SAN FRANCISCO—Digital Realty Trust, Inc. announced today financial results for the first quarter of 2014, stating that were up 3% over the previous quarter, and 9% compared to the same period last year.

All per share results are shown on a diluted share and unit basis. The firm also executed leases totaling $47 million of annualized GAAP rental revenue, including a $12 million direct lease with a former sub-tenant.

 

Highlights

    –  Reported FFO per share of $1.22 in 1Q14, up 5% from $1.16 in 1Q13;
    –  Reported core FFO per share of $1.28 in 1Q14, up 8% from $1.18 in 1Q13;
    –  Signed leases during 1Q14 expected to generate $47 million in annualized
        GAAP rental revenue (including a direct lease with a former sub-tenant
        representing approximately $12 million of annualized GAAP rental
        revenue);
    –  Contributed a fully-leased, 108,000 square foot data center located in
        Somerset, NJ to the existing Digital Realty / Prudential Real Estate
        Investors joint venture at a valuation of approximately $40 million,
        representing a 7.1% cap rate (including debt prepayment penalty as well
        as closing costs);
    –  Completed the sale of 14.6 million shares of 7.375% Series H Cumulative
        Redeemable Preferred  Stock, including partial exercise of the
        underwriters’ over-allotment option, raising net proceeds of $353
        million;
    –  Closed a £300 million 9.5-year senior unsecured notes offering with a
        coupon of 4.75% per annum; and
    –  Raised 2014 core FFO per share outlook to $4.80-$4.90 from the prior
        range of $4.75-$4.90.

 

Financial Results

Revenues were $391 million for the first quarter, a 3% increase over the previous quarter and a 9% increase over the same quarter last year.

Adjusted EBITDA was $234 million for the first quarter, a 3% increase over the previous quarter and a 9% increase over the same quarter last year.

Funds from operations (“FFO”) on a diluted basis was $168 million in the first quarter of 2014, or $1.22 per share, compared to $1.26 per share in the fourth quarter of 2013 and $1.16 per share in the first quarter of 2013.

First quarter 2014 results include a severance charge of approximately $12 million, or $0.09 per share, related to the departure of the company’s former chief executive officer.

Excluding the severance charge and certain items that do not represent core expenses or revenue streams, first quarter 2014 core FFO was $1.28 per share compared to $1.26 per share in the fourth quarter of 2013 and $1.18 per share in the first quarter of 2013.

Net income for the first quarter of 2014 was $47 million, and net income available to common stockholders was $34 million, or $0.26 per diluted share, compared to $0.33 per diluted share in the fourth quarter of 2013 and $0.34 per diluted share in the first quarter of 2013.

Leasing Activity

“We signed new leases totaling $47 million of annualized GAAP rental revenue, including a $12 million direct lease with a former sub-tenant, during what is typically a seasonally-slow leasing quarter,” commented Interim CEO Bill Stein.  “Our mid-market initiative continues to gain traction, and we signed over $4 million of colocation revenue during the first quarter.  Pricing is generally stable-to-slightly-improving across product types and regions.  We are pleased by the strong underlying demand, consistent leasing execution and gradually improving data center fundamentals.”

The weighted-average lag between leases signed during the first quarter and the contractual commencement date was a little over six months.

In addition to the new leases signed, Digital Realty also signed renewal leases representing $15 million of annualized GAAP rental revenue during the quarter.  Rental rates on renewal leases signed during the first quarter of 2014 were flat on a cash basis and rolled up 13.5% on a GAAP basis.

Investment Activity

In March 2014, the company contributed a fully-leased, 108,000 square foot data center located in Somerset, NJ to the existing Digital Realty / Prudential Real Estate Investors joint venture at a valuation of approximately $40 million, generating a $1.9 million gain, and representing a 7.1% cap rate (including prepayment penalty as well as closing costs).

Subsequent to the end of the quarter, the company sold a single-tenant asset to the user for approximately $42 million, generating net proceeds of approximately $38 million.  The company expects to recognize a gain on this sale of approximately $16 million in the second quarter of 2014.