Back to top

Image: Bigstock

Digital Realty's (DLR) Q2 FFO & Revenues Miss Estimates

Read MoreHide Full Article

Digital Realty Trust’s (DLR - Free Report) second-quarter 2022 funds from operations (FFO) per share of $1.55 lagged the Zacks Consensus Estimate of $1.64. On a year-over-year basis, the figure declined nearly 13%.

The quarterly results reflect lower-than-expected revenues.

DLR clocked in revenues of $1.14 billion, missing the Zacks Consensus Estimate of $1.16 billion. However, year over year, the figure increased 4.2%.

Also, the core FFO per share improved 11.7% year over year to $1.72.

Per A. William Stein, CEO of the company, “Demand for data center solutions continued to be strong through the second quarter, with healthy contributions from both hyperscale and enterprise segments.”

Quarter in Detail

On comparing with the prior-year quarter, the company’s rental revenues marginally fell to $767.3 million. The rental property operating expenses marginally declined to $198.1 million.

Cash net operating income (NOI) decreased 1.1% year over year to nearly $642.5 million.

DLR generated second-quarter adjusted EBITDA of approximately $611 million, indicating a 1.4% increase year over year.

During the reported quarter, the company signed total bookings estimated to generate $113 million of annualized GAAP rental revenues, including a $12 million contribution from interconnection.  The weighted-average lag between the new leases signed during the quarter and the contractual commencement date was 13 months.

DLR also signed renewal leases, marking $173 million of annualized GAAP rental revenues during the quarter. The rental rates on renewal leases increased 3.4% on a cash basis and were up 5.3% on a GAAP basis.

Portfolio Activity

During the reported quarter, Digital Realty acquired an 8-acre land parcel for $6 million in Dublin. The site is expected to support the development of almost 40 megawatts of IT load.

Moreover, it purchased 2.4-acre and 34-acre land parcels in Barcelona and Frankfurt for $11 million and $60 million, respectively. While the Barcelona parcel can support up to 15 megawatts of IT load, the Frankfurt parcel is estimated to hold up to 70 megawatts of IT load.

Further, Digital Realty joined forces with Mivne Real Estate through a joint venture (JV), marking its entry into Israel’s market. The JV will operate under the brand name Digital Realty Mivne to develop a multi-tenant data center campus in Petah Tikvah, which is the primary connectivity hub in Israel. The site will support the development of up to 20 megawatts of IT load, and the initial phase is expected to be delivered in 2023, subject to customer demand.

Balance Sheet

Digital Realty exited second-quarter 2022 with cash and cash equivalents of $99.2 million, down from $158 million recorded as of Mar 31, 2022.

As of Jun 30, 2022, this data center REIT had roughly $14.3 billion of total debt outstanding, of which $14.1 billion was unsecured debt and around $0.2 billion was secured debt. As of the same date, its net debt-to-adjusted EBITDA was 6.2X, while fixed charge coverage was 6.0X.

During the quarter, Digital Realty expanded its global revolving credit facility from $3.0 billion to $3.75 billion.

Revised 2022 Guidance

Digital Realty has revised its 2022 outlook.

Core FFO per share is expected in the range of $6.75-$6.85, revised from the earlier guidance of $6.80-$6.90. The Zacks Consensus Estimate for the same is currently pegged at $6.84.

DLR projects total revenues in the band of $4.65-$4.75 billion and adjusted EBITDA in the range of $2.45-$2.50 billion.

This data center REIT projects rental rates on renewal leases to be slightly positive on a cash basis and up low-single-digits on a GAAP basis. The year-end portfolio occupancy is expected to be 83-84%, while same-capital cash NOI is estimated to decline 3.5-4.5%.

Currently, DLR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Digital Realty Trust, Inc. Price, Consensus and EPS Surprise Digital Realty Trust, Inc. Price, Consensus and EPS Surprise

Digital Realty Trust, Inc. price-consensus-eps-surprise-chart | Digital Realty Trust, Inc. Quote

Performance of Notable REITs

Kimco Realty Corp.’s (KIM - Free Report) second-quarter 2022 FFO per diluted share came in at 40 cents, surpassing the Zacks Consensus Estimate of 38 cents. The figure grew 17.6% from the year-ago quarter’s 34 cents.

Results reflect year-over-year growth in the top line. The rise in occupancy levels and rental rate growth aided KIM’s performance. It raised 2022 FFO outlook.

Boston Properties Inc.’s (BXP - Free Report) second-quarter 2022 FFO per share of $1.94 beat the Zacks Consensus Estimate of $1.85. The figure also compared favorably with the year-ago quarter’s $1.72.

BXP’s quarterly results reflect growth in the bottom line. Also, it experienced strong leasing activity during the quarter.

AvalonBay Communities, Inc.’s (AVB - Free Report) second-quarter 2022 core FFO per share of $2.43 surpassed the Zacks Consensus Estimate of $2.35. The figure increased 22.7% on a year-over-year basis.

AVB’s second-quarter results reflect a year-over-year increase in same-store residential rental revenues driven by strong, effective lease rate growth and higher rent relief.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Published in