Digital Realty Off From Q408, Well Ahead of Q108

Funds from operations [FFO] came in ahead of analysts' average expectation at $64.5 million. FFO was down 5.6% on a dollar basis from 4Q08 due to the aforementioned one-time gains but up 52% from 1Q08. On a per-share basis, FFO was down 6.6% from 4Q08 and up 22% from 1Q08.

Rental revenue was approximately $116 million in 1Q09, up 20% from 1Q08. Total operating revenue in 1Q09 was approximately $146 million, up 30% from 1Q08, while total operating expenses were up only 20.5%. Same-store NOI came in at $20.4 million, up 98% from 1Q08. The company's portfolio is 95% leased.

With regard to liquidity, Chief Financial officer William Stein said the company had about $770 million of immediate liquidity that could be drawn on its revolving credit facility. "This provides us with sufficient liquidity to meet our currently anticipated capital requirements budgeted through 2009 and debt maturities for the next three years without raising additional capital," he said.

Digital Realty signed 85,000 square feet of leases in 1Q09, which compared to 276,000 square feet in the 4Q08 and 260,000 square feet in 1Q08. Lease commencements in 1Q09 totaled 450,000 square feet, up from 320,000 in 4Q08 and 335,000 in 1Q08.

Of the 450,000 square feet of lease commencements in 1Q09, 30% (134,000 square feet) was the company's most expensive space, Turn-Key Datacenter space, for which the average annual lease rate is $179 per square foot on average. An additional 38% (174,000 square feet) was its Powered Base Building space, for which the initial lease rate is $62 per square foot on average. Compared to 4Q08 the average commencing annual lease rate on its most expensive space is up nearly 12%; compared to 1Q08 the average commencing lease rate is up more than 44%.

Of the 85,000 square feet of lease deals signed in 1Q09, nearly 60% (57,000 square feet) was for Turn-Key Datacenter space, for which the initial lease rate will be $172 per square foot. The rate is up more than 70% from $100 1Q08 but down 4.4% from $180 in 4Q08. The remainder of its leasing was for the company's least expensive space non-technical space, which leased at an average annual rate of $19 per square foot. The rate is up 15% from $15 in 4Q08 and down 27% from $25.93 in 1Q08.

The Company's portfolio comprises 75 properties, excluding one property held in an unconsolidated joint venture, consisting of 99 operating buildings totaling approximately 11.8 million square feet. The company's total rentable square feet has grown by 400,000 since the end of the year and by 1 million over the past 12 months. Average occupancy in 1Q09 was 95%, down from 95.4% in 4Q08 but up from 94.7% in 1Q08.