Yahoo Finance Digital Realty's (DLR) Q1 FFO Beat Estimates, Revenues Lag
Digital Realty Trust DLR reported first-quarter 2024 core funds from operations (FFO) per share of $1.67, outpacing the Zacks Consensus Estimate of $1.63.
Results reflect healthy leasing activity. However, rising operating expenses acted as a dampener in the quarter. DLR revised its outlook for 2024.
The company registered operating revenues of $1.33 billion in the first quarter, missing the Zacks Consensus Estimate of $1.36 billion. DLR also reported a "Same-Capital" cash net operating income (NOI) growth of 4.7%.
On a year-over-year basis, while operating revenues declined marginally, core FFO per share rose marginally.
According to Digital Realty’s president & CEO, Andy Power, "Digital Realty saw accelerating demand in the first quarter, executing on a number of multifaceted AI-oriented opportunities while continuing to support hybrid multi-cloud requirements. Strong demand supported a new leasing record, driven by large footprint deals."
Quarter in Detail
Total operating expenses increased 1.8% year over year to $1.18 billion. The rise was attributable to the increase in expenses related to property taxes, depreciation and amortization, general and administration costs, transaction and integration expenses, and other expenses.
In the reported quarter, signed total bookings were estimated to generate $252 million of annualized GAAP rental revenues, including a $40 million contribution from the 0-1-megawatt category and a $13 million contribution from interconnection. The weighted average lag between the new leases signed in the first quarter and the contractual commencement date was seven months.
Digital Realty signed renewal leases, marking $248 million of annualized cash rental revenues during the January-March quarter. Rental rates on renewal leases signed during the quarter rose 11.8% on a cash basis and 13% on a GAAP basis.
Adjusted EBITDA of $710.6 million in the quarter marked a 6.4% increase year over year.
Portfolio Activity
During the January-March period, Digital Realty joined forces with Mitsubishi Corporation to form a data center development joint venture ("JV"). The collaboration marks a significant milestone in both companies’ expansion strategy, aiming to capitalize on the ever-growing demand for data infrastructure. The JV revolves around the development of two build-to-suit data centers in the Dallas metro area. Digital Realty has retained a 35% equity interest in the joint venture, while Mitsubishi retained a remaining 65% interest, with an initial investment of approximately $200 million.
Digital Realty and Blackstone Inc. established the first phase of their $7 billion hyperscale data center development JV. Upon obtaining the required approvals, the second phase is scheduled to close later this year.
Balance Sheet
Digital Realty exited the first quarter with cash and cash equivalents of $1.19 billion, down from $1.63 billion recorded as of Dec 31, 2023.
As of Mar 31, 2024, this data center REIT had $17 billion of total debt outstanding, of which $16.4 billion was unsecured debt and $0.6 billion was secured debt and other. As of the same date, its net debt-to-adjusted EBITDA was 6.1X, while the fixed charge coverage was 4.0X.
Its debt maturity schedule is well-laddered with modest near-term maturities, with a weighted average maturity of 4.3 years and a 2.8% weighted average coupon as of Mar 31, 2024.
During the quarter, DLR sold 0.6 million shares of its common stock at a weighted average price of $133.43 per share, reaping around $84 million in net proceeds.
2024 Guidance Revised
Digital Realty maintained its guidance for 2024 core FFO per share in the range of $6.60-$6.75. The Zacks Consensus Estimate is currently pegged at $6.68, within the guided range.
The company also maintained its expectations for total revenues in the band of $5.55-$5.65 billion. The consensus mark is pegged at $5.62 billion, within the guided range.
Adjusted EBITDA remains unchanged in the range of $2.8-$2.9 billion.
This data center REIT revised its projections for rental rates on renewal leases in the range of 5-7% on a cash basis and 7-9% on a GAAP basis. The year-end portfolio occupancy remains unchanged, with an increase of 100-200 bps. The Same-Capital cash NOI is estimated to grow 2.5-3.5%, revised upward from the prior-guided range of 2-3%.
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-eps-surprise-chart | Digital Realty Trust, Inc. Quote
Performance of Other REITs
Ventas, Inc. VTR reported a first-quarter 2024 normalized FFO per share of 78 cents, beating the Zacks Consensus Estimate of 74 cents. The reported figure increased 5.4% from the prior-year quarter’s tally.
Results reflect better-than-anticipated revenues. Also, Ventas’ same-store cash NOI increased year over year on strong performance across the portfolio, except for triple-net leased properties. It has also raised its 2024 outlook.
Healthpeak Properties, Inc. DOC reported first-quarter 2024 FFO as adjusted per share of 45 cents, beating the Zacks Consensus Estimate by a penny. The reported figure rose 7.1% from the prior-year quarter.
Results reflect better-than-anticipated revenues. Moreover, growth in total merger-combined same-store cash (adjusted) NOI was witnessed across the portfolio. The company also revised its 2024 outlook.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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