Digital Realty Trust(US:DLR)2022-05-25 19:12Summary of Digital Realty Trust, Inc. Conference Call Company Overview - Company: Digital Realty Trust, Inc. (NYSE: DLR) and Digital Core REIT - Event: RBC Global Communications Infrastructure Conference - Date: May 25, 2022 - Participants: John Stewart (CEO of Digital Core REIT), Matthew Mercier (SVP of Global Finance & Accounting) Key Points Company Profile and Financial Metrics - Digital Core REIT went public on the Singapore Stock Exchange in December 2021 with a portfolio of 10 core assets in North America, including Northern Virginia, Los Angeles, Silicon Valley, and Toronto [4] - Investors prioritize DPU yield and growth, with a focus on cap rates for potential DPU growth from acquisitions [4] Ownership and Investor Base - Digital Realty holds 35% of Digital Core REIT, with 15% held by retail investors and the remainder by institutions, primarily from North America and Singapore [6] Financial Performance and Guidance - Same-store revenue and NOI growth are expected to reflect built-in rental rate escalators and timing factors, with a faster growth anticipated in cash NOI [8] - Same-store guidance for 2022 is projected at negative 2.5% to 3.5%, but adjusted for constant currency, it improves to approximately negative 1% [21] Contract Structures - Approximately two-thirds of contracts are triple-net, with energy costs passed through to customers, insulating the company from rising energy costs [10] Acquisition Strategy - Digital Core REIT has a right of first refusal (ROFR) on assets Digital Realty wants to sell, providing a significant growth runway [12] - The company is focused on acquiring stabilized income-producing assets, primarily avoiding development projects [14] Market Dynamics and Pricing Trends - Demand for data center space remains strong, with over $100 million in signings in seven of the last eight quarters [18] - Pricing power is improving, particularly in Northern Virginia, where prices have increased by approximately 6% on a like-for-like basis [39] - The company has seen good pricing dynamics in Singapore and parts of EMEA due to tightening supply and demand [40] Capital Recycling and M&A Activity - Digital Realty expects to dispose of $500 million to $1 billion in non-core assets this year, with a focus on partnerships with Digital Core REIT [25] - The acquisition of Teraco in South Africa is underway, expected to close in Q3 2022, enhancing Digital Realty's presence in the African market [28] Interest Rate and Cost Management - The majority of Digital Realty's debt is long-term fixed rate, mitigating the impact of rising interest rates [18] - The company has been able to pass through nearly 90% of power costs to customers, insulating it from recent increases [17] Future Outlook - The company is optimistic about improving same-store results due to enhanced pricing power and leasing efforts [23] - There is potential for higher fixed rent bumps in contracts, reflecting current inflation pressures [46] Conclusion - Digital Realty Trust, Inc. is well-positioned in the data center market with a strong focus on yield-oriented investments, strategic acquisitions, and effective cost management, while navigating challenges such as rising interest rates and energy costs. The company anticipates continued growth driven by strong demand and improved pricing dynamics across its portfolio.