Digital Realty Reports First Quarter 2014 Results

              Digital Realty Reports First Quarter 2014 Results

PR Newswire

SAN FRANCISCO, May 6, 2014

SAN FRANCISCO, May 6, 2014 /PRNewswire/ --Digital Realty Trust, Inc. (NYSE:
DLR), the leading global provider of data center solutions, announced today
financial results for the first quarter of 2014. All per share results are
shown on a diluted share and unit basis.

Highlights

  oReported FFO per share of $1.22 in 1Q14, up 5% from $1.16 in 1Q13;
  oReported core FFO per share of $1.28 in 1Q14, up 8% from $1.18 in 1Q13;
  oSigned leases during 1Q14 expected to generate $47 million in annualized
    GAAP rental revenue (including a direct lease with a former sub-tenant
    representing approximately $12 million of annualized GAAP rental revenue);
  oContributed a fully-leased, 108,000 square foot data center located in
    Somerset, NJ to the existing Digital Realty / Prudential Real Estate
    Investors joint venture at a valuation of approximately $40 million,
    representing a 7.1% cap rate (including debt prepayment penalty as well as
    closing costs);
  oCompleted the sale of 14.6 million shares of 7.375% Series H Cumulative
    Redeemable Preferred Stock, including partial exercise of the
    underwriters' over-allotment option, raising net proceeds of $353 million;
  oClosed a £300 million 9.5-year senior unsecured notes offering with a
    coupon of 4.75% per annum; and
  oRaised 2014 core FFO per share outlook to $4.80-$4.90 from the prior range
    of $4.75-$4.90.

Financial Results

Revenues were $391 million for the first quarter, a 3% increase over the
previous quarter and a 9% increase over the same quarter last year.

Adjusted EBITDA was $234 million for the first quarter, a 3% increase over the
previous quarter and a 9% increase over the same quarter last year.

Funds from operations ("FFO") on a diluted basis was $168 million in the first
quarter of 2014, or $1.22 per share, compared to $1.26 per share in the fourth
quarter of 2013 and $1.16 per share in the first quarter of 2013.

First quarter 2014 results include a severance charge of approximately $12
million, or $0.09 per share, related to the departure of the company's former
Chief Executive Officer.

Excluding the severance charge and certain items that do not represent core
expenses or revenue streams, first quarter 2014 core FFO was $1.28 per share
compared to $1.26 per share in the fourth quarter of 2013 and $1.18 per share
in the first quarter of 2013. 

Net income for the first quarter of 2014 was $47 million, and net income
available to common stockholders was $34 million, or $0.26 per diluted share,
compared to $0.33 per diluted share in the fourth quarter of 2013 and $0.34
per diluted share in the first quarter of 2013.

Leasing Activity

"We signed new leases totaling $47 million of annualized GAAP rental revenue,
including a $12 million direct lease with a former sub-tenant, during what is
typically a seasonally-slow leasing quarter," commented Interim Chief
Executive Officer Bill Stein. "Our mid-market initiative continues to gain
traction, and we signed over $4 million of colocation revenue during the first
quarter. Pricing is generally stable-to-slightly-improving across product
types and regions. We are pleased by the strong underlying demand, consistent
leasing execution and gradually improving data center fundamentals."

The weighted-average lag between leases signed during the first quarter and
the contractual commencement date was a little over six months.

In addition to the new leases signed, Digital Realty also signed renewal
leases representing $15 million of annualized GAAP rental revenue during the
quarter. Rental rates on renewal leases signed during the first quarter of
2014 were flat on a cash basis and rolled up 13.5% on a GAAP basis.

New leases signed during the first quarter of 2014 by region and product type
are summarized as follows:

North America   Annualized GAAP Rent (in  Square Feet GAAP Rent MW   GAAP Rent
                thousands)                            / Sq. Ft.      / kW
Turn-Key Flex   $12,376                   76,017      $163      6.7  $154
Powered Base    12,040                    160,632     75        -    -
Building
Colocation      3,347                     20,139      166       1.4  202
Non-Technical   375                       30,962      12        -    -
Total           $28,138                   287,750     $98       8.1  $162
Europe^(1)
Turn-Key Flex   $3,560                    17,821      $200      1.6  $183
Colocation      788                       4,048       195       0.3  222
Non-Technical   106                       2,515       42        -    -
Total           $4,454                    24,384      $183      1.9  $189
Asia Pac^(1)
Turn-Key Flex   $13,817                   53,572      $258      6.2  $185
Colocation      -                         -           -         -    -
Non-Technical   175                       2,900       60        -    -
Total           $13,992                   56,472      $248      6.2  $185
Grand Total     $46,584                   368,606     $126      16.2 $174
^(1) Based on quarterly average exchange rates during the three
months ended March 31, 2014.

Investment Activity

In March 2014, the company contributed a fully-leased, 108,000 square foot
data center located in Somerset, NJ to the existing Digital Realty /
Prudential Real Estate Investors joint venture at a valuation of approximately
$40 million, generating a $1.9 million gain, and representing a 7.1% cap rate
(including prepayment penalty as well as closing costs).

Subsequent to the end of the quarter, the company sold a single-tenant asset
to the user for approximately $42 million, generating net proceeds of
approximately $38 million. The company expects to recognize a gain on this
sale of approximately $16 million in the second quarter of 2014.

Balance Sheet

Digital Realty had $5 billion of total debt outstanding as of March 31, 2014,
comprised of $4.5 billion of unsecured debt and approximately $550 million of
secured debt. At the end of the first quarter, net debt-to-adjusted EBITDA
was 5.3x, debt-plus-preferred-to-total-enterprise-value was 46.3% and fixed
charge coverage was 3.5x.

In March and April 2014, Digital Realty completed the sale of 14.6 million
shares of 7.375% Series H Cumulative Redeemable Preferred Stock, including
partial exercise of the underwriter's over-allotment option, raising net
proceeds of $353 million. In April, the company also closed a £300 million
9.5-year senior unsecured notes offering, interest on which is payable
semiannually in arrears at a rate of 4.75% per annum.

In mid-April, Digital Realty redeemed $5.2 million of its 5.50% exchangeable
senior debentures due 2029 at a price equal to 100% of the principal amount
plus accrued and unpaid interest. In connection with the redemption, the
company issued 6.7 million shares of restricted common stock in exchange for
the $261.2 million remaining principal amount of the 2029 debentures pursuant
to the holders' exercise of their exchange right.

Revised 2014 Outlook

Digital Realty raised its 2014 core FFO per share outlook to $4.80-$4.90 up
from the prior range of $4.75-$4.90. The assumptions underlying this guidance
are summarized as follows.

                        As of January 6,   As of February    As of May 6, 2014
                        2014               24, 2014
Internal Growth
Rental Rates on Renewal
Leases
Cash Basis              Roughly flat       Roughly flat      Roughly flat
GAAP Basis              Modestly positive  Modestly positive Modestly positive
Year-end portfolio      N/A                N/A               92.0%-93.0%
occupancy
"Same-capital" cash NOI N/A                N/A               4.0%-5.0%
growth^(1)
                        25-75 bps <        25-75 bps <       25-75 bps <
Operating Margin        historical         historical        historical
                        run-rate           run-rate          run-rate
Incremental Revenue
from Speculative        $20-$30 million    $20-$30 million   $10-$15 million
Leasing^(2)
Overhead Load^(3)       75-85 bps on total 75-85 bps on      75-85 bps on
                        assets             total assets      total assets
External Growth
Acquisitions
Dollar Volume           $0-$400 million    $0-$400 million   $0-$400 million
Cap Rate                7.5%-8.5%          7.5%-8.5%         7.5%-8.5%
Joint Ventures
Dollar Volume           $0-$400 million    $0-$400 million   $40-$400 million
Cap Rate                6.75%-7.25%        6.75%-7.25%       6.75%-7.25%
Development
CapEx                   $600-$800 million  $600-$800 million $600-$800 million
Average Stabilized      10%-12%            10%-12%           10%-12%
Yields
Enhancements and Other  $85-$90 million    $85-$90 million   $85-$90 million
Non-recurring CapEx^(4)
Recurring CapEx +
Capitalized Leasing     $75-$80 million    $75-$80 million   $75-$80 million
Costs^(5)
Balance Sheet
Preferred Equity
Dollar Amount           $100-$250 million  $100-$250 million $365 million
Pricing                 8.0%-8.5%          8.0%-8.5%         7.375%
Timing                  Early 2014         Early 2014        Early 2014
Long-Term Debt
Dollar Amount           $700-$900 million  $700-$900 million $700-$900 million
Pricing                 4.75%-5.50%        4.75%-5.50%       4.75%-5.50%
Timing                  Early 2014         Early 2014        Mid-2014
Core Funds From
Operations
$ / Share               $4.75-$4.90        $4.75-$4.90       $4.80-$4.90



    The "same-capital" pool includes properties owned as of December 31, 2012
    with less than 5% of total rentable square feet under development. It
    also excludes properties that were undergoing, or were expected to
(1) undergo, development activities in 2013-2014. NOI is defined as rental
    revenue and tenant reimbursement revenue less rental property operating
    and maintenance expenses, property taxes and insurance expenses (as
    reflected in the statement of operations), and cash NOI is NOI less
    straight-line rents and above- and below-market rent amortization.
    Incremental revenue from speculative leasing represents revenue expected
(2) to be recognized in the current year from leases that have not yet been
    signed.
(3) Overhead load is defined as General & Administrative expense divided by
    Total Assets.
    Other non-recurring CapEx represents costs incurred to enhance the
    capacity or marketability of operating properties, such as network fiber
    initiatives, the build-out of an additional sub-station or installation of
(4) a new security system, in addition to major remediation costs on
    recently-acquired properties, whether or not contemplated in the original
    acquisition underwriting. Other non-recurring CapEx also includes
    infrequent and major component replacements.
    Recurring CapEx represents non-incremental improvements required to
(5) 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.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, including FFO, core
FFO and Adjusted EBITDA. A reconciliation from U.S. GAAP net income available
to common stockholders to FFO, a definition of FFO, a reconciliation from FFO
to core FFO, and a definition of core FFO are included as an attachment to
this press release. A reconciliation from U.S. GAAP net income available to
common stockholders to Adjusted EBITDA, a definition of Adjusted EBITDA, a
definition of debt plus preferred to total enterprise value, and a definition
of fixed charge coverage ratio are included as an attachment to this press
release.

Investor Conference Call

Prior to Digital Realty's conference call today at 5:30 p.m. EDT / 2:30 p.m.
PDT, Digital Realty will post a presentation to the Investors section of the
company's website at http://investor.digitalrealty.com. The presentation is
designed to accompany the discussion of its first quarter 2014 financial
results and operating performance. The conference call will feature: Interim
Chief Executive Officer and Chief Financial Officer A. William Stein; Chief
Investment Officer Scott Peterson; Senior Vice President of Sales & Marketing
Matt Miszewski; and Vice President of Finance Matt Mercier.

To participate in the live call, investors are invited to dial +1 (877)
870-4263 (for domestic callers) or +1 (412) 317-0790 (for international
callers) at least five minutes prior to start time. A live webcast of the
call will be available via the Investors section of Digital Realty's website
at http://investor.digitalrealty.com.

Telephone and webcast replays will be available until 9:00 a.m. EDT on June 4,
2014. The telephone replay can be accessed one hour after the call by dialing
+1 (877) 344-7529 (for domestic callers) or +1 (412) 317-0088 (for
international callers) and providing the conference ID# 10043944. The webcast
replay can be accessed on Digital Realty's website immediately after the live
call has concluded.

About Digital Realty

Digital Realty Trust, Inc. focuses on delivering customer-driven data center
solutions by providing secure, reliable and cost-effective facilities that
meet each customer's unique data center needs. Digital Realty's customers
include domestic and international companies across multiple industry
verticals ranging from financial services, cloud and information technology
services, to manufacturing, energy, health care and consumer products.
Digital Realty's 131 properties, including 13 properties held as investments
in unconsolidated joint ventures, comprise approximately 24.5 million square
feet as of March 31, 2014, including 1.3 million square feet of space under
active development and 1.4 million square feet of space held for future
development. Digital Realty's portfolio is located in 33 markets throughout
North America, Europe, Asia and Australia. Additional information about
Digital Realty is included in the Company Overview, which is available on the
Investors page of Digital Realty's website at http://www.digitalrealty.com.

Safe Harbor Statement

This 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 supply and demand for data center
and colocation space; leasing demand, volume and pipeline; data center
fundamentals; rent from leases that have been signed but have not yet
commenced and other contracted rent to be received in future periods; rental
rates on future leases; our contribution of the Somerset, NJ property to our
unconsolidated joint venture; cap rates and yields; and the company's revised
2014 FFO, core FFO and net income outlook 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 our geographic markets; 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; 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 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 company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 2013. 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.

A. William Stein                John J. Stewart
Interim Chief ExecutiveOfficer Senior Vice President
and Chief Financial Officer     Investor Relations
Digital Realty Trust, Inc.      Digital Realty Trust, Inc.
+1 (415) 738-6500               +1 (415) 738-6500



Digital Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(in thousands, except share and per share data)
(unaudited)
                                 Three Months Ended
                                 March 31, 2014         March 31, 2013
Operating Revenues:
 Rental                          $            $          
                                  305,786               281,399
 Tenant reimbursements           83,621                 75,917
 Fee income                      1,183                  806
 Other                           -                      248
 Total operating revenues        390,590                358,370
Operating Expenses:
 Rental property operating and   117,896                105,480
 maintenance
 Property taxes                  22,125                 21,042
 Insurance                       2,422                  2,205
 Construction management         164                    384
 Change in fair value of         (3,403)                1,300
 contingent consideration
 Depreciation and amortization   130,620                111,623
 General and administrative      30,678                 15,951
 Transactions                    81                     1,763
 Other                           -                      36
 Total operating expenses        300,583                259,784
 Operating income                90,007                 98,586
Other Income (Expenses):
 Equity in earnings of           2,581                  2,335
 unconsolidated joint ventures
 Gain on contribution of
 property to unconsolidated      1,906                  -
 joint venture
 Interest and other income       1,727                  41
 Interest expense                (47,374)               (48,078)
 Tax expense                     (1,838)                (1,203)
 Loss from early extinguishment  (292)                  -
 of debt
Net Income                       46,717                 51,681
 Net income attributable to      (805)                  (970)
 noncontrolling interests
Net Income Attributable to       45,912                 50,711
Digital Realty Trust, Inc.
 Preferred stock dividends       (11,726)               (8,054)
Net Income Available to Common   $            $          
Stockholders                      34,186                42,657
 Net income per share available
 to common stockholders:
 Basic                           $            $          
                                    0.27                0.34
 Diluted                         $            $          
                                    0.26                0.34
 Weighted average shares
 outstanding:
 Basic                           128,535,995            126,445,285
 Diluted                         129,136,961            126,738,339



Digital Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
                                    March 31, 2014         December 31, 2013
ASSETS                              (unaudited)
Investments in real estate
Properties:
Land                                $            $         
                                      685,640           693,791
Acquired ground leases              14,680                 14,618
Buildings and improvements          8,834,693              8,680,677
Tenant improvements                 490,697                490,492
Total investments in properties     10,025,710             9,879,578
Accumulated depreciation and        (1,665,421)            (1,565,996)
amortization
Net investments in properties       8,360,289              8,313,582
Investment in unconsolidated joint  81,411                 70,504
ventures
Net investments in real estate      8,441,700              8,384,086
Cash and cash equivalents           70,242                 56,808
Accounts and other receivables,     181,433                181,163
net
Deferred rent                       415,515                393,504
Acquired above market leases, net  49,521                 52,264
Acquired in place lease value and   479,940                489,456
deferred leasing costs, net
Deferred financing costs, net      34,295                 36,475
Restricted cash                     42,842                 40,362
Assets held for sale                25,070                 -
Other assets                        64,836                 51,627
Total Assets                        $            $        
                                     9,805,394            9,685,745
LIABILITIES AND EQUITY
Global revolving credit facility    $            $         
                                      790,500           724,668
Unsecured term loan                 1,026,891              1,020,984
Unsecured senior notes, net of      2,368,848              2,364,232
discount
Exchangeable senior debentures      266,400                266,400
Mortgage loans, net of premiums     554,742                585,608
Accounts payable and other accrued  614,645                662,687
liabilities
Accrued dividends and               -                      102,509
distributions
Acquired below market leases, net   123,152                130,269
Security deposits and prepaid       180,886                181,876
rents
Liabilities associated with assets  3,610                  -
held for sale
Total Liabilities                   5,929,674              6,039,233
Equity:
Stockholders' equity                3,831,233              3,610,516
Noncontrolling interests            44,487                 35,996
Total Equity                        3,875,720              3,646,512
Total Liabilities and Equity        $            $        
                                     9,805,394            9,685,745







Digital Realty Trust, Inc. and Subsidiaries
Reconciliation of Net Income Available to Common Stockholders to Funds From
Operations (FFO)
(in thousands, except per share and unit data)
(unaudited)
                          Three Months Ended
                          March 31, 2014    December 31, 2013 March 31, 2013
Net income available to   $          $         $       
common stockholders       34,186            42,977             42,657
Adjustments:
Noncontrolling interests  693               849               824
in operating partnership
Real estate related
depreciation and          129,496           125,671           110,690
amortization (1)
Real estate related
depreciation and
amortization related to   1,628             1,387             833
investment in
 unconsolidated joint
ventures
Gain on contribution of
properties to             (1,906)           (555)             -
unconsolidated joint
venture
FFO available to common   $           $          $       
stockholders and          164,097          170,329           155,004
unitholders (2)
Basic FFO per share and   $         $         $       
unit                       1.25             1.30              1.20
Diluted FFO per share and $         $         $       
unit (2)                   1.22             1.26              1.16
Weighted average common
stock and units
outstanding
Basic                     131,143           130,982           128,888
Diluted (2)               138,162           137,891           137,680
(1) Real estate related
depreciation and
amortization was computed
as follows:
Depreciation and
amortization per income   130,620           126,776           111,623
statement
Non-real estate           (1,124)           (1,105)           (933)
depreciation
                          $           $          $       
                          129,496          125,671           110,690


(2) At March 31, 2013, we had 0 series D convertible preferred shares
outstanding, as a result of the conversion of all remaining shares on February
26, 2013, which calculates into 1,909 common shares on a weighted average
basis for the three months ended March 31, 2013. For the three months ended
March 31, 2014, December 31, 2013 and March 31, 2013, we have excluded the
effect of dilutive series E, series F, series G and series H preferred stock,
as applicable, that may be converted upon the occurrence of specified change
in control transactions as described in the articles supplementary governing
the series E, series F, series G and series H preferred stock, as applicable,
which we consider highly improbable; if included, the dilutive effect for the
three months ended March 31, 2014, December 31, 2013 and March 31, 2013 would
be 14,582, 15,372 and 7,161 shares, respectively. In addition, we had a
balance of $266,400 of 5.50% exchangeable senior debentures due 2029 that were
exchangeable for 6,806, 6,712 and 6,590 common shares on a weighted average
basis for the three months ended March 31, 2014, December 31, 2013 and March
31, 2013, respectively. See below for calculations of diluted FFO available
to common stockholders and unitholders and weighted average common stock and
units outstanding.
                          Three Months Ended
                          March 31, 2014    December 31, 2013 March 31, 2013
FFO available to common   $           $          $       
stockholders and          164,097          170,329           155,004
unitholders
Add: Series D
convertible preferred     -                 -                 -
dividends
Add: 5.50% exchangeable
senior debentures         4,050             4,050             4,050
interest expense
FFO available to common   $           $          $       
stockholders and          168,147          174,379           159,054
unitholders -- diluted
Weighted average common
stock and units           131,143           130,982           128,888
outstanding
Add: Effect of dilutive
securities (excluding
series D convertible      213               197               293
preferred stock and 5.50%
exchangeable senior
debentures)
Add: Effect of dilutive
series D convertible      -                 -                 1,909
preferred stock
Add: Effect of dilutive
5.50% exchangeable senior 6,806             6,712             6,590
debentures
Weighted average common
stock and units           138,162           137,891           137,680
outstanding -- diluted
Digital Realty Trust, Inc. and Subsidiaries
Reconciliation of Funds From Operations (FFO) to Core Funds From Operations
(CFFO)
(in thousands, except per share and unit data)
(unaudited)
                          Three Months Ended
                          March 31, 2014    December 31, 2013 March 31, 2013
FFO available to common   $           $          $       
stockholders and          168,147          174,379           159,054
unitholders -- diluted
Termination fees and
other non-core revenues   (2,047)           -                 (248)
^(3)
Significant transaction   81                1,108             1,763
expenses
Loss from early           292               608               -
extinguishment of debt
Change in fair value of
contingent consideration  (3,403)           (1,749)           1,300
^(4)
Equity in earnings
adjustment for non-core   843               -                 -
items
Severance accrual and     12,430            -                 -
equity acceleration ^(5)
Other non-core expense    -                 7                 36
adjustments ^(6)
CFFO available to common  $           $          $       
stockholders and          176,343          174,353           161,905
unitholders -- diluted
Diluted CFFO per share    $         $         $       
and unit                   1.28             1.26              1.18
(3) Includes one-time fees, proceeds and certain other adjustments that are
not core to our business.
(4) Relates to earn-out contingency in connection with Sentrum Portfolio
acquisition.
(5) Relates to a severance charge of approximately $12.4 million, or $0.09 per
share and unit, related to the departure of the company's former Chief
Executive Officer.
(6) Includes reversal of accruals and certain other adjustments that are not
core to our business.
Digital Realty Trust, Inc. and Subsidiaries
Reconciliation of Net Income Available to Common Stockholders to Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted
EBITDA
(in thousands)
(unaudited)
                          Three Months Ended
                          March 31, 2014    December 31, 2013 March 31, 2013
Net income available to   $          $         $       
common stockholders       34,186            42,977             42,657
Interest                  47,374            45,996            48,078
Loss from early           292               608               -
extinguishment of debt
Taxes                     1,838             (473)             1,203
Depreciation and          130,620           126,776           111,623
amortization
EBITDA                    214,310           215,884           203,561
Change in fair value of   (3,403)           (1,749)           1,300
contingent consideration
Severance accrual and     12,430            -                 -
equity acceleration
Gain on contribution of
properties to             (1,906)           (555)             -
unconsolidated joint
venture
Noncontrolling interests  805               964               970
Preferred stock dividends 11,726            11,726            8,054
Adjusted EBITDA           $           $          $       
                          233,962          226,270           213,885



A reconciliation of the range of 2014 projected net income to projected FFO
and core FFO follows:
                                                              Low - High
Net income available to common stockholders per diluted share $1.05 – 1.20
 Add:
Real estate depreciation and amortization                     $3.69
Less:
Dilutive impact of convertible stock                          ($0.04)
 Projected FFO per diluted share          $4.70– 4.85
Adjustments for items that do not represent core expenses and $0.05
revenue streams
 Projected core FFO per diluted share     $4.75– 4.90

Funds From Operations

Digital Realty calculates 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) available to
common stockholders and unitholders (computed in accordance with U.S. GAAP),
excluding gains (or losses) from sales of property, 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, it provides a
performance measure that, when compared year over year, captures trends in
occupancy rates, rental rates and operating costs. Digital Realty also
believes 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 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 as a
measure of our performance. 

Core Funds from Operations

We present core funds from operations, or CFFO, 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 CFFO by adding to or subtracting from FFO (i)termination fees and
other non-core revenues, (ii) significant transaction expenses, (iii) loss
from early extinguishment of debt, (iv) costs on redemption of preferred
stock, (v) significant property tax adjustments, net and (vi) 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 CFFO as a measure of our performance is limited. Other REITs may
not calculate CFFO in a consistent manner. Accordingly, our CFFO may not be
comparable to other REITs' CFFO. CFFO should be considered only as a
supplement to net income computed in accordance with GAAP as a measure of our
performance. 

EBITDA and Adjusted EBITDA

We believe that earnings before interest expense, income taxes, 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, straight-line rent
expense adjustment attributable to prior periods, change in fair value of
contingent consideration, severance accrual and equity acceleration, gain on
contribution of properties to unconsolidated joint venture, non-controlling
interests, and preferred stock dividends. Adjusted EBITDA is EBITDA excluding
straight-line rent expense adjustment attributable to prior periods, change in
fair value of contingent consideration, severance accrual and equity
acceleration, gain on contribution of properties to unconsolidated joint
venture, non-controlling interests, and preferred stock dividends.

Additional Definitions

Debt-to-Adjusted EBITDA ratio is calculated using total debt at balance sheet
carrying value less unrestricted cash and cash equivalents divided by the
product of Adjusted EBITDA multiplied by four.

Net debt plus preferred to total enterprise value is mortgage debt and other
loans plus preferred stock divided by mortgage debt and other loans plus the
liquidation value of preferred stock and the market value of outstanding
Digital Realty Trust, Inc. common stock and Digital Realty Trust, L.P. units,
assuming the redemption of Digital Realty Trust, L.P. units for shares of
Digital Realty Trust, Inc. common stock.

Fixed charge coverage ratio is Adjusted EBITDA divided by the sum of GAAP
interest expense, scheduled debt principal payments and preferred dividends.
For the quarter ended March 31, 2014, GAAP interest expense was $47.4 million
and scheduled debt principal payments and preferred dividends was $15.1
million.



SOURCE Digital Realty Trust, Inc.

Website: http://www.digitalrealtytrust.com
 
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