January 08, 2018
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SAN FRANCISCO, Jan. 8, 2018 /PRNewswire/ -- Digital Realty (NYSE:DLR, news, filings), a leading global provider of data center, colocation and interconnection solutions, announced today its initial 2018 outlook along with details for its fourth quarter 2017 earnings release and conference call.
Digital Realty expects to deliver 2018 core FFO per share within a range of $6.45-$6.60, which represents year-over-year growth of approximately 8% from the midpoint of 2017 core FFO per share guidance of $6.00-$6.10.
"The strength of our global, connected, sustainable platform – supported by strong secular demand drivers – provides the framework for our expectation of delivering high-single-digit growth in 2018 core FFO per share," said Chief Executive Officer A. William Stein.
"Digital Realty's comprehensive set of data center solutions provides unparalleled value to our customers, translating to a stable earnings base while also positioning us to achieve accelerating growth upon this base," added Chief Financial Officer Andrew P. Power. "We are committed to delivering sustainable growth for our customers, shareholders and employees, and we expect to generate growth in cash flow on par with earnings growth in 2018 and beyond."
The primary assumptions underlying the 2018 outlook are summarized in the following table.
Top-Line and Cost Structure
January 8, 2018
2018 total revenue
$3.0 - $3.2 billion
2018 net non-cash rent adjustments (1)
($5 - $15 million)
2018 Adjusted EBITDA margin
58.0% - 60.0%
2018 G&A margin
5.5% - 6.5%
Rental rates on renewal leases
Year-end portfolio occupancy
+/- 50 bps
"Same-capital" cash NOI growth (2)
0% - 3.0%
Foreign Exchange Rates
U.S. Dollar / Pound Sterling
$1.28 - $1.32
U.S. Dollar / Euro
$1.10 - $1.20
$0 - $200 million
0.0% - 10.0%
$0.9 - $1.1 billion
Average stabilized yields
10.0% - 12.0%
Enhancements and other non-recurring CapEx (3)
$25 - $30 million
Recurring CapEx + capitalized leasing costs (4)
$160 - $170 million
Long-term debt issuance
$0 - $500 million
3.25% - 4.25%
Net income per diluted share
$1.50 - $1.55
Real estate depreciation and (gain)/loss on sale
$4.90 - $4.95
Funds From Operations / share (NAREIT-Defined)
$6.40 - $6.50
Non-core expense and revenue streams
$0.05 - $0.10
Core Funds From Operations / share
$6.45 - $6.60
(1) Net non-cash rent adjustments represent the sum of straight-line rental revenue, straight-line rent expense as well as the amortization of above- and below-market leases (i.e., FAS 141 adjustments).
(2) The "same-capital" pool includes properties owned as of December 31, 2016 with less than 5% of the total rentable square feet under development. It also excludes properties that were undergoing, or were expected to undergo, development activities in 2017-2018, properties classified as held for sale, and properties sold or contributed to joint ventures for all periods presented.
(3) Other non-recurring CapEx represents costs incurred to enhance the capacity or marketability of operating properties, such as network fiber initiatives and software development costs.
(4) Recurring CapEx represents non-incremental improvements required to maintain current revenues, including second-generation tenant improvements and leasing commissions. Capitalized leasing costs include capitalized leasing compensation as well as capitalized internal leasing commissions.
Fourth Quarter 2017 Earnings Release and Conference Call
Digital Realty plans to release its financial results for the fourth quarter and full-year 2017 after the market closes on Thursday, February 15, 2018. The company will host a conference call to discuss these results at 5:30 p.m. EST / 2:30 p.m. PST on Thursday, February 15, 2018.
To participate in the live call, investors are invited to dial +1 (888) 317-6003 (for domestic callers) or +1 (412) 317-6061 (for international callers) and reference the conference ID # 6927108 at least five minutes prior to start time. A live webcast of the call will be available on the Investors section of Digital Realty's website at http://investor.digitalrealty.com.
Telephone and webcast replays will be available from one hour after the call until March 16, 2018. The telephone replay can be accessed by dialing +1 (877) 344-7529 (for domestic callers) or +1 (412) 317-0088 (for international callers) and using the conference ID # 10114216. The webcast replay can be accessed on Digital Realty's website.
For Additional Information
Andrew P. Power
Chief Financial Officer
John J. Stewart / Maria S. Lukens
About Digital Realty
Digital Realty supports the data center, colocation and interconnection strategies of more than 2,300 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia. Digital Realty's clients include domestic and international companies of all sizes, ranging from cloud and information technology services, to financial services, manufacturing, energy, gaming, life sciences and consumer products customers. https://www.digitalrealty.com/
Safe Harbor Statement
This press release contains forward-looking statements which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially, including statements related to our future growth, financial resources and success, expected demand drivers, foreign currency translation and the company's 2018 revenue, net income, core FFO, FFO and underlying assumptions. These risks and uncertainties include, among others, the following: the impact of current global economic, credit and market conditions; current local economic conditions in the geographies in which we operate; decreases in information technology spending, including as a result of economic slowdowns or recession; adverse economic or real estate developments in our industry or the industry sectors that we sell to (including risks relating to decreasing real estate valuations and impairment charges); our dependence upon significant tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; defaults on or non-renewal of leases by tenants; our failure to obtain necessary debt and equity financing; risks associated with using debt to fund our business activities, including re-financing and interest rate risks, our failure to repay debt when due, adverse changes in our credit ratings or our breach of covenants or other terms contained in our loan facilities and agreements; financial market fluctuations; changes in foreign currency exchange rates; the impact of the United Kingdom's referendum on withdrawal from the European Union on global financial markets and our business; our inability to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; our failure to successfully integrate and operate acquired or developed properties or businesses; the suitability of our properties and data center infrastructure, delays or disruptions in connectivity, failure of our physical and information security infrastructure or services or availability of power; risks related to joint venture investments, including as a result of our lack of control of such investments; delays or unexpected costs in development of properties; decreased rental rates, increased operating costs or increased vacancy rates; increased competition or available supply of data center space; our inability to successfully develop and lease new properties and development space; difficulties in identifying properties to acquire and completing acquisitions; our inability to acquire off-market properties; our inability to comply with the rules and regulations applicable to reporting companies; our failure to maintain our status as a REIT; possible adverse changes to tax laws; restrictions on our ability to engage in certain business activities; environmental uncertainties and risks related to natural disasters; losses in excess of our insurance coverage; changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation; and changes in local, state and federal regulatory requirements, including changes in real estate and zoning laws and increases in real property tax rates. For a further list and description of such risks and uncertainties, see the reports and other filings by the company with the U.S. Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended December 31, 2016, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Funds From Operations (FFO)
We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from real estate transactions, impairment charges, real estate related depreciation and amortization (excluding amortization of deferred financing costs), non-controlling interests in operating partnership and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
Core Funds From Operations
We present core funds from operations, or core FFO, as a supplemental operating measure because, in excluding certain items that do not reflect core revenue or expense streams, it provides a performance measure that, when compared year over year, captures trends in our core business operating performance. We calculate core FFO by adding to or subtracting from FFO (i) termination fees and other non-core revenues, (ii) transaction and integration expenses, (iii) gain (loss) from early extinguishment of debt, (iv) issuance costs associated with redeemed preferred stock, (v) equity in earnings adjustment for non-core items, (vi) severance, equity acceleration, and legal expenses, (vii) bridge facility fees, (viii) loss on currency forwards and (ix) other non-core expense adjustments. Because certain of these adjustments have a real economic impact on our financial condition and results from operations, the utility of core FFO as a measure of our performance is limited. Other REITs may not calculate core FFO in a consistent manner. Accordingly, our core FFO may not be comparable to other REITs' core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
EBITDA and Adjusted EBITDA
We believe that earnings before interest, (gain) loss from early extinguishment of debt, income taxes, depreciation and amortization and impairment of investments in real estate, or EBITDA, and Adjusted EBITDA (as defined below), are useful supplemental performance measures because they allow investors to view our performance without the impact of non-cash depreciation and amortization or the cost of debt and, with respect to Adjusted EBITDA, severance-related expense, equity acceleration, and legal expenses, transaction and integration expenses, (gain) loss on real estate transactions, non-cash (gain) on lease termination, equity in earnings adjustment for non-core items, other non-core expense adjustments, noncontrolling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. Adjusted EBITDA is EBITDA excluding severance-related expense, equity acceleration, and legal expenses, transaction and integration expenses, (gain) loss on real estate transactions, non-cash (gain) on lease termination, equity in earnings adjustment for noncore items, other non-core expense adjustments, non-controlling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. In addition, we believe EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Because EBITDA and Adjusted EBITDA are calculated before recurring cash charges including interest expense and income taxes, exclude capitalized costs, such as leasing commissions, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utility as a measure of our performance is limited. Other REITs may calculate EBITDA and Adjusted EBITDA differently than we do; accordingly, our EBITDA and Adjusted EBITDA may not be comparable to such other REITs' EBITDA and Adjusted EBITDA. Accordingly, EBITDA and Adjusted EBITDA should be considered only as supplements to net income computed in accordance with GAAP as a measure of our financial performance.
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SOURCE Digital Realty