Digital Realty Reports Second Quarter 2020 Results

SAN FRANCISCO, July 30, 2020 /PRNewswire/ -- Digital Realty (NYSE: DLR), a leading global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, announced today financial results for the second quarter of 2020. All per-share results are presented on a fully-diluted share and unit basis.

Highlights

    --  Reported net income available to common stockholders of $0.20 per share
        in 2Q20, compared to $0.15 in 2Q19
    --  Reported FFO per share of $1.49 in 2Q20, compared to $1.53 in 2Q19
    --  Reported core FFO per share of $1.54 in 2Q20, compared to $1.64 in 2Q19
    --  Signed total bookings during 2Q20 expected to generate $144 million of
        annualized GAAP rental revenue, including a $12 million contribution
        from interconnection
    --  Raised 2020 core FFO per share outlook from $5.90-$6.10 to $6.00-$6.10

Financial Results

Digital Realty reported revenues for the second quarter of 2020 of $993 million, a 21% increase from the previous quarter and a 24% increase from the same quarter last year.

The company delivered second quarter of 2020 net income of $76 million, and net income available to common stockholders of $54 million, or $0.20 per diluted share, compared to $0.90 per diluted share in the previous quarter and $0.15 per diluted share in the same quarter last year.

Digital Realty generated second quarter of 2020 adjusted EBITDA of $559 million, a 16% increase from the previous quarter and a 17% increase over the same quarter last year.

The company reported second quarter of 2020 funds from operations of $415 million, or $1.49 per share, compared to $0.91 per share in the previous quarter and $1.53 per share in the same quarter last year.

Excluding certain items that do not represent core expenses or revenue streams, Digital Realty delivered second quarter of 2020 core FFO per share of $1.54, a 1% increase from $1.53 per share in the previous quarter, and a 6% decrease from $1.64 per share in the same quarter last year.

Leasing Activity

In the second quarter, Digital Realty signed total bookings expected to generate $144 million of annualized GAAP rental revenue, including a $12 million contribution from interconnection and an $18 million contribution from the combination with Interxion, which was completed on March 12, 2020.

"I'm incredibly proud of the way the Digital Realty team has come together during the difficult circumstances of the past several months to maintain steadfast support for our customers around the world, prioritizing health and safety while maintaining service levels," said Digital Realty Chief Executive Officer A. William Stein. "We continued to seed investments to support our customers' future growth across the Americas, APAC and EMEA, while delivering record current-period bookings, demonstrating the power of our global platform as well as the resiliency of our business. Looking ahead, we are well positioned to continue to deliver sustainable growth for customers, shareholders and employees, into the second half of 2020 and beyond."

The weighted-average lag between leases signed during the second quarter of 2020 and the contractual commencement date was seven months.

In addition to new leases signed, Digital Realty also signed renewal leases representing $169 million of annualized GAAP rental revenue during the quarter. Rental rates on renewal leases signed during the second quarter of 2020 rolled down 2.8% on a cash basis and up 7.2% on a GAAP basis.

New leases signed during the second quarter of 2020 are summarized by region as follows:




                                   Annualized GAAP


                                      Base Rent                                       GAAP Base Rent                   GAAP Base Rent


                  The Americas     (in thousands)           
     
     Square Feet           per Square Foot 
     
     Megawatts     per Kilowatt




      0-1 MW                                       $11,645                    59,770                             $195               4.5   $214



      > 1 MW                                        78,711                   668,092                              118              70.6     93



      Other (1)                                     17,376                   532,078                               33



     
              Total                             $107,733                 1,259,940                              $86              75.1   $100




                  Europe (2)



      0-1 MW                                        $9,898                    40,469                             $245               3.2   $260



      > 1 MW                                        11,237                   111,474                              101               9.6     98



      Other (1)                                        108                       927                              116



     
              Total                              $21,243                   152,870                             $139              12.8   $138




                  Asia Pacific (2)



      0-1 MW                                          $617                     2,891                             $213               0.2   $266



      > 1 MW                                         2,433                    10,024                              243               1.2    167



      Other (1)



     
              Total                               $3,050                    12,915                             $236               1.4   $180




                 All Regions (2)



      0-1 MW                                       $22,160                   103,130                             $215               7.9   $234



      > 1 MW                                        92,382                   789,590                              117              81.4     95



      Other (1)                                     17,484                   533,005                               33



     
              Total                             $132,026                 1,425,725                              $93              89.3   $107




                 Interconnection                    $11,775                       N/A                             N/A              N/A   N/A




                 Grand Total                       $143,800                 1,425,725                              $93              89.3   $107




     Note:  Totals may not foot due to rounding differences.



     (1)   
              Other includes Powered Base Building shell capacity as well as storage and office space within fully improved data center facilities.



     (2)   
              Based on quarterly average exchange rates during the three months ended June 30, 2020.

Investment Activity

During the second quarter of 2020, Interxion, a leading European provider of carrier- and cloud-neutral colocation data center solutions and a Digital Realty company, acquired a 3.6-acre land parcel in Madrid, Spain for approximately EUR33 million, or $37 million. The land parcel is less than one kilometer from Interxion's existing campus in Madrid. Upon completion, the new facility is expected to support up to 34 megawatts of critical IT capacity and will encompass more than 375,000 square feet. Commencement of development will be subject to market demand, and delivery will be phased to meet future customer growth requirements.

Subsequent to quarter-end, Interxion acquired the freehold to the land under its Hanauer Landstraße campus in Frankfurt for EUR185 million, or approximately $209 million. The site includes nine Interxion data centers previously subject to leasehold agreements with approximately nine years of remaining lease term, along with Interxion's German headquarters office as well as several buildings currently leased to other customers. Interxion now owns the freehold to all 15 data centers on its Frankfurt campus.

Separately, Interxion reached an agreement to acquire an expansion parcel within approximately one kilometre of the Hanauer Landstraße campus for EUR177 million, or approximately $200 million. The expansion parcel totals 107,000 square metres that will support the development of up to 180 megawatts of additional IT capacity and will be fully connected to the existing campus. The purchase is expected to close in two stages, with final transfer of ownership in early 2021.

Subsequent to quarter-end, Digital Realty closed on the sale of a property in Gronigen, the Netherlands for EUR20 million, or $22 million. The property is expected to generate 2020 cash net operating income of approximately EUR1.3 million, or $1.5 million, representing a 6.7% cap rate.

Balance Sheet

Digital Realty completed the following financing transactions during the second quarter of 2020.

    --  In mid-June, Digital Realty closed an offering of EUR500 million, or
        approximately $565 million, of 1.250% Euro-denominated notes due 2031.
    --  Likewise in mid-June, Digital Realty liquidated a portion of its stake
        in Megaport with the sale of 7.7 million shares at a weighted average
        price of A$13.36 generating gross proceeds of A$103 million, or
        approximately $70 million.
    --  During the second quarter of 2020, Digital Realty issued 4.5 million
        shares of common stock under the company's at-the-market equity offering
        program at a weighted average price of $142.43 per share, generating
        gross proceeds of approximately $645 million.
    --  Subsequent to quarter-end, Digital Realty announced its intent to redeem
        all $300 million of its outstanding 3.625% notes due 2022 as well as all
        $500 million of its outstanding 3.950% notes due 2022.

Digital Realty had approximately $12.4 billion of total debt outstanding as of June 30, 2020, comprised of $12.1 billion of unsecured debt and approximately $0.2 billion of secured debt. At the end of the second quarter of 2020, net debt-to-adjusted EBITDA was 5.7x, debt plus-preferred-to-total enterprise value was 26.0% and fixed charge coverage was 4.6x. Pro forma for settlement of the $1 billion forward equity offering, net debt-to-adjusted EBITDA was 5.2x and fixed charge coverage was 4.9x.

COVID-19

Throughout the COVID-19 global pandemic, Digital Realty's data centers around the world have remained fully operational in accordance with business continuity and pandemic response plans, prioritizing the health and safety of employees, customers and partners while ensuring service levels are maintained. Digital Realty data centers have been deemed essential operations, allowing for critical personnel to remain in place and continue to provide services and support for customers. Construction activity has been somewhat delayed in a few markets due to government restrictions in certain locations and/or limited availability of labor. In some instances, these delays have impacted scheduled delivery dates. We are monitoring the situation closely and remain in frequent communication with customers, contractors and suppliers. We have proactively managed our supply chain, and we believe we have acquired the vast majority of the equipment needed to complete our 2020 development activities. We believe we have ample liquidity to fund our business needs, given the $1 billion available upon physical settlement of the forward equity offering as well as the $505 million of cash on the balance sheet and $2.5 billion of availability under our global revolving credit facilities as of June 30, 2020. While we have not experienced any significant business disruptions from the COVID-19 pandemic to date, we cannot predict what impact the COVID-19 pandemic may have on our future financial condition, results of operations or cash flows due to numerous uncertainties.

2020 Outlook

Digital Realty raised its 2020 core FFO per share outlook from $5.90-$6.10 to $6.00-$6.10. The assumptions underlying the outlook are summarized in the following table.




                                              
          
               As of               
          
                As of


                    Top-Line and Cost
                     Structure              
          
              May 7, 2020          
         
               July 30, 2020




     Total revenue                               
            $3.725 - $3.825 billion       
             $3.775 - $3.825 billion


      Net non-cash rent
       adjustments (1)                               
             ($20 - $30 million)          
              ($20 - $30 million)


      Adjusted EBITDA                             
            $2.075 - $2.125 billion       
             $2.100 - $2.125 billion



     G&A                                            
             $320 - $330 million          
              $320 - $330 million




                    Internal Growth


      Rental rates on renewal
       leases



     Cash basis                                   
            Down low single-digits        
             Down low single-digits



     GAAP basis                                              
              Unchanged                    
              Unchanged


      Year-end portfolio
       occupancy (2)                                                 85.0% - 86.0%                          85.0% - 86.0%


      "Same-capital" cash NOI
       growth (3)                                       
              (2.5%) - (3.5%)             
              (2.5%) - (3.5%)




      Foreign Exchange Rates


      U.S. Dollar /Pound
       Sterling                                           
              $1.20 - $1.25                
              $1.20 - $1.25


      U.S. Dollar /Euro                                   
              $1.05 - $1.10                
              $1.05 - $1.15




                    External Growth



     Dispositions



     Dollar volume                                  
             $0.6 - $1.0 billion          
              $0.6 - $1.0 billion



     Cap rate                                                        0.0% - 12.0%                           0.0% - 12.0%



     Development



     CapEx (4)                                      
             $1.9 - $2.2 billion          
              $1.9 - $2.2 billion


      Average stabilized yields                                       9.0% - 15.0%                           9.0% - 15.0%


      Enhancements and other
       non-recurring CapEx (5)                         
              $5 - $10 million             
              $5 - $10 million


      Recurring CapEx +
       capitalized leasing
       costs (6)                                     
             $220 - $230 million          
              $220 - $230 million




                    Balance Sheet


      Long-term debt issuance



     Dollar amount                                        
              $1.9 billion                 
              $2.5 billion



     Pricing                                                                1.00%                           1.00% - 1.25%



     Timing                                                 
              Early 2020            
              Early-to-mid 2020




                    Net income per diluted
                     share                      
           
                $1.60 - $1.75     
            
                $1.20 - $1.25


      Real estate depreciation
       and (gain) /loss on
       sale                                               
              $3.50 - $3.50                
              $3.90 - $3.90


                    Funds From Operations /
                     share (NAREIT-Defined)     
           
                $5.10 - $5.25     
            
                $5.10 - $5.15


      Non-core expenses and
       revenue streams                                    
              $0.80 - $0.85                
              $0.90 - $0.95


                    Core Funds From
                     Operations /share          
           
                $5.90 - $6.10     
            
                $6.00 - $6.10


      Foreign currency
       translation adjustments                            
              $0.05 - $0.15                
              $0.05 - $0.15


                    Constant-Currency Core
                     FFO /share                 
           
                $5.95 - $6.25     
            
                $6.05 - $6.25




              (1)              Net non-cash rent adjustments
                                  represent the sum of straight-
                                  line rental revenue and straight-
                                  line rent expense, as well as the
                                  amortization of above- and below-
                                  market leases (i.e., ASC 805
                                  adjustments).



              (2)              Reflects inclusion of the Interxion
                                  portfolio, which was approximately
                                  75% occupied as of June 30, 2020.



              (3)              The "same-capital" pool includes
                                  properties owned as of December
                                  31, 2018 with less than 5% of
                                  total rentable square feet under
                                  development.  It also excludes
                                  properties that were undergoing,
                                  or were expected to undergo,
                                  development activities in
                                  2019-2020, properties classified
                                  as held for sale, and properties
                                  sold or contributed to joint
                                  ventures for all periods
                                  presented.



              (4)              Includes land acquisitions.



              (5)              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.



              (6)              Recurring CapEx represents non-
                                  incremental improvements required
                                  to maintain current revenues,
                                  including second-generation
                                  tenant improvements and 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 reconciliation from FFO to core FFO, and definitions of FFO and core FFO are included as an attachment to this document. A reconciliation from U.S. GAAP net income available to common stockholders to Adjusted EBITDA, a definition of Adjusted EBITDA and definitions of net debt-to-Adjusted EBITDA, debt-plus-preferred-to-total enterprise value, cash NOI, and fixed charge coverage ratio are included as an attachment to this document.

Investor Conference Call

Prior to Digital Realty's investor conference call at 5:30 p.m. EDT / 2:30 p.m. PDT on July 30, 2020, a presentation will be posted to the Investors section of the company's website at https://investor.digitalrealty.com/. The presentation is designed to accompany the discussion of the company's second quarter 2020 financial results and operating performance. The conference call will feature Chief Executive Officer A. William Stein and Chief Financial Officer Andrew P. Power.

To participate in the live call, investors are invited to dial (888) 317-6003 (for domestic callers) or (412) 317-6061 (for international callers) and reference the conference ID# 0396071 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 https://investor.digitalrealty.com/.

Telephone and webcast replays will be available after the call until August 30, 2020. The telephone replay can be accessed by dialing (877) 344-7529 (for domestic callers) or (412) 317-0088 (for international callers) and providing the conference ID# 10145667. The webcast replay can be accessed on Digital Realty's website.

About Digital Realty

Digital Realty supports the data center, colocation and interconnection strategies of customers across the Americas, EMEA and APAC, ranging from cloud and information technology services, communications and social networking to financial services, manufacturing, energy, healthcare and consumer products. To learn more about Digital Realty, please visit digitalrealty.com or follow us on LinkedIn and Twitter.

Contact Information

Andrew P. Power
Chief Financial Officer
Digital Realty
(415) 738-6500

John J. Stewart / Jim Huseby
Investor Relations
Digital Realty
(415) 738-6500



     
                Consolidated Quarterly Statements of Operations                                                                                                                               Financial Supplement



     
                Unaudited and Dollars in Thousands, Except Per Share Data                                                                                                                      Second Quarter 2020




                                                                                          
      
     Three Months Ended                                Six Months Ended

                                                                                                                             ---

                                                                             
     
       30-Jun-20        
              
       31-Mar-20     
     
     31-Dec-19     
              
       30-Sep-19    
     
     30-Jun-19                          
     
     30-Jun-20      
     
     30-Jun-19




     Rental revenues                                                               $698,041                         $579,774           $549,733                      $564,975          $565,925                              $1,277,815          $1,151,349



     Tenant reimbursements - Utilities                                              141,576                          113,520            107,518                       114,719           106,409                                 255,096             208,978



     Tenant reimbursements - Other                                                   62,630                           56,943             59,641                        57,466            62,820                                 119,573             118,688



     Interconnection & other                                                         85,428                           69,835             65,576                        65,312            64,232                                 155,263             132,400



     Fee income                                                                       4,353                            2,452              4,814                         3,994               925                                   6,805               2,845



     Other                                                                              967                              813                181                                            486                                   1,780               1,051



     
                Total Operating Revenues                                         $992,995                         $823,337           $787,463                      $806,466          $800,797                              $1,816,332          $1,615,311





     Utilities                                                                     $160,173                         $129,526           $125,127                      $132,565          $123,398                                $289,698            $247,732



     Rental property operating                                                      172,474                          136,182            129,034                       126,866           128,634                                 308,656             259,254



     Property taxes                                                                  45,071                           42,123             42,541                        38,255            41,482                                  87,194              78,797



     Insurance                                                                        3,370                            3,547              3,055                         3,103             3,441                                   6,917               6,432



     Depreciation & amortization                                                    349,165                          291,457            275,008                       286,718           290,562                                 640,622             602,048



     General & administration                                                        90,649                           62,266             53,540                        49,862            52,318                                 152,915             104,294



     Severance, equity acceleration, and legal expenses                               3,642                            1,272              1,130                           123               665                                   4,914               2,148



     Transaction and integration expenses                                            15,618                           56,801             17,106                         4,115             4,210                                  72,419               6,704



     Impairment of investments in real estate                                                                                                                                                                                                   5,351



     Other expenses                                                                      22                              114              1,989                            92             7,115                                     136              12,037



     
                Total Operating Expenses                                         $840,184                         $723,288           $648,530                      $641,699          $651,825                              $1,563,471          $1,324,797





     
                Operating Income                                                 $152,811                         $100,049           $138,933                      $164,767          $148,972                                $252,861            $290,514





     Equity in (loss) earnings of unconsolidated joint ventures                     (7,632)                        (78,996)            11,157                      (19,269)            6,962                                (86,628)             16,180



     Gain on sale / deconsolidation                                                                                 304,801            267,651                                                                               304,801              67,497



     Interest and other income (expense), net                                        22,163                          (3,542)            10,734                        16,842            16,980                                  18,621              38,424



     Interest (expense)                                                            (79,874)                        (85,800)          (80,880)                     (84,574)         (86,051)                              (165,674)          (187,603)



     Income tax benefit (expense)                                                  (11,490)                         (7,182)             1,731                       (4,826)          (4,634)                               (18,672)            (8,900)



     Loss from early extinguishment of debt                                                                           (632)                                        (5,366)         (20,905)                                  (632)           (33,791)



     
                Net Income                                                        $75,978                         $228,698           $349,326                       $67,574           $61,324                                $304,677            $182,321





     Net (income) loss attributable to noncontrolling interests                     (1,147)                         (4,684)          (13,042)                      (1,077)          (1,156)                                (5,831)            (5,341)



     
                Net Income Attributable to Digital Realty Trust, Inc.             $74,831                         $224,014           $336,284                       $66,497           $60,168                                $298,846            $176,980





     Preferred stock dividends, including undeclared dividends                     (21,155)                        (21,155)          (20,707)                     (16,670)         (16,670)                               (42,310)           (37,613)



     Issuance costs associated with redeemed preferred stock                                                                                                                       (11,760)                                                  (11,760)



     
                Net Income Available to Common Stockholders                       $53,676                         $202,859           $315,577                       $49,827           $31,738                                $256,536            $127,607





     Weighted-average shares outstanding - basic                                267,569,823                      222,163,324        208,776,355                   208,421,470       208,284,407                             244,866,574         208,048,207



     Weighted-average shares outstanding - diluted                              270,744,408                      224,474,295        210,286,278                   209,801,771       209,435,572                             247,576,014         208,894,294



     Weighted-average fully diluted shares and units                            278,719,109                      232,753,630        218,901,078                   218,755,597       218,497,318                             255,704,473         218,039,658





     Net income per share - basic                                                     $0.20                            $0.91              $1.51                         $0.24             $0.15                                   $1.05               $0.61



     Net income per share - diluted                                                   $0.20                            $0.90              $1.50                         $0.24             $0.15                                   $1.04               $0.61



       
                Funds From Operations and Core Funds From Operations                                                                                                              Financial Supplement



       
                Unaudited and in Thousands, Except Per Share Data                                                                                                                  Second Quarter 2020




                                                                                 
        
          Three Months Ended                  Six Months Ended

                                                                                                                ---          ---


       
                Reconciliation of Net Income to Funds From Operations (FFO)   30-Jun-20                      31-Mar-20                  31-Dec-19      30-Sep-19    30-Jun-19                          30-Jun-20      30-Jun-19

    ---




       
                Net Income Available to Common Stockholders                     $53,676                        $202,859                       $315,577      $49,827       $31,738                            $256,535        $127,607



       Adjustments:



       Non-controlling interest operating partnership                                 1,400                           7,800                         13,100        2,300         1,400                               9,200           5,700



       Real estate related depreciation & amortization (1)                          342,334                         286,517                        271,371      283,090       286,915                             628,851         594,779



       Unconsolidated JV real estate related depreciation & amortization             17,123                          19,923                         21,631       13,612        13,623                              37,046          17,474



       (Gain) on real estate transactions                                                                        (304,801)                     (267,651)                                                   (304,801)



       Impairment of investments in real estate                                                                                                                                                                               5,351




       
                Funds From Operations                                          $414,533                        $212,298                       $354,028     $348,829      $333,676                            $626,831        $750,911





       
                Funds From Operations - diluted                                $414,533                        $212,298                       $354,028     $348,829      $333,676                            $626,831        $750,911





       Weighted-average shares and units outstanding - basic                        275,545                         230,443                        217,391      217,375       217,346                             252,995         217,194



       Weighted-average shares and units outstanding - diluted (2)                  278,719                         232,754                        218,901      218,756       218,497                             255,704         218,040





       
                Funds From Operations per share - basic                           $1.50                           $0.92                          $1.63        $1.60         $1.54                               $2.48           $3.46





       
                Funds From Operations per share - diluted (2)                     $1.49                           $0.91                          $1.62        $1.59         $1.53                               $2.45           $3.44




                                                                                 
        
          Three Months Ended                  Six Months Ended

                                                                                                                ---          ---


       
                Reconciliation of FFO to Core FFO                             30-Jun-20                      31-Mar-20                  31-Dec-19      30-Sep-19    30-Jun-19                          30-Jun-20      30-Jun-19

    ---




       
                Funds From Operations - diluted                                $414,533                        $212,298                       $354,028     $348,829      $333,676                            $626,831        $750,911



       Termination fees and other non-core revenues (3)                            (21,908)                        (2,425)                       (5,634)    (16,792)     (16,826)                           (24,333)       (31,271)



       Transaction and integration expenses                                          15,618                          56,801                         17,106        4,115         4,210                              72,419           6,704



       Loss from early extinguishment of debt                                                                          632                                      5,366        20,905                                 632          33,791



       Issuance costs associated with redeemed preferred stock                                                                                                             11,760                                             11,760



       Severance, equity acceleration, and legal expenses (4)                         3,642                           1,272                          1,130          123           665                               4,914           2,148



       (Gain) / Loss on FX revaluation                                               17,526                          81,288                       (10,422)      23,136       (4,251)                             98,814           5,353



       (Gain) on contribution to unconsolidated JV, net of related tax                                                                                                                                                     (58,497)



       Other non-core expense adjustments                                                22                           5,509                        (1,511)          92         7,115                               5,531          12,037




       
                Core Funds From Operations - diluted                           $429,433                        $355,375                       $354,697     $364,869      $357,254                            $784,808        $732,936





       Weighted-average shares and units outstanding - diluted (2)                  278,719                         232,754                        218,901      218,756       218,497                             255,704         218,040





       
                Core Funds From Operations per share - diluted (2)                $1.54                           $1.53                          $1.62        $1.67         $1.64                               $3.07           $3.36





       (1) Real Estate Related Depreciation & Amortization                      
        
          Three Months Ended                  Six Months Ended

                                                                                                                ---          ---

                                                                                   30-Jun-20                      31-Mar-20                  31-Dec-19      30-Sep-19    30-Jun-19                          30-Jun-20      30-Jun-19





       Depreciation & amortization per income statement                            $349,165                        $291,457                       $275,008     $286,718      $290,562                             640,622         602,048



       Non-real estate depreciation                                                 (6,831)                        (4,940)                       (3,637)     (3,628)      (3,647)                           (11,771)        (7,269)




       
                Real Estate Related Depreciation & Amortization                $342,334                        $286,517                       $271,371     $283,090      $286,915                            $628,851        $594,779




              (2)              For all periods presented, we have
                                  excluded the effect of dilutive
                                  series C, series G, series H,
                                  series I, series J, series K and
                                  series L preferred stock, as
                                  applicable, that may be converted
                                  into common stock upon the
                                  occurrence of specified change in
                                  control transactions as described
                                  in the articles supplementary
                                  governing the series C, series G,
                                  series H, series I, series J,
                                  series K and series L preferred
                                  stock, as applicable, which we
                                  consider highly improbable. See
                                  above for calculations of diluted
                                  FFO and the share count detail
                                  section that follows the
                                  reconciliation of core FFO to AFFO
                                  for calculations of weighted
                                  average common stock and units
                                  outstanding.  For definitions and
                                  discussion of FFO and core FFO, see
                                  the definition section.



              (3)              Includes lease termination fees and
                                  certain other adjustments that are
                                  not core to our business.



              (4)              Relates to severance and other
                                  charges related to the departure of
                                  company executives and integration-
                                  related severance.



       
                Adjusted Funds From Operations (AFFO)                                                                                                                            Financial Supplement



       
                Unaudited and in Thousands, Except Per Share Data                                                                                                                 Second Quarter 2020




                                                                                
         
         Three Months Ended                  Six Months Ended

                                                                                                               ---          ---


       
                 Reconciliation of Core FFO to AFFO                          30-Jun-20                      31-Mar-20                  31-Dec-19      30-Sep-19    30-Jun-19                          30-Jun-20      30-Jun-19

    ---




       
                 Core FFO available to common stockholders and unitholders    $429,433                        $355,375                       $354,697     $364,869      $357,254                            $784,808        $732,936



       Adjustments:



       Non-real estate depreciation                                                  6,831                           4,940                          3,637        3,628         3,647                              11,771           7,269



       Amortization of deferred financing costs                                      3,661                           4,260                          3,064        2,900         2,905                               7,921           7,398



       Amortization of debt discount/premium                                         1,011                             943                            612          466           515                               1,954           1,275



       Non-cash stock-based compensation expense                                    15,060                          12,153                          8,937        8,906         9,468                              27,213          17,060



       Straight-line rental revenue                                               (10,928)                       (15,404)                      (13,994)    (12,764)     (13,033)                           (26,332)       (29,013)



       Straight-line rental expense                                                  7,373                           1,460                          (342)       (209)          318                               8,833           1,552



       Above- and below-market rent amortization                                     3,794                           3,294                          4,109        2,824         3,954                               7,088          10,163



       Deferred tax expense                                                          (150)                          (792)                         (998)     (1,418)        (979)                              (942)       (16,376)



       Leasing compensation & internal lease commissions (1)                         1,739                           2,793                          3,646        3,254         4,025                               4,532           7,606



       Recurring capital expenditures (2)                                         (38,796)                       (34,677)                      (54,731)    (48,408)     (39,515)                           (73,473)       (77,574)





       
                AFFO available to common stockholders and unitholders (3)     $419,028                        $334,345                       $308,637     $324,048      $328,559                            $753,373        $662,296





       Weighted-average shares and units outstanding - basic                       275,545                         230,443                        217,391      217,375       217,346                             252,995         217,194



       Weighted-average shares and units outstanding - diluted (4)                 278,719                         232,754                        218,901      218,756       218,497                             255,704         218,040





       
                AFFO per share - diluted (4)                                     $1.50                           $1.44                          $1.41        $1.48         $1.50                               $2.95           $3.04





        Dividends per share and common unit                                          $1.12                           $1.12                          $1.08        $1.08         $1.08                               $2.24           $2.16





       
                Diluted AFFO Payout Ratio                                        74.5%                          78.0%                         76.6%       72.9%        71.8%                              76.0%          71.1%




                                                                                
         
         Three Months Ended                  Six Months Ended

                                                                                                               ---          ---


       
                Share Count Detail                                           30-Jun-20                      31-Mar-20                  31-Dec-19      30-Sep-19    30-Jun-19                          30-Jun-20      30-Jun-19

    ---




       
                Weighted Average Common Stock and Units Outstanding            275,545                         230,443                        217,391      217,375       217,346                             252,995         217,194



       Add: Effect of dilutive securities                                            3,174                           2,311                          1,510        1,381         1,151                               2,709             846




       
                Weighted Avg. Common Stock and Units Outstanding - diluted     278,719                         232,754                        218,901      218,756       218,497                             255,704         218,040




              (1)              The company adopted ASC 842 in the
                                  first quarter of 2019.



              (2)              Recurring capital expenditures
                                  represent non-incremental building
                                  improvements required to maintain
                                  current revenues, including second-
                                  generation tenant improvements and
                                  external leasing commissions.
                                  Recurring capital expenditures do
                                  not include acquisition costs
                                  contemplated when underwriting the
                                  purchase of a building, costs which
                                  are incurred to bring a building up
                                  to Digital Realty's operating
                                  standards, or internal leasing
                                  commissions.



              (3)              For a definition and discussion of
                                  AFFO, see the definitions section.
                                  For a reconciliation of net income
                                  available to common stockholders to
                                  FFO and core FFO, see above.



              (4)              For all periods presented, we have
                                  excluded the effect of dilutive
                                  series C, series G, series H,
                                  series I, series J, series K and
                                  series L preferred stock, as
                                  applicable, that may be converted
                                  into common stock upon the
                                  occurrence of specified change in
                                  control transactions as described
                                  in the articles supplementary
                                  governing the series C, series G,
                                  series H, series I, series J,
                                  series K and series L preferred
                                  stock, as applicable, which we
                                  consider highly improbable. See
                                  above for calculations of diluted
                                  FFO available to common
                                  stockholders and unitholders and
                                  for calculations of weighted
                                  average common stock and units
                                  outstanding.



     
                Consolidated Balance Sheets                                                                                                                           Financial Supplement



     
                Unaudited and in Thousands, Except Share and Per Share Data                                                                                            Second Quarter 2020




                                                                                   30-Jun-20             31-March-20         31-Dec-19 30-Sep-19               30-Jun-19




     
                Assets



     Investments in real estate:



     Real estate                                                                            $20,843,273              $20,477,290                  $16,886,592                                   $16,407,080     $17,324,416



     Construction in progress                                                                 2,514,324                2,204,869                    1,732,555                                     1,647,130       1,685,056



     Land held for future development                                                           175,209                  137,447                      147,597                                       150,265         152,368



     
                Investments in real estate                                                $23,532,806              $22,819,606                  $18,766,744                                   $18,204,475     $19,161,840



     Accumulated depreciation and amortization                                              (4,945,534)             (4,694,713)                 (4,536,169)                                  (4,298,629)    (4,312,357)



     
                Net Investments in Properties                                             $18,587,272              $18,124,893                  $14,230,575                                   $13,905,846     $14,849,483



     Investment in unconsolidated joint ventures                                              1,033,235                1,064,009                    1,287,109                                     1,035,861         979,350



     
                Net Investments in Real Estate                                            $19,620,507              $19,188,902                  $15,517,684                                   $14,941,707     $15,828,833





     Cash and cash equivalents                                                                 $505,174                 $246,480                      $89,817                                        $7,190         $33,536



     Accounts and other receivables (1)                                                         542,750                  527,699                      305,501                                       304,712         320,938



     Deferred rent                                                                              496,684                  484,179                      478,744                                       471,516         491,486



     Customer relationship value, deferred leasing costs & other intangibles, net             3,128,140                3,500,588                    2,195,324                                     2,245,017       2,499,564



     Acquired above-market leases, net                                                           57,535                   66,033                       74,815                                        84,315          94,474



     Goodwill                                                                                 7,791,522                7,466,046                    3,363,070                                     3,338,168       3,353,538



     Assets associated with real estate held for sale                                            10,981                                              229,934                                       967,527



     Operating lease right-of-use assets (2)                                                  1,375,427                1,364,621                      628,681                                       634,085         648,952



     Other assets                                                                               333,916                  268,752                      184,561                                       178,528         158,770



     
                Total Assets                                                              $33,862,636              $33,113,300                  $23,068,131                                   $23,172,765     $23,430,091





     
                Liabilities and Equity



     Global unsecured revolving credit facilities                                               $64,492                 $603,101                     $234,105                                    $1,833,512      $1,417,675



     Unsecured term loans                                                                       799,550                  771,425                      810,219                                       796,232         807,922



     Unsecured senior notes, net of discount                                                 11,268,753               10,637,006                    8,973,190                                     8,189,138       8,511,656



     Secured debt, net of premiums                                                              238,826                  239,800                      104,934                                       105,153         105,325



     Operating lease liabilities (2)                                                          1,451,152                1,431,292                      693,539                                       699,381         714,256



     Accounts payable and other accrued liabilities                                           1,828,288                1,732,318                    1,007,761                                       938,740         984,812



     Accrued dividends and distributions                                                                                                            234,620



     Acquired below-market leases                                                               139,851                  145,208                      148,774                                       153,422         183,832



     Security deposits and prepaid rent                                                         348,253                  336,583                      208,724                                       203,708         213,549



     Liabilities associated with assets held for sale                                               238                                                2,700                                        23,534



     
                Total Liabilities                                                         $16,139,403              $15,896,733                  $12,418,566                                   $12,942,820     $12,939,027





     Redeemable non-controlling interests - operating partnership                                40,584                   40,027                       41,465                                        19,090          17,344





     
                Equity



     Preferred Stock:  $0.01 par value per share, 110,000,000 shares authorized:



     Series C Cumulative Redeemable Perpetual Preferred Stock (3)                              $219,250                 $219,250                     $219,250                                      $219,250        $219,250



     Series G Cumulative Redeemable Preferred Stock (4)                                         241,468                  241,468                      241,468                                       241,468         241,468



     Series I Cumulative Redeemable Preferred Stock (5)                                         242,012                  242,012                      242,012                                       242,012         242,012



     Series J Cumulative Redeemable Preferred Stock (6)                                         193,540                  193,540                      193,540                                       193,540         193,540



     Series K Cumulative Redeemable Preferred Stock (7)                                         203,264                  203,264                      203,264                                       203,264         203,264



     Series L Cumulative Redeemable Preferred Stock (8)                                         334,886                  334,886                      334,886



     Common Stock: $0.01 par value per share, 392,000,000 shares authorized (9)                   2,670                    2,622                        2,073                                         2,069           2,067



     Additional paid-in capital                                                              19,292,311               18,606,766                   11,577,320                                    11,540,980      11,511,519



     Dividends in excess of earnings                                                        (3,386,525)             (3,139,350)                 (3,046,579)                                  (3,136,668)    (2,961,307)



     Accumulated other comprehensive (loss), net                                              (358,349)               (444,222)                    (87,922)                                     (68,625)       (89,588)



     
                Total Stockholders' Equity                                                $16,984,527              $16,460,236                   $9,879,312                                    $9,437,290      $9,562,225





     
                Noncontrolling Interests



     Noncontrolling interest in operating partnership                                          $633,831                 $656,266                     $708,163                                      $732,314        $756,050



     Noncontrolling interest in consolidated joint ventures                                      64,291                   60,038                       20,625                                        41,251         155,445





     
                Total Noncontrolling Interests                                               $698,122                 $716,304                     $728,788                                      $773,565        $911,495





     
                Total Equity                                                              $17,682,649              $17,176,540                  $10,608,100                                   $10,210,855     $10,473,720





     
                Total Liabilities and Equity                                              $33,862,636              $33,113,300                  $23,068,131                                   $23,172,765     $23,430,091




              (1)              Net of allowance for doubtful
                                  accounts of $18,264 and $13,753
                                  as of June 30, 2020 and
                                  December 31, 2019,
                                  respectively.



              (2)              Adoption of the new lease
                                  accounting standard required
                                  that we adjust the consolidated
                                  balance sheet to include the
                                  recognition of additional
                                  right-of-use assets and lease
                                  liabilities for operating
                                  leases. See our quarterly
                                  report on Form 10-Q filed on
                                  May 10, 2019 for additional
                                  information.



              (3)              Series C Cumulative Redeemable
                                  Perpetual Preferred Stock,
                                  6.625%, $201,250 and $201,250
                                  liquidation preference,
                                  respectively ($25.00 per
                                  share), 8,050,000 and 8,050,000
                                  shares issued and outstanding
                                  as of June 30, 2020 and
                                  December 31, 2019,
                                  respectively.



              (4)              Series G Cumulative Redeemable
                                  Preferred Stock, 5.875%,
                                  $250,000 and $250,000
                                  liquidation preference,
                                  respectively ($25.00 per
                                  share), 10,000,000 and
                                  10,000,000 shares issued and
                                  outstanding as of June 30, 2020
                                  and December 31, 2019,
                                  respectively.



              (5)              Series I Cumulative Redeemable
                                  Preferred Stock, 6.350%,
                                  $250,000 and $250,000
                                  liquidation preference,
                                  respectively ($25.00 per
                                  share), 10,000,000 and
                                  10,000,000 shares issued and
                                  outstanding as of June 30, 2020
                                  and December 31, 2019,
                                  respectively.



              (6)              Series J Cumulative Redeemable
                                  Preferred Stock, 5.250%,
                                  $200,000 and $200,000
                                  liquidation preference,
                                  respectively ($25.00 per
                                  share), 8,000,000 and 8,000,000
                                  shares issued and outstanding
                                  as of June 30, 2020 and
                                  December 31, 2019,
                                  respectively.



              (7)              Series K Cumulative Redeemable
                                  Preferred Stock, 5.850%,
                                  $210,000 and $210,000
                                  liquidation preference,
                                  respectively ($25.00 per
                                  share), 8,400,000 and 8,400,000
                                   shares issued and outstanding
                                   as of June 30, 2020 and
                                  December 31, 2019,
                                  respectively.



              (8)              Series L Cumulative Redeemable
                                  Preferred Stock, 5.200%,
                                  $345,000 and $345,000
                                  liquidation preference,
                                  respectively ($25.00 per
                                  share), 13,800,000 and
                                  13,800,000  shares issued and
                                  outstanding as of June 30, 2020
                                  and December 31, 2019,
                                  respectively.



              (9)              Common Stock: 268,399,073 and
                                  208,900,758 shares issued and
                                  outstanding as of June 30, 2020
                                  and December 31, 2019,
                                  respectively.



       
                Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization and Financial Ratios                                                             Financial Supplement



       
                Unaudited and Dollars in Thousands                                                                                                                               Second Quarter 2020




                                                                                                                         
         
         Three Months Ended

                                                                                                                                                          ---


       
                Reconciliation of Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) (1)           30-Jun-20                        31-Mar-20    31-Dec-19                    30-Sep-19           30-Jun-19






       
                Net Income Available to Common Stockholders                                                             $53,676                          $202,859      $315,577                            $49,827         $31,738



       Interest                                                                                                              79,874                            85,800        80,880                             84,574          86,051



       Loss from early extinguishment of debt                                                                                                                    632                                           5,366          20,905



       Income tax (benefit) expense                                                                                          11,490                             7,182       (1,731)                             4,826           4,634



       Depreciation & amortization                                                                                          349,165                           291,457       275,008                            286,718         290,562



       
                EBITDA                                                                                                 $494,205                          $587,930      $669,734                           $431,311        $433,890



       Unconsolidated JV real estate related depreciation & amortization                                                     17,123                            19,923        21,631                             13,612          13,623



       Unconsolidated JV interest expense and tax expense                                                                     9,203                             9,944        13,553                             10,816          10,277



       Severance, equity acceleration, and legal expenses                                                                     3,642                             1,272         1,130                                123             665



       Transaction and integration expenses                                                                                  15,618                            56,801        17,106                              4,115           4,210



       (Gain) on sale / deconsolidation                                                                                                                    (304,801)    (267,651)



       Other non-core adjustments, net                                                                                      (3,404)                           85,185      (13,886)                             6,436        (13,476)



       Non-controlling interests                                                                                              1,147                             4,684        13,042                              1,077           1,156



       Preferred stock dividends, including undeclared dividends                                                             21,155                            21,155        20,707                             16,670          16,670



       Issuance costs associated with redeemed preferred stock                                                                                                                                                              11,760




       
                Adjusted EBITDA                                                                                        $558,690                          $482,093      $475,366                           $484,160        $478,775





       (1)   For definitions and discussion of EBITDA and Adjusted EBITDA, see the definitions section.






                                                                                                                         
         
         Three Months Ended

                                                                                                                                                          ---


       
                Financial Ratios                                                                                      30-Jun-20                        31-Mar-20    31-Dec-19                    30-Sep-19           30-Jun-19






       Total GAAP interest expense                                                                                          $79,874                           $85,800       $80,880                            $84,574         $86,051



       Capitalized interest                                                                                                  13,133                            10,480         9,877                              9,936           9,493



       Change in accrued interest and other non-cash amounts                                                               (38,478)                           24,321      (30,564)                             8,490        (20,656)



       
                Cash Interest Expense (2)                                                                               $54,529                          $120,601       $60,193                           $103,000         $74,888





       Scheduled debt principal payments                                                                                         57                               125           210                                163             159



       Preferred dividends                                                                                                   21,155                            21,155        20,707                             16,670          16,670



       
                Total Fixed Charges (3)                                                                                $114,219                          $117,560      $111,674                           $111,343        $112,373







       
                Coverage



       Interest coverage ratio (4)                                                                                      
          5.6x                    
            4.6x  
          4.7x                  
               4.7x    
          4.6x

    ---


       Cash interest coverage ratio (5)                                                                                 
          9.1x                    
            3.7x  
          6.7x                  
               4.3x    
          5.8x

    ---


       Fixed charge coverage ratio (6)                                                                                  
          4.6x                    
            3.8x  
          3.9x                  
               4.0x    
          4.0x

    ---


       Cash fixed charge coverage ratio (7)                                                                             
          6.8x                    
            3.2x  
          5.2x                  
               3.8x    
          4.8x

    ---




       
                Leverage



       Debt to total enterprise value (8) (9)                                                                                 23.3%                            23.8%        26.9%                             27.1%          28.8%

    ---


       Debt plus preferred stock to total enterprise value (10)                                                               26.0%                            26.6%        30.8%                             29.9%          31.8%

    ---


       Pre-tax income to interest expense (11)                                                                          
          2.0x                    
            3.7x  
          5.3x                  
               1.8x    
          1.7x

    ---


       Net Debt to Adjusted EBITDA (12)                                                                                 
          5.7x                    
            6.6x  
          5.7x                  
               6.0x    
          6.0x

    ---




              (2)               Cash interest expense is interest
                                   expense less amortization of debt
                                   discount and deferred financing fees
                                   and includes interest that we
                                   capitalized.  We consider cash
                                   interest expense to be a useful
                                   measure of interest as it excludes
                                   non cash-based interest expense.



              (3)               Fixed charges consist of GAAP
                                   interest expense, capitalized
                                   interest, scheduled debt principal
                                   payments and preferred dividends.



              (4)               Adjusted EBITDA divided by GAAP
                                   interest expense plus capitalized
                                   interest (including our pro rata
                                   share of unconsolidated joint
                                   venture interest expense).



              (5)               Adjusted EBITDA divided by cash
                                   interest expense (including our pro
                                   rata share of unconsolidated joint
                                   venture interest expense).



              (6)               Adjusted EBITDA divided by fixed
                                   charges (including our pro rata
                                   share of unconsolidated joint
                                   venture fixed charges).



              (7)               Adjusted EBITDA divided by the sum of
                                   cash interest expense, scheduled
                                   debt principal payments and
                                   preferred dividends (including our
                                   pro rata share of unconsolidated
                                   joint venture fixed charges).



              (8)               Mortgage debt and other loans divided
                                   by market value of equity plus debt
                                   plus preferred stock.



              (9)               Total enterprise value defined as
                                   market value of common equity plus
                                   debt plus preferred stock. See page
                                   7 for definition of market value of
                                   common equity.



              (10)              Same as (8), except numerator
                                   includes preferred stock.



              (11)              Calculated as net income plus
                                   interest expense divided by GAAP
                                   interest expense.



              (12)              Calculated as total debt at balance
                                   sheet carrying value (see page 6),
                                   plus capital lease obligations, plus
                                   Digital Realty's share of joint
                                   venture debt, less cash and cash
                                   equivalents divided by the product
                                   of Adjusted EBITDA (inclusive of our
                                   share of joint venture EBITDA),
                                   multiplied by four.


        Management Statements on Non-GAAP
         Measures                         Financial Supplement



     
     Unaudited                          Second Quarter 2020

Definitions

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, in the Nareit Funds From Operations White Paper - 2018 Restatement. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from real estate transactions, impairment of investment in real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs), unconsolidated JV real estate related depreciation & amortization, non-controlling interests in operating partnership 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 data centers 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 data centers, 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 other REITs' FFO. 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 (Core FFO):

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 and integration expenses, (iii) loss from early extinguishment of debt, (iv) issuance costs associated with redeemed preferred stock, (v) severance, equity acceleration, and legal expenses, (vi) gain/loss on FX revaluation, (vii) gain on contribution to unconsolidated joint venture, net of related tax, and (viii) 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 calculate core FFO differently than we do and 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.

Adjusted Funds from Operations (AFFO):

We present adjusted funds from operations, or AFFO, as a supplemental operating measure because, when compared year over year, it assesses our ability to fund dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the operations of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs, including on a per share and unit basis. We calculate AFFO by adding to or subtracting from core FFO (i) non-real estate depreciation, (ii) amortization of deferred financing costs, (iii) amortization of debt discount/premium, (iv) non-cash stock-based compensation expense, (v) straight-line rental revenue, (vi) straight-line rental expense, (vii) above- and below-market rent amortization, (viii) deferred tax expense, (ix) leasing compensation and internal lease commissions, and (x) recurring capital expenditures. Other REITs may calculate AFFO differently than we do and accordingly, our AFFO may not be comparable to other REITs' AFFO. AFFO 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, 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, unconsolidated joint venture real estate related depreciation & amortization, unconsolidated joint venture interest expense and tax, severance, equity acceleration, and legal expenses, transaction and integration expenses, gain on sale / deconsolidation, other non-core adjustments, net, non-controlling interests, preferred stock dividends, including undeclared dividends, and issuance costs associated with redeemed preferred stock. Adjusted EBITDA is EBITDA excluding unconsolidated joint venture real estate related depreciation & amortization, unconsolidated joint venture interest expense and tax, severance, equity acceleration, and legal expenses, transaction and integration expenses, gain on sale / deconsolidation, other non-core adjustments, net, non-controlling interests, preferred stock dividends, including undeclared 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 and, accordingly, our EBITDA and Adjusted EBITDA may not be comparable to 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.

Net Operating Income (NOI) and Cash NOI:

Net operating income, or NOI, represents rental revenue, tenant reimbursement revenue and interconnection revenue less utilities expense, rental property operating expenses, property taxes and insurance expenses (as reflected in the statement of operations). NOI is commonly used by stockholders, company management and industry analysts as a measurement of operating performance of the company's rental portfolio. Cash NOI is NOI less straight-line rents and above- and below-market rent amortization. Cash NOI is commonly used by stockholders, company management and industry analysts as a measure of property operating performance on a cash basis. However, because NOI and cash NOI exclude depreciation and amortization and capture neither the changes in the value of our data centers 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 data centers, all of which have real economic effect and could materially impact our results from operations, the utility of NOI and cash NOI as measures of our performance is limited. Other REITs may calculate NOI and cash NOI differently than we do and, accordingly, our NOI and cash NOI may not be comparable to other REITs' NOI and cash NOI. NOI and cash NOI should be considered only as supplements to net income computed in accordance with GAAP as measures of our performance.

Additional Definitions

Net debt-to-Adjusted EBITDA ratio is calculated using total debt at balance sheet carrying value, plus capital lease obligations, plus our share of JV debt, less unrestricted cash and cash equivalents divided by the product of Adjusted EBITDA (inclusive of our share of JV EBITDA) multiplied by four.

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, capitalized interest, scheduled debt principal payments and preferred dividends. For the Quarter Ended June 30, 2020, GAAP interest expense was $80 million, capitalized interest was $13 million and scheduled debt principal payments and preferred dividends was $21 million.





       
                Reconciliation of Net Operating Income (NOI)    
          
     Three Months Ended                      Six Months Ended



       
                (in thousands)                               30-Jun-20                      31-Mar-20 30-Jun-19                   30-Jun-20   30-Jun-19

    ---




       
                Operating income                                             $152,811                   $100,049                     $148,972              $252,861     $290,514





        Fee income                                                                (4,353)                   (2,452)                       (925)              (6,805)     (2,845)



        Other income                                                                (967)                     (813)                       (486)              (1,780)     (1,051)



        Depreciation and amortization                                             349,165                    291,457                      290,562               640,622      602,048



        General and administrative                                                 90,649                     62,266                       52,318               152,915      104,294



        Severance, equity acceleration, and legal expenses                          3,642                      1,272                          665                 4,914        2,148



        Transaction expenses                                                       15,618                     56,801                        4,210                72,419        6,704



        Impairment in investments in real estate                                                                                                                           5,351



        Other expenses                                                                 22                        114                        7,115                   136       12,037





       
                Net Operating Income                                         $606,587                   $508,694                     $502,431            $1,115,282   $1,019,200







       
                 Cash Net Operating Income (Cash NOI)





       
                Net Operating Income                                         $606,587                   $508,694                     $502,431            $1,115,282   $1,019,200





        Straight-line rental revenue                                             (10,713)                  (13,392)                    (14,978)             (24,105)    (29,536)



        Straight-line rental expense                                                7,296                      1,496                          397                 8,791        1,573



        Above- and below-market rent amortization                                   3,794                      3,294                        3,954                 7,087       10,163





       
                Cash Net Operating Income                                    $606,964                   $500,092                     $491,804            $1,107,055   $1,001,400


     Forward-Looking Statements Financial Supplement


                                 Second Quarter 2020

This document contains forward-looking statements within the meaning of the federal securities laws, which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Such forward-looking statements include statements relating to: expected physical settlement of the forward sale agreements and use of proceeds from any such settlement, our expected investment and expansion activity, our joint ventures, supply and demand for data center and colocation space, our acquisition and disposition activity, pricing and net effective leasing economics, market dynamics and data center fundamentals, our strategic priorities, 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, lag between signing and commencement, cap rates and yields, investment activity, the company's FFO, core FFO and net income, 2020 outlook and underlying assumptions, information related to trends, our strategy and plans, leasing expectations, weighted average lease terms, the exercise of lease extensions, lease expirations, debt maturities, annualized rent at expiration of leases, the effect new leases and increases in rental rates will have on our rental revenue, our credit ratings, construction and development activity and plans, projected construction costs, estimated yields on investment, expected occupancy, expected square footage and IT load capacity upon completion of development projects, 2020 backlog NOI, NAV components, and other forward-looking financial data. Such statements are based on management's beliefs and assumptions made based on information currently available to management. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

    --  reduced demand for data centers or decreases in information technology
        spending;
    --  increased competition or available supply of data center space;
    --  decreased rental rates, increased operating costs or increased vacancy
        rates;
    --  the suitability of our data centers and data center infrastructure,
        delays or disruptions in connectivity or availability of power, or
        failures or breaches of our physical and information security
        infrastructure or services;
    --  our dependence upon significant customers, bankruptcy or insolvency of a
        major customer or a significant number of smaller customers, or defaults
        on or non-renewal of leases by customers;
    --  our ability to attract and retain customers;
    --  breaches of our obligations or restrictions under our contracts with our
        customers;
    --  our inability to successfully develop and lease new properties and
        development space, and delays or unexpected costs in development of
        properties;
    --  the impact of current global and local economic, credit and market
        conditions;
    --  our inability to retain data center space that we lease or sublease from
        third parties;
    --  information security and data privacy breaches;
    --  difficulty managing an international business and acquiring or operating
        properties in foreign jurisdictions and unfamiliar metropolitan areas;
    --  our failure to realize the intended benefits from, or disruptions to our
        plans and operations or unknown or contingent liabilities related to,
        our recent acquisitions;
    --  our failure to successfully integrate and operate acquired or developed
        properties or businesses;
    --  difficulties in identifying properties to acquire and completing
        acquisitions;
    --  risks related to joint venture investments, including as a result of our
        lack of control of such investments;
    --  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;
    --  our failure to obtain necessary debt and equity financing, and our
        dependence on external sources of capital;
    --  financial market fluctuations and changes in foreign currency exchange
        rates;
    --  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 and goodwill and other
        intangible asset impairment charges;
    --  our inability to manage our growth effectively;
    --  losses in excess of our insurance coverage;
    --  our inability to attract and retain talent;
    --  impact on our operations and on the operations of our customers,
        suppliers and business partners during a pandemic, such as COVID-19;
    --  environmental liabilities, risks related to natural disasters and our
        inability to achieve our sustainability goals;
    --  our inability to comply with rules and regulations applicable to our
        company;
    --  Digital Realty Trust, Inc.'s failure to maintain its status as a REIT
        for federal income tax purposes;
    --  Digital Realty Trust, L.P.'s failure to qualify as a partnership for
        federal income tax purposes;
    --  restrictions on our ability to engage in certain business activities;
    --  changes in local, state, federal and international laws and regulations,
        including related to taxation, real estate and zoning laws, and
        increases in real property tax rates; and
    --  the impact of any financial, accounting, legal or regulatory issues or
        litigation that may affect us.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance. Several additional material risks are discussed in our annual report on Form 10-K for the year ended December 31, 2019, our quarterly report on Form 10-Q for the quarter ended March 31, 2020 and other filings with the Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Digital Realty, Digital Realty Trust, the Digital Realty logo, Turn-Key Flex and Powered Base Building are registered trademarks and service marks of Digital Realty Trust, Inc. in the United States and/or other countries.

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SOURCE Digital Realty