Digital Realty Trust, Inc. — FY2022 Form 10-K
Business and period: Global data-center, colocation and interconnection REIT; the Operating Partnership owns and operates substantially all assets. This filing reports the year ended December 31, 2022, compared with FY2021—not standalone Q4 results. The filing text does not provide a clear set of Q4-only financial values.
Financial and operating performance
| Metric | FY2022 | FY2021 / change |
|---|---|---|
| Operating revenue | $4.692 billion | $4.428 billion; up 6.0% |
| Operating income | $590.0 million | $694.0 million; down 15.0% |
| Operating margin | 12.6% | 15.7% (calculated from reported figures) |
| Net income | $380.3 million | $1.747 billion |
| Net income available to common stockholders; diluted EPS | $337.0 million; $1.11 | $1.681 billion; $5.94 |
| Nareit FFO per diluted share and unit | $6.03 | $6.36 |
| Cash from operations | $1.659 billion | $1.702 billion |
| Cash used in investing | $4.699 billion | $1.062 billion |
| Cash and cash equivalents at year-end | $141.8 million | $142.7 million |
| Consolidated debt at year-end | $16.724 billion | $13.562 billion |
- Revenue growth was led by development completions and lease-up, plus $71.4 million of Teraco revenue after its August acquisition. Stabilized revenue fell 1.3%, including a $131.9 million adverse foreign-exchange effect.
- Property-level operating expenses rose 13.5% to $2.018 billion, driven mainly by utility costs and the larger, recently completed portfolio. Utilities are generally passed through to customers, though recovery is not complete in every case.
- Reported net income fell sharply in part because FY2021 included about $1.3 billion of property disposition gains, versus $176.8 million in FY2022. FY2022 included a $174 million gain on the sale of a non-core Dallas property and a $51.1 million debt-extinguishment loss.
- FY2022 cash from financing was $2.969 billion, including debt issuance and proceeds from settling forward equity sales. Capital expenditures were $2.490 billion, compared with $2.396 billion in FY2021.
- Year-end debt was 80.8% fixed-rate or hedged and 19.2% unhedged variable-rate; reported effective interest rate was 2.51%. Approximately $1.7 billion was available under the global revolving credit facility at year-end. Debt maturities include $3.675 billion in 2026, largely revolving-facility borrowings.
- Portfolio occupancy, including unconsolidated entities, was 84.7%, versus 83.6% in 2021. The portfolio comprised 316 data centers and about 50.8 million rentable square feet, including development and future-development space. Average remaining lease term was about five years.
Material changes, outlook and risks
- The company acquired a 61.1% controlling interest in South Africa’s Teraco for approximately $1.7 billion cash. The acquisition added $1.626 billion of goodwill and $1.530 billion of redeemable noncontrolling interests; the filing notes Teraco’s internal controls were excluded from the company’s year-end control assessment.
- Management expected FY2023 development capital expenditures of approximately $2.3–$2.5 billion, subject to demand, leasing and access to capital. It expected aggregate rental rates on renewals of leases expiring in 2023 to be positive on both GAAP and cash bases, while cautioning that outcomes are uncertain. No numeric earnings or FFO guidance is provided in the supplied filing text.
- There were 49 development projects underway, with 58.5% of data-center activity pre-leased. Open construction commitments were approximately $2.6 billion. The company’s stated through-cycle financial targets are debt-to-Adjusted EBITDA of 5.5x, fixed-charge coverage above 3x, and floating-rate debt below 20%; actual debt-to-Adjusted EBITDA and fixed-charge coverage values are not clear in the supplied text.
- Key risks include power availability, price and reliability; construction costs, supply-chain and labor delays; higher interest rates and refinancing needs; customer concentration and lease renewals; competition and ability to lease development space; foreign-exchange exposure; cybersecurity and service interruptions; and climate, water and regulatory constraints. Northern Virginia represented 18.3% of annualized rent; the largest customer represented 10.2%.
- Common-stock dividends were $4.88 per share for 2022. The company states regular future distributions are subject to board discretion, cash flow, capital requirements and REIT rules. It reported compliance with revolving-credit and senior-note financial covenants at year-end. No material legal proceedings were reported.
- KPMG issued unqualified opinions on the consolidated financial statements and the parent’s internal control over financial reporting. The audit identified lease-payment collectability as a critical audit matter, involving judgment about customer creditworthiness. Management reported effective disclosure controls; its internal-control assessment excluded Teraco.
Important facts for investors to verify
- Review the full financial statements and notes for Q4-specific results, debt maturities, borrowing availability and the terms of the Teraco put/call rights; this summary is based on annual results.
- Assess whether occupancy, pre-leasing and renewal pricing can support the planned $2.3–$2.5 billion FY2023 development spend and the roughly $2.6 billion of construction commitments.
- Track unhedged variable-rate debt, refinancing exposure—especially the 2026 maturities—and performance against the company’s leverage and coverage targets.
- Evaluate the quality and collectability of lease revenue, given the $601.6 million net deferred-rent balance, and the concentration of revenue among major customers and markets.
- Consider the earnings effect of disposition gains, foreign-exchange movements, acquisition-related goodwill and ongoing depreciation before relying on GAAP net income or FFO as a measure of recurring performance.