ViktorCap/iStock via Getty Images Co-produced by Austin Rogers We have largely avoided investing in data center REITs, and we admit that we have missed out on a strong rally from this sector over the last decade or so as the amount of digital data stored in the cloud has exploded. The two pure-play data center RETs on the market today, Digital Realty (DLR) and Equinix (EQIX), have massively outperformed the real estate sector (VNQ) over the last ~15 years VAL Digital Realty Trust Inc (DLR) Total Return Equi ...

Summary of Digital Realty Trust, Inc. Conference Call Company Overview - **Company**: Digital Realty Trust, Inc. (NYSE: DLR) - **Industry**: Data Center and Telecommunications Infrastructure Key Points and Arguments Financial Performance and Growth Projections - The company aims to increase its AFFO (Adjusted Funds From Operations) per share growth from 0%-1% in 2020 to mid-single digits by 2025, indicating a strong recovery and growth trajectory [2][3] - Digital Realty has successfully reduced its leverage from 7 times to 5.3 times, enhancing its financial stability and capital access [3][12] - The company anticipates a baseline growth of 5% in 2025, with potential for acceleration due to positive pricing dynamics and lease expirations [5][7] Capital Management and Joint Ventures - Digital Realty has diversified its capital sources and established joint ventures (JVs) to bolster growth, including a significant $7 billion JV with Blackstone covering three markets [3][17] - The company is focused on maintaining bottom-line growth while exploring equity issuance as a means to fund development opportunities [8][11] - The management emphasizes that any equity issuance will not materially impact the ability to generate bottom-line growth [11] Demand and Market Dynamics - The demand environment for data centers is described as robust, driven by traditional workloads and an increasing interest in AI applications [26] - The company reported record leasing signings, with over $400 million in the first half of the year, doubling the previous year's performance [26] - Digital Realty is experiencing positive pricing trends across major markets, with a focus on maintaining its presence in core markets despite land and power constraints [40][42] Operational Considerations - The company is adapting to the unique requirements of AI workloads, which demand higher density and specialized cooling solutions [34][36] - Digital Realty can typically bring a full data center online within 18 to 24 months, depending on site readiness and power availability [39] - The management acknowledges supply chain challenges but asserts that they are well-positioned to manage these through proactive planning and established vendor relationships [47][48] Strategic Focus and Future Outlook - Digital Realty's strategy involves focusing on major global markets to ensure sustainable growth and pricing power, avoiding potential volatility in secondary and tertiary markets [43][50] - The management believes that current constraints in power and land will persist, providing a favorable supply-demand dynamic for the foreseeable future [51] - The company is cautious about potential commoditization in the industry, emphasizing the importance of maintaining a competitive edge in core markets [45] Additional Important Insights - The company has cultivated a diverse range of JV partners, allowing for both financial and operational strategic advantages [20][21] - Digital Realty's historical experience in managing high-density workloads positions it well to meet the evolving demands of hyperscale customers [38] - The management is optimistic about long-term pricing power due to ongoing demand and supply constraints, suggesting a positive outlook for the company's financial performance [51]

Digital Realty Trust, Inc. (NYSE:DLR) Bank of America 2024 Media, Communications & Entertainment Conference September 4, 2024 8:50 AM ET Company Participants Matt Mercier - CFO Conference Call Participants David Barden - Bank of America David Barden Everybody, I'm Dave Barden. I head up Telecommunications and Comm-Infrastructure Research for Bank of America. And I'm here with the Chief Financial Officer of Digital Realty, Matt Mercier. Thank you for joining us, Matt. Matt Mercier Thanks for having me. Quest ...

Andrii Yalanskyi Fixed income is an area in which, far too often, allocation is dictated by category rather than opportunity. There are various fixed income instruments: Treasuries Munis Investment grade bonds Corporate junk bonds Preferred stock ("preferreds"). Many or even most institutions will have strict rules on where they can allocate capital. Some, such as pensions or other highly regulated capital, can only invest in investment grade or treasuries, others can only do bonds. Preferreds are frequentl ...

Shares of Digital Realty (DLR) have soared 11.4% in the year-to-date period compared with the industry's growth of 2.4%. The rising demand for high-performing data centers amid enterprises' growing reliance on technology and acceleration in digital transformation strategies has been one of the key forces driving the performance of data center real estate investment trusts (REITs) like Digital Realty. A solid tenant base assures stable revenues. It also carries out various development and redevelopment activ ...

Company Overview - Digital Realty Trust, Inc. (NYSE:DLR) has shown positive operating performance in recent quarters, with shares increasing by over 42% since February 2023, driven by the rise of Artificial Intelligence (AI) [1][2] - The company is one of the largest REITs in the U.S., with a market value of approximately $50 billion, and operates over 300 data centers globally, serving more than 5,000 customers [3] Financial Performance - Digital Realty's revenues were about $1.36 billion in Q2 2024, showing a 5% year-over-year increase when adjusted for certain effects, while Free Funds From Operations (FFO) amounted to $511 million, reflecting a 9.4% year-over-year increase [5] - The occupancy rate improved to 82.9% at the end of June 2024, up by about 100 basis points compared to the same quarter in 2023, with strong leasing activity contributing to this growth [5] - The backlog of new leasing reached approximately $527 million, with $176 million in new leasing initiated during the last quarter, indicating strong revenue growth potential [5] Industry Outlook - The demand for data centers is expected to remain solid, particularly due to the increasing technological requirements driven by AI, leading to a decline in vacancy rates across the industry [3][4] - Despite positive industry dynamics, Digital Realty faces challenges such as competition from major cloud providers like Amazon, Alphabet, and Microsoft, which are developing their own data centers [4] - Digital Realty's vacancy rate was reported at 17.1% at the end of June 2024, significantly higher than the industry's global vacancy rate of 6.5%, attributed to a higher share of older data centers [4] Investment Considerations - Digital Realty's current valuation is around 21.6x FFO, which is above its historical average of 19.8x and higher than the peer group average of 17x FFO, raising questions about the justification for this premium [5] - The company's quarterly dividend has remained unchanged at $1.22 per share since March 2022, resulting in an annual dividend of $4.88 per share, with a payout ratio of about 73% based on FFO guidance for 2024 [5] - While Digital Realty is in a stronger financial position than in previous years, the current dividend yield of around 3.3% may not be attractive enough for income-oriented investors [6]

AUSTIN, Texas, Aug. 7, 2024 /PRNewswire/ -- Digital Realty (NYSE: DLR), the largest global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, announced today its board of directors has authorized quarterly cash dividends for common and preferred stock for the third quarter of 2024. Common Stock Digital Realty's board of directors authorized a cash dividend of $1.22 per share to common stockholders of record as of the close of business on September 13, 2024.The comm ...

OVERR NDERRATI ogichobanov Co-produced by Austin Rogers Investors are becoming interested in real estate investment trusts ("REITs") again. Since the Federal Reserve began hiking their key policy rate in early 2022, the real estate sector (VNQ) has suffered a multi-year bear market. VAL Vanguard Real Estate ETF (VNQ) Price 89.73 Effective Federal Funds Rate (I:EFFRND) 5.33% 5.33% 112.00 4.80% 104.00 4.00% 96.00 3.20% 89.73 2.40% 1.60% 80.00 72.00 0.80% 64.00 0.00% 56.00 -0.80% 2020 2021 2022 2023 2024 Seeki ...

Joint Ventures and Sales - In January 2024, the company formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses, receiving approximately $231 million in net proceeds and retaining a 20% interest[147]. - The company sold its interest in four data centers to Brookfield for approximately $271 million, recognizing a total gain on disposition of approximately $203.1 million[148]. - In March 2024, a joint venture with Mitsubishi Corporation was formed to develop two pre-leased data centers in Dallas, with a contribution value of approximately $261 million and the company retaining a 35% interest[149]. - The company expanded its joint venture with GI Partners by selling a 75% interest in a facility valued at approximately $453 million, receiving approximately $386 million in net proceeds and recognizing a gain on disposition of approximately $172 million[150]. - An additional 24.9% interest in a Frankfurt data center was sold to DCREIT for approximately $126 million, with DCREIT now holding a 49.9% interest[151]. - The joint venture with GI Partners resulted in a cash capital contribution of $68 million, increasing GI Partners' ownership interest in the joint venture to 80%[203]. - The joint venture with Blackstone Inc. is expected to incur an estimated development cost of $3.0 billion for the first phase, with the company retaining a 20% interest[205]. - The company recognized a total gain of approximately $194.2 million from the sale of four data centers to Brookfield Infrastructure Partners L.P. in January 2024[175]. Financial Performance - The company's revenue primarily consists of rental income from its data center portfolio, with occupancy rates being a key factor for revenue growth[153]. - Total operating revenues decreased by approximately $9.5 million and $17.1 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023[166]. - Stabilized rental and other services revenue decreased by $16.3 million and $23.5 million in the three and six months ended June 30, 2024, primarily due to a decrease in utility reimbursement of $52.6 million and $95.4 million[166]. - New leasing and renewals across all regions contributed an increase of $23.4 million and $49.0 million in stabilized rental revenue for the same periods[166]. - Total operating revenues for the three months ended June 30, 2024, were $1,356,749, a decrease of $9,518 or (0.7)% compared to $1,366,267 in the same period of 2023[167]. - The company reported a net income available to common stockholders of $70.039 million for the three months ended June 30, 2024, compared to $108.003 million for the same period in 2023, representing a decrease of approximately 35.1%[222]. - Funds from Operations (FFO) for the three months ended June 30, 2024, was $168.303 million, compared to $165.843 million for the same period in 2023, reflecting a year-over-year increase of approximately 0.88%[222]. - Basic FFO per share for the three months ended June 30, 2024, was $1.57, slightly up from $1.54 in the same period of 2023, indicating a growth of about 1.94%[222]. Occupancy and Leasing - As of June 30, 2024, the total net rentable square feet was 41,220, with an occupancy rate of 82.9%[154]. - The average remaining lease term was approximately five years, indicating a long-term commitment from customers[155]. - The geographic concentration of total annualized rent as of June 30, 2024, showed Northern Virginia at 18.9% and Chicago at 7.9%[159]. - The company expects average aggregate rental rates on renewed data center leases for 2024 expirations to be positive compared to current rates[156]. Expenses and Operating Costs - Operating expenses are expected to increase as the company continues to expand its data center operations[160]. - Total stabilized utilities expenses decreased by approximately $58.8 million (15.9%) in the three months ended June 30, 2024, compared to the same period in 2023[170]. - Total rental property operating and maintenance expenses (excluding utilities) increased by approximately $18.8 million (5.7%) in the three months ended June 30, 2024, compared to the same period in 2023[172]. - Total property level operating expenses decreased by $43,523 (6.7%) in the three months ended June 30, 2024, compared to the same period in 2023[176]. - Total stabilized property taxes and insurance increased by approximately $9.6 million (39.9%) in the three months ended June 30, 2024, compared to the same period in 2023[172]. Capital Expenditures and Debt - The company expects to incur approximately $0.9 billion to $1.4 billion in capital expenditures for its consolidated development programs during the remainder of 2024[194]. - Total capital expenditures for the six months ended June 30, 2024, were $1,204.4 million, compared to $1,266.6 million for the same period in 2023[198]. - The total outstanding consolidated indebtedness as of June 30, 2024, was $16,438 million, with fixed-rate debt comprising 85.6% of the total[209]. - The effective interest rate as of June 30, 2024, was 2.87%, with fixed-rate debt having an effective interest rate of 2.61%[209]. - The company paid down $240 million on the U.S. term loan facility, resulting in an early extinguishment charge of approximately $1.1 million during the six months ended June 30, 2024[178]. - The company’s ratio of debt to total enterprise value was approximately 24% as of June 30, 2024[210]. Cash and Liquidity - As of June 30, 2024, Digital Realty Trust, Inc. had $2,282.1 million in cash and cash equivalents, excluding $5.2 million of restricted cash[191]. - The company reported a net increase in cash, cash equivalents, and restricted cash of $697,850 for the six months ended June 30, 2024[213]. - As of July 31, 2024, the company had approximately $1.8 billion of borrowings available under its Global Revolving Credit Facilities[202]. - The Global Revolving Credit Facilities provide for borrowings up to $3.9 billion, with an additional $750 million available subject to lender commitments[192]. Interest Rate and Currency Risks - The company utilized interest rate swap agreements to manage exposure to interest rate movements, with fixed rate debt totaling $11.182 billion as of June 30, 2024[225]. - The company expects to mitigate foreign currency exchange risk through local currency financing and cross-currency interest rate swaps[228]. - The company is exposed to foreign currency exchange risks primarily with the Euro, Japanese yen, British pound sterling, Singapore dollar, South African rand, and Brazilian real[228]. - The company mitigates currency fluctuation risks by financing investments in local currencies and using cross-currency interest rate swaps[228]. - The company's analysis indicates that a 10% increase in interest rates would lead to an increase of $3 million in annual interest expense on variable rate debt not subject to swaps[226]. - The effectiveness of hedging strategies, such as foreign currency forwards or options, cannot be guaranteed[228]. - Changes in foreign currency relations to the U.S. dollar may impact revenues, operating margins, and stockholders' equity[228]. - The company's exposure to the Brazilian real is limited to its share of the Ascenty entity's operations[228].

The company registered operating revenues of $1.36 billion in the second quarter, which missed the Zacks Consensus Estimate of $1.38 billion.DLR also reported "Same-Capital" cash net operating income (NOI) growth of 2%. Quarter in Detail In the second quarter, rental property operating expenses increased by 5.7% to $237.6 million, property taxes rose by 6.2% to $49.6 million, and interest expenses jumped by 3.3% to $114.7 million. As of Jun 30, 2024, this data center REIT had $16.3 billion of total debt out ...