Digital Realty Trust(DLR) - 2023 Q1 - Quarterly Report

Financing and Debt Management - The company completed a $740 million senior unsecured term loan facility in January 2023[136] - The company has $1.1 billion available under its Global Revolving Credit Facilities as of May 1, 2023, with a total capacity of $3.9 billion[196][197] - Outstanding consolidated debt as of March 31, 2023, totaled $18.0 billion, with 81.1% being fixed-rate debt and 18.9% variable-rate debt[201] - Total outstanding debt as of March 31, 2023 was $18.0 billion, consisting of $14.6 billion in fixed rate debt (including interest rate swaps) and $3.4 billion in variable rate debt[222] - A 10% increase in interest rates would decrease the fair value of fixed rate debt by $265.4 million and increase annual interest expense on variable rate debt by $17.0 million[223] - A 10% decrease in interest rates would increase the fair value of fixed rate debt by $278.5 million and decrease annual interest expense on variable rate debt by $17.0 million[223] - Teraco secured a syndicated loan facility worth R11.8 billion ($681 million) in December 2022, with R5.7 billion ($329 million) allocated for growth and R6.1 billion ($329 million) for refinancing existing debt[199] - The company's pro-rata share of secured debt from unconsolidated entities was approximately $1,123.4 million as of March 31, 2023[203] Occupancy Rates - North America occupancy rate decreased from 86.3% in December 2022 to 84.8% in March 2023[138] - Europe occupancy rate decreased from 79.3% in December 2022 to 77.7% in March 2023[138] - Asia Pacific occupancy rate slightly decreased from 75.9% in December 2022 to 75.6% in March 2023[138] - Africa occupancy rate increased from 70.2% in December 2022 to 74.9% in March 2023[138] - Consolidated portfolio occupancy rate decreased from 83.5% in December 2022 to 82.3% in March 2023[138] - Managed Unconsolidated Portfolio occupancy rate decreased from 98.4% in December 2022 to 97.5% in March 2023[138] - Non-Managed Unconsolidated Portfolio occupancy rate decreased from 87.1% in December 2022 to 86.1% in March 2023[138] - Total portfolio occupancy rate decreased from 84.7% in December 2022 to 83.5% in March 2023[138] Revenue and Expenses - Total operating revenues increased by 18.8% to $1.34 billion in Q1 2023 compared to Q1 2022[155] - Stabilized rental and other services revenue increased by 11.4% to $1.06 billion in Q1 2023[155] - Non-stabilized rental and other services revenue increased by 59.6% to $267.7 million in Q1 2023[155] - Total utilities expenses increased by 43.6% to $346.4 million in Q1 2023[158] - Total property level operating expenses increased by 26.8% to $616.0 million in Q1 2023[158] - Depreciation and amortization increased by $39.1 million (10.2%) to $421.2 million in Q1 2023 compared to Q1 2022[166] - Total operating expenses rose by $175.3 million (17.8%) to $1.16 billion in Q1 2023[166] - Interest expense increased by $35.5 million in Q1 2023, driven by new debt issuances and higher interest rates[170] - Income tax expense increased by $8.2 million in Q1 2023 due to acquisitions and foreign jurisdiction impacts[171] - Loss from early extinguishment of debt decreased by $51.1 million in Q1 2023 compared to Q1 2022[169] Leasing and Rental Rates - The average remaining lease term as of March 31, 2023, was approximately five years[140] - Renewals signed for spaces 0-1 MW increased rental rates by 5.1% to $222 per square foot[141] - Renewals signed for spaces >1 MW increased rental rates by 11.8% to $152 per square foot[141] - New leases signed for spaces 0-1 MW achieved rental rates of $239 per square foot[141] - Northern Virginia accounted for 17.9% of total annualized rent as of March 31, 2023[146] - The aggregate amount of abatements for Q1 2023 was approximately $31.0 million[146] Capital Expenditures and Development - The company expects $1.7 billion to $1.9 billion in capital expenditures for development programs in 2023[186] - Total construction in progress and land held for future development amounted to $8.46 billion as of March 31, 2023[189] - Data center construction includes 8.8 million square feet of Turn Key Flex® and Powered Base Building® products, expected to be delivered within 12 months[190] - Capital expenditures for development projects increased to $644.9 million in Q1 2023, up from $430.9 million in Q1 2022, reflecting a 49.7% year-over-year growth[191] - Total capital expenditures (excluding indirect costs) reached $688.2 million in Q1 2023, a 42.4% increase compared to $483.1 million in Q1 2022[191] - Capitalized interest for Q1 2023 was $26.8 million, up 81.1% from $14.8 million in Q1 2022, driven by increased qualifying activities[192] Cash Flow and Financial Position - As of March 31, 2023, the company had $131.4 million in cash and cash equivalents, excluding $10.2 million in restricted cash[184] - Net cash provided by operating activities increased by 25.9% to $349.7 million in Q1 2023, compared to $277.7 million in Q1 2022[206] - Net cash used in investing activities rose to $749.0 million in Q1 2023, up 4.2% from $719.1 million in Q1 2022, primarily due to increased spending on development projects[206][209] - The company's debt-to-total enterprise value ratio was approximately 37% as of March 31, 2023, based on a closing stock price of $98.31[201] Funds from Operations (FFO) - FFO (Funds from Operations) for Q1 2023 was $484.7 million, compared to $465.4 million in Q1 2022, representing a 4.1% year-over-year increase[215] - Basic FFO per share and unit for Q1 2023 was $1.63, up from $1.60 in Q1 2022[215] - Diluted FFO per share and unit for Q1 2023 was $1.60, unchanged from Q1 2022[215] - Real estate related depreciation and amortization increased to $412.2 million in Q1 2023 from $374.2 million in Q1 2022, a 10.2% increase[215][217] Foreign Currency and Risk Management - The company has foreign currency exposure primarily to the Euro, Japanese yen, British pound sterling, Singapore dollar and South African rand[224] - The company mitigates foreign exchange risk by financing investments in local currencies and using hedging instruments like foreign currency forwards and options[224] - The company is exposed to foreign currency exchange risk, primarily to the Euro, Japanese yen, British pound sterling, Singapore dollar, and South African rand, with limited exposure to the Brazilian real[224] - The company mitigates currency fluctuation risks by financing investments in local currencies and using foreign currency forwards or options, though effectiveness is not guaranteed[224] - Changes in foreign currency exchange rates may impact the company's revenues, operating margins, distributions, and the book value of assets and stockholders' equity[224] Disclosure Controls and Procedures - Disclosure controls and procedures were deemed effective by management as of the end of Q1 2023[226][230] - The company maintains disclosure controls and procedures to ensure timely and accurate reporting under the Securities Exchange Act of 1934[225] - The company's management evaluates the cost-benefit relationship of controls and procedures, recognizing that they provide only reasonable assurance of achieving control objectives[225] - The company has investments in unconsolidated entities accounted for using the equity method, with limited disclosure controls compared to consolidated subsidiaries[225] - The company's chief executive officer and chief financial officer concluded that disclosure controls and procedures were effective at the reasonable assurance level[226] - No material changes in the company's internal control over financial reporting occurred during the most recent fiscal quarter[227] - The Operating Partnership also maintains disclosure controls and procedures similar to the company, with investments in unconsolidated entities accounted for using the equity method[229] - The Operating Partnership's chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level[230] Equity and Unconsolidated Entities - Equity in earnings of unconsolidated entities decreased by $46.1 million in Q1 2023 due to foreign exchange remeasurement of debt[167] - The company has investments in unconsolidated entities accounted for using the equity method, with limited disclosure controls compared to consolidated subsidiaries[225] - The Operating Partnership also maintains disclosure controls and procedures similar to the company, with investments in unconsolidated entities accounted for using the equity method[229]