Digital Realty Trust Q4 2021 Earnings Call Transcript

Key Takeaways

  • Digital Realty posted a record $156M in Q4 bookings and finished 2021 with $500M in new bookings, up 15% year-over-year, driven by strength in both sub-1MW and >1MW deals across all regions.
  • The company launched DigitalCore REIT via a Singapore IPO, contributing 90% interest in a $1.4B portfolio, netting $950M and retaining a 35% stake to serve as a perpetual capital partner.
  • Digital Realty agreed to acquire a 55% stake in Teraco, Africa’s leading carrier-neutral colocation provider, adding 7 data centers, 22K interconnections, and a pipeline to expand capacity by over 25%.
  • Organic development remains robust with $580M of growth CapEx in Q4, 44 projects totaling 250MW of IT capacity in 27 metros and 46% pre-sold as of year-end.
  • The balance sheet was strengthened through a €750M bond at 1.375%, an upsized $3B credit facility with sustainability-linked pricing, and 94% fixed-rate, 94% non-USD debt that acts as a natural FX hedge.
AI Generated. May Contain Errors.
Earnings Conference Call
Digital Realty Trust Q4 2021
00:00 / 00:00

There are 12 speakers on the call.

Operator

Good afternoon and welcome to the Digital Realty 4th Quarter 2021 Earnings Call. Please note this event is being recorded. During today's presentation, all parties will be in a listen only mode. Following the presentation, we will conduct a question and answer session. Callers will be limited to one question plus a follow-up and we will conclude promptly at the bottom of the hour.

Operator

I would now like to turn the call over to Jim Huseby, Digital Realty's Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and welcome everyone to Digital Realty's 4th quarter 2021 earnings conference call. Joining me on today's call are CEO, Bill Stein and President and CFO, Andy Power Chief Investment Officer, Greg Wright Chief Technology Officer, Chris Sharp and Chief Revenue Officer, Corey Dyer are also on the call and they will be available for Q and A. Management may make forward looking statements including guidance and underlying assumptions on today's call. Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of the risks related to our business, Please see our 10 ks and subsequent filings with the SEC.

Speaker 1

This call will contain non GAAP financial information. Reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Bill, I'd like to hit the tops of the waves on our 4th quarter results. We further strengthened connections with customers With $156,000,000 of new bookings with record results in both the 0 to 1 megawatt and greater than a megawatt category and ended the year with $500,000,000 in new bookings, a 15% increase over the prior year. We also continued to enhance our global platform.

Speaker 1

With the completion of organic development projects in multiple metros, Despite the continued challenges presented by the pandemic and the global supply chain, in addition to strategic investments Establishing Digital Realty as the leading Pan African provider. Financially, we had a solid quarter with full year results above the high end of the guidance range that we provided this time last year. And finally, We continue to strengthen our balance sheet by raising equity capital through the establishment of DigitalCore REIT in a highly successful IPO On the Singapore Stock Exchange and the related sale of a 90% interest in 10 fully utilized core data centers. As a perpetual capital partner, Digital Realty and DigitalCore REIT can continue to work together while providing our customers with a seamless experience. And with that, I'd like to turn the call over to Bill.

Speaker 2

Thanks, Jim. Good afternoon and thank you all for joining us. Our formula for long term value creation Is a global connected sustainable framework and we made further progress on each front during the 4th quarter. First, we continue to globalize our business with record global bookings and strength across all regions And all product types, including quarterly highs in both our sub-one megawatt and greater than 1 megawatt categories. We also announced 2 significant global initiatives.

Speaker 2

First, in December, we announced the successful listing of DigitalCore REIT As a standalone publicly traded company on the Singapore Stock Exchange, Digital Realty contributed a 90% interest in a portfolio of 10 Core data centers concentrated in top tier markets across the U. S. And Canada valued at $1,400,000,000 at a 4.25 percent cap rate. We generated net proceeds of over $950,000,000 from the transaction And we retained a 35% equity interest in the publicly traded REIT. The offering was very well received And DigitalCore Reef has traded up approximately 30% since the IPO, enhancing the gain on our remaining ownership stake.

Speaker 2

In addition to providing investors a stable cash flow stream from our portfolio of high quality core data centers, DigitalCoreREIT offers key strategic benefits to Digital Realty. First, DigitalCoreREIT is a perpetual capital partner. It has a long term investment horizon and a global mandate to invest in stabilized income producing data centers. 2nd, DigitalCore REIT has been carefully crafted to provide a seamless customer experience. Digital Quarry is sponsored by and externally managed by Digital Realty.

Speaker 2

We will continue to manage the properties providing the same level of operational excellence and we will earn fees for asset and property management as well as acquisitions, Dispositions and development. From a customer perspective, nothing changes when we contribute an asset to DigitalCore REIT. 3rd, DigitalCoreREIT is an ideal partner vehicle for Digital Realty. We expect to contribute additional Stabilize core assets to DigitalCoreREIT in the future and we may also co invest alongside DigitalCoreREIT on future investment activity. Finally, our interests are aligned.

Speaker 2

As mentioned, Digital Realty will continue to own A 10% direct ownership stake in each of the assets in addition to 35% in the publicly traded vehicle. DigitalCore REIT is led by 2 longtime Digital Realty team members, John Stewart, Who most of you know well along with Dan Tif. We are excited about their opportunity to create value for DigitalCore REIT unitholders Including Digital Realty. Our second global initiative, which we announced just after quarter end, It's the definitive agreement to acquire roughly a 55% stake in Teraco, Africa's leading Carrier neutral colocation provider. This acquisition immediately establishes Digital Realty as the leading colocation An interconnection provider on the high growth African continent and builds upon our earlier investments in Africa with icolo in both Kenya and Mozambique and in Medallion in Nigeria.

Speaker 2

Caracope complements these investments As well as our highly connected facilities in the Mediterranean by hosting the key strategic landing points for subsea cables circling Africa. From Marseille in Athens in the north Mombasa and Maputo along the east Durban and Cape Town in the south In Lagos along the Western Coast, Platform Digital is supporting the growth of our customers as well as the broader digital transformation of the entire African continent. Tereco has 7 state of the art data centers across 3 Key metros in South Africa and serves over 600 customers including more than 2 75 connectivity providers Over 25 cloud and content platforms and approximately 300 enterprises. Teraco facilitates approximately 22,000 interconnections between customers and hosts 7 cloud on ramps and provides direct access to 7 Subsea Cables. Tereco has historically generated healthy double digit growth in revenue and EBITDA.

Speaker 2

In addition, more than half of Tereco's in service portfolio was developed within the past 2 years. The current development pipeline will expand the existing asset base by over 25% and Terrific owns land adjacent to its highly connected campuses in Johannesburg and Cape Town that will support another doubling of the in place capacity, representing significant embedded growth potential and providing considerable runway to support our customers' growth. Leading global cloud and content platforms have recently begun making significant investments in Okay. Given the existing capacity within the in service portfolio, the incremental capacity currently under construction and the strategic land holdings to support future expansion. Tereco is uniquely positioned to support the expected growth of digital infrastructure in Africa over the next several years.

Speaker 2

Let's discuss our sustainable growth initiatives on page 3. During the 4th quarter, Digital Realty earned NAREIT's Leader in the Light award for the 5th consecutive year, complementing the company's 5 star GRESB rating and top ranking within the technology and science sector. Digital Realty was also named 1 of America's Most Responsible Companies by Newsweek and was the number 1 ranked data center company. We continue to advance our sustainable financing strategy, recasting and upsizing our credit facility with improved terms, while incorporating a sustainability linked pricing component, with pricing subject to adjustment based on annual performance against certain green targets. We are committed to minimizing our impact on the environment, While simultaneously meeting the needs of our customers, our investors and our employees along with the broader society and advancing our goal of delivering sustainable growth for all these stakeholders.

Speaker 2

Let's turn to our investment activity on page 4. We continue to invest in the expansion of our global platform. In addition to the Teraco transaction, We've grown our presence along the Eastern Coast of Africa with icolo and supplemented our acquisition of Medallion Data Centers in Nigeria with 2 land purchases in Lagos for future development. Over the next decade, we expect to see huge for global businesses to tap into Africa's rapidly growing Internet economy and Digital Realty is uniquely positioned to enable this growth. We also continue to invest in the organic growth of our platform.

Speaker 2

We spent $580,000,000 on growth CapEx In the Q4, our largest quarterly growth CapEx investment to date. We currently have 44 projects underway totaling more than 2 50 megawatts of IT capacity in 27 metros around the world. This capacity was 46% presold as of year end. Geographically, we continue to invest most heavily in EMEA with 27 projects underway totaling more than 140 megawatts across 16 metros. In Asia Pacific, We delivered several development projects during the Q4, including facilities in Singapore and Hong Kong.

Speaker 2

In January, We opened Digital Seoul 1, our first data center in South Korea and the 1st carrier on neutral facility in the country. This facility will serve as a connectivity gateway for latency sensitive customer workloads, but can be connected to hyperscale applications hosted in our 2nd facility in Korea totaling over 60 megawatts of capacity currently under construction just outside the city center. The two facilities will be tied together with fiber to create a connected campus And we'll complement each other by providing solutions for the full customer spectrum from small performance sensitive colocation customers to huge hyperscale deployments. In North America, our development pipeline is diversified by product mix As well as geographically with projects underway in 7 different markets. We continue to see strong hyperscale demand in Hillsboro, While we are expanding in downtown Atlanta to bring on additional colocation capacity at one of the most highly connected destinations In the Southoutheastern United States, we are bringing capacity online in both these markets among others given the robust demand backdrop and our tightening inventory position.

Speaker 2

Let's turn to the macro environment on page 5. We are fortunate to be operating in a business lever to secular demand drivers. Our leadership position provides us unique vantage point to detect secular trends as they emerge globally on platform digital. Our customers continue to solve some of the most complex IT infrastructure, connectivity and data integration challenges. We are witnessing a growing trend of multinational companies across all segments deploying and connecting large private data infrastructure footprints on platform digital across multiple regions and metros globally.

Speaker 2

Industry research firm Gartner recently updated their global IT spending forecast for 2022 projecting a 5.1% increase to $4,500,000,000,000 driven by companies investing in digital data growth strategies. Additionally, Gartner believes that by 2024, 75% of organizations will have deployed multiple data hubs to drive mission critical data analytics, sharing and governance in support of digital data growth strategies. These forecasts are consistent with our view of where the puck is headed. Our market intelligence tool, The Data Gravity Index forecasts similar growth in the intensity of data creation and its gravitational pull on global IT infrastructure. In addition, our industry manifesto, enabling connected data communities serves As the global playbook for industry collaboration to tackle data gravity challenges head on and unlock a new era of growth opportunity for all companies.

Speaker 2

Digital Realty was recently named company of the year By Frost and Sullivan for North American Data Center Best Practices. This award reflects our continued focus on operational excellence, Underpinned by continuous innovation and execution of the platform digital roadmap. We are honored by the strong validation of the differentiated value proposition we are creating for customers and partners. Given the resiliency of the demand drivers underpinning our business and the relevance of our platform in meeting these needs, We believe we are well positioned to continue to deliver sustainable growth for customers, shareholders and employees whatever the macro environment may hold in store. With that, I'd like to turn the call over to Andy to take you through our financial results.

Speaker 3

Thank you, Bill. Let's turn to our leasing activity on page 7. As Bill noted, We delivered record bookings of $156,000,000 with an $11,000,000 contribution from interconnection during the Q4. Volume was elevated across both of our primary reporting categories in the quarter with a healthy mix between enterprise and hyperscale business. For the full year, we booked $500,000,000 of new business with roughly a sixty-forty split between greater than 1 megawatt and less than a megawatt plus interconnection.

Speaker 3

The EMEA region had a particularly strong quarter accounting for approximately 60% of total bookings led by Frankfurt with standout performance across product types. The 4th quarter was also notable for the strength of cross selling between regions. Nearly 30% Our sub-one megawatt plus interconnection bookings were exported from one region to another, a strong indication of the value customers derive from our global platform. Not surprisingly, the Americas was our biggest exporter with most deals landing in EMEA followed by APAC. Both EMEA and APAC had strong export quarters as well with over 15% of their sub-one Megawatt Plus interconnection bookings landing out of region.

Speaker 3

The weighted average lease term was nearly 10 years, primarily driven by hyperscale pre leasing in EMEA. We landed over 130 new logos during the 4th quarter, Our 2nd best quarterly result and just shy of last quarter's record 140 for our full year total of 480 new logos. We are encouraged by the consistent organic growth of our customer base And we view these results as strong validation of Platform Digital and our global strategy. In terms of specific wins during the quarter and around the world, Grafcor, a British semiconductor company The developed accelerators and systems for AI and machine learning selected platform digital to address their density, security And scale requirements. The initial deployment will land in Amsterdam to be followed by a global rollout And we are also collaborating on solution engineering and joint go to market activities.

Speaker 3

A leading high frequency trading shop Is expanding on Platform Digital to extend their high performance computing platform across 2 continents And expand trading into 2 new international metros, while improving cloud access and business continuity stateside. A Global 2000 U. S. Energy provider is expanding with Digital Realty, consolidating their own on premise facilities And using platform digital to scale their business across multiple metros. A leading aerospace manufacturing and services company Is expanding on platform digital, leveraging dense interconnection to support data exchange across 4 new markets.

Speaker 3

A Global 2000 Insurance Brokerage is consolidating their data center footprint and has adopted Platform Digital to remove data gravity barriers and interconnect with clouds across multiple metros. And Ivy League University is expanding on platform digital to exit their own on premise facility Enhance their access to the health care provider community for data exchange. And finally, a major APAC food services organization Selected Platform Digital to improve cloud connectivity and leverage the local centers of data exchange in Japan. Turning to our backlog on page 9. The current backlog of leases signed but not yet commenced rose from 330,000,000 to $378,000,000 as our 4th record 4th quarter signs more than offset commencements.

Speaker 3

The lag between signings and commencements was unusually high at nearly 14 months, primarily driven by long term leases on recent development As customers accelerate efforts to secure a long term runway for growth against a backdrop of steadily dwindling inventory. Moving on to renewal leasing activity on page 10. We signed $151,000,000 of renewal leases during the 4th quarter In addition to the record new leases signed, the weighted average lease term on renewals signed during the Q4 was nearly 40 years. Renewal rates rolled down 4%, driven by a handful of large deals in North America as negative releasing spreads on greater than 1 megawatt renewals more than offset the positive releasing spreads on the sub-one megawatt renewals. In terms of operating performance, Overall portfolio occupancy ticked down 60 basis points almost entirely due to development deliveries placed in service during the quarter.

Speaker 3

Same Capital cash NOI growth was negative 6.6% in the 4th quarter, primarily driven by churn in North America as well as higher property operating and net utilities expense. As a reminder, the 2021 same store pool did not include the Westin Building in Seattle, the InterXion platform in MEA, Land the Helix in Greece or Altus IT in Croatia. Each of these businesses will be included in the same store pool beginning in the Q1 of 2022 and each is expected to contribute to improving same store growth going forward, partially offset by higher property taxes as well as FX headwinds expected in 2022. Turning to our economic risk mitigation strategies on page 11. The U.

Speaker 3

S. Dollar strengthened during the 4th quarter relative to prior year exchange rates. And FX represented roughly 130 basis points headwind to the year over year growth and our reported results from the top to the bottom line. As a reminder, we manage currency risk by issuing locally denominated debt To act as a natural hedge, so only our net assets within a given region are exposed to the currency risk from an economic perspective. In addition to managing credit risk and foreign currency exposure, we also mitigate interest rate risk by proactively terming out short term variable rate debt with longer term fixed rate financing.

Speaker 3

Given our strategy of matching the duration of our long lived assets With long term fixed rate debt, a 100 basis point move in base rates would have roughly a 50 basis point impact on our full year FFO per Our near term funding and refinancing risk is very well managed with a well diversified menu of public and private capital sources available to fund the growth of our business. In terms of earnings growth, 4th quarter core FFO per share was up 4% year over year and up 1% sequentially, driven by solid operational execution, cost controls and a reduction in financing costs due to proactive balance sheet management over the past 12 months. For the full year, core FFO per share was up 5% year over year and came in $0.03 above the high end of our initial guidance range, which did not contemplate the contribution of $1,400,000,000 of assets to DigitalCore REIT in early December. As a reminder, full year core FFO per share excludes the $20,000,000 promote fee on the Prudential joint venture in the 3rd quarter as well as the $25,000,000 PPA settlement in the Q1. Looking ahead to 2022, We expect core FFO per share will be between $6.80 $6.90 including the 1% dilution from Caraco as well as 100 to 200 basis points of expected FX headwinds due to the strength of the dollar relative to 2021.

Speaker 3

We expect to deliver revenue between $4,700,000,000 $4,800,000,000 In 2022, an adjusted EBITDA of approximately $2,500,000,000 Given the tightened supply environment, we expect Flat cash renewal rates in 2022, up from slightly negative in 2021 and we expect overall portfolio to remain within the current range despite the significant new capacity scheduled to come online during the year in addition to the embedded lease up potential within the Tereco portfolio. We are off to a great start on our financing plans for the year With a highly successful €750,000,000 bond offering in early January of 10.5 year paper at 1.3eight coupon. Finally, we expect to raise $500,000,000 to $1,000,000,000 from capital recycling whether through contributions to digital core REIT, Non core asset sales to 3rd parties or a combination of both. In terms of the quarterly dividend, The distribution policy is ultimately a Board level decision. Given the continued growth in our cash flows and taxable income, We would expect to see continued growth in the per share dividend just as we have had each and every year since our IPO in 2004.

Speaker 3

Last but certainly not least, let's turn to the balance sheet on page 12. As of year end, our reported leverage ratio stood at 6.1 times, while fixed charge coverage was 5.4 times. Pro form a for settlement of the $1,000,000,000 September forward equity offering, leverage drops to 5.7 times, while fixed charge coverage also improved to 5.7 times. We continue to execute on our financial strategy Of maximizing the menu of available capital options, while minimizing the related costs and extending the duration of our liabilities to match our long lived assets. As Bill previously mentioned, we recast our credit facility during the Q4, Upsizing from $2,350,000,000 to $3,000,000,000 extending the maturity by 3 years and tightening pricing by 5 basis points.

Speaker 3

We also incorporated a sustainability linked pricing component subject to adjustment based on annual performance targets, further demonstrating our commitment to sustainable business practices. Subsequent to quarter end, We raised approximately $850,000,000 from the 10.5 year eurobonds at 1.375 percent and we used a portion of the proceeds to redeem All $450,000,000 of our outstanding 4.75 U. S. Dollar bonds due 2025. This successful execution against our financing strategy reflects the strength of our global platform, which provides access to the full menu Our public as well as private capital sets us apart from our peers and enables us to prudently fund our growth.

Speaker 3

As you can see from the chart on page 13, our weighted average debt maturity is over 6 years and our weighted average coupon is just over 2%. A little over 3 quarters of our debt is non U. S. Dollar denominated, reflecting the growth of our global platform, while also acting as a natural FX hedge for our investments outside the U. S.

Speaker 3

94% of our debt is fixed rate, Guarding against a rising rate environment and 99% of our debt is unsecured providing the greatest flexibility for capital recycling. Finally, as you can see from the left side of page 13, we have a clear runway with nominal near term debt maturities and no far too tall in the out years. Our balance sheet is poised to weather a storm, but also positioned to fuel growth opportunities for our customers around the globe consistent with our long term financing strategy. This concludes our prepared remarks. And now we'll be pleased to take your questions.

Speaker 3

Operator, would you please begin the Q and A session?

Operator

We will now begin the Question and Answer Session. As a reminder, participants will be limited to one question and one follow-up. Our first question will come from Jon Atkins of RBC Sequium Capital Markets, please go ahead.

Speaker 4

Thanks. I wondered if you could talk a little bit about supply chain. Last call. Call, you talked about kind of on time and on budget in terms of delivery of turnkey inventory. Any update on that?

Speaker 4

And did that play a role In the slightly more elongated commencement timeframe associated with your leasing of 14 months compared to what you've Done in the past.

Speaker 2

Thanks, John. We are seeing Some effects on the supply chain. Clearly, most of the equipment is strained in terms of Availability including data center infrastructure servers and network gear and shortages in things like chips and fans are impacting Many industries, not just ours. Our VMI program, the vendor managed inventory program utilizes our knowledge and market way To overcome some of these disruptions, I believe that we're the gold standard for managing vendors and for forecasting. And this It gives us priority for production slots with our suppliers.

Speaker 2

This program has allowed us to reduce lead times by an average of 70% versus standard. Increased we increased the BMI pool when COVID hit. So I think we're pretty well prepared for the current disruptions and we're evaluating the program to expand it even further to better support our programs. Steel, aluminum and copper is also rising, which affects some fit out like cages and cabinets. This is only this really only comes into play though for Ag Projects that are scheduled for completion in the next 6 to 12 months.

Speaker 2

And in those cases, we're working closely with our customers to order gear Early to lock in the pricing and avoid any shipment delays. Let me hand it over to Andy to Address the relationship to delay in construction and anything else that you might want to add? Sure.

Speaker 3

I think we'll cover it. But just on the John, the Elongated book to build or timeline, which had nothing really to do with supply chain. 2 factors there. 1, You can see in the Americas region, we did a power based shell deal, obviously, a longer lead time to develop that and bring that online. And then in Europe where we had the concentration of our largest deals, obviously, standout quarter for EMEA across the board, Some of the plus megawatt deals were rather large in size and take downs.

Speaker 3

And I think there's a project or 2 where we're literally at Land State And the customers are looking to really just book that future runway for growth. So that was kind of what drove the overall timeline out for Sign to commence.

Speaker 4

And then maybe more broadly, I wondered if you could maybe comment on the willingness to flex your CapEx budget To a higher level, you accelerated compared to last year. But given all the demand that's out there and all the aggressive investment by some of your peers, In order to maintain your share, what is your thought about flexing the CapEx budget higher? And any kind of updated thoughts on financing mix How you might do that? It seems like that would really affect 2022 CapEx, but further out any kind of broad Thoughts on that would be appreciated.

Speaker 3

Sure. So we finished 2021 at South of $2,200,000,000 of development CapEx or so. Our guidance range is a step up of $2,300,000,000 to $2,500,000,000 of CapEx. You can just look at our press release throughout the year. We've been opening new markets, expanding our addressable market, building out The pipeline from land to shelves to finished suites to colo and to activity inventory.

Speaker 3

I don't think we're looking to change our posture. We really go market by market supply chain excuse me, market by market supply demand view and we think we're Positioning ahead of our competitors, and I don't think there's a really necessary reactionary flex needed into our business. But if the opportunity presents itself, We look at that and we'll make those investments. And as I mentioned in my prepared remarks, we've got a diverse menu of capital sources to fuel our growth.

Speaker 5

Thank you.

Operator

The next question comes from Michael Rollins of Citi. Please go ahead.

Speaker 5

Thanks and good afternoon. I was curious first if you can unpack the guidance For the same capital cash NOI growth of down 2.5%, 3.5%, maybe some of the puts and takes in there and how that might Play out over the course of the year. And then I can share the follow-up after this one.

Speaker 3

Sure. Thanks, Michael. So just a quick backdrop on same capital. So Last year, we guided slightly negative on same capital or and we came in at 4 4.4% as same capital cash NOI negative. This was slightly worse than the year prior.

Speaker 3

As I mentioned, that was a real subset of the pool that's reported in 2021. You flip to 2022, you call it almost 80% of our company is in that pool With the addition of Weston Building, InterXion Lambda Helix and Altus IT in Croatia. So you get a much larger sample set And improving complexion. So negative 4.4%, we guided to call it negative 3% at the midpoint. It's really been impacted by 2 elements.

Speaker 3

1, currency. We hedged through the balance sheet, so all the currency fluctuations are hitting that pool. If you Look at that on a constant currency, you're probably closer to negative 1%. And then if you peel back the onion on that, It's really strong positives, several like 3% or so in APAC, close to flat In EMEA due to the utilities being elevated and then the negative contribution largely focused in the Americas region Where we are getting hit by what looks like a property tax increase that's going to hit us in that year Excuse me, 2022, but not continue in 2023 beyond. And the major driver of still Not being more firmly in a positive, although improving really is downtime for re leasing of some of the larger non retentions.

Speaker 3

We've been working away at that and making good activity actually releasing it and then moving those customers into that space. It just takes time, Not because of supply chain bottlenecks, more of that 1 5 megawatt customer leaves and a new 5 megawatt customer refills, The refurbs, the new PDUs, etcetera just takes time. And for those chunky deals, you lose a month or 2 of rent in a year. That's just it won't flow through until you get to 2023. So Net net, not in positive territory firmly on a reported basis yet, but heading that way.

Speaker 5

And just to follow-up on some comments that You and the team have provided earlier on just pricing.

Speaker 3

Can you

Speaker 5

give us an update on the pricing strategy, Opportunities to leverage price whether it's because of the inflationary backdrop or some of the other macro factors that you're dealing with? And How that would affect the financial performance over time?

Speaker 3

Sure. So I mean, Pricing from 2 lenses, obviously, you saw in the guidance, we're guiding towards flat Releasing spreads on our renewals for 2020. So that's not new news. We've been mentioning that we've been working our way into that positive territory, Partly due to mix of exploration, but certainly I would say pricing related. And then also call it pricing on new deals.

Speaker 3

Holistically, I think our supply chain team has done a really and design and structure has done a really good job insulating us Given our scale, our consistency in market, I don't think that's industry wide. And if you're a newer, smaller, more fledgling or regional competitor, That's creating disruptions from an inflation standpoint. And there's just overall strains on delivery of capacity, See whether it's moratoriums in certain countries or the ability to deliver power, all these elements I'd say add up together To I think be an incremental benefit to our value proposition to our customer of having this incumbent platform of 26 countries, 50 metros with runway for growth that the pricing pendulum feels like it's continuing to slowly Swing more and more in our favor.

Operator

The next question comes from Eric Luebco of Wells Fargo. Please go ahead.

Speaker 6

Great. Thanks for taking the question. I wanted to talk about the strength you had in the less than 1 megawatt category. Maybe you could break down where you're seeing the most success whether it's Traditional enterprise, smaller hyperscale edge nodes. And do you think that steady improvement you've had is sustainable going forward?

Speaker 6

And then my second question was on the asset disposition front. Andy, I think in the past you've said you don't have a lot left to do on non core. So should we assume that You have a heavier weighting towards SREIT contributions throughout the course of the year. And related to that, Where do you think your leverage slightly north of 6 times? Should we expect it to remain elevated?

Speaker 6

Or are you looking to drive that down with Teraco financing and potentially other asset sales? Thanks.

Speaker 3

Well, I'll have Cory start us off On the enterprise less than Megawatt interconnection category and then I can fill in any factoids and talk about sourcing uses on your second question.

Speaker 7

Yeah. Thanks, Eric for the question. I'll tell you that we're really happy and feel good about the healthy demand that we're getting out of the sub-one megawatt You seem to be consistent about kind of where we're growing that and how it's been building. We mentioned The enterprise demand is just where it's coming across. It's coming across from a lot of our customers trying to take advantage of hybrid IT environments.

Speaker 7

And so we're seeing that come across the board, Across the globe, we'd have really strong demand and pipeline. And the nice thing about it is it's coming from an enterprise 2 thirds of that pipeline is coming through as enterprise and we're also getting good channel progress from it. So From a sub-one megawatt perspective, is it sustainable? Is it something that we're going to continue? I think you're going to see it continue.

Speaker 7

And we're happy with where we're seeing that demand across all regions And coming through the channel specifically and then also enterprises. So we're happy about where that is and I think it's going to continue.

Speaker 3

Just to add a couple more visual tidbits, Eric. So EMEA was an absolute standout for the less than a megawatt As you saw in the numbers, Frankfurt, London, Paris, Amsterdam, Marseille, big contributors. Over half of our new logos actually came out of that region. In the Americas, New York, Chicago, Dallas, Atlanta were the top markets and Singapore is obviously a standout in APAC. And Eric, do you mind just repeating the second part of your question about the sources you

Speaker 8

need to use? I heard

Speaker 3

the first part about just non core versus contributions to the Ash Street. What was the second part Good question.

Speaker 6

And just how we should think about your leverage throughout the year? You're a little above 6 times. I know you have the Equity Forward. You have the Tereco financing. Just how we should think about the cadence of leverage this year?

Speaker 6

That would be helpful. Thanks.

Speaker 3

Sure. So as you've seen in the guidance table, we put about $500,000,000 to $1,000,000,000 of call it capital recycling, which would be both of these categories. We ended the year with really a one off asset for $60,000,000 that will be likely redeveloped into a residential project in San Jose and there are a called a short list of whittling down of incremental non core dispositions That could happen during the year. Do you be a piece of that? And then I think looking for incremental contributions to DigitalCore REIT Would probably be the larger segment of that source of capital.

Speaker 3

That's obviously been a great success. John Stewart after 32 earnings calls hung up the HP 12C is now looking to grow that vehicle. In terms of funding for the year, we finished out the year with about almost $1,000,000,000 of proceeds if you include that one off asset Digital core REIT in December. That put the balance sheet twelvethirty one with $140 ish million of cash, $400,000,000 of excuse me $400,000,000 drawn on our $3,300,000,000 credit facility. We got Lucky beat the late March with a $850,000,000 euro bond beginning of the year.

Speaker 3

That's probably an incremental $500,000,000 of proceeds. We still have the $1,000,000,000 undrawn forward that we'll take down. So those combinations of sources and uses will essentially fund The closing of the $1,700,000,000 purchase of Tereco. And then obviously those incremental non dispose or incremental contributions in the back half of the year will be the call it the replenishing of the capital stack And we'll look to leverage the call it stay to move more in line to our targeted leverage levels below 6 times for sure As we move through the year.

Speaker 5

Great. Thank you.

Operator

The next question comes Simon Flannery of Morgan Stanley. Please go ahead.

Speaker 9

Thank you very much. Good evening. Andy, just wanted to continue on the Digital Core REIT. How should we think about what to expect there for 2022? Is this going to be something where it will Potentially do more deals with you.

Speaker 9

And how are those is it really North America focused today and in the near term? Or Could we see assets from Europe or elsewhere go in there? And you mentioned the stock price appreciation. Is there any magic It's 35% a magic number in terms of your stake? Or could you get use that as a source of funding as well to take your stake down in the vehicle?

Speaker 9

Thanks.

Speaker 3

Yes. So this was essentially an evolution of our capital sources here It dates back to probably the origins when Bill created the Prudential JV that just actually ran its course and we recognized and promote in the fall. Perpetual externally managed public vehicle with a global mandate, although albeit originally in North America portfolio. So over time, I would expect it to through contributions of assets from Digital Realty and they can also acquire 3rd party assets, Diversify its portfolio geographically, but really with core assets, data centers that Digital Realty believes in for the long run That have really long term weighted average lease terms, high occupancies, core to our strategy. We don't have a set exact dollar amount or time of 2022 where we're looking to do a contribution.

Speaker 3

We'll work collaboratively with John and his team to position that at the right time for Digital Corveit and its shareholders and Digital Realty's funding plans. But I would think it will diversify over time and continue to scale and It's been well received to date and I think that we'll be able to build upon that success.

Speaker 9

And your 35% stake?

Speaker 3

I'm sorry. That there's no magic to that. That was really just a product of the size of initial portfolio, the we have leverage we put on the vehicle day 1 and a modest IPO size. We the underwriters lockup Technically expires in the next several months, so not it's right around the corner. We have no interest to sell down.

Speaker 3

We can sell down if we want to. More likely over time, I could see us being diluted down as DigitalCorey buys for cash More assets and Digital Realty makes room for incremental investors, both institutional and retail To participate in the growth of the vehicle.

Speaker 9

Great. Thank you.

Operator

The next question comes from Erik Rasmussen of Stifel. Please go ahead.

Speaker 2

Yes. Thanks for taking the questions. New logos were quite strong. I think you highlighted your record in the quarter. Maybe just talk about what's behind the success There and then maybe do you see that momentum sustaining into the New Year?

Speaker 7

Yes. So it was our second first off, thanks for the question and also thanks for just the acknowledgment of the success we're having around new logos. 2nd highest quarter in new logos Yet our highest year in new logos at 480. It's really with customers coming to A hybrid IT and a data centric kind of mindset around what they're going to do that's what we're seeing come through on the new logos. We've got a lot of customers now picking us Consistently in making those decisions on it.

Speaker 7

Where we've seen kind of an outside growth from the new logos is around our channel. We went from channel sales of 15% up to I'm sorry from 10% in 2020 15% in 2021, but the new logos we're getting are close to 20% to 25% on a quarterly basis from the channel. So you ask where it's coming from, it's coming across the whole globe. You also think through our exports. We mentioned that 30% of our export business Our 30% of our business is going export meaning across regions and landing in EMEA at 60%.

Speaker 7

So really good progress across the globe on new logos Supported by strong success with the channel. And I think we're going to see that continue as well. So thanks for the question, Eric.

Speaker 2

Great. And then maybe just my follow-up. Obviously hyperscale was strong. But maybe talk about the types of hyperscalers you're seeing. Is there a shift in the customer makeup?

Speaker 2

And what's driving that demand?

Speaker 3

So I would maybe go region by region real Quickly, I just saw there wasn't a lot of activity in APAC this particular quarter, but we had a great 2021 overall in that region, plus all product types, but certainly including hyperscale and we're seeing significant demand continue I'm really excited with the introduction of Sol 1, which we just opened up as well as significant activity across the Japanese market. In EMEA, we had 4 of the 5 top CSPs all signed new business with us during the quarter. A lot of activity in Frankfurt, both in the East with the legacy Interxion campus and the West with the legacy digital campus, Zurich, Marseille, Madrid and Paris were also contributors as well as Amsterdam. In North America, In the I'll say the social media category has been a contributor and Ashburn was probably the standout for the quarter Where we've remained incredibly tight during the recovering market and continue to see strong demand.

Operator

The next question comes from David Barden of Bank of America. Please go ahead.

Speaker 10

Hey, guys. Thanks so much for taking the questions. 2 if I could please. One was Andy you talked about co investment with the Singapore Core REIT. And I'm wondering now given I think we're looking at about a 3.7% cap rate implied on the market cap now.

Speaker 10

Whether this how this affects how you guys think about mergers and acquisitions and we've seen a lot of Partnership models emerge across all sorts of digital infrastructure asset classes. I'd be interested in kind of hearing A little bit more about what you meant by that. And then Bill, look I'm a long time listener, first time caller. It's not gone unnoticed that John is taking over as CEO of Seeing for Cory, Andy's become President, you've moved to Austin. I mean, we're all big fans of what you've done.

Speaker 10

What are we Should we be expecting something? And I'd love to hear your thoughts on succession right now. Thank you.

Speaker 11

Hey, David. It's Greg Wright. Let me take the first question. Your question To the SREIT and how we think about it in terms of our M and A strategy. I mean, look, I think when you look at the mandate That John and his team have for that vehicle.

Speaker 11

It's clearly it's a yield driven vehicle. And you obviously we assess that cost of capital for that vehicle like we do Digital Realty standalone. And those assets going to go into that. They're not going to be development. They're going to be stabilized.

Speaker 11

You've heard John's pitch in terms of the types of assets they're looking for that To put into that vehicle, well as we do if we do a future M and A earning like that and there happens to be those kinds of assets, They will be a natural home for that. Now we obviously have a partner to pursue those transactions simultaneously And be able to bifurcate the assets and to get the best cost of capital. So that's how we think about it from an M and A standpoint. In terms of cost of capital, we still go back with your underwrites. We're going to go out and do DCFs and take a look at the projections and take a look at the risk of the asset and we're going to price it accordingly.

Speaker 11

And obviously having a vehicle that's got a better cost of capital is helpful, but that's generally the approach we'll use for M and A.

Speaker 3

The only thing I would add to that question John, I'm sorry, David was Listen, Singapore is opening up its moratorium in a very rational prudent way. Now with the development of call it 3 new data center locations, I can't think of a better Partner to be one of the 3 given our experience in this business, 4,000 global customers, leadership and sustainability, Experience in region and last but not least having a partner DigitalCore REIT listed on the Singapore Exchange There could be an eventual owner of that asset, allow all the citizens of Singapore to participate in the digital transformation of that country in the region. So that's a unique Incremental attribute that could play in the future?

Speaker 2

Relative to the move to Austin, I am not the only person who has moved to Austin. We moved the corporate headquarters to Austin January of last year And I'm surrounded by people who have also moved to Austin. On my right is my Chief of Staff, Bill Bradley. On my left is My Chief Investment Officer, Greg Wright. I'm looking down the table here at our Chief Operating Officer, Eric Sanchak.

Speaker 2

So we have quite a few people who have moved. Andy Power is planning to move at the end of the year. So this is the corporate headquarters. We made a conscious decision To lead California for a number of reasons. I think we've articulated that.

Speaker 2

We're going to be moving our staffs out of California and New York, we've announced that. We have downsized in California our offices there. We've moved from Fornberger to Center Up the block to space at on California Street and we're going to be downsizing in New York as well. So There's nothing about this move to Austin that is related to succession. Relative to The movement of Andy into the President's lung, I think that's your question.

Speaker 2

Our my goal and the goal of the Board Is to try to give our top performing executives as much experience and different experience as we possibly Ken. So this gives Andy an opportunity to spend time in operations as well as working with Chris Sharp On the networking side, the product development side, the innovation side, we have a number of Very capable executives that work for this company that report to me and I think many of them are potential candidates This is to succeed me. My obligation to the Board is to make sure that they have choices and I'm trying to Provide for that. And so when the time is right for me to move into retirement, I'd like our Board to be able to look at a number of potential candidates inside the company and potentially consider candidates outside the company as well. But I have No plans to step down at any point in the near future.

Speaker 2

I like what I do. And I think we're pretty good at it.

Operator

The next question comes from Brendan Lynch of Barclays. Please go ahead.

Speaker 10

Great. Thanks for taking my question. Maybe this one is for Chris. With your growing pool of Colo assets, do you have any interest in creating an internal software defined network? And if so, what would that entail?

Speaker 10

And what competitive advantages would that provide to you?

Speaker 8

Yes. No, thanks, Brendan. I appreciate the question. Absolutely, right? That's what the customers are looking for.

Speaker 8

And I just want Go back a little bit on what Eric had asked Corey on, what's driving that sub-one megawatt? It's a sweet spot where customers are starting to outgrow colo. So it's very beneficial to our asset class to be able to support that growing need and allow them to land and expand even beyond The 1 megawatt and you start to go to more markets, but that all requires an SDN, just the software defined networking for the broader group, That capability to tie it all together. And so one of the things you're going to hear about later in the year is we are absolutely bringing to market 1 of 2 platforms in the world that is purpose built for orchestrating at a higher level that type of capability on our customer behalf, Right. And I'll just impress upon everybody, it's not improving on a 10 year old product.

Speaker 8

It's definitely purpose built. And at the Core of that is enhancing our customer experience where we're removing that technical complexity that a lot of customers are impacted by interconnection and making it easier for them to procure and deploy in all of these locations. And that's why that new logo growth is starting to grow at record numbers and you'll see that continually feed off of itself because they're getting a big benefit out of the community of interest that's being created around the globe. But again, at the end of the day, it's about open access and unfettered customer experience, which

Operator

Go ahead.

Speaker 3

Hey, guys. Thanks for squeezing me in. I'll keep this brief. Maybe 2 for Andy. First off, does the 2022 guide, Can you quantify what's embedded in there from Tereco?

Speaker 3

Just thinking about revenue, EBITDA and core FFO. And then secondly, maybe bellfailing on that. Typically, you'll give some directional color on how to think about 4 quarter Core FFO, I'm just wondering if there are any puts and takes for 1Q core FFO per share that you would flag to be mindful of? Thanks. Sure.

Speaker 3

So just working backwards. So we didn't I don't think we have I like our famous bar charts without numbers on it for you in terms of weighted distribution. We do have a pretty decent moving part here with the timing of Erika, which I can't remember if Greg mentioned this yet, but I mean we're working through the closing conditions and really the process For call it competition committee review, but feels like it's going to happen call it the early very early second quarter to a couple of months into the second quarter timeframe. So that does put a little bit of puts and takes from a quarterly blend. It is just to confirm the dilution from Teraco Is included in our guidance table in the sup.

Speaker 3

So at the bottom line, our midpoint is call it Growing call it 5%, which is about 100 basis points increase from our guidance a year ago, Which we did beat by 140 bps. We also are absorbing call it 100 basis points to 200 basis points of FX headwinds. So, if you normalize for those items, you're call it close to the 6.5% call it core FFO per share growth. The components of Tereco, I would call it ballpark for A rough swag of partial year contribution to revenue and an EBITDA basis call it 100 of revenue and seventy ish of EBITDA contribution rough swags. Just a reminder, a data point, Our year over year revenue and EBITDA growth is deflated when you just look at our reported financials.

Speaker 3

Remember that we had a PPA in a Settlement and H Promote in 2021. So that plus really that plus FX calls it puts you call it 9.3 percent growth 150 basis points higher on the revenue input from a constant currency basis. That's great. Thank you.

Operator

That concludes the question and answer portion of today's call. I'd now like to turn the call back over to

Speaker 2

Whether it be an uninterrupted performance during a record Texas ice storm or on time delivery of new capacity, Despite a global pandemic and the resulting strain on global supply chains, our customers trust us with mission critical applications And digital delivers. We're expanding our global platform, establishing Digital Realty As the unquestioned leading colocation interconnection provider in Africa and positioning Platform Digital at key points of interconnection and Subsea Cable Landing Stations. We announced our expansion in India together with our partner Brookfield And we invested in Atlas Edge gaining exposure to the European Edge market all while investing over $2,000,000,000 in organic development around the world. We posted solid financial results in core FFO revenue and adjusted EBITDA above the high end of our initial guidance. Our 2022 guidance represents mid single digit growth in core FFO per share Despite absorbing headwinds from FX, Tereco and Capital Recycling, constant currency guidance for CFO, If we were to exclude Terraco, it would be in high single digits.

Speaker 2

Last but not least, we further strengthened our balance sheet raising $1,000,000,000 of Proceeds from asset sales, all the while positioning ourselves as the leading global provider of the full spectrum of data center solutions. I'd like to once again thank the Digital Realty frontline team members in critical data center facility roles To have kept the digital world turning, I hope that all of you stay safe and healthy and we hope to see many of you in person again soon. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.