Digital Realty Earnings Preview

Digital Realty Trust (DLR) reports earnings tomorrow. As the leading data center REIT, Digital Realty's announcement will probably serve as a bellwether for the wholesale data center vertical.

Digital Realty Trust (DLR) will be reporting 3Q 2010 results tomorrow. The San Francisco company is the leading REIT (real estate investment trust) in the data center sector, mainly providing Turn-Key Datacenter solutions to large tenants. As such, tomorrow's announcement will probably represent the bellwether for the wholesale data center vertical, which represents, according to analysts like Gartner's Lydia Leong, probably the strongest market in the data center sector at present.

After Equinix's revenue warning, which pushed down the whole sector, Digital Realty issued a press release meant to underline some of the positive trends in its core business, and further differentiate from Equinix's own or retail related problems: "After 2008's third quarter, these results represent the second highest third quarter for leases signed for our Turn-Key Datacenter product, reflecting strong demand from a variety of industry verticals. As important, we continued to see very favorable pricing in all of our key markets," commented Michael F. Foust, Chief Executive Officer of Digital Realty Trust. "Leases signed during the quarter with new and existing customers included colocation and managed service providers, IT enterprise, financial services and healthcare firms."

In our spreadsheet below, we are trying to resume some of the metrics that might be worth checking, apart from the usual suspects, to understand how Digital Trust business is evolving. As usual, you may download the spreadsheet for your own modeling at this link. Some parts of the spreadsheet may take a moment to load.

We are also reporting FFO (Funds from Operations) as one of the most important data to look at for Digital Realty. FFO is a supplemental non-GAAP financial measure used by the real estate industry to measure the operating performance of the company. The last few sheets refer to new leases, both commenced (with the different unit price related to each separate offering), or signed (future business). These numbers are already known for Q3, as they were released on October 11.

It's interesting to note that new signings seem to point steadily to a higher price per square foot. In 2010 as far as Turn Key solutions (from $141 in Q1 to $198 in Q3 2010).

Paolo Gorgo writes about the colocation and CDN sector at Nortia Research and Seeking Alpha.

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