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Technology / Data Centre

Data centre REIT Digital Realty prepares further global expansion

US data centre builder and developer Digital Realty has reported revenues of $1.8bn for the year 2015, with its $1.8bn Telx acquisition contributing $89m.

The 9% increase over 2014 ($1.6bn), was fuelled by a strong Q4 with the company posting a 21% revenue increase topping $500m, compared to the previous year ($412m) and a 15% compared to Q3 2015 ($435m).

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for Q4 2015 was $288m, a 15% increase from the previous quarter and a 19% increase over the same quarter last year.

Digital Realty reported a net loss for the fourth quarter of 2015 of $17m (Q3: gained $57m; Q4 2014: loss of $34m), and net loss available to common stockholders was $40m, down from a net loss available to common stockholders of $52 in Q4 2014.

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In a statement, the company said the net loss during Q4 2015 was "primarily attributable to the write-off of straight-line rent receivables related to Telx".

For the full-year 2015, net income was $302m and net income available to common shareholders was $217m.

Generally accepted accounting principles (GAAP) accounted for $36.2m, led by $31.3m of annualised GAAP base rent in North America, followed by $4.1m in Europe. Asia-Pacific contributed with $677,000.

Digital Realty had approximately $5.9bn of total debt outstanding as of December 31, 2015, comprised of $5.6bn of unsecured debt and approximately $0.3bn of secured debt.

Total operating expenses were $459m in Q4 2015, up from $331m in Q3, and $418m in Q4 2014.

Total direct capital expenditures were $175m in Q4 2015, down from $208m in Q4 2014, and up from Q3 2015’s $140m. Has for the year, total direct capital expenditures were down from 2014’s $805m to $627m.

In 2015, the company closed a $1.86bn buyout of Telx’s data centre business from private equity firms ABRY Partners and Berkshire Partners.

In its results, Digital Realty also recognised a loss of approximately $100,000 with the divestment of its 128,000 sq ft data centre in New Jersey, US, last December.

The operator also closed on the sale of Californian hub and two adjacent non-data centre properties totalling 199,000 square feet for $37.5m.

Elsewhere, Digital Realty also completed in Q4 2015 a $43m acquisition of a 126-acre land parcel in Virginia, to build out a collocation data centre of over two million sq ft with a power supply of nearly 150 MW. The company said construction works are expected to start this year, subject to market demand.

In Europe, the company acquired a six-acre land parcel in Frankfurt, Germany for $6m. The site is capable of supporting a 27 MW campus across three buildings, totalling 339,000 square feet. Construction on site has not been scheduled and the company said works will be carried out once market demand justifies so.

For 2016, the company expects to increase yearly revenues between $200m and $400m to $2 – $2.2bn. Reports have also emerged that Digital Realty is planning to buy rival Interxion, which operates 20 data centres, mostly in Europe. The company has not commented on this.

A. William Stein, CEO of Digital Realty, said: "Data centre demand remains steady, with new leases signed during the fourth quarter of 2015 representing $36m in annualized GAAP rental revenue, including a $6m contribution from Telx, the acquisition of which we completed in October.

"In addition to space and power, Telx also contributed $7m of annualised interconnection revenue bookings during the fourth quarter.

"The data centre fundamental backdrop remains healthy, and particularly following the successful refinancing of our global credit facilities in January and corresponding extension of debt maturities, we are well positioned to continue to deliver superior risk-adjusted returns for shareholders."

During the company’s earnings call, Stein played down the prospect of the company being impacted by the potential sell of data centre assets by telcos including CenturyLink and AT&T, to which Digital Realty is the landlord for some facilities.

According to Seeking Alpha’s transcript of the call, he said: "Holistically, the best way is obviously to mitigate this are through diversification of your customers, your locations, your leases, maturities.

"I do not think there is anything on the horizon right now, either with a Rackspace, AT&T or a CenturyLink, where they are actually looking to contract from our specific footprints.

"I think some of the noise you are seeing in the market or on the news rags is more about folks, who some of them, excluding probably Rackspace, focusing on their core businesses and selling non-core businesses."

Digital Realty currently owns 139 data centres in Europe, North America and Asia-Pacific, eight more than in December 31, 2014.

Total net of rentable sq ft as of the closure of 2015 was 22,894,255, up from 22,146,385 in 2014. Total IT load as of December 31, 2015 was 518 MW.
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