Digital Realty Trust(DLR) - 2024 Q3 - Quarterly Report

Joint Ventures and Partnerships - Company formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses, receiving approximately $231 million in net proceeds and retaining a 20% interest[172] - Company formed a joint venture with Mitsubishi Corporation to develop two data centers in the Dallas metro area, contributing data centers valued at approximately$ 261 million and retaining a 35% interest[174] - Company expanded its joint venture with GI Partners by selling a 75% interest in a third facility in Chicago, contributing the data center at a value of approximately $453 million and retaining a 25% interest[175] - GI Partners increased its ownership in a joint venture from 65% to 80% through a$ 68 million capital contribution, reducing the company's stake to 20%[254] - The company formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses, with an estimated development cost of $3.0 billion for the first phase[256] - The company formed a joint venture with Mitsubishi Corporation to develop two data centers in Dallas, contributing$ 261 million and retaining a 35% interest[258] - The company expanded its joint venture with GI Partners, selling a 75% interest in a third facility for approximately $386 million and retaining a 25% interest[259] Asset Sales and Dispositions - Company sold its interest in four data centers to Brookfield Infrastructure Partners L.P. for approximately$ 271 million, recognizing a total gain on disposition of approximately $203.1 million[173] - Company sold an additional 24.9% interest in a Frankfurt data center to DCREIT for approximately$ 126 million, with DCREIT now holding a 49.9% interest[176] - The company recognized a total gain of $194.2 million from the sale of its interest in four data centers to Brookfield Infrastructure Partners L.P. in January 2024[209] - The company recognized a total gain of$ 172 million from the contribution of a data center to the joint venture with GI Partners in April 2024[212] - 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[257] Debt and Financing Activities - Company issued and sold €850 million aggregate principal amount of 3.875% Guaranteed Notes due 2033, receiving net proceeds of approximately €843 million[178] - Company refinanced its Global Revolving Credit Facility and Yen Revolving Credit Facility, providing for borrowings up to $4.5 billion with maturity on January 24, 2029[179] - Company completed a common stock offering, selling approximately 12.1 million shares at$ 136.66 per share, receiving net proceeds of approximately $1.7 billion[177] - Digital Realty Trust, Inc. generated net proceeds of approximately$ 99 million from the issuance of 0.6 million common shares at an average price of $133.43 per share under the 2023 Sales Agreement[223] - Digital Realty Trust, Inc. generated net proceeds of approximately$ 983 million from the issuance of 6.4 million common shares at an average price of $154.84 per share under the 2024 Sales Agreement Amendment[224] - As of October 30, 2024, approximately$ 0.9 billion remains available for future sales under the 2024 Sales Agreement Amendment[224] - Digital Realty Trust, Inc. received net proceeds of approximately $1.7 billion from the sale of 12.1 million shares of common stock at a purchase price of$ 136.66 per share[226] - The company issued €850 million in 3.875% Guaranteed Notes due 2033, with net proceeds of approximately €843 million ( $933 million) used to repay debt and for general corporate purposes[253] - Net cash provided by financing activities increased by$ 630.2 million, primarily due to higher proceeds from short-term borrowings and issuance of common stock, offset by debt repayments[268] - The company issued approximately 7.0 million shares of common stock under its ATM program, raising $1.1 billion, and 12.1 million shares through an equity offering, raising$ 1.7 billion[268] - Debt repayments included $240 million on the U.S. term loan facility,$ 637 million on Euro notes, $324 million on 2.750% notes, and$ 415 million on Euro Term Loan Facilities[268] Financial Performance and Metrics - Company targets a debt-to-Adjusted EBITDA ratio around 5.5x, fixed charge coverage greater than three times, and floating rate debt at less than 20% of total outstanding debt[170] - Total operating revenues increased by $28.8 million and$ 11.7 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[198] - Stabilized rental and other services revenue decreased by $35.8 million (3.2%) and$ 59.4 million (1.8%) in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[199] - Non-stabilized rental and other services revenue increased by $54.9 million (20.1%) and$ 54.3 million (6.8%) in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[199] - Total stabilized utilities expenses decreased by $58.1 million (17.1%) and$ 148.4 million (15.6%) in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[201][202] - Total non-stabilized utilities expenses increased by $29.7 million (67.7%) and$ 38.5 million (24.6%) in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[201][203] - Total stabilized rental property operating and maintenance expenses (excluding utilities) increased by $16.1 million (9.7%) and$ 34.8 million (6.9%) in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[206] - Total non-stabilized property taxes and insurance decreased by $22.6 million (70.3%) and$ 37.6 million (57.8%) in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[207] - Gain on disposition of properties decreased by $811.2 million and$ 449.7 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[209] - Interest expense increased by $13.0 million and$ 24.0 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[215] - Income tax expense decreased by $4.8 million and$ 5.0 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023[216] - Net cash provided by operating activities for the nine months ended September 30, 2024 increased to $1.49 billion from$ 1.17 billion in 2023[265] - FFO available to common stockholders and unitholders was $520.4 million for Q3 2024, up from$ 481.5 million in Q3 2023[274] - Basic FFO per share and unit was $1.56 for Q3 2024, unchanged from Q3 2023[274] Occupancy and Portfolio Metrics - Company's revenue primarily consists of rental income from data centers, with occupancy rates being a key factor in revenue generation[181] - North America data center occupancy decreased from 85.4% to 83.8% from September 30, 2024, to December 31, 2023, with net rentable square feet increasing slightly from 20,003 to 20,150[182] - Europe data center occupancy dropped from 77.3% to 75.8%, with net rentable square feet decreasing from 9,363 to 8,873 during the same period[182] - Asia Pacific data center occupancy fell from 81.8% to 76.7%, while net rentable square feet remained stable at 1,667 and 1,652 respectively[182] - The company's consolidated portfolio occupancy decreased from 82.6% to 79.8%, with net rentable square feet dropping from 32,644 to 32,203[182] - Average remaining lease term as of September 30, 2024, was approximately five years, reflecting the long-term nature of data center operations[184] - Renewals for leases >1 MW showed a significant rental rate increase of 31.9%, from$ 133 to $175 per square foot[185] - Northern Virginia accounted for 18.5% of total annualized rent as of September 30, 2024, making it the largest contributor among metropolitan areas[189] - The stabilized portfolio increased from 22,600 to 24,642 net rentable square feet, while the non-stabilized portfolio decreased from 9,603 to 8,002 from December 31, 2023, to September 30, 2024[196] Capital Expenditures and Investments - The company expects to incur approximately$ 0.4 billion to $0.6 billion of capital expenditures for consolidated development programs during the remainder of 2024[239] - Cumulative investments in current development projects as of September 30, 2024, totaled$ 5,198,446, with future investments estimated at $4,340,581[243] - Capitalized interest for the nine months ended September 30, 2024 increased to$ 84.4 million from $83.8 million in 2023 due to higher qualifying activities and interest rates[246] - Total capital expenditures (excluding indirect costs) for the nine months ended September 30, 2024 were$ 1.93 billion, down from $2.31 billion in 2023[251] Debt and Interest Rate Exposure - Total outstanding debt as of September 30, 2024 was$ 17.1 billion, consisting of $15.2 billion fixed rate debt and$ 1.9 billion variable rate debt[279] - A 10% increase in interest rates would increase annual interest expense on variable rate debt by $6 million[280] - A 10% decrease in interest rates would decrease the fair value of fixed rate debt by$ 153 million[280] - The company's consolidated debt as of September 30, 2024, was $17.109 billion, with fixed rate debt (including interest rate swaps) at$ 15.187 billion and variable rate debt at $1.922 billion[279] - A 10% increase in interest rates would result in a$ 2 million increase in the fair value of interest rate swaps and a $6 million increase in annual interest expense on variable rate debt not subject to swaps[280] - A 10% decrease in interest rates would lead to a$ 2 million decrease in the fair value of interest rate swaps and a $6 million decrease in annual interest expense on variable rate debt not subject to swaps[280] Foreign Currency and Risk Management - The company's primary currency exposures are to the Euro, Japanese yen, British pound, Singapore dollar, South African rand, and Brazilian real, with limited exposure to the Brazilian real through its share of the Ascenty entity's financial position[282] - The company uses cross-currency interest rate swaps and foreign currency forwards or options to hedge against currency fluctuations, but there is no assurance these will be effective[282] - The company is exposed to foreign currency exchange risks, primarily to the Euro, Japanese yen, British pound, Singapore dollar, South African rand, and Brazilian real, which may affect future costs and cash flows[282] - The company mitigates foreign exchange risk by financing in local currencies and using cross-currency interest rate swaps and foreign currency forwards or options[282] Internal Controls and Legal Proceedings - The company maintains disclosure controls and procedures to ensure timely and accurate reporting of required information, but recognizes that these controls can only provide reasonable assurance of achieving desired objectives[282] - The company's chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level as of the end of the quarter covered by the report[282] - There were no material changes in the company's internal control over financial reporting during its most recent fiscal quarter[282] - The company is not currently a party to any legal proceedings that would have a material adverse effect on its operations or financial position as of September 30, 2024[287] - The company's disclosure controls and procedures are designed to ensure timely and accurate reporting of required information under the Securities Exchange Act of 1934[282][283] - The company's management, including the chief executive officer and chief financial officer, concluded that the disclosure controls and procedures were effective at the reasonable assurance level[282][284] - There have been no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[282][285] - The company has investments in unconsolidated entities, which are accounted for using the equity method of accounting, and its disclosure controls and procedures for these entities are more limited[282][283] - As of September 30, 2024, the company was not a party to any legal proceedings that would have a material adverse effect on its operations or financial position[287] Derivatives and Hedging - The company does not use derivatives for trading or speculative purposes and only enters into contracts with major financial institutions based on their credit ratings and other factors[278]