Business Context and Reporting Period
Company: Digital Realty Trust, Inc. and Digital Realty Trust, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: September 12, 2012
Subject: Regulation FD Disclosure regarding dividend declarations and adjustments to the conversion rate of Series D Cumulative Convertible Preferred Stock.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on capital structure adjustments triggered by dividend payments.
- Dividend Status: The company declared and paid (or will pay) dividends on common stock in excess of the "reference dividend" for the quarters ended June 30, 2012, and September 30, 2012.
- Series D Preferred Stock Adjustment: The excess dividends triggered an adjustment to the conversion rate.
- New Conversion Rate: 0.6360 shares of common stock per $25.00 liquidation preference of Series D Preferred Stock, effective September 12, 2012.
- Exchangeable Senior Debentures: As of September 12, 2012, the exchange rate for 5.50% Exchangeable Senior Debentures due 2029 is 24.4550 shares per $1,000 principal amount.
Material Changes
The primary material change is the adjustment to the conversion rate of the 5.500% Series D Cumulative Convertible Preferred Stock. This adjustment was necessitated by the payment of common stock dividends exceeding the reference dividend defined in the Articles Supplementary dated February 5, 2008. Adjustments are only required when they result in a change of at least 1% of the conversion rate; any unmade adjustments are carried forward.
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding expected dividend payments and includes a comprehensive list of risks and uncertainties that could cause actual results to differ materially from expectations. Key risks identified include:
- Deterioration in global economic, credit, and market conditions, including the downgrade of the U.S. government's credit rating.
- Decreases in information technology spending due to economic slowdowns.
- Tenant risks, including bankruptcy, insolvency, defaults, or non-renewal of leases.
- Financing risks, such as the failure to obtain necessary debt/equity financing, increased interest rates, and refinancing risks.
- Operational risks, including difficulties in acquiring properties, integrating acquisitions, and managing growth.
- Regulatory and tax risks, including the failure to maintain REIT status and changes in tax laws.
The company disclaims any obligation to update these forward-looking statements.
Investor Verification Checklist
- Verify the exact dividend amounts paid for the quarters ended June 30, 2012, and September 30, 2012, to confirm the trigger for the conversion rate adjustment.
- Review the Articles Supplementary dated February 5, 2008, to understand the specific mechanics of the "reference dividend" and future adjustment thresholds.
- Confirm the current trading price of the common stock relative to the new conversion rate of 0.6360 shares per $25.00 liquidation preference.
- Assess the impact of the U.S. government credit rating downgrade on the company's cost of capital and tenant spending as highlighted in the risk factors.