Investor Meetings
September 2006
Exhibit 99.1
| Investor Meetings September 2006 Exhibit 99.1 |
 1 Forward Looking Statements The information included in this presentation contains forward-looking statements.
Such statements are based on management’s beliefs and assumptions made
based on information currently available to management. Such forward looking statements include statements and projections related to proposed
terms of the exchangeable senior notes, growth in the e-commerce
market, the digital communication and distribution market, and the data
storage market, the market effects of regulatory requirements, the disaster recovery market, the replacement cost of our assets, redevelopment costs in our buildings, and
time periods to stabilization of our development space, the effect new
leases will have on our rental revenues and results of operations, lease
expiration rates, the effect of leasing and acquisition on our FFO, and annualized GAAP rent. Such statements are subject to risks, uncertainties and assumptions and are not
guarantees of future performance and may be affected by known and unknown
risks, trends, uncertainties and factors that are beyond our control that
may cause actual results to vary materially. Some of the risks and uncertainties include, among others, the following: adverse economic or real estate developments in our
markets or the technology industry; general and local economic conditions;
defaults on or non-renewal of leases by tenants; difficulty acquiring
or operating properties in foreign jurisdictions, changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation, increased interest rates
and operating costs; inability to acquire new properties (including those we are in the process of acquiring); our failure to obtain necessary outside financing; increased construction costs; decreased rental rates or increased
vacancy rates; difficulties in identifying properties to acquire and
completing acquisitions; our failure to successfully operate acquired properties and operations; our failure to maintain our status as a REIT; possible adverse changes to tax law; environmental uncertainties and risks related to natural disasters; environmental or
contamination issues at our buildings; financial market fluctuations;
changes in foreign currency exchange rates; and changes in real estate and
zoning laws and increases in real property tax rates. The risks described above are not exhaustive, and additional factors could adversely affect our business and financial performance,
including those discussed in our annual report on Form 10-K for the
year ended December 31, 2005 and other filings with the Securities and Exchange Commission. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. |
 2 Digital Realty Trust overview • Tenants consist of leading global companies diversified across various industries • Own 51 properties comprising 10.3 million rentable sq ft which includes 1.2 million sq ft of additional space held for redevelopment (1) • Portfolio occupancy of 94.7% and “same store” occupancy of 96.4% (2) • Assets strategically located in top technology markets in the US, Canada and Europe DLR is a leading institutional owner focused on mission critical technology properties in the US and Europe 350 East Cermak Road Chicago, IL (1) Includes property acquisitions announced in our Earnings Release dated August 3,
2006. (2) Occupancy is as of June 30, 2006 net of redevelopment space.
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 3 DLR investment highlights • Specialized focus in dynamic and growing industries • High quality portfolio that is difficult to replicate • Experienced industry consolidator with proven ability to acquire assets below replacement cost • Acquisition and leasing pace creates potential for strong FFO growth • Uniquely positioned as both a value and growth REIT 2323 Bryan Street Dallas, TX |
 4 DLR properties feature advanced technical systems Power backup/redundancy Power management/conversion Precision air cooling/handling Systems and security controls Between $500 and $1,000 psf typically invested in DLR buildings, creating a barrier to exit for tenants and discouraging speculative new supply |
 5 DLR is unique in its focus on technology properties Data Centers (37% (1) ) Internet Gateways (42% (1) ) Financial Health/Insurance Communications Internet Enterprise • Storage/server intensive buildings • Provide a secure 24 x 7 environment for the storage and processing of mission-critical electronic information • Used to house the primary IT operations of leading companies, transaction processing and disaster recovery purposes • Internet and telecom network intensive buildings • Serve as the hub for Internet and data communications within and between major metropolitan areas • Market-dominant position in their respective MSAs • Frequently serve as a super- regional connection point with multiple anchor tenants (1) Calculated based on gross annualized rents using in place leases as of June
30, 2006. IT Services |
 6 Strong trends drive sustained demand for DLR space Other Growth Drivers Increased federal regulatory and legislative requirements for business continuity and records retention Disaster Recovery initiatives prioritized as a result of Hurricanes Katrina and Rita HIPAA patient records security and retention regulations Significant growth in online advertising; up 30% in 2005 to $12.5 billion (4) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% E-Commerce (1) Digital Communication & Distribution (2) Data Storage (3) 14% 73% 60% Primary Drivers – Estimated Annual Growth Rates (1) Forrester Research estimate of US online sales growth from 2005 -2010 (2) IDC estimate of US VOIP subscriber growth from 2005 to 2009 (3) Wall Street Journal estimate of corporate data storage capacity growth (4) PriceWaterhouseCoopers |
 7 0% 10% 20% 30% 40% 50% 60% 70% Q1'02 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 $0 $100 $200 $300 $400 $500 $600 Source: Estimated based on reported cabinet (available and billing), square feet and revenue
data from Equinix and Savvis as per press releases, SEC filings, research reports and internal DLR estimates as of June 30, 2006. Assumes 35 sq ft per cabinet throughout period if square feet not reported. Equinix and Savvis, two leading managed service providers that “resell”
space leased directly from DLR, are experiencing strong growth in revenues and utilization
Bill rates and utilization rates are escalating Revenue PSF Utilization Rate Revenue PSF (Utilized) Revenue PSF (Total) Utilization Rate 29% $518 psf $540psf $148 psf $329 psf 64% |
 8 • Former General Manager of Critical Facilities for EDS • 18+ years of technology infrastructure experience Ted Martin Director of Operations • Former Director of Sales, Nortel Networks • 13+ years of technology business experience Christopher Crosby SVP Sales & Tech Svcs • Former Head of GI Partners real estate acquisitions • 17+ years of real estate experience Scott Peterson SVP Acquisitions • Former President & CFO of TriNet • 24+ years of finance and real estate experience A. William Stein CFO/CIO • Co-founder of Digital Realty Trust • 25+ years of real estate and technology experience Michael Foust CEO • Co-founder of Digital Realty Trust • 23+ years of real estate and technology experience Richard Magnuson Executive Chairman Senior management leads a complete REIT team • Relevant experience • Proven track record • Public markets background DLR is organized and managed to deliver growth Management is supported by a team of over 70 professionals in the US and Europe focused on executing DLR’s core strategy |
 9 36.8% 20.9% 24.7% 77.9% 12.1% 29.4% 0% 20% 40% 60% 80% 100% DLR RMS Peer Group Composite FY 2005 Total Return 2006 YTD Total Return DLR continues to outperform its Peer Group and the RMS DLR is a top performing REIT Note: YTD 2006 Total Return as of September 7, 2006 assuming dividend reinvestment as
per SNL Financial. (1) Peer Group Composite includes ARE, BMR, GSL and
OFC. (1) |
 10 DLR Presence in 23 Top Markets Boston Boston San Francisco Los Angeles Dallas Chicago NY Metro DLR Regional Office DLR Market Note: Reflects all owned assets as of August 3, 2006. Charlotte St. Paul Philadelphia Phoenix Denver Sacramento Geneva Dublin Austin Toronto Silicon Valley Northern Virginia Atlanta Miami Boston London Amsterdam Houston # of Properties # of Buildings Total Rentable Square Feet Domestic 45 61 9,950,141 International 6 7 338,653 Total 51 68 10,288,794 |
 11 Communications 38% IT Services 28% Other Technology 6% Professional & Financial Services 13% Non-Technology 15% DLR is increasingly well diversified by sector Industry Distribution Note: Calculated based on gross annualized rents using in place leases as of June 30,
2006. |
 12 2005 & YTD 2006 Acquisitions (1) Net rentable square feet figures excludes space held for redevelopment. (2) Savvis Portfolio includes 2401 & 2403 Walsh Street, 4605 & 4700 Old
Ironsides Drive and 200 North Nash Street. (3) Charlotte Portfolio includes
113 & 125 North Meyers and 731 East Trade Street. (4) Estimated occupancy
based on information provided by the seller. DLR acquired approximately $881M
in new properties Total Net Rentable Redevelopment Occupancy Property Location Sq. Ft. Sq Ft (1) Sq Ft (Net of Redev) 833 Chestnut East Philadelphia 654,758 535,098 119,660 76% 1125 Energy Park Drive St. Paul 112,827 112,827 - 100% 350 East Cermak Road Chicago 1,133,391 870,183 263,208 93% 8534 Concord Center Drive Denver 82,229 82,229 - 100% Savvis Portfolio (2) Santa Clara & Los Angeles 560,000 560,000 - 100% 600-780 South Federal Chicago 161,547 161,547 - 84% Paul van Vlissingenstraat 16 Amsterdam 112,472 77,472 35,000 90% Charlotte Portfolio (3) Charlotte 95,499 72,550 22,949 100% 115 Second Avenue Waltham, MA 66,730 10,494 56,236 N/A Chemin de l'Epinglier 2 Geneva 59,190 59,190 - 100% 251 Exchange Place Herndon, VA 70,982 70,982 - 100% 7500 &7620 Metro Center Drive Austin 119,962 45,000 74,962 100% 3 Corporate Place Piscataway, NJ 283,124 - 283,124 N/A 2005 Acquisitions 3,512,711 2,657,572 855,139 4025 Midway Road Carrollton, TX 99,947 49,947 50,000 40% Clonshaugh Industrial Estate Dublin, Ireland 20,000 20,000 - 100% Clonshaugh Industrial Estate Dublin, Ireland 2.6 acres - - N/A 6800 Millcreek Drive Toronto, Canada 83,758 83,758 - 100% 101 Aquila Way Atlanta 313,581 313,581 - 100% 12001 North Freeway Houston 300,705 281,426 19,279 99% 14901 FAA Boulevard Dallas 263,700 263,700 - 100% 120 E. Van Buren Street (4) Phoenix 347,000 275,227 71,773 73% Gyroscoopweg 2E-2F Amsterdam, Netherlands 55,585 55,585 - 100% YTD 2006 Acquisitions 1,484,276 1,343,224 141,052 Total 2005 & YTD 2006 4,996,987 4,000,796 996,191 |
 13 Source: Independent study by CCG Facilities Integration Inc. based on data center
projects with improvements similar to DLR. (1) Infrastructure only.
Does not include electronic equipment. Assumes 60% ratio of data center to
total building with all cost allocated to raised floor area. (2)
Reflects all owned properties and properties under contract. Replacement
Cost Estimate Replacement cost illustrates the value of DLR’s portfolio DLR owns over 5.0M sq ft of improved data center space (2) Cost per Square Foot Cost Components Low High Land $40 $70 Building Shell 60 150 Electrical Systems $297 $396 Mechanical Systems (HVAC) 92 122 Fire Protection 21 29 Other Construction and Fees 130 173 Sub Total $540 $720 Total Development Costs $640 $940 Base Building Data Center Improvements (1) |
 14 DLR’s Value-Add Redevelopment Program Robust demand from diverse industry sectors: – Financial services – Internet enterprises – Telecom applications providers – Energy companies – Healthcare Limited supply of existing facilities Existing corporate data centers often do not satisfy electrical and HVAC requirements of current web hosting, data storage and IT applications Objective: Achieve attractive returns by providing corporate tenants with
custom data center solutions |
 15 DLR’s competitive advantage Inventory totals 1.2 million sf of vacant, redevelopment space, potential for 740,000 sf of data center: – Approximately 735,000 sf in income producing properties; potential for 440,000 sf of data center – Approximately 500,000 sf of redevelopment space in recently acquired vacant buildings in Boston, NY Metro, Dallas and Austin; potential for 300,000 sf of data center Redevelopment costs vary by building – Base building power, structural upgrades: $35 - $50 psf – Custom data center: $450 to $650 psf (often funded by tenants) Stabilized income projected within 24 to 36 months DLR’s unmatched sales and technical team offers tenants design, construction management, engineering and facilities management expertise |
 16 Leasing Drives Internal Growth DLR executed 71 leases in SECOND QUARTER 2006, contributing approximately $11.6M in annualized GAAP rental revenues (1) As of June 30, 2006, portfolio occupancy was 94.7% and “same store” was 96.4% (2) (1) GAAP rental revenues include total rent for both renewals and expansions.
(2) Occupancy percentages exclude 1.2 million square feet of space held for
redevelopment. $88,700 $24.00 3,742 6 Non Technical $1.7 million $39.00 44,993 3 Redevelopment $9.7 million $85.00 115,092 62 Data Center Annualized GAAP Rent Annualized GAAP Rent PSF Total SF Leased # of Leases Type of Space DLR commenced 47 leases during the second quarter 2006, contributing approximately $7.4 M in annualized GAAP rental revenues (1) |
 17 Leasing Drives Internal Growth DLR has executed 113 leases YEAR-TO-DATE 2006, contributing approximately
$17.5M in annualized GAAP rental revenues (1) (1) GAAP rental revenues include total rent for both renewals and expansions.
$0.5 million $25.00 20,844 13 Non Technical $3.9 million $54.00 71,971 5 Redevelopment $13.1 million $85.00 154,645 95 Data Center Annualized GAAP Rent Annualized GAAP Rent PSF Total SF Leased # of Leases Type of Space DLR commenced 94 leases during the YTD 2006, contributing approximately $11.7 M in annualized GAAP rental revenues (1) |
 18 Case studies: DLR’s value-add leasing Recent leasing illustrates effectiveness of DLR’s leasing and engineering team
• Executed new 10,000 sf suite lease with IT services company at approx. $100 psf for 10 yr term • Executed new 22,300 sf lease with financial institution at an average of $79 psf for 2.5 yr term • Invested approx. $2.5M to fully condition 10,000 sq. ft. on a speculative basis • Designed and constructed custom data center facility for major international finance institution • 35,000 sf previously vacant • Prior rate approx. $25 psf • Executed new 60,000 sf lease with global internet services company at an average of $22 psf NNN for 10 yr term • Provided tenant improvement allowance of $10 psf; in addition to significant investment in space by tenant • Designed and constructed custom data center solution • 60,000 sf vacant shell redevelopment space • Executed new 10,000 sf lease with international telecom at approx. $57 psf for 10 yr term • Executed new 22,500 sf lease with software company at approx. $62 psf for 3 yr term • Invested approx. $10 psf to enhance space • 40,000 sf suite previously vacant • Space substantially conditioned by prior tenant for data center operations • Prior rate approx. $36 psf Result DLR Action Opportunity |
 19 2.7% 1.2% 3.2% 5.7% 10.5% 15.2% 1.7% 9.0% 4.6% 14.2% 26.7% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Thereafter DLR’s model features long-term, stable leases • The average lease term is approximately 12 years with 7 years remaining • Leases typically contain 3% annual rent bumps <7.1% in next 3 yrs The stability of our long-term leases complements our growth Note: Excludes vacant square footage of 0.5 million square feet and space held for redevelopment as of June 30, 2006. Lease Expiration as a % of Net Rentable Square Feet |
 20 Digital Realty’s financial results Reported FFO (1) of $23.2 million for 2Q06, up 18% from $19.6 million for 2Q05; or $0.38 per diluted share and unit for 2Q06, up 3% from $0.37 per diluted share and unit for 2Q05 2Q06 FFO payout ratio was 71%; 2Q06 AFFO (1) payout ratio was 100% DLR’s stock generated a total return to common shareholders of 78% in 2005; YTD 2006 DLR stock has generated a total return of 37% (2) Increased quarterly common dividend 8.7% on an annualized basis to $1.06 per share in November 2005 Priced follow on offering of 4 million shares of common stock for approximately $95 million of net proceeds on May 23, 2006 Priced a private placement of $150 million of 4.125% Exchangeable Senior Debentures due 2026 on August 9, 2006 (1) FFO and AFFO is a non GAAP financial measure. For a description of FFO and AFFO see
page 25. (2) Based on closing price of DLR common stock ($30.30) as of September 7, 2006.
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 21 17.2x 18.7x 20.7x 15.9x 15.5x 18.1x 3.9% 3.5% 3.3% 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x 22.0x RMS DLR Peer Group Composite 3.0% 4.0% 5.0% 6.0% 2006E FFO Multiple 2007E FFO Multiple Dividend Yield (2) Note: Based on closing price of DLR common stock ($30.30) and other securities as of
September 7, 2006. (1) Based on First Call consensus estimates for indicative
purposes. DLR does not endorse the First Call consensus estimate. (2)
Peer Group Composite includes ARE, BMR, GSL and OFC. DLR trades at a discount to
public peers DLR’s FFO multiples remain at a discount to its Peer
Group Dividend Yield FFO Multiple (1) |
     22 Improving overall credit quality of DLR portfolio + = + = Approximately $18 million of base rental income, or over 11% of overall income, has experienced an improvement in credit quality. (1) As a result of a sublease relationship with Microsoft for 200,000 sq ft of space that
is leased directly by Savvis. (2) On June 30, 2006, SAVVIS completed the exchange of its Series A Preferred stock for
37.4 million shares of common stock. (1) (2) |
 23 DLR employs a conservative capital structure Wtd Average Cost of Debt: 5.55%; Approximately 80% fixed rate debt (4) Expanded credit facility to $500M from $350M, increasing liquidity and financial flexibility Periodically refinancing high cost debt with lower rate, longer term, fixed rate financing No debt maturing through 2008 (assuming extensions) Total Market Capitalization (1) $3,067.2M (1) Based on closing price and shares outstanding of DLR common stock ($30.30) at September 7, 2006. (2) Excludes $2.1 million of unamortized debt premium for 1125 Energy Park Drive & 731 East Trade Street. (3) Unsecured credit facility as of August 31, 2006. (4) Includes $172.5 million of convertible debt. Dividend Yield / Rate: 3.5% / $1.06 Fixed Rate Debt, $788.1 Variable Rate Debt, $201.8 Preferred Stock, $166.8 Equity, $1,910.5 (2)(4) (3) |
 24 Definition of Non-GAAP Financial Measures This presentation includes certain non-GAAP financial measures that management believes are
helpful in understanding our business, as further described below. Our definition
and calculation of non-GAAP financial measures may differ from those of other REITs, and, therefore, may not be comparable. The non-GAAP financial measures should not be considered an alternative to net
income or any other GAAP measurement of performance and should not be considered an
alternative to cash flows from operating, investing or financing activities as a measure of liquidity. Funds from Operations (FFO) We calculate Funds from Operations, or FFO, in accordance with the standards established by the
National Association of Real Estate Investment Trusts, or NAREIT. FFO
represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, real estate related depreciation and amortization (excluding amortization of deferred financing
costs) and after adjustments for unconsolidated partnerships and joint
ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely
recognized measure of the performance of REITs, FFO will be used by investors as a
basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from
use or market conditions, nor the level of capital expenditures and leasing
commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. Adjusted Funds From Operations (AFFO) We present adjusted funds from operations, or AFFO, as a supplemental operating measure because,
when compared year over year, it assesses our ability to fund dividend and
distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the operations of REITs, AFFO will be used by investors as a basis to assess our ability to fund
dividend payments in comparison to other REITs. We calculate adjusted funds from
operations, or AFFO, by adding to or subtracting from FFO (i) non-real estate depreciation, (ii) amortization of deferred financing costs (iii) non cash compensation (iv) loss from early extinguishment of debt (v) straight line rents (vi) fair value of lease revenue amortization (vii) capitalized leasing payroll (viii) recurring tenant improvements and (ix) capitalized
leasing commissions. Other equity REITs may not calculate AFFO in a consistent
manner. Accordingly, our AFFO may not be comparable to other equity REITs’ AFFO. AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our operations.
EBITDA and Adjusted EBITDA We believe that earnings before interest, income taxes, depreciation and amortization, or EBITDA
and Adjusted EBITDA (as defined below), are useful supplemental performance measures because they allow investors to view our performance without
the impact of non cash depreciation and amortization or the cost of debt and with respect to Adjusted EBITDA preferred dividends and minority interests. Adjusted EBITDA is EBITDA excluding minority interests and preferred stock dividends. In addition, we believe EBITDA and adjusted
EBITDA are frequently used by securities analysts, investors and other interested
parties in the evaluation of REITs. Because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and income taxes, and are not adjusted for capital expenditures or
other recurring cash requirements of our business, their utility as a measure of our performance is limited. Accordingly, EBITDA and Adjusted EBITDA should be considered only as supplements to net income (computed in accordance with GAAP) as a measure of our financial performance. Other equity REITs may calculate EBITDA and Adjusted EBITDA differently than we do; accordingly, our EBITDA and Adjusted EBITDA may not comparable to such
other REITs’ EBITDA and Adjusted EBITDA. Each of FFO and Adjusted EBITDA exclude items that have real economic effect and could
materially impact our results from operations, and therefore the utility of FFO and
Adjusted EBTIDA as a measure of our performance is limited. Nothing contained
herein is intended to revise the earnings, FFO or acquisition guidance we confirmed on our Earnings Conference Call dated August 3, 2006 and available on our website at www.digitalrealtytrust.com.
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 25 Reconciliation of non GAAP items to their closest GAAP Funds from operations (1) Q206 Q106 FY2005 Q206 Q106 FY2005 Net income available to common stockholders $1,650 $1,642 $6,087 Net income available to common stockholders $1,650 $1,642 $6,087 Interest 12,181 11,388 39,122 Minority interests in operating partnership including discontinued operations 1,340 1,846 8,268 Depreciation and amortization 20,275 18,256 62,232 Real estate related depreciation and amortization (2) 20,238 18,185 62,171 and amortization (EBITDA) $34,106 $31,286 $107,441 Funds from operations (FFO) $23,228 $21,673 $76,526 Minority interests 1,340 1,831 8,256 Non real estate depreciation 37 71 61 Preferred stock dividends 3,445 3,445 10,014 Amortization of deferred financing costs 937 795 2,965 Adjusted Earnings before interest, taxes and depreciation and amortization (Adjusted EBITDA) $38,891 $36,562 $125,711 Non cash compensation 435 431 481 Loss from early extinguishment of debt 425 57 1,021 Cash paid for interest (including discontinued operations) Straight line rents (4,233) (3,843) (13,023) Above and below market rent amortization (1,504) (433) (1,717) Total GAAP interest expense (including discontinued operations) $12,181 $11,388 $39,122 Capitalized leasing compensation (888) (764) (781) Amortization of deferred financing costs (749) (754) (2,921) Recurring capital expenditures and tenant improvements (338) (904) (2,897) Capitalized interest 1,058 762 279 Capitalized leasing commissions (1,682) (265) (3,051) Noncash interest 806 (1,152) (1,424) Adjusted funds from operations (1) $16,417 $16,818 $59,585 Cash paid for interest $13,296 $10,244 $35,056 (2) Real estate depreciation and amortization was computed as follows: Q206 Q106 FY2005 Depreciation and amortization per income statement $19,511 $17,513 $59,616 Depreciation and amortization of discontinued operations at 7979 East Tufts Avenue 764 743 2,616 Non real estate depreciation (37) (71) (61) $20,238 $18,185 $62,171 (1) Funds from operations and Adjusted Funds from operations for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006. EBITDA and Adjusted EBITDA (including discontinued operations) |