Digital Realty Trust, Inc. · NYSE:DLR
Digital Realty Trust — Q2 2014 Earnings Presentation
23 slides from Digital Realty Trust's earnings presentation, Jul 29, 2014
Slide 1: Stable Conditions
Stable Conditions 29 July 2014 July 29, 2014
Slide 2: The Way Forward: 120-Day Top Priorities Progress Report
The Way Forward 120-Day Top Priorities Progress Report WE SAID… WE DID… • Lease-up existing inventory and improve ROIC • Improved ROIC 20 bps year-to-date • Align our leasing efforts and sales incentive • Rolled out new sales comp plan in January 2014 program to bring inventory back into equilibrium
Slide 3: Macro Dashboard
Macro Dashboard Relatively Benign Outlook 1Q14 Call Current Better / 2015E 2016E May 6, 2014 July 25, 2014 Worse Global GDP Growth Forecast (1) 2014E: 2.8% 2014E: 2.5% q 3.1% 3.2% Macroeconomic U.S. GDP Growth Forecast (2) 2014E: 2.7% 2014E: 1.7% q 3.0% 3.0% U.S. Unemployment Rate (2) 6.7% 6.2% q 5.
Slide 4: Investment Strategy
Investment Strategy Improve ROIC by Pruning the Portfolio Non-Core Assets Non-Core Markets Under-Performers At-Risk Properties 4
Slide 5: Sustained Leasing Momentum
Sustained Leasing Momentum Consistent Execution in Absorbing Inventory Annualized GAAP Annualized GAAP Type of Space Total s.f. Signed(1) Base Rent / s.f.(2) Base Rent(2) Turn-Key Flex® 182,598 $150 $27.3 million ® Powered Base Building - - - Custom Solutions - - - Colocation 26,899 $211 $5.7 millio
Slide 6: Healthy Renewal Economics
Healthy Renewal Economics (1) Positive Cash Re-Leasing Spreads TKF ® PBB ® Total Datacenter • Signed renewal leases representing $6.9 million 12% of annualized GAAP rental revenue 10.5% 9.7% • Rental rates on renewals increased by 6% on a cash basis and almost 10% on a GAAP basis for total data cent
Slide 7: Strong Start to the Year
Strong Start to the Year Low Face Rate YTD, Albeit Due to Market Mix GAAP Annualized Base Rent(1) $ in millions TKF PBB Custom Solutions DC Master Lease Colo Non-Tech $200 $161 $150 $137 $112 $112 $106 $100 $82 $64 $56 $50 $0 (2) 2007 2008 2009 2010 2011 2012 2013 2014 YTD TKF Rates / s.f. - Global
Slide 8: Recurring Revenue Model
Recurring Revenue Model Healthy Average Lease Term, Any Way You Slice It • 92% leased real estate portfolio(1) • 2.5% - 3% contractual annual rent bumps(2) • Seven-year average remaining lease term(3) • < 10% of leases expiring in any given year(3) In-Place 2Q14 Leasing Activity Weighted-Average Wei
Slide 9: Signing Quarter Lag Largely Due to Future Deliveries
Lag Largely Due to Future Deliveries Seven-Month Sign-to-Commencement Gap in 2Q14(1) $ in millions Expected Commencement Quarter (2) 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 2016+ Acquired & Pre $66.8 $20.9 $10.4 $13.8 $.4 $7.3 $.2 $2.5 $1.3 $1.0 $.0 $.0 $
Slide 10: Significant Absorption of Available Inventory
Significant Absorption of Available Inventory 25% Reduction Since Investor Day in megawatts Investor Day 6/30/2014 12 8 4 - Boston Chicago Dallas Houston N Virginia NY Metro Phoenix Silicon Valley 10
Slide 11: 1Q14 U.S. Major Market Data Center Supply
1Q14 U.S. Major Market Data Center Supply (1) Healthy Demand, but Northern Virginia Stands Out Current Supply New Construction Sublease Availablility DLR Inventory in megawatts 80 67 60 44 40 28 24 17 18 20 13 10 - Boston Chicago Dallas Houston N Virginia NY Metro Phoenix Silicon Valley 1) Based on
Slide 12: 2Q14 U.S. Major Market Data Center Supply
2Q14 U.S. Major Market Data Center Supply (1) New Starts in Dallas & Houston; NoVa Still a Focus Current Supply New Construction Sublease Availablility DLR Inventory in megawatts 80 63 60 54 40 33 28 24 22 16 20 10 - Boston Chicago Dallas Houston N Virginia NY Metro Phoenix Silicon Valley 1) Based o
Slide 13: Credit Metrics Compare Favorably to REIT Peers
Credit Metrics Compare Favorably to REIT Peers Leverage is Conservative at 5.1x Net Debt / LQA Adjusted EBITDA(1) Net Debt + Preferred / LQA Adjusted EBITDA(1) 8.0x 7.2x 7.1x 8.0x 7.3x 7.2x 7.1x 6.3x 5.8x 5.7x 5.6x 5.7x 5.6x 6.0x 5.4x 5.1x 6.0x 5.4x 4.0x 4.0x 2.0x 2.0x 0.0x (2) (2) (2) (2) 0.0x (2)
Slide 14: Credit Spread Tightens
Credit Spread Tightens Reflection of Stable Conditions & Execution Strategy Basis points Spread between DLR 2022 Notes and REIT BBB 10yr Bond Rates 120 100 80 60 40 Jul-13 Aug-13 Oct-13 Nov-13 Jan-14 Feb-14 Apr-14 May-14 Jul-14 14
Slide 15: Contractual NOI Step Function
Contractual NOI Step Function (1)(2) Growing NOI Embedded in Lease Signings $ in millions $1,103 $1,100 $1,055 $48 $1,050 $21 $8 $7 $999 $25 $1,000 $5 $950 $900 2Q14 2Q14-4Q14 2Q14 2Q14 leases 3Q14-4Q14 3Q14-4Q14 4Q14 2015+ leasing 2015+ Annualized NOI, dispositions + unconsolidated commenced leasin
Slide 16: Summary
Summary Focus on Top Priorities Drives Results • Signed $35 million of new leasing, including a $5.7 million mid-market contribution; • Leased nine megawatts of existing inventory, with 4.5 megawatts of positive net absorption; • Achieved our full-year speculative leasing target by mid-July; • Occup
Slide 17: Appendix
Appendix 17
Slide 18: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures The information included in this presentation contains certain non-GAAP financial measures that management believes are helpful in understanding our business, as further described below. Our definition and calculation of non-GAAP financial measures may diff
Slide 19: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) AND ADJUSTED EBITDA We believe that earnings before interest expense, income taxes, depreciation and amortization, or EBITDA and Adjusted EBITDA (as defined below), are useful supplemen
Slide 20: Reconciliation of Non-GAAP Items 1Q14
Reconciliation of Non-GAAP Items 1Q14 To Their Closest GAAP Equivalent Digital Realty Trust, Inc. and Subsidiaries Three Months Ended Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO) March 31, 2014 (in thousands, except per share and unit data) (unaudited)
Slide 21: Reconciliation of Non-GAAP Items 2Q14
Reconciliation of Non-GAAP Items 2Q14 To Their Closest GAAP Equivalent Digital Realty Trust, Inc. and Subsidiaries Three Months Ended Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO) June 30, 2014 (in thousands, except per share and unit data) (unaudited)
Slide 22: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items To Their Closest GAAP Equivalent Digital Realty Trust, Inc. and Subsidiaries A reconciliation of the range of 2014 projected net income to projected FFO and core FFO follows: Reconciliation of Operating Income to Net Operating Income (NOI) (unaudited, in thousands) T
Slide 23: Forward-Looking Statements
Forward-Looking Statements The information included in this presentation contains forward-looking statements. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. Such forward-looking statements include statements relating to