Digital Realty Trust(US:DLR)2024-10-25 01:37Financial Data and Key Metrics Changes - New leasing volume reached $521 million, surpassing previous records and expectations, with a backlog of nearly $860 million in signed but not commenced leases [3][4][17] - Core FFO was reported at $1.67 per share, with data center revenue growing by 7.5% year-over-year [20][21] - Adjusted EBITDA increased by 11% year-over-year, driven by improved pricing and higher revenues [21][25] Business Line Data and Key Metrics Changes - Greater than 1 megawatt leasing volume was a significant driver, with bookings in North America up more than 75% from the previous record [7][16] - The 0-1 megawatt interconnection segment saw record bookings of over $66 million, a 20% increase from the prior record [8][9] - Cash renewal spreads increased by 15.2% on a cash basis, with overall renewal spreads at 10.5% year-to-date [18][19] Market Data and Key Metrics Changes - The development pipeline increased by nearly 50% to 644 megawatts under construction, with 74% pre-leased at an average expected yield of 12% [4][23] - The backlog now represents 20% of the quarter's annualized data center revenues, with significant future commencements scheduled [17][25] Company Strategy and Development Direction - The company is focused on capitalizing on strong demand for data center capacity, particularly in core markets, and enhancing its value proposition [5][6] - Digital Realty aims to maintain a robust land bank to support over 3 gigawatts of incremental development [6][10] - The company continues to lead in ESG initiatives, issuing a EUR850 million green bond and achieving various sustainability certifications [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand for data center capacity, driven by cloud and digital transformation trends [5][11] - The company anticipates continued strong performance in the fourth quarter, although it may not match the record set in Q3 due to seasonal factors [28][44] - Future growth is expected to accelerate beyond 2024 levels, supported by a strong backlog and favorable market conditions [25][28] Other Important Information - The company has strengthened its balance sheet, raising over $800 million in equity and maintaining nearly $5 billion in total liquidity [24] - The weighted average interest rate on debt is 2.8%, with 89% of net debt being fixed rate [24] Q&A Session Summary Question: Demand Risks and Power Readiness - Management indicated that while there may be some pull forward in demand, significant capacity remains available for future leasing [30][31] Question: AI Use Cases and Build Costs - Approximately 50% of bookings were attributed to AI use cases, with build costs experiencing inflationary trends but remaining manageable relative to rental rate increases [34][35] Question: New Normal for Bookings - Management highlighted that the current demand fundamentals remain strong, with a backlog that supports future growth [41][44] Question: Future CapEx Levels - CapEx for 2024 is expected to remain within the current range, with a focus on maintaining leverage targets [46][48] Question: Large Package Deals - Management noted that while large package deals are episodic, they contribute positively to cash mark-to-market rates [50][51] Question: Power Delivery and Capacity Blocks - Updates on power delivery indicated that significant capacity blocks are nearing completion, with a long runway for growth [54][55] Question: Enterprise Segment Performance - The enterprise segment saw improved bookings due to a strong value proposition and effective go-to-market strategies [71][72]