Digital Realty Provides Initial 2017 Outlook and Schedules 4Q16 Earnings Release and Conference Call
Tuesday, January 03, 2017 4:02:00 PM ET
Digital Realty (DLR ), a leading global provider of data center, colocation and interconnection solutions, announced today its initial 2017 outlook along with details for its fourth quarter 2016 earnings release and conference call.
2017 Outlook Digital Realty expects to deliver 2017 core FFO per share within a range of $5.90-$6.10, which represents year-over-year growth in excess of 5% from the midpoint of 2016 core FFO per share guidance of $5.65-$5.75. Foreign currency translation is expected to represent a headwind of approximately 1%-3% in 2017. On a constant-currency basis, year-over-year core FFO per share growth is expected to be approximately 7%.
"The long-term secular demand drivers underpinning data center absorption give us confidence in our ability to achieve mid-single-digit growth in 2017 core FFO per share, despite further headwinds from foreign currency translation," said Andrew P. Power, Digital Realtys Chief Financial Officer. "Our forecast also reflects continued progress towards the 200 basis point EBITDA margin expansion target initially established at our Investor Day in October 2015, as well as solid execution against our objective of achieving operating efficiencies to drive sustained growth in earnings, cash flow and value per share."
The primary assumptions underlying the 2017 outlook are summarized in the following table.
As of January 3, 2017
Top-Line and Cost Structure
2017 total revenue $2.2 - $2.3 billion
2017 net non-cash rent adjustments (1) ($5-$10 million)
2017 adjusted EBITDA margin 57.0% - 59.0%
2017 G&A margin 6.0% - 7.0%
Rental rates on renewal leases
Cash basis Slightly positive
GAAP basis Up high single-digits
Year-end portfolio occupancy +/- 50 bps
"Same-capital" cash NOI growth (2) 2.0% - 3.0%
Foreign Exchange Rates
U.S. Dollar / Pound Sterling $1.20 - $1.24
U.S. Dollar / Euro $1.00 - $1.05
Dollar volume $0 - $200 million
Cap rate 0.0% - 10.0%
CapEx $0.8 - $1.0 billion
Average stabilized yields 10.0% - 12.0%
Enhancements and other non-recurring CapEx (3) $20 - $25 million
Recurring CapEx + capitalized leasing costs (4) $125 - $135 million
Long-term debt issuance
Dollar amount $400 - $600 million
Pricing 3.50% - 4.25%
Timing Mid-to-late 2017
Funds from Operations / share (NAREIT-defined) $5.80 - $5.95
Adjustments for non-core expenses and revenue streams $0.10 - $0.15
Core Funds from Operations / share $5.90 - $6.10
Foreign currency translation adjustments $0.05 - $0.15
Constant-Currency Core Funds from Operations / share $5.95 - $6.25
1. Net non-cash rent represents 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, 2015 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 2016-2017, 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 2016 Earnings Release and Conference Call Digital Realty plans to release its financial results for the fourth quarter and full-year 2016 after the market closes on Thursday, February 16, 2017. 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 16, 2017.
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 #4875948 at least five minutes prior to start time. A live webcast of the call will be available on the Investors section of Digital Realtys website at http://investor.digitalrealty.com .
Telephone and webcast replays will be available one hour after the call until March 16, 2017. 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 #10097947. The webcast replay can be accessed on Digital Realtys website.
For Additional Information
Andrew P. Power Chief Financial Officer Digital Realty (415) 738-6500
Investor Relations John J. Stewart / Maria S. Lukens Digital Realty (415) 738-6500 firstname.lastname@example.org
Non-GAAP Financial Measures This press release contains non-GAAP financial measures, including Funds from Operations, Core Funds from Operations and Constant-Currency Core Funds from Operations. The following table provides a reconciliation of each of these non-GAAP measures to the range of 2017 projected net income:
Low - High
Net income available to common stockholders per diluted share $1.60 - $1.75
Add: Real estate depreciation and amortization $4.20 - $4.20
Projected Funds from Operations per diluted share $5.80 - $5.95
Add: Adjustments for items that do not represent core expenses and revenue streams $0.10 - $0.15
Projected Core Funds from Operations per diluted share $5.90 - $6.10
Add: Foreign currency translation adjustments $0.05 - $0.15
Projected Constant-Currency Core Funds from Operations per diluted share $5.95 - $6.25
About Digital Realty Digital Realty supports the data center, colocation and interconnection strategies of more than 2,000 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia. Digital Realtys clients include domestic and international companies of all sizes, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences and consumer products. https://www.digitalrealty.com/
Safe Harbor StatementThis 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 companys 2017 revenue, net income, core FFO, FFO and constant-currency core FFO guidance 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 Kingdoms 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 companys Annual Report on Form 10-K for the year ended December 31, 2015, as amended, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016. 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 sales of property, excluding a gain from a pre-existing relationship, impairment charges, real estate related depreciation and amortization (excluding amortization of deferred financing costs) 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 expenses, (iii) loss from early extinguishment of debt, (iv) costs on redemption of preferred stock, (v) change in fair value of contingent consideration, (vi) severance-related expense, 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.
Constant-Currency Core Funds from Operations:We calculate constant-currency core funds from operations by adjusting the core funds from operations for foreign currency translations.
EBITDA and Adjusted EBITDA:We believe that earnings before interest, loss from early extinguishment of debt, income taxes and depreciation and amortization, 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, change in fair value of contingent consideration, severance related expense, equity acceleration, and legal expenses, transaction expenses, gain (loss) on sale of property, gain on settlement of pre-existing relationship with Telx, loss on currency forwards, other non-core expense adjustments, noncontrolling interests, and preferred stock dividends. Adjusted EBITDA is EBITDA excluding change in fair value of contingent consideration, severance related expense, equity acceleration, and legal expenses, transaction expenses, gain (loss) on sale of property, gain on settlement of pre-existing relationship with Telx, loss on currency forwards, other non-core expense adjustments, noncontrolling interests, preferred stock 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