 MW | 17,339 | 80 | 217 | 9.0 | 161 | ||||||||
| Other (1) | 168 | 5 | 35 | — | — | ||||||||
| Total | $37,913 | 151 | $252 | 16.5 | $191 | ||||||||
| Asia Pacific (2) | |||||||||||||
| 0-1 MW | $6,563 | 20 | $324 | 1.7 | $315 | ||||||||
| > 1 MW | 6,764 | 55 | 124 | 4.4 | 129 | ||||||||
| Other (1) | 216 | 2 | 87 | — | — | ||||||||
| Total | $13,543 | 77 | $175 | 6.1 | $182 | ||||||||
| All Regions (2) | |||||||||||||
| 0-1 MW | $50,363 | 169 | $297 | 16.6 | $252 | ||||||||
| > 1 MW | 449,744 | 1,236 | 364 | 172.1 | 218 | ||||||||
| Other (1) | 5,068 | 73 | 69 | — | — | ||||||||
| Total | $505,174 | 1,479 | $342 | 188.8 | $221 | ||||||||
| Interconnection | $15,702 | N/A | N/A | N/A | N/A | ||||||||
| Grand Total | $520,876 | 1,479 | $342 | 188.8 | $221 | ||||||||
| 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, 2024. |
Investment Activity
As previously disclosed, in July, Digital Realty closed on the acquisition of two data centers with a combined IT load of 15 megawatts in the Slough Trading Estate for $200 million, marking the Company’s entry into the west London, UK submarket.
During the quarter, Digital Realty acquired the land and shell of one of its existing data centers in Schiphol Rijk, Amsterdam for €43 million, or approximately $48 million. The site comprises approximately 15 megawatts of fully leased capacity and was previously operated pursuant to an operating lease.
Subsequent to quarter end, Digital Realty closed on the acquisition of a 6.7-acre parcel in Richardson, Texas, adjacent to Digital Realty’s existing campus, for approximately $15 million to support the development of more than 80 megawatts of incremental IT capacity.
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Balance Sheet
Digital Realty had approximately $17.0 billion of total debt outstanding as of September 30, 2024, comprised of $16.2 billion of unsecured debt and approximately $0.8 billion of secured debt and other. At the end of the third quarter of 2024, net debt-to-Adjusted EBITDA was 5.4x, debt-plus-preferred-to-total enterprise value was 24.5% and fixed charge coverage was 4.1x.
Digital Realty completed the following financing transactions during the third quarter:
- In July, the company repaid £250 million ($316 million) in aggregate principal amount of its 2.75% senior notes;
- In September, the company issued €850 million aggregate principal amount of 3.875% notes due 2033. Net proceeds were approximately €843 million ($933 million);
- In September, the company repaid €375 million ($415 million) on the Euro term loan;
- In late September, the company amended, extended, and upsized both its existing global revolving credit facility from $3.75 billion to $4.2 billion and its existing Japanese yen-denominated revolving credit facility from ¥33.3 billion (approximately $232 million) to ¥42.5 billion (approximately $297 million); and
- The company also sold 5.2 million shares of common stock under its At-The-Market (ATM) equity issuance program at a weighted average price of $156.19 per share, for net proceeds of approximately $806 million.
Subsequent to quarter end, the company sold an additional 0.4 million shares of common stock under its ATM program at a weighted average price of $160.81 per share, for net proceeds of approximately $62 million.
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2024 Outlook
Digital Realty raised its 2024 Core FFO per share and Constant-Currency Core FFO per share outlook to $6.65 – $6.75. 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 15, 2024 | May 2, 2024 | July 25, 2024 | October 24, 2024 | |||||
| Total revenue | $5.550 – $5.650 billion | $5.550 – $5.650 billion | $5.550 – $5.650 billion | $5.550 – $5.600 billion | |||||
| Net non-cash rent adjustments (1) | ($35 – $40 million) | ($35 – $40 million) | ($35 – $40 million) | ($25 – $30 million) | |||||
| Adjusted EBITDA | $2.800 – $2.900 billion | $2.800 – $2.900 billion | $2.800 – $2.900 billion | $2.925 – $2.975 billion | |||||
| G&A | $450 – $460 million | $450 – $460 million | $450 – $460 million | $455 – $460 million | |||||
| Internal Growth | |||||||||
| Rental rates on renewal leases | |||||||||
| Cash basis | 4.0% – 6.0% | 5.0% – 7.0% | 5.0% – 7.0% | 8.0% – 10.0% | |||||
| GAAP basis | 6.0% – 8.0% | 7.0% – 9.0% | 7.0% – 9.0% | 12.0% – 14.0% | |||||
| Year-end portfolio occupancy | +100 – 200 bps | +100 – 200 bps | +100 – 200 bps | +150 – 200 bps | |||||
| “Same-Capital” cash NOI growth (2) | 2.0% – 3.0% | 2.5% – 3.5% | 2.5% – 3.5% | 2.75% – 3.25% | |||||
| Foreign Exchange Rates | |||||||||
| U.S. Dollar / Pound Sterling | $1.25 – $1.30 | $1.25 – $1.30 | $1.25 – $1.30 | $1.25 – $1.30 | |||||
| U.S. Dollar / Euro | $1.05 – $1.10 | $1.05 – $1.10 | $1.05 – $1.10 | $1.05 – $1.10 | |||||
| External Growth | |||||||||
| Dispositions / Joint Venture Capital | |||||||||
| Dollar volume | $1,000 – $1,500 million | $1,000 – $1,500 million | $1,000 – $1,500 million | $1,000 – $1,500 million | |||||
| Cap rate | 6.0% – 8.0% | 6.0% – 8.0% | 6.0% – 8.0% | 6.0% – 8.0% | |||||
| Development | |||||||||
| CapEx (Net of Partner Contributions) (3) | $2,000 – $2,500 million | $2,000 – $2,500 million | $2,000 – $2,500 million | $2,200 – $2,400 million | |||||
| Average stabilized yields | 10.0%+ | 10.0%+ | 10.0%+ | 10.0%+ | |||||
| Enhancements and other non-recurring CapEx (4) | $15 – $20 million | $15 – $20 million | $15 – $20 million | $25 – $30 million | |||||
| Recurring CapEx + capitalized leasing costs (5) | $260 – $275 million | $260 – $275 million | $260 – $275 million | $260 – $275 million | |||||
| Balance Sheet | |||||||||
| Long-term debt issuance | |||||||||
| Dollar amount | $0 – $1,000 million | $0 – $1,000 million | $0 – $1,000 million | $933 million | |||||
| Pricing | 5.0% – 5.5% | 5.0% – 5.5% | 5.0% – 5.5% | 3.875 % | |||||
| Timing | Mid-Year | Mid-Year | Mid-Year | Sep-24 | |||||
| Net income per diluted share | $1.80 – $1.95 | $1.80 – $1.95 | $1.40 – $1.55 | $1.40 – $1.50 | |||||
| Real estate depreciation and (gain) / loss on sale | $4.40 – $4.40 | $4.40 – $4.40 | $4.75 – $4.75 | $4.75 – $4.75 | |||||
| Funds From Operations / share (NAREIT-Defined) | $6.20 – $6.35 | $6.20 – $6.35 | $6.15 – $6.30 | $6.15 – $6.25 | |||||
| Non-core expenses and revenue streams | $0.40 – $0.40 | $0.40 – $0.40 | $0.45 – $0.45 | $0.50 – $0.50 | |||||
| Core Funds From Operations / share | $6.60 – $6.75 | $6.60 – $6.75 | $6.60 – $6.75 | $6.65 – $6.75 | |||||
| Foreign currency translation adjustments | $0.00 – $0.00 | $0.00 – $0.00 | $0.00 – $0.00 | $0.00 – $0.00 | |||||
| Constant-Currency Core Funds From Operations / share | $6.60 – $6.75 | $6.60 – $6.75 | $6.60 – $6.75 | $6.65 – $6.75 |
| (1) | Net non-cash rent adjustments represent the sum of straight-line rental revenue and straight-line rental 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, 2022 with less than 5% of total rentable square feet under development. It excludes properties that were undergoing, or were expected to undergo, development activities in 2023-2024, properties classified as held for sale, and properties sold or contributed to joint ventures for all periods presented. |
| (3) | Excludes land acquisitions and includes Digital Realty’s share of JV contributions. Figure is net of JV partner contributions. |
| (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. |
| Note: The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. Please see Non-GAAP Financial Measures in this document for further discussion. | |
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Non-GAAP Financial Measures
This document contains non-GAAP financial measures, including FFO, Core FFO, Adjusted FFO, Net Operating Income (NOI), “Same-Capital” Cash NOI and Adjusted EBITDA. A reconciliation from U.S. GAAP net income available to common stockholders to FFO, a reconciliation from FFO to Core FFO, a reconciliation from Core FFO to Adjusted FFO, reconciliation from NOI to Cash NOI, and definitions of FFO, Core FFO, Adjusted FFO, NOI and “Same-Capital” Cash NOI 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.
The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis, where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact net income attributable to common stockholders per diluted share, which is the most directly comparable forward-looking GAAP financial measure. This includes, for example, external growth factors, such as dispositions, and balance sheet items such as debt issuances, that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
Investor Conference Call
Prior to Digital Realty’s investor conference call at 5:00 p.m. ET / 4:00 p.m. CT on October 24, 2024, 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 2024 financial results and operating performance. The conference call will feature President & Chief Executive Officer Andy Power and Chief Financial Officer Matt Mercier.
To participate in the live call, investors are invited to dial +1 (888) 317-6003 (for domestic callers) or +1 (412) 317-6061 (for international callers) and reference the conference ID# 0345410 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 24, 2024. The telephone replay can be accessed by dialing +1 (877) 344-7529 (for domestic callers) or +1 (412) 317-0088 (for international callers) and providing the conference ID# 4823548. The webcast replay can be accessed on Digital Realty’s website.
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Digital Realty Reports Third Quarter 2024 Results. source
