Q4 2023 Digital Realty Trust Inc Earnings Call

Operator: www.realvision.com BF-WATCH TV 2021 BF-WATCH TV 2021 BF-WATCH TV 2021, Good afternoon, and welcome to the Digital Realty fourth quarter 2023 earnings call. Please note, this event is being recorded. During today's presentation, all parties will be placed in a listen-only mode.

Yes.

[music].

Speaker Change: Good afternoon, and welcome to the digital Realty fourth quarter 2023 earnings call.

Operator: Following the presentation, we will conduct a question and answer session. Callers will be limited to one question and we will aim to conclude at the end of the hour. I would now like to turn the call over to Jordan Sadler, Digital Realty's Senior Vice President of Public and Private Investor Relations. Jordan, please go ahead.

Speaker Change: Please note this event is being recorded.

Speaker Change: During todays presentation, all parties will be placed in a listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: Callers will be limited to one question and we will aim to conclude the bar at the bottom of the hour.

Speaker Change: I would now like to turn the call over to Jordan Sadler Digital Realty's Senior Vice President of public and private Investor Relations.

Jordan Sadler: Please go ahead.

Jordan Sadler: Thank you, operator, and welcome, everyone, to Digital Realty's fourth quarter 2023 earnings conference call. Joining me on today's call are President and CEO Andy Power and CFO Matt Mercier. Chief Investment Officer Greg Wright, Chief Technology Officer Chris Sharp, and Chief Revenue Officer Colin McLean are also on the call and will be available for Q&A. Management will be making 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.

Jordan Sadler: Thank you operator, and welcome everyone to digital Realty's fourth quarter 2023 earnings conference call joining.

Jordan Sadler: Joining me on today's call are president and CEO, Andy power CFO, Matt Mercier.

Jordan Sadler: <unk> investment Officer, Greg Wright, Chief Technology Officer, Chris Sharp and Chief revenue Officer, Colin Mcqueen are also on the call and will be available for Q&A.

Jordan Sadler: Management will be making 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 risks related to our business see our 10-K and subsequent filings with the SEC.

Jordan Sadler: For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will also contain non-GAAP financial information. Reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website.

Jordan Sadler: This call will also contain non-GAAP financial information reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website.

Jordan Sadler: Before I turn the call over to Andy, let me offer a few key takeaways from our fourth quarter and our full year. First, we are seeing a robust wave of demand across our platform, and we are optimistic about our ability to execute. Leasing in the quarter was healthy, highlighted by strong volume in the zero to one megawatt plus interconnection segment, record pricing in the greater than a megawatt category, and the second highest quarter ever of new logos added.

Jordan Sadler: Before I turn the call over to Andy Let me offer a few key takeaways from our fourth quarter and our full year <unk>.

Andrew Power: First we are seeing a robust wave of demand across our platform and we are optimistic about our ability to execute.

Andrew Power: Leasing in the quarter was healthy highlighted by strong volume in the zero to one megawatt plus interconnection segment record pricing and a greater than a megawatt category and the second highest quarter ever of new logos added.

Jordan Sadler: Second, our fundamental metrics capped off the year on a high note with the strongest cash releasing spreads and same capital cash NOI growth we've seen in years, as our unique and differentiated value proposition continued to resonate. And lastly, in the fourth quarter alone, we announced nearly $8 billion in new development joint ventures and completed over $1 billion of equity issuance under our ATM, bringing total capital sources raised during the year to more than $12 billion and reducing pro forma leverage below our year-end 2023 target. The execution of our funding and capital plan in 2023 has positioned Digital Realty to be able to support our customers' data center infrastructure needs as the next generation of technology unfolds. With that said, I'd like to turn the call over to our president and CEO, Andy Power. Thanks, Jordan, and thanks to everyone for joining our call.

Andrew Power: Second our fundamental metrics capped off the year on a high note with our strongest cash re leasing spreads and same capital cash NOI growth, we've seen in years as our unique and differentiated value proposition continued to resonate.

Andrew Power: And lastly in the fourth quarter alone, we announced nearly $8 billion of new development joint ventures, and completed over $1 billion of equity issuance under our ATM, bringing total capital sources raised during the year to more than $12 billion.

Andrew Power: And reducing pro forma leverage below our year end 2023 target.

Andrew Power: The execution on our funding and capital plan in 2023 as physician digital realty to be able to support our customers data center infrastructure needs as the next generation of technology unfolds with that I'd like to turn the call over to our president and CEO Andy power.

Andrew Power: Thanks, Jordan and thanks to everyone for joining our call.

Andrew Power: 2023 was a milestone year for digital realty as we made strong progress toward our strategic objectives, despite significant volatility in financial conditions and broader uncertainty around the world. For me, 2023 will be revered as the year of AI's arrival at the data center forefront, ushering in an unprecedented new wave of data-centered demand, driving a step function of change across the industry's landscape.

Andrew Power: 2023 was a milestone year for digital Realty as we made strong progress toward our strategic objectives, despite significant volatility of financial conditions and broader uncertainty around the world.

Andrew Power: For me 2022 will be remembered as the.

Andrew Power: The year of a i's arrival to the data center forefront.

Andrew Power: Ushering in an unprecedented new wave of data center demand driving a step function change across the industry landscape.

Andrew Power: The year that Digital Realty enhanced its customer value proposition by adding connectivity-rich solutions while also scaling our capacity for hyperscale and AI workloads. We expanded our footprint with new connectivity-oriented locations around the Mediterranean and elsewhere, enhanced our joint venture in India with the addition of Reliance Jio, and increased the number of direct access points on our campuses to the leading cloud and service providers. We accelerated the growth of ServiceFabric with more than 70 discrete services added to the platform and over 100 unique services available by year-end, and enhanced its capabilities with new components like the service directory. We also added 9,000 new cross-connects in the year, indicative of a growing connected data community.

Andrew Power: The year, the digital realty enhanced customer value proposition by adding connectivity rich solutions, while also scaling our capacity for Hyperscale in AI workloads.

Andrew Power: We expanded our footprint with new connectivity oriented locations around the Mediterranean and elsewhere.

Andrew Power: Enhanced our joint venture in India with the addition of reliance Gilles.

Andrew Power: And increased the number of direct access points at our campuses to the leading cloud and service providers.

Andrew Power: We accelerated the growth of service fabric with more than 70 discrete services added to the platform and over 100, you need services available by year end and.

Andrew Power: And enhance its capabilities with new proposed select service directory.

Andrew Power: We also added 9000, new cross connects in the year indicative of our growing connected data communities.

Andrew Power: 2023 was the year that we integrated and innovated at a faster pace than ever before. We strengthened our leadership team and aligned our platforms to three regions to be consistently structured around the world. We adapted our product portfolio to meet market demand, evolving our offering to efficiently support next-generation chips like the NVIDIA H100 in numerous data centers. Our high-density COLO capability, deployed across 32 markets, spanning all three regions, is equipped to handle three times the H-100 requirement.

Andrew Power: 2023 was a year that we integrated an innovated at a faster pace than ever before.

Andrew Power: We strengthened our leadership team and aligned our platforms the three regions to.

Andrew Power: To be consistently structured around the world, we adapted our product portfolio to meet market demand evolving our offering to officially support next generation chips like your video each 100 and numerous data centers.

Andrew Power: Our high density Colo capability deployed across 32 markets spanning all three regions is equipped to handle three times states 100 requirements.

Andrew Power: And we continue to add green energy solutions to power many of these power-dense applications, like our large solar PPA in Germany and our agreements supporting 100% renewable power in Texas, San Francisco, New Jersey, and Sydney. 2023 was the year that Digital Realty took decisive action to strengthen its balance sheet by developing a portfolio of private capital partnerships and vehicles that diversified our capital sources, while enabling us to support our customers' fast-growing requirements. And we did all of that while continuing to provide the operational excellence that is expected of a global data center leader and that our customers rightfully demand. On this call a year ago, I outlined a plan to bolster and diversify our capital sources.

Andrew Power: And we continue to add Green energy solutions to power. Many of these power dense applications like our large solar PPA in Germany.

Andrew Power: And our agreement supporting 100% renewable power in Texas.

Andrew Power: Francisco, New Jersey in Sydney.

Andrew Power: And 2023 was the year that digital Realty took decisive action to strengthen our balance sheet by developing a portfolio of private capital partnerships and vehicles the diversified our capital sources.

Andrew Power: While enabling us to support our customers fast growing requirements.

Andrew Power: And we did all of that while continuing to provide the operational excellence that is expected of a global data center leader and that our customers rightfully demand.

Andrew Power: On this call a year ago, I outlined that play in to bolster and diversify our capital sources.

Andrew Power: Our goals were to reduce our leverage towards six times by the end of the year, increase our liquidity to fund our development program, and diversify our capital sources to limit our reliance on the capital market, increasing our ability to meet the accelerating demand for data center capacity and to enhance our returns on invested capital. We outperformed on each of these goals, sourcing over $12 billion of new capital and commitments for new investment and debt repayment. Reducing pro forma leverage to just 5.8 times when adjusted for transactions that have been announced or closed since your departure.

Andrew Power: Our goals were to reduce our leverage towards six times by the end of the year.

Increase our liquidity to fund our development program in.

Andrew Power: And diversify our capital sources to limit our reliance on the capital markets.

Andrew Power: Our ability to meet the accelerating demand for data center capacity and to enhance our returns on invested capital.

Andrew Power: We outperformed on each of these goals sourcing over 12 billion of new capital and commitments for new investments and debt repayment.

Andrew Power: Reducing pro forma leverage to just 5.8 times when adjusted for transactions that have been announced or closed since year end.

Andrew Power: We also ended the year with five new JV partners and expanded some of our existing relationships. To round out the year, we announced three significant transactions in the fourth quarter, including two development joint ventures and the successful resolution of our relationship with Sixterra. We have also raised $1.2 billion of equity under our ATM since the end of September. I will quickly run through the highlights of these transactions. In early January, Greg completed his famed Triple Lindy with a Sixpanner transaction by selling $275 million of assets to Brookfield, along with the purchase of Sixpanner's leasehold positions in Singapore and Frankfurt for $55 million, yielding net cash of $220 million to digital realty.

Andrew Power: We also ended the year with five new JV partners and expanded some of our existing relationships.

Andrew Power: To round out the year, we announced three significant transactions in the fourth quarter, including two development joint ventures, and the successful resolution to our relationship with six Terra.

Andrew Power: We also raised $1 2 billion of equity under our ATM since the end of September.

Andrew Power: I'll quickly run through the highlights of these transactions.

Andrew Power: In early January Greg completed his famed triple Lindy with.

Andrew Power: With the six tear transaction by selling $275 million of assets to Brookfield, along with the purchase of <unk> leasehold positions in Singapore in Frankfurt for $55 million.

Andrew Power: Yielding net cash of $220 million to digital Realty.

Andrew Power: In addition, Brookfield assumed three existing leases and amended three others in our portfolio to accelerate their expiration to the end of September 2024. Finally, Digital Realty obtained and exercised an option to purchase a six-digit data center in the Slough Trading Estate, adding one of London's highly sought-after submarkets to Platform Digital's Connectivity and Enterprise Co-Owned Offers. This transaction remains subject to customary closing conditions and is expected to close toward the end of the first quarter. In November, Realty Income purchased an 80% interest in two 400 million data centers that are under development and leased to an investment-grade financial services company. The tenant has the option to expand the facility up to an estimated potential cost of $800 million.

Andrew Power: In addition, Brookfield assumed three existing leases and amended three others in our portfolio to accelerate their exploration to the end of September 2024.

Andrew Power: Finally, digital Realty obtained an exercise of the option to purchase a <unk> data center and the Slough trading estate.

Andrew Power: Adding one of London's highly sought after submarkets to platform Digital's connectivity and enterprise Colo offering.

Andrew Power: This transaction remains subject to customary closing conditions and is expected to close towards the end of the first quarter.

Andrew Power: In November Realty income purchased an 80% interest in to 400 million data centers that are underdevelopment at leased to an investment grade financial services company.

Andrew Power: The tenant has the option to expand the facility up to an estimated potential cost of $800 million.

Andrew Power: We received $200 million upon closing and reduced our funding obligations for the remainder of this project to just 20% of the total capital, enabling us to reinvest the capital in higher-return projects. Finally, the $7 billion development joint venture with Blackstone is our largest and most forward-looking transaction and accelerates the monetization of nearly 20% of our 3-plus gigawatt land bank. This JV involves a sale of an 80% interest in nearly 500 megawatts of capacity across four campuses in Paris, Frankfurt, and Northern Virginia and enables us to better support our hyperscale customers' needs. Approximately 20% of Ventures' total potential data center capacity is expected to be delivered through 2025. We will retain a 20% interest in these developments and earn fees for developing, leasing, operating, and managing these facilities.

Andrew Power: We received 200 million upon closing and reduced our funding obligations for the remainder of this project to just 20% of the total capital.

Andrew Power: Enabling us to reinvest the capital in higher return projects.

Andrew Power: Finally, the $7 billion development joint venture with Blackstone is our largest and most forward looking transaction.

Andrew Power: Celebrates the monetization of nearly 20% of our three plus gigawatt land land bank.

Andrew Power: This JV involves the sale of an 80% interest in nearly 500 megawatts of capacity across four campuses in Paris, Frankfurt and Northern Virginia.

Andrew Power: It enables us to better support our hyperscale customers needs.

Andrew Power: 20% of the ventures total potential data center capacity is expected to be delivered through 2025.

Andrew Power: We will retain a 20% interest in these developments and earn fees for developing leasing operating and managing these facilities.

Andrew Power: All told in 2023.

Andrew Power: All told, in 2023, we announced or completed joint ventures and asset sales, driving levers down roughly 1.3 turns from the first quarter peak, accelerating our ability to deliver needed capacity to our customers and enhancing our returns on invested capital. I would also be remiss if I did not mention DigitalCorp reached a successful $120 million follow-on equity offering last week, which will support the REIT's planned acquisition of an incremental 24.9% interest in our jointly owned asset in Frankfurt for $125 million. Now, let's shift to a brief recap of our results and offer some insights into the trends we are seeing across our business. I'm pleased with our results for 2023, which helped to lay the foundation for an acceleration in long-term sustainable growth in earnings and free cash flow that should take shape as we head into 2025.

Andrew Power: We announced or completed joint ventures, and asset sales driving leverage down roughly one three turns from the first quarter peak.

Andrew Power: Accelerating our ability to deliver needed capacity to our customers and enhancing our returns on invested capital.

Andrew Power: I would also be remiss, if I did not mentioned digital Colgate successful $120 million follow on equity offering last week.

Andrew Power: Which will support the reach planned acquisition of an incremental 24, 9% interest in our jointly owned asset in Frankfurt for $125 million.

Andrew Power: Let's shift to a brief recap of our results and offer some insights into the trends we are seeing across our business.

Andrew Power: I'm pleased with our results for 2023, which helped to lay the foundation for an acceleration in long term sustainable growth in earnings and free cash flow that should take shape as we head into 2025 or.

Andrew Power: Our fourth-quarter results were broadly consistent with the first three quarters of 2023, with continued strength in our operating performance KPIs, and an incremental improvement in our financial position as we continue to execute on our value proposition with a goal to support the increased demand for data center capacity. Leasing will remain healthy, especially in our targeted 0 to 1 plus interconnection segment, with 134 new logos, bringing our total new logos for 2023 to a new annual record of more than 500. Renewal spreads were strong for the fifth consecutive quarter, remaining positive across product types and regions.

Andrew Power: Our fourth quarter results were broadly consistent with the first three quarters of toy twenty-three with continued strength in our operating performance Kpis and incremental improvement to our financial position as we continue to execute on our value proposition with a goal to support the increased demand for data center capacity.

Andrew Power: Lisa will remain healthy, especially in our targeted zero to one plus interconnection segment.

Andrew Power: With 134, new logos, bringing our total new logos for 2023 to a new annual record of more than 500.

Renewal spreads were strong for the fifth consecutive quarter remaining positive across product types and regions.

Andrew Power: The same capital cash NOI growth continued to demonstrate the underlying strength of our business with 9.9% year-over-year growth in the quarter, and Churn remained low and well controlled at 1% while occupancy was impacted by the delivery of significant vacant development capacity. The combination of cloud and AI is driving unprecedented demand for scale and hyperscale capacity alongside the steady enterprise and connectivity-oriented demand we're experiencing within our zero to one megawatt plus interconnection segment. Supply constraints driven by limited availability of power and global supply chain delays have continued to drive the pricing pendulum in our favor, while our growing value proposition is increasing interest in our existing inventory and the new development that we have underway. Ongoing conversations with customers predict a significant potential acceleration of leasing and development, and we believe we are well positioned. Demand seems to be spilling across most markets, particularly for larger capacity blocks. Though there are a few pockets of strength worth noting, including Northern Virginia, Santa Clara, New Jersey, Paris, Frankfurt, Singapore, and Seoul.

Andrew Power: Same capital cash NOI growth continuing to demonstrate the underlying strength of our business with nine 9% year over year growth in the quarter.

And churn remained low and well controlled at 1% while occupancy was impacted by the delivery of a significant vacant development capacity.

Andrew Power: The combination of cloud and AI is driving unprecedented demand for scale and hyperscale capacity.

Andrew Power: One side, the steady enterprise and connectivity oriented demand, we're experiencing within our zero to one megawatt plus interconnection segment.

Andrew Power: Supply constraints, driven by limited availability of power and global supply chain delays have continued to drive the pricing pedal them in our favor while our growing value proposition is increasingly interested in our existing inventory and the new development that we have underway.

Andrew Power: Ongoing conversations with customers portend, a significant potential acceleration of leasing and development and we believe we are well positioned.

Andrew Power: The demand seems to be spilling across most markets, particularly for larger capacity blocks, though there are a few pockets of strikes worth, noting including Northern Virginia, Santa Clara New Jersey.

Andrew Power: Frankfurt, Singapore and Seoul.

Andrew Power: Our new capacity is concentrated in core markets aligned with our global meeting play strategy.

Andrew Power: Our new capacity is concentrated in core markets aligned with our global meeting place strategy, while the scale of data center infrastructure opportunities has increased alongside AI's arrival. We remain disciplined and thoughtful, prioritizing locations that enhance platform digital connectivity and our connected campus community. During the fourth quarter, Digital demonstrated the benefits of collaborating with our partners, with the signing of an Oracle Cloud Infrastructure Dedicated Region deployment by a financial services customer, showcasing the potential of the collaboration between Oracle and Digital Realty to fulfill enterprise customers' hybrid cloud requirements. Other customers are recognizing the growing value of Platform Digital's broad and open structure. For example, an AI service provider leveraged Platform Digital's pre-provisioned high-density COLO offering to improve its time-to-market in order to extend a North American AI cloud offering that provides managed AI-as-a-service for a global manufacturing client.

Andrew Power: While the scale data center infrastructure opportunities has increased alongside a i's arrival.

Andrew Power: We remain disciplined and thoughtful prioritize your locations that enhanced platform digital connectivity and our connected campus communities.

Andrew Power: During the fourth quarter digital demonstrated the benefits of collaborating with our partners with the signing of an Oracle cloud infrastructure dedicated region deployment by our financial services customer.

Andrew Power: Joe case, and the potential of the collaboration between Oracle and digital Realty.

Andrew Power: To fulfill enterprise customers hybrid cloud requirements.

Andrew Power: Other customers are recognizing the growing value of platform digital's broad and open structure.

Andrew Power: And AI service provider leveraged platform Digital's pre provisioned high density Colo offering to improve their time to market in order to extend their North America AI cloud offering that provides managed AI as a service for a global manufacturing clients.

Andrew Power: A global service provider and partner targeting the enterprise it is customers, adding more connectivity for their hybrid offerings on platform digital enabling them to upgrade their it environments to a consumption based.

Andrew Power: A global service provider and partner targeting enterprises' customers added more connectivity for their hybrid offerings on Platform Digital, enabling them to upgrade their IT environments to a consumption-based IT infrastructure and managed services model. A Global 2000 leader in material sciences for industrial and scientific applications needed a data center provider with global interconnectivity and access to cloud providers in Seoul and chose Platform Digital to enable them to employ and interconnect a private AI node.

Andrew Power: Infrastructure and managed services model.

A global 2000 leader in materials Sciences for industrial and scientific applications needed a data center provider with global Interconnectivity and access to cloud providers in Seoul, and shoulder platform digital to enable them to employ an interconnect a private AI node.

Andrew Power: A Global 50 financial services company is migrating from an on-premises data center to platform digital and utilizing service fabric to improve sustainability, resiliency, scalability, security, and carrier diversity. And a leading Global 2000 consumer goods manufacturer grew their presence on platform digital by adding two additional metros to support their IT workloads and cloud connectivity. Moving over to a quick update on our largest market, Northern Virginia. We have over 100 megawatts available for lease today in Loudoun County and nearly 200 megawatts of capacity available for lease in Manassas.

Andrew Power: A global 50 financial services company is migrating from an on Prem data center to platform digital and utilizing service fabric to improve sustainability resiliency scalability security and carrier diversity.

Andrew Power: And a leading global 2000 consumer goods manufacturer grew their presence on platform digital by adding two additional metros to support their it workloads and cloud connectivity.

Andrew Power: Moving over to a quick update on our largest market in northern Virginia, we have over 100 megawatts available for lease today in Loudoun County, and nearly 200 megawatts of capacity available for lease in Manassas.

Andrew Power: We are currently in active negotiations with a handful of customers for substantially all of our capacity in Loudoun, though, in contrast with the rumor mill, nothing has been finalized just yet. Beyond this capacity, we have another 900 megawatts of buildable capacity at Digital Dulles, which we are cautiously optimistic will gain access to power in 2026 and beyond. We also expect to benefit from the active and ongoing management of our existing 500-megawatt portfolio in this market over time. Before turning it over to Matt, I'd like to touch on our ESG progress during the fourth quarter. We continue to be recognized for our strong ESG performance in the fourth quarter and in 2024. For example, we placed second on Sustainability Magazine's list of the Top 10 Sustainable Data Center Providers.

Andrew Power: We are currently in active negotiations with a handful of customers for substantially all of our capacity in Loudon. So in contrast, with the rumor mill nothing has been finalized just yet.

Andrew Power: Beyond this capacity, we have another 900 megawatts of buildup of capacity at digital Dulles, which we're cautiously optimistic we'll gain access to power in 2026 and beyond.

We also expect to benefit from the active and ongoing management of our existing 500 megawatt portfolio in this market over time.

Speaker Change: Before turning it over to Matt I'd like to touch on our ESG progress during the fourth quarter we.

Speaker Change: We continue to be recognized for our strong ESG performance and the fourth quarter and in 2024.

Speaker Change: We placed second on sustainability magazine's list of top 10 sustainable data center providers, we improved a number eight on the U S. Epa's Green power partnership National Top 100 for renewable energy use and we were named as a top rated regional performer in North America by a leading global ESG ratings provider.

Andrew Power: We improved at number 8 on the U.S. EPA's Green Power Partnership National Top 100 for renewable energy use, and we were named as a top rated regional performer in North America by a leading global ESG ratings provider. We remain committed to minimizing digital realty's impact on the environment while delivering sustainable growth for all of our stakeholders. With that, I'm pleased to turn over the call to our CFO, Matt Mercier. Thank you, Andy.

Speaker Change: We remain committed to minimizing digital realty's impact on the environment, while delivering sustainable growth for all of our stakeholders with that.

Speaker Change: I am pleased to turn over the call to our CFO, Matt Mercier.

Matt Mercier: Thank you Andy let me jump right into our fourth quarter results.

Matt Mercier: Let me jump right into our fourth quarter results. We signed a total of 110 million new leases in the fourth quarter, with 53 million of 0 to 1 megawatt plus interconnection leasing led by strength in the EMEA region. Interconnection bookings rebounded sequentially to $13.5 million, and we finished the year with 220,000 cross-connects despite continued network grooming. Turning to our backlog slide, the current backlog of signed but not yet commenced leases increased to a new record of $495 million at quarter end, as new leasing outran $84 million of commencements in the quarter. We expect commencements to pick up as nearly two-thirds of the backlog is scheduled to commence in 2024, with the majority coming in the second half of the year. During the fourth quarter, we signed $210 million of renewal leases with pricing increases of 8.2% on a cash basis. Setting the high watermark for the year, though this was skewed over 100 basis points by shorter-term renewals in one market. For the full year, cash renewal spreads were up 6.8% or 5.5% when normalizing for short-term extension.

Matt Mercier: We signed a total of $110 million of new leases in the fourth quarter with $53 million of zero to one megawatt plus interconnection leasing led by strength in the EMEA region.

Connection bookings rebounded sequentially to $13 5 million and we finished the year with 220000 cross connects despite continued network grooming.

Matt Mercier: Turning to our backlog slide the current backlog of signed but not yet commenced leases increased to a new record of $495 million at quarter end as new leasing outran $84 million of Commencements in the quarter.

Matt Mercier: We expect commencement to pick up nearly two thirds of the backlog is scheduled to commence in 2024 with the majority coming in the second half of the year.

Matt Mercier: During the fourth quarter, we signed $210 million of renewal leases with pricing increases of eight 2% on a cash basis setting.

Matt Mercier: Studying the high watermark for the year, though this was skewed over 100 basis points by shorter term renewals in one market.

Matt Mercier: For the full year cash renewal spreads were up six 8% or five 5% when normalizing for short term extensions.

Matt Mercier: Releasing spreads were positive across product, market, and region in 2023, setting the foundation for an acceleration in long-term sustainable growth. In 2024, we expect the pricing environment to remain firm, and renewal spreads to remain positive, principally reflecting the near 80% weighting of lease expirations in the 0 to 1 megawatt segment. In terms of earnings growth, we reported fourth-quarter core FFO of $1.63 per share and $6.59 for the full year within our guidance range. Earnings reflect the continued strong organic results, together with the impact from capital recycling, deleveraging, and increased development spending throughout the year, as discussed on our third-quarter call. Total revenue was up 11% year-over-year despite the incremental drag from the stabilized JV contributions and the non-core asset sales that closed in the third quarter.

Matt Mercier: Releasing spreads were positive across product market and region in 2023.

Matt Mercier: Setting the foundation for an acceleration and long term sustainable growth.

Matt Mercier: In 2024, we expect the pricing environment to remain firm and renewal spreads to remain positive.

Matt Mercier: Reflecting the near 80% weighting of lease expirations in the zero to one megawatt segment.

Matt Mercier: In terms of earnings growth.

Matt Mercier: Reported fourth quarter core <unk> of $1 63 per share and $6 59 for the full year within our guidance range, earning.

Matt Mercier: Earnings reflect the continued strong organic results together with the impact from capital recycling deleveraging and increased development spending throughout the year as discussed on our third quarter call.

Matt Mercier: Total revenue was up 11% year over year, despite the incremental drag from the stabilized JV contributions and the noncore asset sales that closed in the third quarter.

Matt Mercier: As we also noted last quarter, year-over-year revenue growth continued to be positively impacted by the significant volatility in utility costs and reimbursement. Particularly in Europe, energy dynamics proved to be a tailwind for our results in 2023. However, assuming more normalized energy prices, we expect the related upside impact will moderate in 2024. Interconnection revenue was $106 million, up 9% year-over-year, reflecting continued unit growth and price increases. Moving over to the expense side, Utilities were 5% lower sequentially, reflecting the joint venture contributions over the summer combined with seasonal impact. However, operating expenses increased due to seasonally elevated maintenance spending in the fourth quarter. Property taxes fell back toward normalized levels, reflecting the one-time property tax reassessment experienced in the third quarter.

Matt Mercier: As we also noted last quarter year over year revenue growth continued to be positively impacted by the significant volatility in utility costs and reimbursements, particularly in Europe energy dynamics proved to be a tailwind for our results in 2023.

Matt Mercier: Assuming more normalized energy prices, we expect the related upside impact will moderate in 2024.

Interconnection revenue was $106 million.

Matt Mercier: Up 9% year over year, reflecting continued unit growth and price increases.

Matt Mercier: Moving over to the expense side, Utah.

Utilities were 5% lower sequentially.

Matt Mercier: Collecting the joint venture contributions over the summer combined with seasonal impacts.

Matt Mercier: Operating expenses increased due to seasonally elevated maintenance spending in the fourth quarter.

Matt Mercier: Property taxes fell back toward normalized levels, reflecting the one time property tax reassessment experienced in the third quarter.

Matt Mercier: Net of this movement, adjusted EBITDA increased 9% year over year. Additionally, improvement in our stabilized same capital operating performance continued in the fourth quarter with a year-over-year cash NOI up a strong 9.9% and up 7.7% on a constant currency basis. For the full year, results were also strong, with cash NOI growth of 7.5% and 6.5% on a constant currency basis, focusing on investment activity. We spent $3 billion on development in 2023, net of the proceeds received from our first development JV closing in November, and we delivered over 230 megawatts of new capacity across the globe. Turning to the balance sheet, we continue to strengthen our balance sheet since the end of the third quarter with the sale of $1.2 billion of equity through the ATM at an average price of $133 per share, achieving our goal of lowering our leverage towards six times and finishing the year at 6.2 times.

Matt Mercier: Net of this movement adjusted EBITDA increased 9% year over year.

Matt Mercier: Improvement in our stabilized same capital operating performance continued in the fourth quarter with a year over year cash NOI up a strong nine 9% and up seven 7% on a constant currency basis.

Matt Mercier: For the full year results were also strong.

Matt Mercier: With cash NOI growth of seven 5% and six 5% on a constant currency basis.

Matt Mercier: Focusing on investment activity we.

Matt Mercier: We spent 3 billion on development in 2023 net of the proceeds received from our first development JV closing in November and we delivered over 230 megawatts of new capacity across the globe.

Matt Mercier: Turning to the balance sheet.

We continued to strengthen our balance sheet since the end of the third quarter with the sale of $1 2 billion of equity through the ATM at an average price of $133 per share achieve.

Matt Mercier: Achieving our goal of lowering our leverage towards six times and finishing the year at six two times.

Matt Mercier: After year-end, we made further progress on the balance sheet with the closings of the Sixterra transactions in the first phase of the Blackstone joint venture. GI partners also exercised their option and closed on an additional 15% share of the two stabilized assets in our Chicago JV, bringing their stake to 80%. Pro forma for these activities, year-end leverage was 5.8 times.

Matt Mercier: After year end, we made further progress on the balance sheet with the closings of the <unk> transactions in the first phase of the Blackstone joint venture.

Matt Mercier: GI partners also exercised their option and closed on an additional 15% share of the two stabilized assets in our Chicago JV, bringing their stake to 80%.

Matt Mercier: Pro forma for these activities yearend leverage was five eight times.

Matt Mercier: S&P recognized our progress in December and upgraded our outlook. Early in the fourth quarter, we paid off our $100 million Swiss franc notes and closed the Realty Income Joint Venture, which generated $200 million of gross proceeds and reduced our CapEx commitments for the remainder of the project's development. We continue to keep significant cash on the balance sheet, with over $1.6 billion at year-end, as we continue to prioritize liquidity to support ongoing development spend. Moving on to our debt profile. Our weighted average debt maturity is nearly four and a half years, and our weighted average interest rate is 2.9%.

Matt Mercier: S&P recognized our progress in December and upgraded our outlook.

Matt Mercier: Early in the fourth quarter, we paid off.

Matt Mercier: Our 100 million Swiss franc notes and closed the Realty income joint venture, which generated $200 million of gross proceeds and reduced our capex commitments for the remainder of the projects development.

Matt Mercier: We continue to keep significant cash on the balance sheet with over $1 6 billion at year end as we continue to prioritize the liquidity to support ongoing development spend.

Matt Mercier: Moving on to our debt profile.

Matt Mercier: Our weighted average debt maturity is nearly four and a half years.

Matt Mercier: Our weighted average interest rate is two 9%.

Matt Mercier: Approximately 84% of our debt is non-US dollar denominated, reflecting the growth of our global platform and our FX hedging strategy. Additionally, approximately 85% of our net debt is fixed rate, and 97% of our debt is unsecured, providing ample flexibility for capital recycling. Finally, we have less than a billion of debt maturing in 2024, and beyond that, our maturities remain well-laddered through 2032. I'll finish with Gaiden.

Approximately 84% of our debt is non U S dollar denominated, reflecting the growth of our global platform and our FX hedging strategy.

Matt Mercier: Approximately 85% of our net debt is fixed rate and 97% of our debt is unsecured providing ample flexibility for capital recycling.

Matt Mercier: Finally, we have less than $1 billion of debt maturing in 'twenty 'twenty, four and beyond that our maturities remain well ladder through 2032.

Speaker Change: I'll finish with guidance, we are providing an initial core <unk> per share guidance range for the full year of 2024 of $6 60 to.

Matt Mercier: We are providing an initial core FFO per share guidance range for the full year 2024 of $6.60 to $6.75, reflecting the underlying growth of our business offset by the impact of the deleveraging activities we completed or announced in 2023. As a reminder, over the course of 2024 and 2025, we expect that our $6 billion development pipeline will become increasingly accretive as higher yielding projects deliver. For 2024, we expect total revenue to grow by 2% and adjusted EBITDA to grow by 4% at the midpoint of our guidance ranges. When normalizing this growth for the impact of capital recycling, total revenue and adjusted EBITDA are anticipated to grow by 7% and 10%, respectively, in 2024.

Speaker Change: To $6 75.

Speaker Change: Reflecting the underlying growth of our business offset by the impact of the deleveraging activities, we completed or announced in 2023.

Speaker Change: As a reminder, over the course of 'twenty 'twenty, four and 'twenty to 'twenty five we expect that our $6 billion development pipeline will become increasingly accretive as higher yielding projects deliver.

For 'twenty to 'twenty four we expect total revenue to grow by 2% and adjusted EBITDA to grow by 4% at the midpoint of our guidance ranges.

Speaker Change: When normalizing this growth for the impact of capital recycling total revenue and adjusted EBITDA are anticipated to grow by 7% and 10% respectively in 2024.

Matt Mercier: We expect both our cash and gap-releasing spreads, along with same capital cash and OI growth, to remain solidly positive. Occupancy is expected to improve steadily throughout the year, as our record backlog commences and available capacity is leased, specifically. Cash releasing spreads are expected to increase by 4-6% in 2024. Same capital cash NOI is expected to grow by two to three percent.

Speaker Change: We expect both our cash and GAAP re leasing spreads along with same capital cash NOI growth to remain solidly positive.

Speaker Change: While occupancy is expected to improve steadily throughout the year as our record backlog commences and available capacity is leased.

Speaker Change: Specifically <unk>.

Speaker Change: Cash releasing spreads are expected to increase by 4% to 6% in 2024.

Speaker Change: Same capital cash NOI is expected to grow by 2% to 3%.

Matt Mercier: Given the tougher base year comparison versus last year's 7.5% growth and our expectations for FX and energy pricing in our COLO segment, total portfolio occupancy is expected to improve by 100 to 200 basis points by the end of 2024. While total occupancy slipped to 81.7% in the fourth quarter of 2023, this was predominantly driven by the delivery of substantial vacant development capacity that is slated to be occupied, as same capital occupancy was stable quarter over quarter.

Speaker Change: And our expectations for FX and energy pricing in our Colo segment.

Speaker Change: Total portfolio occupancy is expected to improve by 100 to 200 basis points by the end of 2024.

Speaker Change: While total occupancy slipped to 81, 7% in the fourth quarter of 2023. This was predominantly driven by the delivery of substantial vacant development capacity that is slated to be occupied as same capital occupancy was stable quarter over quarter.

Matt Mercier: We also expect to continue to recycle capital in 2024 with non-core asset sales and stabilized joint ventures raising $1.25 billion at the midpoint of our guidance range. Nearly a third of this activity was completed in early January, while the balance should close throughout this year. Along with cash on hand and retained cash flow from operations, this capital is expected to be the primary funding source of our $2 to $2.5 billion net development CapEx program for 2024. To be clear, this approximately 25% reduction in development spend year-over-year represents digital realty's share of CapEx spend. The total development spend on these projects will be higher when including our partners ProRataShare.

Speaker Change: We also expect to continue to recycle capital in 'twenty to 'twenty, four with noncore asset sales and stabilized joint ventures, raising 1.25 billion at the midpoint of our guidance range.

Speaker Change: Nearly a third of this activity was completed in early January.

Speaker Change: The balance should close throughout this year.

Speaker Change: Along with cash on hand, and retained cash flow from operations. This capital is expected to be the primary funding source of our two to two and a half billion net development Capex program for 2024.

Speaker Change: To be clear.

Speaker Change: Approximately 25% reduction in development spend year over year represents digital realty share of Capex spend.

Speaker Change: The total development spend on these projects will be higher when including our partners pro rata share.

Operator: This concludes our prepared remarks, and now we'll be pleased to take your questions. Operator, would you please begin the Q&A session? We will now open up the call for questions. In the interest of time and to allow a larger number of people to ask questions, callers will be limited to one question. To ask a question, you may press star and then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: This concludes our prepared remarks, and now we'd be pleased to take your questions.

Speaker Change: Operator would you please begin the Q&A session.

Speaker Change: We will now open up the call for questions.

Speaker Change: In the interest of time and to allow a larger number of people to ask questions callers will be limited to one question.

To ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Michael Rollins with Citi. Please go ahead. Thanks, and good afternoon.

Speaker Change: Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question today comes from Michael Rollins with Citi. Please go ahead.

Michael I. Rollins: Thanks, and good afternoon.

Michael I. Rollins: A couple of questions first in terms of.

Jordan Sadler: A couple questions. You know, first, in terms of... The Bulletproof Executive 2013, shift in same capital cash NOI growth from seven and a half. Can you unpack more of what you're seeing? For, Related, www.realvision.com The Bulletproof Executive 2013, And thanks, Mike. So we'll try to weave that into one answer, so we're trying to stick to one question, get through the whole roster, maybe loop back, but I'll turn it over to Matt to call it, give you the bridge. All from the same store, basically.

Michael I. Rollins: Just describing that.

Michael I. Rollins: A shift in same capital cash NOI growth from seven and a half.

Michael I. Rollins: Sugar Creek.

Michael I. Rollins: More of what Youre seeing in 'twenty four.

Michael I. Rollins: Late 'twenty, three and and how pricing kind of comes.

Michael I. Rollins: <unk>.

Michael I. Rollins: The expectation for 2024.

Speaker Change: Hey, Thanks, Mike.

Speaker Change: So we will try to weave that into one answer to trying to stick to one question and get through the whole roster, maybe look back but alternative to Matt to give you the bridge.

Speaker Change: From a same store basis.

Matt Mercier: Sure, thanks Mike. So, a couple things that I would call out first, in terms of the spreading of the releases and their influence. First off, as we know, not all of our leases roll within the calendar year, so we roll roughly 20-25% of our portfolio in a year, and of that, 80% is in the 0-1 megawatt category, which is influenced by inflation or CPI, which we've seen come down over the course of the year, and therefore part of the market price within that segment. Then when you flip over to the other 20%, which is in the greater than a megawatt category, we're seeing expiring rents that are higher than what we saw in 23, which creates a tougher comp in terms of the role despite strong market rents and overall growth. So that's on the on the spread side.

Matt Mercier: Sure. Thanks, Mike So a couple of things that I would I would I would call out first in terms of in terms of.

Matt Mercier: Paul the re leasing spreads and their influence.

Matt Mercier: First of all I think I think as we know not all of our leases roll within the calendar year. So we rolled roughly call it.

Matt Mercier: 20% to 25% of our portfolio in a year.

Matt Mercier: And of that 80, 80% is in the zero to one megawatt category, which is influenced by inflation or CPI, which we've seen come down over the course over the course of the year and therefore part of part of the Mark to market pricing within that segment.

Then when you flip over the other 20% which is in the greater than one megawatt category, we're seeing in 'twenty four expiring rents.

<unk> that are higher than what we saw in 2003, which creates a tougher comp in terms of in terms of the role despite strong market rents and overall growth.

Matt Mercier: So that's on the on the spread side.

Matt Mercier: The other part that I would call out is, you know, in 23, we saw benefits or tailwinds from FX, as well as power pricing, which we're not seeing in 24. And lastly, in 24, we're expecting higher property tax expense. So putting all those together kind of is why you're seeing sort of a still positive, but not as positive as 23 results for same store portfolio in 24. The next question comes from David Barden with Bank of America. Please go ahead.

Matt Mercier: The other part that I would I would call out is in 'twenty, three we saw benefits or tailwind from FX as well as power pricing, which we're not seeing in 'twenty four.

Matt Mercier: And lastly in 'twenty four we are expecting higher property tax expense, so putting all those together.

Matt Mercier: Is why youre seeing sort of the.

Matt Mercier: Still positive, but not as positive as 23 <unk>.

Matt Mercier: <unk> for same store portfolio in 'twenty four.

Matt Mercier: The next question comes from David Barden with Bank of America. Please go ahead.

Andrew Power: Hey, guys, thanks so much for taking the questions. Um, maybe first, you know, last night, we heard from one of your peers, that that the higher power prices in 2023, have created some sort of lag, crowding out effect in terms of budgeting and decision-making and I was wondering if you could kind of talk a little bit about that it kind of sound like maybe you're hearing or seeing some of that in your colo business but it wasn't crystal and then just as a follow-up if I could Matt can you break down that 1.25 billion in in kind of or the rest of the 1.25 billion that's closing this year what is you know how is it all break down and the cadence of that thank you Hey, thanks, Dave. This is Andy.

David Barden: Hey, guys. Thanks, so much for taking the questions.

David Barden: Maybe first you know.

David Barden: Last night, we heard.

David Barden: From one of your peers.

David Barden: That the higher power prices in 2023 have created some sort of lagged crowding out effect in terms of budgeting and decision, making and I was wondering if you could kind of talk a little bit about that it kind of sounds like maybe you're hearing or seeing some of that in your colo business, but it wasn't crystal.

David Barden: And then Jim.

Jim: As a follow up if I could Matt can you breakdown that 1.25 billion and in kind of where the rest of the one 5 billion. That's closing this year what is how is it all breakout in the cadence of that thank you.

Jim: Thanks, Dave This is Andy.

Andrew Power: I don't, I don't think we're experiencing the same exact dynamics on power as what you heard last night, quite honestly. I think what Matt just told you from Matt is that the comps on a growth basis in the same store pool are not as big. We benefited in 23 from power, and we're not going to have that benefit repeat itself in 2024. And I think this all is going to be washed out once we say goodbye to 25, assuming we don't go back into another very volatile power environment. So it's almost one-time in nature.

Andrew Power: I don't think.

Andrew Power: Our experienced the same exact dynamics on power.

Andrew Power: What you heard last night quite honestly I think what Matt you just heard.

Speaker Change: For Matt is the comps on a growth basis in the same store pool.

Speaker Change: Or not as we benefitted in 'twenty three from power and we're not going to have that kind of.

Speaker Change: Benefit repeat itself in 2024, assuming and I think this all is going to be washed out once we say goodbye to 25% assuming we don't go back into this another color very volatile power environment. So it's almost one time in nature I don't I don't believe that is.

Andrew Power: I don't believe that is. Todd has impacted buyer behavior, and I don't believe we're suffering or benefiting, depending on the period, to the same degree as what was described. Maybe that's due to the market mix, overall business mix, and our hedging strategy, which are not identical. I can tell you from a business standpoint, and you can see this in the results, we capped off a very strong year, let's call it focused on the enterprise connectivity segment, record overall new logos, north of 500, and strong quarters of new signings. You had a very strong interconnection quarter, both in new signings and also what flowed through the P&L, which has been accelerating, and net absorption, certainly in that category, which was strong in the fourth quarter and through the year. But I don't see the power flowing through.

Speaker Change: Todd has impacted buyer behavior.

Speaker Change: And I don't believe.

Speaker Change: We're suffering are benefiting depending on the period.

Speaker Change: To the same degree of what was described maybe thats due to the market mix overall business mix in our hedging strategy, which are not identical I can tell you from a business standpoint.

Speaker Change: And you just see this as a results we capped off.

Speaker Change: A very strong year.

Speaker Change: This call focused on the enterprise Colo connectivity segment.

Speaker Change: Record overall, new logos north of 500.

Speaker Change: Strong quarters of new signings.

Speaker Change: You had a very strong interconnection quarter, both in new signings and also will flow through the P&L, which has been accelerating.

Speaker Change: And net absorption certainly in that category that was strong in the fourth quarter and through the year. So I don't see the power.

Flowing through.

Gregory S. Wright: I know we're trying to get to one question per day and then rotate back. As we move there, Greg, why don't you touch on the components of the $1.25 billion in our guidance for data? Sure. Thanks, Andy. Hey, David, how are you?

Speaker Change: I know, we're trying to get to a one question per se and then rotate back.

Speaker Change: <unk>.

Speaker Change: Greg why don't you just touch on the components of the $1 $2 5 billion.

Gregory S. Wright: And our guidance for David sure. Thanks, Annie Hey, David how are you.

Gregory S. Wright: Look, I think, again, there's two components there. It's really a stabilized joint venture, and it's our sort of non-core asset disposition. When you look at that, call it $1.25 billion or a range of $1 billion to $1.5 billion, call it whatever you like. I think it's important to note that over a third of that has already been announced and is either closed or is pending closure. So obviously, we feel good about that number, and it's clearly much less in the context of last year. The next question comes from Michael Alive on BBC Radio 4 with CD Cowan. Please go ahead.

Gregory S. Wright: Look I think again, there's two components there, it's really it's a stabilized joint ventures and it's our.

Speaker Change: Non core.

Gregory S. Wright: Asset disposition and when you look at that call. It 1 billion $2 50, or a range of $1 2 billion and a half call. It.

Speaker Change: I think it's important to note that over a third of that.

Speaker Change: Has already been.

Speaker Change: <unk> has already been announced and is either closed or pending close. So obviously, we feel good about that number.

Speaker Change: And it's clearly much less in the context of last year.

Speaker Change: The next question comes from Michael Alive.

Mike Rollins: Cowen. Please go ahead.

Andrew Power: Great. Thanks for taking the time to answer the question. So, Andy, we're in the middle of one of the strongest hyperscale demand environments that we've seen in recent history. I was wondering, can you talk about the go-forward demand pipeline and the relative strength of the pipeline versus last year? And as part of that, can you talk about the opportunity set for the pricing for new leasing, specifically, do you see there being a governor on pricing given the supply-demand backdrop that we're seeing? Thank you.

Mike Rollins: Great. Thanks for taking the question.

Mike Rollins: So Andy we're in the middle of one of the strongest hyperscale demand environment that we've seen in recent history.

Mike Rollins: I was wondering can you talk about the go forward demand pipeline and the relative strength of the pipeline versus last year and as part of that can you talk about the opportunity set for for the pricing for new leasing specifically is do you see there being a governor on pricing given the supply demand backdrop.

Speaker Change: Not that we're seeing.

Andrew Power: Thanks, Michael. So, I would say on a year-on-year basis, the dynamics have changed tremendously on so many fronts. Overall, the pipeline for hyperscale has continued to grow to new heights. I view the AI demand as a new wave of demand, incremental, it's called enterprise hybrid IT, certainly, and incremental to hyperscale cloud compute. And this is all played out in the backdrop of tightening supply-demand dynamics that have, as we've described over several quarters now, moved the pendulum on pricing more and more in the favor of providers like digital realty Look, I think we've seen rates run tremendously. We just, this quarter, reported in that segment, north of a megawatt, caught our highest gap rate ever at 145.

Speaker Change: Thanks, Michael so.

I would say on a year over year basis.

Speaker Change: Yes.

Speaker Change: The dynamics has changed tremendously on so many fronts overall.

Speaker Change: The pipeline for Hyperscale has continued to grow to new heights.

Speaker Change: I view, the AI demand as a new wave of demand incremental call enterprise hybrid it certainly an incremental two hyperscale cloud compute.

Speaker Change: And this is all laid out in the backdrop of <unk>.

Speaker Change: Tightening.

Speaker Change: Supply demand dynamics that has called as we've described over several quarters now move dependent on pricing.

Speaker Change: More and more in the favor of providers like digital Realty.

Speaker Change: Is there a ceiling.

Speaker Change: Listen I think we've seen rates run tremendously we just this quarter reported in that segment in northern a megawatt caught our highest GAAP rate ever.

At $1 45.

Andrew Power: I'm, we are continuing to see, it's almost like some of these customers who are often on calendar fiscal years, just like digital realty, wrapped up one budget cycle and got a budget refresh, and came back in 2024 with an incremental appetite for demand. These customers are seeking some of the same things. Where we intersect with that demand is our large-scale, hyperscale campuses that are in our major markets, and especially larger capacity blocks that have contiguous capacity are the most sought after. And those rates continue to run in terms of what we've signed and where we put out quotes. And I think we're very well-positioned. If you look at our footprint, you can see a lot of it on the development capacity life cycle, which is just a portion of what we are activating in northern Virginia right now, but some of the other major markets as well, to capture a good, more than our fair share of that demand. And lastly, let's do it.

Speaker Change: We are continuing to see.

Speaker Change: Most likely some of these customers who are often on calendar fiscal years, just like digital Realty.

Speaker Change: Wrapped up one budget cycle and got a budget refresh and came back in 2024, what's the incremental appetite for demand.

Speaker Change: These customers are seeking some of the same things, where we intersect with that demand is in our large scale hyperscale campuses that are in our major markets and especially with larger capacity box that have <unk>.

Speaker Change: <unk> capacity the most sought after.

Speaker Change: And those rates continue to run.

Speaker Change: In terms of what we've signed.

Speaker Change: We've put up quotes.

Speaker Change: And I think we're very well positioned if you look at our footprint and you can see a lot of it alone development capacity lifecycle, which is just a portion of what we could activate in northern Virginia, right now, but some of the other major markets as well.

Speaker Change: To capture a good.

Speaker Change: Good more than our fair share of that demand.

Speaker Change: And the lastly.

Speaker Change: Yeah.

I think there's a I think there is a broader acknowledgement, whether it is hyperscale compute or AI workloads.

Andrew Power: I think there's a broader acknowledgment, whether it is hyperscale compute or AI workloads, these customers are time to market. Many of them are trying to land precious GPUs that are just enormous business opportunities for these customers. And our rent, even historically, but certainly today, plays a very small economic piece in that equation relative to their ability to launch their services and be first to market many times.

Speaker Change: These customers are time to market many of them are trying to land precious gpus.

Speaker Change: Are just enormous business opportunities for these customers.

Speaker Change: And our rent, even historically, but certainly today.

Speaker Change: A very small economic piece of that equation.

Speaker Change: Relative to their ability to launch their services.

Speaker Change: And be first to market.

Speaker Change: Many times.

Matt Mercier: The next question comes from Jonathan Atkin with RBC. Please go ahead. Um, yeah, I was wondering if you could talk a little bit about where we might end the year, kind of in terms of leverage, what are some of the outcomes there, and the role of ATM issuances, uh, equity issuance as part of that. Thanks. Sure. Thanks, Jonathan.

Speaker Change: The next question comes from Jonathan Atkin with RBC. Please go ahead.

Jonathan Atkin: I was wondering if you could talk a little bit about where we might end the year.

In terms of leverage what are some of the outcomes there and the rule of ATM.

Jonathan Atkin: Issuances equity issuance as part of that thanks.

Jonathan Atkin: Sure. Thanks, Thanks, Thanks office so.

Matt Mercier: So, you know, look, I think you've seen the results of the work we did in 23, where we talked about getting down to the six times area, and, you know, the execution that not only Greg's team has done with the transactions that we closed, but also sales on the ATM that we did early in the year, and then more recently getting to that point and actually breaking through that when you look at it on a performer basis, we're at And, you know, we've, and so we continue to want to get down towards that five and a half times area, which is the same messaging we've had since the start of 23, and we've executed on that path, and we think that the plan that we've laid out here in terms of our guidance will enable us to get there, where we continue to do some level of capital recycling, given the broad and diverse sources of capital that we've got And that's the plan we're going to continue to go down in terms of marching towards that five and a half area, which is a smaller task than what we did in 23. The next question comes from Irving Liu with Evercore ISI. Please go ahead. Hi, thank you for the question. I'll stick to just one.

Speaker Change: I think you've seen.

Speaker Change: The results of the work we've done in 'twenty, three where we talked about getting down to the six times area.

Speaker Change: And.

Speaker Change: The execution that not only greg's team done did.

Speaker Change: The transactions that we closed but also <unk>.

Speaker Change: Sales on the ATM that we did early in early in the year and then and then more recently getting to that point and actually breaking through that when you look at it on a pro forma basis, we're at five eight times.

Speaker Change: And.

Speaker Change: And so we continue to want to get down towards that.

Five five times area, which is the same same messaging we've had since the start of the start of 'twenty three.

Speaker Change: And we've executed on that path.

Speaker Change: And we think that the plan that we've laid out here in terms of our guidance.

<unk> will enable us to get us there, where we're continuing some level of capital recycling given the broad and diverse sources of capital that we've got available to us.

Speaker Change: And that's and that's the plan, we're going to we're going to continue to go down in terms of.

Speaker Change: Marching towards that five and a half area, which is a smaller task than than what we did in 'twenty three.

Okay.

Speaker Change: The next question comes from Irving <unk> with Evercore ISI. Please go ahead.

Irving: Hi, Thank you for the question I'll stick to one Andy you mentioned demand for large blocks of capacity in several key markets such as Nova in Silicon Valley among some of the other major markets.

Andrew Power: Andy, you mentioned demand for large blocks of capacity in several key markets, such as Nova and Silicon Valley, among some of the other major markets. At an aggregate level, I think overall supply remains very low in some of these markets. But specifically for you, has lower available capacity been a gating factor for your greater than one megawatt signing performance? Thanks, Irving.

Irving: Could we get level I think overall supply remains at very low in some of these markets and.

Irving: But specifically for you has lower has lower available capacity been a gating factor for your greater than one megawatt signings performance.

Speaker Change: Thanks Evan.

Speaker Change: Okay.

Speaker Change: We we certainly.

Andrew Power: We certainly have a really great opportunity to intersect with these large-capacity block needs of our customers, be it for AI or hyperscale. It is, I would say, maybe potentially unparalleled in what we can offer in Northern Virginia today in terms of available capacity in a market that's shut down in terms of new power until 2026, but the list goes beyond that, whether it's Dallas, Santa Clara, Paris, or Frankfurt. Amsterdam, Seoul, or parts of Japan, not to mention some of our joint ventures in Latin America and South Africa.

Speaker Change: Sure.

A really great opportunity to intersect with these large capacity bought needs of our customer repeat for AI or hyperscale.

Speaker Change: It is it is I would say.

Speaker Change: Maybe potentially unparalleled and what we can offer in northern Virginia today in terms of available capacity in a market that shutdown.

Speaker Change: A new power until 2026, but the list goes beyond that whether it's Dallas, Santa Clara Paris Frankfurt.

Speaker Change: Amsterdam.

Speaker Change: So parts of Japan.

Speaker Change: Not to mention some of our joint ventures in Latin America, and South Africa.

Andrew Power: We've taken an approach, quite honestly, where many of these capacity blocks for ourselves and many providers were at the early stages of development. They were on land, got pad ready, shelves were coming online, and just the first suites were coming online. And throughout 2023, we took a more, call it, approach whereby we didn't go run after the first deal out of the gate for some of these customers because we knew we weren't losing a revenue opportunity because the capacity wasn't even able to be moved into or at least commenced. And in hindsight, that's proven fortuitous, because as the year has played out, and certainly as 2024 has gotten So, I don't think we'll be able to wait too long in 2024.

Speaker Change: We've we've taken an approach quite honestly.

Speaker Change: Where many of these capacity blocks.

Speaker Change: Our self and many providers we're at the early stages of development. They were at lay on went pad ready shelves are coming online in just the first suites coming online and throughout 2023, we took a more caught.

Speaker Change: Approach, whereby we Didnt go run after the first deal out of the gate for some of these customers because we knew we were losing the revenue opportunity because the capacity wasn't even being able to be moved into or at least commenced.

Speaker Change: In hindsight, that's proven fortuitous because as the year has played out and certainly as 2024 has gotten off to the other states will continue to see.

Speaker Change: What we're offering is becoming much more and more attractive to an even broader and diverse set of customers.

Speaker Change: <unk>.

Speaker Change: I don't think we'll be able to spend.

Speaker Change: B wait too long of 'twenty 'twenty four we obviously now have some capacity blocks that are actually live and we can commence rent on so we do have some urgency to get that going.

Andrew Power: We obviously now have some capacity blocks that are actually live and we can commence REN on. So, we do have some urgency to get that going, but I think our patience and prudence here and our approach allowed us to be right. Sometimes it's better to be lucky than smart.

Speaker Change: But I think our patience and prudence here an approach.

Speaker Change: Allowed us to prove prove right sometimes.

Speaker Change: Sometimes it's better to be lucky than smart, if I would've known Astro would have run out of power years ago. I would have we would have sold all of that capacity. We haven't released at the time, but this time.

Andrew Power: If I had known Astra would have run out of power years ago, I would have; we wouldn't have sold all that capacity we had to release at the time. But this time, luck was on our side. The next question comes from David Guerino with Springtree. Please go ahead. Thanks. Hey, Andy, on your comments, at least as I heard them, potentially a very high ceiling for rental rates. Does that kind of take that into consideration and look across the lease expiration table in the greater than one megawatt category? It appears you guys have a pretty favorable mark to market rent opportunity over the next few years. Am I fair to make that assumption?

Speaker Change: We are.

What was on our side.

Speaker Change: The next question comes from David <unk> with.

Speaker Change: Great.

David Barden: Please go ahead.

David Barden: Thanks, Hey, Andy on your comments at least highlight here potentially very high ceiling for rental rates is that kind of take that into consideration and look across our lease expiration table in that greater than one megawatt category. Yet. It appears you guys have a pretty favorable mark to market opportunity over the next few years am I fair to make.

David Barden: That assumption.

Andrew Power: Or is there a chance that some of your leases might have clauses that could limit how much you're able to participate in the upside? Hey, thanks, David. So, I think you heard me loud and clear on where rates have come from and where they've gone and where they're likely to continue to move. And some of these markets haven't even hit peak historical rates, if you look at the whole span of data center capacity. So I don't think we're in a rent bubble or near that, necessarily.

Is there a chance that many of the leases might have clauses that Atlanta, how much youre able to participate in the upside.

Speaker Change: Hey, Thanks, David So.

Speaker Change: <unk>.

Speaker Change: I think you heard me loud and clear on where rates have come from and where they've gone on where they are likely to continue to move.

Speaker Change: And some of these markets haven't even hit peak historical rates. If you look at the whole span of data center capacity. So I don't I don't think rent or rent bubble or near that necessarily.

Andrew Power: And it's been on the back of real constraints and bill costs that have inflated and issues, so I believe these rental moves are justified. I think you will continue to see the cash market markets flow through in our favor. We did call out throughout last year and in the script for this quarter that we had some episodic short-term renewals inflated our cash market markets, but we think being called four to six percent in that category overall is pretty in our favor.

And it's been on the back of real constraints and build cost.

Speaker Change: Inflated and issue so.

Speaker Change: I believe.

Speaker Change: Rental moves are justified.

Speaker Change: I think you will continue to see.

Speaker Change: The cash mark to markets flow through in our fever.

Speaker Change: We did call out.

Throughout last year and in the script.

Speaker Change: This quarter that we had some episodic short term renewals inflated our cash mark to markets.

Speaker Change: But we think being call it 4% to 6% of that category overall.

Speaker Change: Is pretty in our favor and to your question on the bigger deals where you're going to have these potential roll ups. Yes, we do have subsections of our contracts that have clauses that are certainly in the favor of our customer.

Andrew Power: And to your question on the bigger deals, where are you going to have these potential roll-ups? Yes, we do have subsections of our contracts that have clauses that are certainly in the favor of our customers. When the market was quite the opposite of what it is today, and it was filling vacant capacity, we certainly had to succumb to some of those clauses that are customers. But they are all often very narrowly defined in terms of the fixed duration of the renewal time period and other bells and whistles.

Speaker Change: When when the market was quite the opposite of what it was today and it was filling vacant capacity.

Speaker Change: Certainly had to succumb to some of those causes that are customers, but they often are very narrowly defined in terms of.

Speaker Change: Duration of renewal time period, and other bells, and whistles and when a customer which they often do what's negotiate outside of that box that opens up the contract.

Andrew Power: And when a customer, which they often do, wants to negotiate outside of that box, that opens up the contract for free renegotiation, and we try to collaborate with our customers to come to a mutually agreeable outcome. So that's a long way of saying I don't think we'll be able to roll every one of those sub 100 megawatts directly up to the 140 or 150 or 160 or whatever we go in the market. But I do think there is going to be a positive market in that category for some years to come. The next question comes from Aryeh Klein with BMO Capital Markets. Please go ahead.

Speaker Change: Renegotiation.

Speaker Change: We try to collaborate with our customers to come to a mutually agreeable outcome. So that's a long winded way of saying.

Speaker Change: I don't think we'll be able to roll every one of those call. It sub 100, plus megawatts directly up to the $140 or $1 50, or 160 or wherever we're going in the market.

Speaker Change: But I think we will I do think there is going to be a positive mark to market in that category for some years to come.

Speaker Change: The next question comes from Ari Klein with BMO capital markets. Please go ahead.

Matt Mercier: Thanks. Andy, there are a lot of moving parts that are impacting the 2024 guidance that I think Matt mentioned, 10% EBITDA growth normalized for the deleveraging activity. I guess as you move past some of the headwinds creating dilution, and as you noted, it seems like pricing and mark-to-market tailwinds should be here for a while. What kind of growth do you think you can deliver beyond 2024 on the bottom line from a longer-term standpoint? Matt, do you want to start us off on that one?

Thanks.

Speaker Change: Andy.

Aryeh Klein: The parts that are impacting the 2024 guidance there I think maxim, 10% EBITDA growth normalized for the deleveraging activity I guess I'd be moved past some of the headwinds, creating dilution and as he noted it seems like pricing and mark to market tailwind should be here for a while.

Aryeh Klein: Kind of growth do you think you can deliver beyond 2024 on the bottom line from a longer term standpoint.

Aryeh Klein: Yeah.

Aryeh Klein: Matt do you want to.

Matt Mercier: Start us off on that one.

Matt Mercier: Sure. So, a couple of things. Aryeh, thanks.

Matt Mercier: Sure.

Matt Mercier: Yes so.

Matt Mercier: A couple of things so alright. Thanks.

Matt Mercier: You know, as we did mention, on a normalized basis in, you know, in 24, for a lot of the transactional activity that hit in 23 and some and what we expect in 24, I do want to reiterate, we're looking at normalized growth of 7% on revenue and 10% on EBITDA, as you noted. And so, 24 is seeing the impact of the timing of those transactions and closings, where in 23, they're in the second half of the year, and 24, we're expecting them, as Greg noted earlier, where we've already got a decent portion out under contract, those are closed in the first part of 24. So creating some of that impact on 24's bottom line.

Matt Mercier: We did mention on a normalized basis.

Matt Mercier: In 24 for a lot of that from the transactional activity that hit in 2003 and.

Matt Mercier: What we expect in 'twenty four.

Matt Mercier: I do want to reiterate we're looking at normalized growth of 7% on revenue and 10% on EBITDA as you noted and so 24 is seeing the impact from the timing of those transactions and close we're in 'twenty three there in the second half of the year and 'twenty four we're expecting them as Greg noted earlier, where we've already got.

Matt Mercier: A decent portion of that under contract those are closed in the first part of 'twenty four so creating some of that impact.

Matt Mercier: 24 bottom line.

Matt Mercier: And we did all that at the same time, again, just as a reminder that we're delivering over a term. If you, you know, if you look through all that, what we would expect is that, you know, we look at it in sort of two buckets, in terms of what we call the growth algorithm, first one being, we would expect on a stabilized same-store pool to have seed growth in that three to 4% area. On top of that, you know, looking at our development pipeline, favorable pricing, better yields, and as those start to deliver in 24 and in 25, we would expect to see another 1 to 2% on top of that. Together, that gets us to kind of the mid to high single digits that we should expect to see in 25. The next question comes from Frank Louthan with Raymond James. Please go ahead. Frank, your line is open. Sorry about that.

Matt Mercier: And we did all that at the same time again just as.

Matt Mercier: A reminder, that we are delivering over a turn.

Matt Mercier: If you look through all of that what we what we would expect is that we look at it in sort of two buckets in terms of in terms of call. It the growth algorithm first one being we would expect on a on a stabilized same store pool to have fee growth in that 3% to 4% area.

Matt Mercier: On top of that looking at our development pipeline and favorable pricing better yields and as those start to deliver in 'twenty four 'twenty five we would expect to see another 1% to 2% on top of that two together that gets us to kind of the mid to high single digits that we should expect to see in 2000.

Five and beyond.

Matt Mercier: The next question comes from Frank Louthan with Raymond James. Please go ahead.

Frank Garreth Louthan: Thank you your line is open.

Frank Garreth Louthan: Sorry about that.

Andrew Power: I've heard from several of your peers and some equipment companies and so forth about some macro issues that they're seeing with some elongated sales cycles and squeezing some IT budgets. You mentioned some cross-connect grooming you've seen. Are you seeing anything like that from your enterprise business or elsewhere from any sort of macro pressures in part of your business? Hey, thanks, Frank. I'm gonna have Colin tackle what we're seeing in the enterprise sales cycle. Yeah, Frank, for the question. I appreciate it.

Frank Garreth Louthan: I've heard from several of your peers.

Frank Garreth Louthan: And some equipment companies and so forth about some.

Some macro issues.

That theyre seeing with some elongated sales cycles and squeezing some I T budgets you mentioned some cross connect room and you have seen or are you seeing anything like that from your enterprise business or elsewhere from any sort of macro pressures and part of your business.

Collyn: Hey, Thanks, Frank only have collyn tackle what we're seeing in the enterprise.

Speaker Change: Enterprise sales cycles, yes, thanks, Frank for the question appreciate it as Andy highlighted the pipeline across the board it's robust.

Colin McLean: As Andy highlighted, the pipeline across the board is robust. That's both above and below one megawatt. Companies landed with us in Q4, which again, I think it's a strong growth testimony. In terms of time to close overall, I think we highlighted previously a couple of hiccups. Q1-Q2. We haven't really seen that honestly today. It's really flattened out.

Speaker Change: That's both above and below one megawatt.

Speaker Change: Certainly see our customers engaging consistently with this.

Speaker Change: Related to growing their platform globally, so that $53 million back to back strong quarters, I think the testimony to how we are supporting their needs pretty well in.

Speaker Change: In fact, 1000 plus companies landed with us in Q4, which again I think it's a strong growth testimony.

Speaker Change: In terms of time to close overall I think we highlighted previously a couple of hiccups maybe early in the year Q1 Q2 in terms of expanded time, because we haven't really seen that honestly today.

Speaker Change: It's really flattened out and so I really think thats, a byproduct of us engaging showing up differently.

Colin McLean: I really think it's a byproduct of us engaging, showing up differently. The new logo engagement, I think, overall, has been particularly strong. We did 134 new logos last quarter. On the enterprise side, on the whole, I think we've seen pretty strong interest, pipeline, and execution. Right. And one thing I'd like to share a bit more detail on the equipment.

Speaker Change: The new logo engagement I think overall has been particularly strong.

Speaker Change: We did a 134, new logos last quarter so.

Speaker Change: On the enterprise side on the whole I think we've seen pretty strong interest pipeline and the execution on the whole.

Speaker Change: And one thing I'd like to spread a bit more detail on the equipment with the offering that we launched last year round of a high density Colo in anticipation of a lot of private AI type of deployments coming to market are part of that program is not only that the 32 markets and three regions being able to do 70 kilowatts, Iraq, what we're really doing is pre buying or.

Colin McLean: With the offering that we launched last year around the high-density COLO, in anticipation of a lot of private AI deployments coming to market, a part of that program is not only that the 32 markets in three regions being able to do 70 kilowatts a rack, but we're really doing is pre-buying a lot of the technology to support that power density to allow our customers to deploy in a very timely fashion. That also expedites a bit of that higher-end kind of new AI capability coming to market. The next question comes from Matt Nicknam with Deutsche Bank; please go ahead. Hey, thank you for taking the time to answer the question. Financial question. So with leverage now back under six turns on a pro forma basis, how do you now think about the dividend and potential forward growth relative to incremental investment in the business and or potential M&A? Thanks. Thanks, Matt.

Speaker Change: A lot of the technology to support that power density to allow our customers to apply to deploy in a very timely fashion, but also expedite is a bit of a higher end.

Kind of new AI capability coming to market.

Speaker Change: The next question comes from Matt Knickman with Deutsche Bank. Please go ahead.

Matt Knickman: Hey, Thank you for taking the question.

Matt Knickman: Financial question, so with leverage now back under six turns on a pro forma basis. How do you now think about the dividend and potential forward growth.

Relative to incremental investments in the business and or potential M&A. Thanks.

Matt Knickman: Okay.

Andrew Power: Multifaceted, I'm going to hand it to Matt to explain how the dividend call works in terms of taxable income and distribution and why the dividend is set where it is set. Because I think the topic of M&A, I mean, you could look at the litany of press releases or just recent events we've done in just the last several months through resolving our relationship with Sixterra to growing our platform in India with the addition of Reliance Jio. We also just had a big announcement with a leader in the GPU space recently, disposing of some non-core assets, JV's stabilized assets, and adding strategically to our land holdings across key markets. So we've been incredibly active on pieces of that. In the broader context of M&A, I think the most critical puzzle pieces have kind of been picked over, and most of our activity from here is really called extending our strategic advantages and is bolt-on in nature to what we have. I don't see any key gems out there that would be really additive to our global platform at this speed.

Speaker Change: Thanks, Matt.

Speaker Change: Multifacet I'm going to hand to Matt to explain how the dividend call works in terms of taxable income and distribution.

Matt: Why the dividend where it is set.

Matt: Because I think the the <unk>.

Speaker Change: Topic of M&A.

Matt: You could look at the litany of press releases or just recent events, we've done and just the last several months to resolving our relationship with <unk> to growing our platform in India with the addition of reliance Geo will also just had a big announcement with a leader in the GPU space recently.

To disposing of some non core assets Tvs stabilized assets.

Matt: Adding strategically to our land holdings across key markets. So.

Matt: We've been incredibly active on pieces of that.

Matt: I think.

Matt: The broader context of M&A I think the most critical puzzle pieces are kind of been picked over.

Matt: And most of our activity from here are really caught extending our strategic advantages.

Matt: And bolt on in nature.

Matt: What we have I don't see any like key gems out there that would be really additive to our global platform at speeds.

Matt Mercier: Matt, why don't you hit on the dividend, because Matt brought that up? Sure. I mean, you know, similar to what we talked about in 23... There are two major components in terms of... There's our dividend and related taxable income.

Matt: Matt why don't you hit on the.

Matt: The dividend.

Matt: Magic quadrant.

Matt: Sure I mean.

Matt: Similar similar to what we talked about in 'twenty three I mean, theres two two major components in terms of.

Matt: The dividend and related taxable income there is our ordinary income we get from operations and then there's also the income that's generated from transactions and the related gains that we have.

Matt Mercier: There's our ordinary income that we get from operations, and then there's also the income that's generated from transactions and the related gains that we have from executing those, which we had a sizable amount of at 23. Now we're looking at smaller transaction sizes than 24, but as you saw in the guide, we talked about a billion to a billion and a half. So we expect that there'll still be related income from that, and we still have cash flow even after the dividend, and we think we'll be able to support where we are. And ultimately, our goal and target is that we grow the dividend as AFFO and as our cash flow grows, which we expect we'll start to see over the long term as a result of the growth algorithm that I talked about earlier. The next question comes from Simon Flannery with Morgan Stanley. Please go ahead. Great, thanks very much. Good evening.

Matt: From executing those which we had a sizable amount of into 'twenty three.

Matt: Now we're looking at.

Matt: Yes.

Less transaction size in 'twenty four but gives you saw on the guide you talked about 1 billion to 1 billion and a half.

Matt: We expect that there'll still be related income from that and.

Matt: And we still have cash flow even after after dividend and we think we'll be able to support where we are and ultimately our goal and target is that we.

Matt: We grow the dividend as is <unk> and as our cash flow grows.

Matt: Which we which we expect will start to see over the long term related to the growth algorithm that I talked about earlier.

Matt: The next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Simon Flannery: Great. Thanks, very much good evening I wanted to just talk about the mix between the zero to one.

Andrew Power: I wanted to just talk about the mix between the zero to one and the greater than one megawatt. It looks like you have almost 50% coming from zero to one plus interconnection, which has been gradually rising over the last few quarters. So how do we think about this going forward? Your focus should should be should that mix trend higher than the 50-50? Or is it going to be jumping around as it has done in the past?

Simon Flannery: Greater than one megawatt and it looks like you had almost 50% coming from zero to one plus interconnection that's been gradually rising over the last few quarters. So how do we think about this going forward. Your focus on should that mix trends are higher than the 50 50 or.

Simon Flannery: Is it going to be jumping around as it has done in the past. Thanks.

Andrew Power: Thanks. Thanks, Simon. So, one of our top, top, top priorities is to continue to focus on delivering an acceleration in that zero-to-one megawatt interconnection cohort, enterprise connectivity-oriented customers, the most granular and the largest volume, over 5,000 customers, as well as our new logos. So, by and large, the more quarters where that represents a larger and increasing piece of the mix and continues to accelerate like it has done recently, that is filling our existing vacant capacity, its wins at our highest rates, its multi-market, multi-geo enterprise customers, and is the place where we believe we can deliver the greatest value to our customers, most consistently in the long term and durable. There will be episodic quarters, well that will be a lower percentage, but that's likely not because we've faltered in our execution; that's likely because we're also supporting some of the largest hyperscales around the world.

Speaker Change: Hey, Thanks, Simon so.

Speaker Change: One of our top top top priorities is to continue to focus on delivering.

Speaker Change: The acceleration in that zero to one megawatt interconnection cohort enterprise connectivity with our customers the most granular.

Speaker Change: The largest volume of over 5000 customers as well as our new logos to by and large.

Speaker Change: The more quarters, where that represents a larger and increasing piece of the mix and continues to accelerate accelerate like it has done recently.

Speaker Change: That is filling our existing vacant capacity.

Speaker Change: It's wins at our highest rates multi market multi geo enterprise customers.

Speaker Change: And is the place where we believe we can deliver the greatest value to our customers most consistently and long term and durable.

There will be episodic quarters will that will be a lower percentage, but that's likely not because we.

Speaker Change: We falter that our execution thats likely because we've also are supporting some of the largest hyperscale is around the world.

Andrew Power: We're bringing our capacity to over half of our 50 plus metropolitan areas, places where we can really add value to those customers, where they've already landed, compute, or AZs, where they want to grow in our contiguous capacity with operational excellence, where we have that long runway of growth that they can get from no one else. And those are the quarters where we are deciding larger, lumpier deals, obviously, into those capacity blocks. So we think both of these are large addressable markets where we have a distinct value proposition and a competitive moat that will continue to focus on executing each and every day. The next question comes from Eric Rasmussen with People. Please go ahead.

Speaker Change: We're bringing on capacity and over half of our 50 plus metropolitan areas.

Speaker Change: Places, where we can really add value to those customers, where they have already landed there.

Speaker Change: Compute or disease, where they want to grow and our continuous capacity with operational excellence, where we have that long runway of growth that can get from no one else.

Speaker Change: And those will be quarters, where we will be sorry, larger lumpier deals obviously into those capacity blocks.

Speaker Change: So we think both of these are large addressable markets, where we have it.

<unk> value proposition and a competitive moat.

Speaker Change: That will continue to focus on executing each and every day.

Speaker Change: The next question comes from Eric <unk> with Stifel. Please go ahead.

Andrew Power: Yeah, thanks for taking the question. Maybe just on AI, it seems, you know, most of the demand in the early stages is expected to come from training versus inferencing. But, you know, we heard from Microsoft on their innings call, and they said that most of the AI strength that they were seeing for Azure was, in fact, from inferencing workloads. Are you seeing the same as it relates to sort of the demand patterns from your customers? And then maybe, you know, any way to quantify how much AI has contributed or the size of the opportunity? Hey, thanks, Erik. Let me just touch on this a little bit and then hand it to Chris to walk you through chapter and verse. Um, I look at where our heritage is as a company and this AI opportunity is tremendously in our wheelhouse. We came at this from the hyperscale piece of the business and built the color connectivity capabilities organically and inorganically.

Eric: Yes, thanks for taking the question.

Eric: Maybe just on <unk>.

Eric: AI seems.

Eric: Most of the demand in the early stages and is expected to come from training courses inferencing, but yes.

We heard from Microsoft on their earnings call and they said that most of the strength that they're seeing for each year was in fact from inferencing workloads are you seeing the same as it relates to sort of the demand patterns from your customers and then maybe.

Eric: Any way to quantify how much AI has contributed or the size of the opportunity.

Speaker Change: Hey, Thanks, Eric Let me just.

Speaker Change: Touch on this a little bit and then turn it to Chris.

Speaker Change: To walk you through chapter and verse.

Speaker Change: I look at where our heritage as a company.

Eric: This AI opportunities tremendously in our wheelhouse.

Speaker Change: We came at this from a hyperscale piece.

Chris Sharp: Piece of the business and built the Colo connectivity capabilities organically and in organically.

Andrew Power: We are often taking larger halls that are at higher power densities and using our engineering prowess to work for enterprise customers and pushing their boundaries on power densities. I can tell you AI workloads were digital before I joined over nine years ago. We've done retrofits on existing deployments just to fit out for customers needing AI just this year. At the end of last year, I was touring one of our Paris facilities where one of our partners' customers had fitted out liquid cooling for a multinational financial services company's live environments, which meant they had to get going on that years ago to be live at the end of last year. This is right in our wheelhouse, and we've been winning in that category for the last year in the sub-100 kilowatt domain to the 30 plus megawatt piece of that. You've seen some testimonials on that.

Chris Sharp: We are often taking larger holes that are at higher power densities and using our engineering prowess to work for enterprise customers and pushing the boundaries on power densities.

I can tell you.

Chris Sharp: Workloads, we're a digital before I joined over nine years ago.

Chris Sharp: We've done retrofits of existing deployments.

Chris Sharp: For customers needing AI just this year.

Chris Sharp: At the end of last year with total of our Paris facilities, where one of our partners customers have figured out a liquid cooling.

Chris Sharp: A multinational financial services company live environments, which meant that they had to get going on that years ago to be live at the end of last year.

Chris Sharp: So this is right in our wheelhouse and we've been winning in that category in the last year in the call. It several hundred kilowatt.

Chris Sharp: Domain to the 30 plus megawatts.

Chris Sharp: Piece of this and you've seen some testimonials on that.

Chris Sharp: Chris, why don't you give a little bit of color as to some of the verticals we've been looking at and where you see this going as well? Yeah, it's a great question, and I appreciate it, Erik. I think there's a couple of dynamics that you touched on. The training to inference, that's something that we've been watching for some time. And we're selective with some of the training environments just because we're looking for a long-term, durable workload to be deployed on the asset.

Chris Sharp: Chris why don't you give a little bit color as to some of the verticals within running in.

Chris Sharp: You see this going as well, yes, it's a great question and I appreciate it Eric I think Theres a couple of dynamics that you touched on the training to inference, that's something that we've been watching for some time and we're selective with some of the training environment, just because we're looking for a long term durable workload being deployed into the asset and so a lot of the customers we see today our app.

Chris Sharp: And so a lot of the customers we see today are actually doing training or inference inside of their training just because of the sheer availability of the GPUs and time to market. But we definitely see the long tail of that value happening in inference and then also kind of another section of private AI. And so we're seeing customers come to market with these types of requirements, where Andy alluded to this at a high level. Coming from our heritage of scale and then being able to evolve and support a colo type of capability, if you will, allows us to support a higher power density need with our versatile designs. And so being highly focused on that with a lot of our hyper-scale customers and being foundational for their cloud services has been top of mind.

Chris Sharp: Actually doing training or inference inside of their training just because of sheer availability of the gpus and time to market, but we definitely see the long tail of that value happening in infants and then also kind of.

Chris Sharp: Another section of private AI, and so we're seeing customers come to market with these types of requirements, where Andy alluded to this at a high level coming from our heritage of scale, and then being able to evolve in support.

<unk> Colo type of capability. If you will allows us to support a higher power density need with our versatile designs and so being highly focused on that with a lot of the hyperscale customers and being foundational for their cloud services has been top of mind and then I think another element that may be overlooked is a lot of.

Chris Sharp: And then I think another element that may be overlooked is that a lot of this inference is embedded in a lot of our top customers' capabilities today. So when you read about, and I think you referenced Microsoft and the work that they've been doing with Copilot, a lot of that AI is embedded in enhancing their current product capabilities. And so we're constantly watching how that evolves. But being proximate to, you know, the AI being proximate to the existing infrastructure and workload is absolutely something that we're very excited about because that inference benefits from the data oceans that exist within digital reality, its current infrastructure, and how all that culminates together. So it's something you'll see play out this year. I think we just had a really good case study with Cacao Bank where that's a highlighted private AI deployment where they're able to generate and do a little bit of R&D around new product offerings for a financial vertical.

Chris Sharp: This influence is embedded in a lot of our top customers today as capabilities. So when you read about and I think you referenced Microsoft and the work that they've been doing with co pilot a lot of that AI is embedded in enhancing their current product capabilities and so we're constantly watching how that evolves, but being proximate too.

Chris Sharp: The AI being proximate to the existing infrastructure and workload is absolutely something that we're very excited about because that influenced benefits from the data oceans that exists within digital realty their current infrastructure and how all of that culminates together. So its something youll see play out over this year I think we just had a really good case study with cacao bank.

Chris Sharp: Where that's a highlighted private AI deployment, where they are able to generate and do a little bit of R&D around new product offerings for our financial vertical. So these are the things you're going to see play out in 2024 that we're very excited about.

Andrew Power: So these are the things you're going to see play out in 2024 that we're very excited about. The next question comes from Nick DelDeo with Moffett Nathanson. Please go ahead. Hey, thanks for squeezing me in.

Speaker Change: The next question comes from Nick del Deo with Melissa.

Speaker Change: Please go ahead.

Speaker Change: Hey, Thanks for squeezing me in.

Matt Mercier: I was wondering if you could expand a little bit on the assumptions you're making about the broader lease environment and the price environment to get to the four to 6% range for cash renewal spreads. Are you just basically taking current prices as a given? Or are you kind of assuming further increases or other changes? And can you share anything about how the expected renewal spreads look for zero to one versus greater than one categories? Sure, Matt. Why don't you take that one?

Speaker Change: Was wondering if you could expand a little bit on the assumptions youre, making behind.

Speaker Change: About the broader lease environment, and the pricing environment to get to the 4% to 6% range for cash renewal spreads.

Speaker Change: Are you just basically taking current prices are given where you're kind of assuming further increases or other changes and can you share anything about how the expected renewal spreads look for as you are.

Speaker Change: <unk> to one versus greater one categories. Thanks.

Sure Matt wants to take that.

Speaker Change: Yes.

Matt Mercier: Yeah, so thanks, Nick. With regard to, I think I'll go back to some of the comments I had, I think, from one of the first questions. So, with regard to zero to one megawatt, you know, that's on both the escalation and the escapism, and renewables tend to be influenced by inflation and where CPI is coming in. So, that's going to be spread across the leases that are rolling, whether they be in North America versus EMEA, you know, and those have come down, you know, since last year and more in that three to And then on the greater than a megawatt, you know, as I mentioned, we're assuming, call it current market pricing, and that's more heavily influenced by where the expiring rates are versus that.

Matt: So thanks Nick.

With regard to I think I'll go back to some of the comments I had I think from from one of the first question. So with regard to zero to one megawatt.

Matt: Yes.

Matt: On both the escalation and renewals tends to be.

Matt: It tends to be influenced by inflation, where CPI is coming in so that's going to that's going to be spread across the leases that are rolling whether they'd be in north America versus EMEA and those those.

Speaker Change: How come down.

Speaker Change: Since last year and more than that more than that 3% to 4%, 3% to 4% range.

Speaker Change: And then on the greater than a megawatt as I as I mentioned.

Speaker Change: We're assuming.

Speaker Change: Call It current market pricing.

Speaker Change: That's more heavily influenced by where we're there.

Speaker Change: The expiring rates are versus versus that so that's within the greater than two megawatt segment, which we're assuming it's still positive.

Matt Mercier: So, that's within the greater than a megawatt segment, which we're assuming is still positive and, you know, resulting in the four to six percent total that we've got. The next question comes from Brandon Mizto with KeyBank Capital Markets. Please go ahead. Hey, thanks. Just a quick question.

Speaker Change: The.

Speaker Change: Resulting in the 4% to 6% total that we've that we've guided towards.

Speaker Change: The next question comes from Brandon <unk> with Keybanc capital markets. Please go ahead.

Brandon: Hey, Thanks, just a quick question I think in the guidance for development capital. The first time its excellent guidance embedded capital contributions can you maybe talk about what your total capital outlay will look like in 24 versus 23 on a like for like basis. Thanks.

Matt Mercier: I think in the guidance for development capital, this is the first time it's actually been guided to metacapital contributions. Can you maybe talk about what, you know, your total capital outlay will look like in 24 versus 23 on a like for like basis? Thanks. Sure, yeah. So, I mean, obviously, the net is given the development joint ventures that we've established, you know, over 23 and that will also close that are under contract throughout 24, in particular the one we announced with Blackstone, phase 1 is already closed, and phase 2 is later in the year. And, you know, if you're looking at it from a gross basis and comparing it to the amount that we spent in 2020, on a gross basis, we're expecting in 24 to be spending north of 3.5 billion in terms of total CapEx. And it would be, you know, which would be roughly 15% higher than the amount that we spent in 2020.

Speaker Change: Sure, Yes, so I mean, obviously the net is given given the development joint ventures that we've established.

Speaker Change: <unk> over 'twenty, three and that will also.

Speaker Change: Clothes that.

Speaker Change: That are under contract and throughout throughout 'twenty four and.

Speaker Change: In particular with the one we announced with Blackstone's phase one is already closed in phase II later in the year.

Speaker Change: And if.

Speaker Change: If you're looking at it from a gross basis in comparison.

Speaker Change: We're expecting in 'twenty for on a gross basis, we'd be spending north of $3 5 billion.

Speaker Change: In terms of total capex and it would be which would be roughly 15% higher than the amount that we spent in 2023.

Andrew Power: That concludes the Q&A portion of today's call. I'd now like to turn the call back over to President and CEO Andy Power for his closing remarks. Thank you, Betsy. Digital Realty capped off a transformative 2023 with a strong fourth quarter that was highlighted by three key elements. First, we sourced over $12 billion of new capital and commitments from an array of hyperscale private capital partners.

Speaker Change: That concludes the Q&A portion of today's call I'd now like to turn the call back over to President and CEO, Andy power for his closing remarks.

Andrew Power: Thank you Betsy.

Andrew Power: Digital Realty capped off a transformative 2023 with a strong fourth quarter that was highlighted by three key elements.

Andrew Power: First we sourced over $12 billion of new capital and commitments from an array of Hyperscale private capital partners.

Andrew Power: You're leveraging our balance sheet and positioning the company for the future. Second, we posted another quarter of improving organic operating results, with the best-paying capital cash NLI growth in nearly a decade, and we are just on the cusp of the AI wave of demand. Third, we continue to grow our footprint and capacity around the world with record deliveries in 2023 to meet the accelerating needs of our growing customer base. These customers look to us to help enable their IT solutions, whether that is AI, cloud, or even enterprises along their digital transformation journeys. Our value proposition is responding. I'd like to thank everyone for joining us today, with a special thank you to our dedicated and exceptional team at Digital Realty, who keep the digital world turning. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021 BF-WATCH TV 2021 BF-WATCH TV 2021

Andrew Power: Deleveraging, our balance sheet and position the company for the future.

Andrew Power: Second we posted another quarter of improving organic operating results with the best same capital cash NOI growth in nearly a decade.

Andrew Power: And we are just on the cusp of the AI wave of demand.

Andrew Power: Third we continue to grow our footprint and capacity around the world with record deliveries in 2023 to meet the accelerating needs of our growing customer base.

Andrew Power: These customers look to us to help enable their Iot solutions, whether that is AI cloud or even enterprises, along their digital transformation journeys.

Andrew Power: Our value proposition is resonating.

Andrew Power: I'd like to thank everyone for joining us today with a special thank you to our dedicated and exceptional team of digital Realty, who keeps the digital world turning.

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

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