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: March 13, 2012
Subject: Regulation FD Disclosure regarding adjustments to conversion rates for Series C and Series D Cumulative Convertible Preferred Stock.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity figures. The document focuses exclusively on the mechanics of dividend-triggered conversion rate adjustments for specific securities.
Material Changes
Effective March 13, 2012, the company adjusted the conversion rates for its convertible preferred stock due to the declaration and payment of common stock dividends in excess of the "reference dividend" for the quarters ended December 31, 2011, and March 31, 2012. The new rates are:
- 4.375% Series C Cumulative Convertible Preferred Stock: Adjusted to 0.5480 shares of common stock per $25.00 liquidation preference.
- 5.500% Series D Cumulative Convertible Preferred Stock: Adjusted to 0.6280 shares of common stock per $25.00 liquidation preference.
- 5.50% Exchangeable Senior Debentures due 2029: Exchange rate remains 24.1820 shares per $1,000 principal amount.
Adjustments are only required when they result in a change of at least 1% of the conversion rate; otherwise, they are carried forward.
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding expected dividend payments. Management highlights significant risks that could cause actual results to differ materially, including:
- Deterioration in global economic, credit, and market conditions, including the U.S. government credit rating downgrade.
- Decreases in information technology spending and economic slowdowns.
- Tenant concentration risks, including bankruptcy or lease defaults.
- Financing risks, including the failure to obtain necessary debt/equity, refinancing risks, and interest rate fluctuations.
- Operational risks such as property development delays, increased vacancy rates, and competition.
- Regulatory risks, including the potential failure to maintain REIT status and changes in tax laws.
Investor Verification Checklist
- Verify the exact timing of the next dividend declaration to determine if further conversion rate adjustments will be triggered.
- Review the Articles Supplementary for Series C and Series D Preferred Stock to understand the specific "reference dividend" thresholds.
- Confirm the current market price of the common stock relative to the new conversion rates to assess the dilution impact on existing shareholders.
- Monitor the company's ability to maintain its REIT status given the dividend payout requirements mentioned in the risk factors.