Digital Realty Trust, Inc. — 2024 Q1

So John, thanks for the question. So I'd say the lion's share of high, high percentage was not done into any of the JVs. I don't have the exact stat given we have now numerous strategic capital partners across our hyperscale platform, be it stabilized JVs. But I'm very confident that none of the leasing we reported in this quarter went into the deal you identified with Blackstone. We are seeing great traction on those projects. But this quarter, none of that lease went inside.

Thanks, Jon. Maybe I'll speak to market rates and where we are able to execute on new leases signed and also renewals first and then hand it over to Matt in terms of FFO trajectory into next year.

Sure. Thanks, Jon. So what I would say is I think we're -- based on our first quarter results, we -- our optimism is improved -- has improved in terms of our -- what we expect to see and what we talked about last quarter in terms of improving growth as we look to 2025.

Sure. Thanks, Eric. So Northern Virginia, obviously, has been a highly dynamic market for some time here. We were very pleased to come together and support our partner at Dominion with a very strategic easement to be the landing of the Mars substation, which we are -- it is our understanding, they are on track to be delivering power and bring power back online by the beginning of 2026 from that southern line. So there's not been a divergence in terms of timing what that was previously expressed to us.

Sure. Thanks, David. So let me just give you the tops of the ways then I'm going to turn it to Chris on how we're tapping our infrastructure capabilities to really excel in this category.

Yes. No, I appreciate it, David. This is Chris Sharp. And so a couple of comments. I think you're thinking about it correctly in that there's 2 lenses, right? There's kind of that hyperscale lens that has AI built within it. And then there's this other pocket that we kind of look at that's definitely emerging with private AI. And so these are these larger deployments that we're seeing come out from multiple types of enterprises.

Sure, Irvin. So I mean, the here and now I think AI is having a numerous positive implications for the sector. And I'll have Chris speak into what's next because I don't think we're really at what's next, be it inference, private data sets, enterprise consumption. But the here and now you have a backdrop of big existing customers with desires to have immediate [ see ] around the capacity.

Yes. Thanks, Irvin. Absolutely. And I think one of the things that we really have thought about for some time now is the data is at the core of a lot of these AI kind of capabilities coming to market. So being to able place that algorithm right next to the data in that market, I think is everything that we've been looking at and doing that algorithm in proximity to the data is absolutely paramount for a lot of these kind of 0 to 1 megawatt offerings.

Thanks, Richard. Maybe I'll hand it to Colin here in a second to talk about the broader backdrop for both the enterprise and also the hyperscale AI side. But I wouldn't call our Northern Virginia activity as a pull forward. As you could see, they're signed to commence time, materially step down, there is urgency around the capacity blocks. We still have significant runway of precious capacity in the Northern Virginia market between now and 2026 that our numerous customers have desires for and we're in various stages of negotiation.

Thanks, Andy. Appreciate the question. Yes, I mean, overall, I would say our pipeline kind of reflects some of the same characteristics or bookings this quarter. So pretty AI heavy, as Andy highlighted, of 50% of our bookings this quarter were AI. I would say our pipeline is representative of that. But honestly, it's a pretty diverse characterization overall between enterprise, namely hybrid, IT, cloud compute and then AI. So I think it's a pretty robust platform across the globe, and you saw that in some of our bookings, in particular, London really jumped up this quarter.

I think you asked the overall mark-to-market on the portfolio, Mike?

So as I think you can get the -- obviously, you look at the in-place rates even pro forma for our recent positive cash mark-to-market on our schedule. I think that question provide more focus on the greater than megawatt category, which we've seen the greatest resurgence or uptick that it does tick down, call it lower for the next few years, call it down to the 130s and then it even hits 100 upon exploration as the low watermark in a few years' time.

Frank, it's Greg right here. Look, I think consistent with past practice, we continue to play across the product spectrum, and it's going to vary by market, right? I mean, as we've mentioned, we're using our third-party capital model to continue to support our hyperscale customers and grow that element of the business. As you know, demand for that business is projected to increase 2.7x between now and 2030.

Thanks, Simon. So I'll do the quick non-U.S. world tour. You're correct, Americas had put up some record results in contribution, and that was not just in the greater than megawatt category. It was also a major contributor in our less than megawatt category, which is great to see.

Yes. Makes sense. So on the leverage front, I mean, just to take a little step back. I mean, hopefully, as you've seen, we've made some considerable progress. You go back a year ago, we were at a little over 7x. We're now at a reported 6.1x, so a full turn of leverage that we've taken out in the last year, thanks to all the work and execution that the broader team has done.

Thanks, Aryeh. So on all scenarios, we don't want to speak to confidential customer information whatsoever. Obviously, anyone who's picked up a newspaper can refer to the scenario you're talking about. 2 comments: first one, which is just from the cheap seats, I would -- my personal opinion is not to jump up to any draconian conclusions on outcomes just yet. There's a lot of innings left in that game and a lot of outcomes that could happen. So I won't jump to a doomsday scenario for Digital, depending on what plays out in ensuing months.

Matt, so I would not characterize the world of supply constraints or just hindrances to supply as being in the rearview mirror in general. And maybe we're not talking about the proverbial waiting for your refrigerators COVID supply chain equivalent. But the friction to supply, whether it is power transmission, power generation, supply chains on data center components or just positions in queue for production or components for substations, broader sustainability concerns, nimbyism in general, that friction is existing, and it's happening in a backdrop where I think we can add more and more value to our customers than probably ever before.

Going to Greg on that one, Michael. Thank you for the compliment.

Yes. Thanks, Michael. Look, I think right now, our appetite for acquisitions, unless they're smaller tuck-in strategic acquisitions. Michael, I think we've discussed this before. It's not that great right now.

Thanks, Nick. So I think if you look at our strategy, we're focused on supporting workloads, be it enterprise, digital transformation or hybrid or hyperscale cloud or AI in markets with robust and diverse demand and supporting applications with latency and locational sensitivity.

Thanks, Erik. So just more on the tactical on the quarterly bookings. I mean, we're out of the gates here with a great start on both the less-than-megawatt category, call it north of 50 for several consecutive quarters now. I think 2 in a row, north of 53, great new logos contribution and obviously, an overall record which we discussed. By and large, I wouldn't say usually another record follows the prior record on the one hand. But on the other, we're certainly in a different territory right now in terms of demand. We have the large capacity blocks that are deeply sought after. We have a team focused on executing, and we got 3 more at bats in 2024 to put those results up.

Thank you all for dialing in. We really appreciate it. Digital Realty had a strong first quarter with record leasing results that reflected the growing impact of AI on our business. Fundamental strength continued through the first quarter with healthy same-capital organic growth and robust re-leasing spreads.