SAN FRANCISCO, Jan. 5, 2015 /PRNewswire/ -- Digital Realty Trust, Inc. (NYSE: DLR), a leading global provider of data center solutions, announced today preliminary leasing results for the fourth quarter of 2014, initial guidance for 2015, and details for its fourth quarter 2014 earnings release and conference call.
Leasing Activity
Digital Realty signed new leases totaling over $45 million of annualized GAAP rental revenue during the fourth quarter, bringing the full-year total for 2014 to over $155 million. The weighted-average lag between leases signed during the fourth quarter and the contractual commencement date was a little over five months, and the weighted-average lease term was a little over eight years, based on preliminary leasing data.
2015 Outlook
Digital Realty also provided initial 2015 core FFO per share guidance within a range of $5.00-$5.10, which represents an increase of approximately 1%-4% over full-year 2014 core FFO per share guidance of $4.90-$4.95. This outlook reflects dilution from the company's capital-recycling program, which is expected to reduce core FFO per share by approximately 2% in 2015. Headwinds from foreign currency translation are expected to represent an additional drag of a little over 1%. The remaining assumptions underlying the 2015 outlook are summarized in the table below.
As of January 5, 2015 | ||
Internal Growth | ||
Rental rates on renewal leases | ||
Cash basis | Slightly positive | |
GAAP basis | Up double digits | |
Year-end portfolio occupancy | 93.0% - 94.0% | |
"Same-capital" cash NOI growth (1) | 2.0% - 4.0% | |
Operating margin | 72.5% - 73.5% | |
Incremental revenue from speculative leasing (2) | $25 - $30 million | |
Overhead load (3) | 80 - 90 bps on total assets | |
External Growth | ||
Acquisitions | ||
Dollar volume | $0 - $200 million | |
Cap rate | 7.5% - 8.5% | |
Dispositions | ||
Dollar volume | $175 - $400 million | |
Cap rate | 0.0% - 10.0% | |
Joint ventures | ||
Dollar volume | $0 - $150 million | |
Cap rate | 6.75% - 7.25% | |
Development | ||
CapEx | $750 - $850 million | |
Average stabilized yields | 10.0% - 12.0% | |
Enhancements and other non-recurring CapEx (4) | $20 - $25 million | |
Recurring CapEx and capitalized leasing costs (5) | $100 - $110 million | |
Balance Sheet | ||
Long-term debt issuance | ||
Size | $300 - $700 million | |
Pricing | 4.50% - 5.50% | |
Timing | Early-to-mid 2015 | |
Core Funds From Operations / Share | $5.00 - $5.10 | |
1. | The "same-capital" pool includes properties owned as of December 31, 2013 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 2014-2015. NOI is defined as rental revenue and tenant reimbursement revenue less rental property operating and maintenance expenses, property taxes and insurance expenses (as reflected in the statement of operations), and cash NOI is NOI less straight-line rents and above- and below-market rent amortization. |
2. | Incremental revenue from speculative leasing represents revenue expected to be recognized in the current year from leases that have not yet been signed. |
3. | Overhead load is defined as general & administrative expense divided by total assets. |
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. Capitalized leasing costs include capitalized leasing compensation as well as capitalized internal leasing commissions. |
Fourth Quarter 2014 Earnings Release and Conference Call
Digital Realty plans to release its financial results for the fourth quarter and full-year 2014 after the market closes on Thursday, February 12, 2015. The company will host a conference call to discuss these results at 5:30 p.m. EST / 2:30 p.m. PST on Thursday, February 12, 2015.
To participate in the live call, investors are invited to dial +1 (866) 737-5498 (for domestic callers) or +1 (412) 902-6526 (for international callers) 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 http://investor.digitalrealty.com.
Telephone and webcast replays will be available one hour after the call until 9:00 a.m. EST on March 12, 2015. The telephone replay can be accessed by dialing +1 (877) 344-7529 (for domestic callers) or +1 (412) 317-0088 (for international callers) and using the conference ID # 10057687. The webcast replay can be accessed on Digital Realty's website.
Contact Information
A. William Stein | John J. Stewart |
Chief Executive Officer and | Senior Vice President |
Chief Financial Officer | Investor Relations |
Digital Realty Trust, Inc. | Digital Realty Trust, Inc. |
+1 (415) 738-6500 | +1 (415) 738-6500 |
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, including Funds From Operations, or FFO, and core FFO. A reconciliation of the range of 2015 projected net income to projected FFO and core FFO follows:
Low - High | |
Net income available to common stockholders per diluted share | $0.90 – 1.00 |
Add: | |
Real estate depreciation and amortization | $4.05 |
Projected FFO per diluted share | $4.95 – 5.05 |
Adjustments for items that do not represent core expenses and revenue streams | $0.05 |
Projected core FFO per diluted share | $5.00 – 5.10 |
About Digital Realty
Digital Realty Trust, Inc. supports the data center and colocation strategies of more than 600 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia. Digital Realty's clients include domestic and international companies of all sizes, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences and consumer products. www.digitalrealty.com
Additional information about Digital Realty is included in the Company Overview, available on the Investors page of Digital Realty's website at www.digitalrealty.com. The Company Overview is updated periodically, and may disclose material information and updates. To receive e-mail alerts when the Company Overview is updated, please visit the Investors page of Digital Realty's website.
Safe Harbor Statement
This press release contains forward-looking statements which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially, including statements related to rent from leases that have been signed but have not yet commenced and other contracted rent to be received in future periods; weighted-average lag between lease signings and commencements, and estimated lease commencements, which may be subject to construction delays or other events, including severe weather and other events outside of our control, that cause our estimated commencement dates to be delayed; lease terms; expectations regarding the company's future growth, financial resources and success; and the company's 2015 net income, core FFO and FFO guidance and underlying assumptions. These risks and uncertainties include, among others, the following: the impact of current global economic, credit and market conditions; current local economic conditions in our geographic markets; decreases in information technology spending, including as a result of economic slowdowns or recession; 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); our dependence upon significant tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; defaults on or non-renewal of leases by tenants; our failure to obtain necessary debt and equity financing; 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; financial market fluctuations; changes in foreign currency exchange rates; our inability to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; our failure to successfully integrate and operate acquired or developed properties or businesses; the suitability of our properties and data center infrastructure, delays or disruptions in connectivity, failure of our physical infrastructure or services or availability of power; risks related to joint venture investments, including as a result of our lack of control of such investments; delays or unexpected costs in development of properties; decreased rental rates, increased operating costs or increased vacancy rates; increased competition or available supply of data center space; our inability to successfully develop and lease new properties and development space; difficulties in identifying properties to acquire and completing acquisitions; our inability to acquire off-market properties; our inability to comply with the rules and regulations applicable to reporting companies; our failure to maintain our status as a REIT; possible adverse changes to tax laws; restrictions on our ability to engage in certain business activities; environmental uncertainties and risks related to natural disasters; losses in excess of our insurance coverage; changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation; and changes in local, state and federal regulatory requirements, including changes in real estate and zoning laws and increases in real property tax rates. For a further list and description of such risks and uncertainties, see the reports and other filings by the company with the U.S. Securities and Exchange Commission, including the company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2013 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Funds From Operations
Digital Realty calculates Funds From Operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) available to common stockholders (computed in accordance with U.S. GAAP), excluding gains (or losses) from sales of property, impairment charges, real estate related depreciation and amortization (excluding amortization of deferred financing costs) 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, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. Digital Realty also believes 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 properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, 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 such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income computed in accordance with U.S. GAAP as a measure of our performance.
Core Funds From Operations
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) significant transaction expenses, (iii) loss from early extinguishment of debt, (iv) costs on redemption of preferred stock, (v) significant property tax adjustments, net and (vi) 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 not calculate core FFO in a consistent manner. 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.
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SOURCE Digital Realty Trust, Inc.
