Record leasing of 48.05 megawatts of critical load year to date
Double digit Revenue, EPS, Normalized FFO per share and AFFO per share growth
WASHINGTON, Oct. 27, 2016 (GLOBE NEWSWIRE) -- DuPont Fabros Technology, Inc. (NYSE:DFT) announces results for the quarter ended September 30, 2016. All per share results are reported on a fully diluted basis.
Highlights
- As of October 27, 2016, our operating portfolio was 97% leased and commenced as measured by critical load (in megawatts, or "MW") and computer room square feet ("CRSF").
- Quarterly Highlights:
- Double digit growth rates versus prior year quarter:
- Revenue - 16%
- Earnings per share - 28%
- Normalized Funds from Operations ("FFO") per share - 18%
- Adjusted FFO ("AFFO") per share - 10%
- Placed CH2 Phase III, totaling 11.3 MW and 71,000 CRSF, into service on July 1st 89% leased based on critical load. CH2 Phase III is now 100% leased.
- Acquired 46.7 acres of land in Hillsboro, Oregon for $11.2 million. This land will be used for the OR1 and OR2 data centers, which have estimated capacity totaling 96.0 MW of critical load.
- Acquired a shell building and associated land in the Greater Toronto Area for $41.6 million USD. This shell will be developed into the TOR1 data center, which has an estimated capacity of 46.0 MW of critical load.
- Executed two new leases totaling 2.42 MW and 16,319 CRSF of space with a weighted average lease term of 12.2 years. One of these leases, which totals 1.22 MW and 8,944 CRSF, was disclosed in our second quarter 2016 earnings release.
- Extended the term of two leases, totaling 3.41 MW and 16,400 CRSF, by 2.0 years. Both extensions were disclosed in our second quarter 2016 earnings release.
- Redeemed the remaining shares outstanding of our Series B preferred stock.
- Refinanced our $250 million unsecured term loan, extending the maturity to 2022, and increased our line of credit to $750 million while extending its maturity to 2020.
- Double digit growth rates versus prior year quarter:
- Subsequent to the Third Quarter 2016:
- Placed ACC7 Phase IV, totaling 8.2 MW and 52,000 CRSF, into service, 49% leased based on critical load.
Christopher Eldredge, President and Chief Executive Officer, said, "DFT made significant progress in our two new markets – Portland and Toronto – by purchasing development sites in Hillsboro, Oregon and the Greater Toronto Area. By starting development in the Toronto market with a shell building in place, we will be able to deliver TOR1 in the third quarter of 2017 – significantly faster than if development was from the ground up. This timing will help serve the growing pipeline of prospective customers interested in the Toronto market."
Third Quarter 2016 Results
For the quarter ended September 30, 2016, earnings were $0.37 per share compared to $0.29 per share in the third quarter of 2015. There were two charges related to refinancings in the quarter ended September 30, 2016:
- Write-off of issuance costs associated with the redemption of preferred shares of $3.7 million, or $0.04 per share, and
- Loss on early extinguishment of debt associated with the debt refinancing of $1.2 million, or $0.01 per share.
In the third quarter of 2015, there was a charge of $0.01 per share for severance and equity accelerations. Excluding these items, earnings increased $0.12 per share year over year, which was primarily due to new leases that commenced in the second half of 2015 and in the first nine months of 2016. Revenues increased 16%, or $19.0 million, to $134.3 million for the third quarter of 2016 over the third quarter of 2015. The increase in revenues was primarily due to new leases commencing.
NAREIT FFO includes the write-off of issuance costs associated with redeemed preferred shares in 2016, the loss on early extinguishment of debt in 2016 and the severance and equity accelerations in 2015. NAREIT FFO was $0.68 per share for the quarter ended September 30, 2016 compared to $0.61 per share for the third quarter of 2015. The increase was primarily due to the items discussed below for Normalized FFO per share and the severance and equity accelerations that occurred in the third quarter of 2015, partially offset by the write-off of issuance costs associated with the redemption of preferred shares and the loss on early extinguishment of debt.
Normalized FFO excludes issuance costs associated with redeemed preferred shares in 2016, the loss on early extinguishment of debt in 2016 and the severance and equity accelerations in 2015. Normalized FFO for the quarter ended September 30, 2016 was $0.73 per share compared to $0.62 per share for the third quarter of 2015. Normalized FFO increased $0.11 per share, or 18%, from the prior year quarter primarily due to the following:
- Increased operating income excluding depreciation of $0.16 per share primarily due to new leases commencing and
- Lower preferred stock dividends of $0.04 per share due to the lower amount of preferred shares outstanding and lower dividend rate, partially offset by
- Increased interest expense of $0.01 per share primarily due to increased LIBOR rates and
- Dilution of $0.08 per share from the issuance of common equity in the first quarter of 2016.
AFFO for the quarter ended September 30, 2016 was $0.75 per share compared to $0.68 per share in the third quarter of 2015. AFFO increased $0.07 per share, or 10%, from the prior year quarter primarily due to the following:
- Increased Normalized FFO of $0.11 per share and
- Lower amortization of lease contracts above and below market value of $0.01 per share, partially offset by
- A decrease in the add-back of straight-line revenues of $0.05 per share primarily resulting from 2015 collections from Net Data Centers that were not applied to revenue and higher straight-line revenues at ACC2 in 2015 versus 2016.
First Nine Months 2016 Results
For the nine months ended September 30, 2016, earnings were $1.23 per share compared to $0.82 per share in the first nine months of 2015. The increase in earnings per share was partially due to:
- A 2016 gain on sale of our NJ1 data center of $0.26 per share,
- A 2015 charge of $0.07 per share for the severance expense and equity accelerations associated with the departure of our former CEO, partially offset by
- A 2016 write-off of issuance costs associated with the redemption of preferred shares of $0.15 per share,
- A 2016 loss on early extinguishment of debt of $0.01 per share and
- Severance costs and equity accelerations in 2016 for the NJ1 employees of $0.01 per share.
Excluding these items, earnings increased $0.25 per share year over year, which was primarily due to new leases that commenced in 2015 and in the first nine months of 2016. Revenues increased 15%, or $50.5 million, to $387.0 million for the first nine months of 2016 over the same period in 2015. The increase in revenues was primarily due to new leases commencing.
NAREIT FFO excludes the gain on sale of NJ1 and was $1.88 per share for the nine months ended September 30, 2016 compared to $1.78 per share for the first nine months of 2015. The increase was primarily due to the severance expense and equity accelerations in 2015 associated with the departure of our former CEO and the items discussed below for Normalized FFO, partially offset by the write-off of issuance costs associated with the redemption of preferred shares, the loss on early extinguishment of debt and the severance costs and equity accelerations for the NJ1 employees.
Normalized FFO excludes the gain on sale of NJ1, the severance costs and equity accelerations of the NJ1 employees and our former CEO, the write-off associated with our redeemed preferred shares and the loss on early extinguishment of debt. Normalized FFO for the nine months ended September 30, 2016 was $2.04 per share compared to $1.85 per share for the first nine months of 2015. Normalized FFO increased $0.19 per share, or 10%, from the prior year period primarily due to the following:
- Increased operating income excluding depreciation of $0.38 per share primarily due to new leases commencing and
- Lower preferred stock dividends of $0.04 per share due to the lower amount of preferred shares outstanding and lower dividend rate, partially offset by
- Increased interest expense of $0.08 per share primarily due to a higher level of outstanding debt related to development financing and
- Dilution of $0.15 per share from the issuance of common equity in the first quarter of 2016.
AFFO for the nine months ended September 30, 2016 was $2.03 per share compared to $2.03 per share in the first nine months of 2015. AFFO was the same in both years primarily due to the following:
- Increased Normalized FFO of $0.19 per share and
- Increased add-back of compensation paid with Company common shares of $0.01 per share offset by,
- A decrease in the add-back of straight-line revenues of $0.16 per share primarily resulting from 2015 collections from Net Data Centers that were not applied to revenue and higher straight-line revenues at ACC2 in 2015 versus 2016,
- Increased capitalized leasing commissions of $0.02 per share due to higher levels of leasing and payments to brokers and
- Increased capital expenditures at our operating data center facilities of $0.02 per share primarily related to ACC2 enhancements.
Portfolio Update
During the third quarter 2016, we:
- Executed two new leases totaling 2.42 MW and 16,319 CRSF:
- One lease was at CH2 Phase III totaling 1.22 MW and 8,944 CRSF. This lease commenced in the third quarter and resulted in CH2 Phase III being 100% leased.
- One pre-lease was at CH2 Phase IV totaling 1.20 MW and 7,375 CRSF. This pre-lease is expected to commence upon the opening of CH2 Phase IV in the fourth quarter of 2016. CH2 Phase IV is now 100% pre-leased based on both critical load and CRSF.
- Extended the terms of two leases totaling 3.41 MW and 16,400 CRSF:
- One extension was at ACC5 for 2.28 MW and 11,000 CRSF which was scheduled to expire in 2017. The lease term was extended by 2.0 years commencing July 1, 2017, and compared to the cash rental rate in effect when the extension was executed, cash base rent will increase 3.0% upon the expiration of the original lease term. GAAP base rent increased 1.2% immediately.
- One extension was at ACC4 for 1.13 MW and 5,400 CRSF which was scheduled to expire in 2017. The lease term was extended by 2.0 years commencing July 1, 2017, and compared to the cash rental rate in effect when the extension was executed, cash base rent will increase 3.0% upon the expiration of the original lease term. GAAP base rent increased 1.5% immediately.
Year to date, we:
- Executed 13 leases with a weighted average lease term of 12.7 years, totaling 48.05 MW and 249,662 CRSF, which are expected to generate approximately $60.2 million of annualized GAAP base rent revenue, which is equivalent to a GAAP rate of $105 per kW per month. These leases are expected to generate approximately $76.1 million of annualized revenue, which includes estimated amounts of operating expense recoveries for the leases structured as triple net leases, net of recovery of metered power, which results in a rate of $132 per kW per month.
- Commenced 15 leases totaling 45.22 MW and 251,479 CRSF.
- Extended the term of seven leases totaling 6.68 MW and 40,443 CRSF by a weighted average of 2.4 years. Compared to the rates in effect when each of the extensions was executed, cash base rents will be an average of 3.0% higher upon the expiration of the original lease terms. GAAP base rents will be an average of 3.4% higher immediately. The average GAAP base rent rate related to these extensions was $123 per kW per month and including operating expense recoveries, this results in $149 per kW per month.
Development Update
Below is a summary of our four projects currently under development:
| Data Center Phase | Capacity (MW) | Anticipated Placed in Service Date | Percentage Pre-Leased CRSF / Critical Load | ||||
| CH2 Phase IV | 1.2 | Q4 2016 | 100% / 100% | ||||
| ACC9 Phase I | 14.4 | Q2 2017 | — | ||||
| ACC9 Phase II | 14.4 | Q3 2017 | — | ||||
| SC1 Phase III | 16.0 | Q3 2017 | 100% / 100% | ||||
| 46.0 | |||||||
In the third quarter, we acquired 46.7 acres of land in Hillsboro, Oregon for $11.2 million. The land has never been developed and is ideal for our OR1 and OR2 data center facilities. Also in the third quarter, we acquired a shell building and associated land in Vaughan, Ontario, a suburb of Toronto, for $41.6 million USD. This building is a former Toronto Star printing facility, and the shell is well-suited for development of our TOR1 data center.
We also entered into a contract to acquire an additional 20.6 acres of land in the Greater Toronto Area for $12.9 million CAD (approximately $10.0 million USD).
Balance Sheet and Liquidity
In July 2016, we redeemed the remaining $100.0 million of our Series B preferred stock. The issuance of our new Series C preferred stock, combined with the redemption of our Series A and B preferred stock, will yield annualized savings of $13.9 million in preferred dividends.
In July 2016, we entered into a credit agreement that includes an unsecured revolving credit facility with a total commitment of $750 million and an unsecured term loan facility with a total commitment and amount outstanding of $250 million. This credit agreement replaced our unsecured term loan, and had the effect of extending the maturity of that loan from July 2019 to January 2022. It also replaced our revolving credit facility, and had the effect of extending the maturity of this facility from May 2018 to July 2020. Under the new credit agreement, the underlying LIBOR-based interest rates remain the same as under the previous instruments. As of October 27, 2016, we have no borrowings under our revolving credit facility, leaving $750 million available for additional borrowings.
Dividend
Our third quarter 2016 dividend of $0.47 per share was paid on October 17, 2016 to shareholders of record as of October 7, 2016. The anticipated 2016 annualized dividend of $1.88 per share represents an estimated AFFO payout ratio of 67% at the midpoint of our current 2016 guidance and a yield of approximately 4.4% based on our current stock price.
Fourth Quarter and Full Year 2016 Guidance
Our GAAP earnings per share guidance for 2016 is $1.64 to $1.67 per share and for the fourth quarter of 2016 is $0.42 to $0.45 per share.
We are tightening our 2016 Normalized FFO guidance range. The new range is $2.77 to $2.80 per share compared to the prior range of $2.76 to $2.82 per share. The midpoint of our revised 2016 Normalized FFO guidance range is $2.79 per share, which is unchanged from our prior guidance midpoint.
Our Normalized FFO guidance range is $0.73 to $0.76 per share for the fourth quarter of 2016. The midpoint of this range is $0.02 higher than the third quarter 2016 Normalized FFO per share. This is due to the following assumptions:
- Decreased interest expense of $0.01 per share due to higher capitalized interest and
- Decreased preferred stock dividends of $0.01 per share due to completion of the redemption of the Series B shares in July 2016.
We are tightening our 2016 AFFO guidance range. The new range is $2.78 to $2.81 per share as compared to the prior range of $2.77 to $2.83 per share. The midpoint of our revised 2016 AFFO guidance range is $2.80 per share, which is unchanged from our prior guidance midpoint.
Our AFFO guidance range is $0.74 to $0.77 per share for the fourth quarter of 2016. The midpoint of the range is $0.01 per share higher than third quarter 2016 AFFO per share. This is due to the following assumptions:
- Increased Normalized FFO of $0.02 per share and
- Increased add-back of straight-line revenues of $0.01 per share, partially offset by
- Increased capitalized leasing commissions of $0.01 per share due to a forecasted increase in fourth quarter leasing and
- Increased capital expenditures for operating properties of $0.01 per share.
The assumptions underlying Normalized FFO and AFFO guidance can be found on the last page of this earnings release.
Third Quarter 2016 Conference Call and Webcast Information
We will host a conference call to discuss these results today, Thursday, October 27, 2016 at 11:00 a.m. ET. To access the live call, please visit the Investor Relations section of our website at www.dft.com or dial 1-877-662-0063 (domestic) or 1-503-406-4459 (international) and entering the conference ID #93487835. A replay will be available for seven days by dialing 1-855-859-2056 (domestic) or 1-404-537-3406 (international) and entering the conference ID #93487835. The webcast will be archived on our website for one year at www.dft.com on the Presentations & Webcasts page.
About DuPont Fabros Technology, Inc.
DuPont Fabros Technology, Inc. (NYSE:DFT) is a leading owner, developer, operator and manager of enterprise-class, carrier neutral, multi-tenant wholesale data centers. The Company's facilities are designed to offer highly specialized, efficient and safe computing environments in a low-cost operating model. The Company's customers outsource their mission critical applications and include national and international enterprises across numerous industries, such as technology, Internet content providers, media, communications, cloud-based, healthcare and financial services. The Company's 11 data centers are located in three major U.S. markets, which total 3.3 million gross square feet and 286 megawatts of available critical load to power the servers and computing equipment of its customers. The Company is in the process of expanding into two new markets. DuPont Fabros Technology, Inc., a real estate investment trust (REIT), is headquartered in Washington, DC. For more information, please visit www.dft.com.
Forward-Looking Statements
Certain statements contained in this press release may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The matters described in these forward-looking statements include expectations regarding future events, results and trends and are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. We face many risks that could cause our actual performance to differ materially from the results contemplated by our forward-looking statements, including, without limitation, the risk that the assumptions underlying our full year and fourth quarter 2016 guidance are not realized, the risks related to the leasing of available space to third-party customers, including delays in executing new leases, failure to negotiate leases on terms that will enable us to achieve our expected returns and declines in rental rates at new and existing facilities, risks related to the collection of accounts and notes receivable, the risk that we may be unable to obtain new financing on favorable terms to facilitate, among other things, future development projects, the risks commonly associated with the acquisition of development sites, construction and development of new facilities (including delays and/or cost increases associated with the completion of new developments), risks relating to obtaining required permits and compliance with permitting, zoning, land-use and environmental requirements, the risk that we will not declare and pay dividends as anticipated for future periods and the risk that we may not be able to maintain our qualification as a REIT for federal tax purposes. The periodic reports that we file with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended December 31, 2015 and the quarterly reports for the quarters ended March 31, 2016 and June 30, 2016 contain detailed descriptions of these and many other risks to which we are subject. These reports are available on our website at www.dft.com. Because of the risks described above and other unknown risks, our actual results, performance or achievements may differ materially from the results, performance or achievements contemplated by our forward-looking statements. The information set forth in this news release represents our expectations and intentions only as of the date of this press release. We assume no responsibility to issue updates to the contents of this press release.
| DUPONT FABROS TECHNOLOGY, INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (unaudited and in thousands except share and per share data) | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Revenues: | |||||||||||||||
| Base rent | $ | 88,614 | $ | 76,771 | $ | 254,509 | $ | 221,046 | |||||||
| Recoveries from tenants | 44,375 | 35,223 | 124,764 | 103,010 | |||||||||||
| Other revenues | 1,337 | 3,343 | 7,740 | 12,421 | |||||||||||
| Total revenues | 134,326 | 115,337 | 387,013 | 336,477 | |||||||||||
| Expenses: | |||||||||||||||
| Property operating costs | 39,214 | 33,209 | 113,102 | 94,362 | |||||||||||
| Real estate taxes and insurance | 4,955 | 5,348 | 16,111 | 16,387 | |||||||||||
| Depreciation and amortization | 27,493 | 26,433 | 79,659 | 77,645 | |||||||||||
| General and administrative | 5,484 | 4,422 | 16,333 | 13,233 | |||||||||||
| Other expenses | 800 | 2,947 | 6,342 | 15,752 | |||||||||||
| Total expenses | 77,946 | 72,359 | 231,547 | 217,379 | |||||||||||
| Operating income | 56,380 | 42,978 | 155,466 | 119,098 | |||||||||||
| Interest: | |||||||||||||||
| Expense incurred | (12,935 | ) | (11,681 | ) | (36,067 | ) | (28,991 | ) | |||||||
| Amortization of deferred financing costs | (1,016 | ) | (904 | ) | (2,780 | ) | (2,240 | ) | |||||||
| Gain on sale of real estate | (231 | ) | — | 22,833 | — | ||||||||||
| Loss on early extinguishment of debt | (1,232 | ) | — | (1,232 | ) | — | |||||||||
| Net income | 40,966 | 30,393 | 138,220 | 87,867 | |||||||||||
| Net income attributable to redeemable noncontrolling interests – operating partnership | (5,144 | ) | (4,520 | ) | (18,089 | ) | (12,901 | ) | |||||||
| Net income attributable to controlling interests | 35,822 | 25,873 | 120,131 | 74,966 | |||||||||||
| Preferred stock dividends | (3,630 | ) | (6,811 | ) | (17,405 | ) | (20,433 | ) | |||||||
| Issuance costs associated with redeemed preferred stock | (3,668 | ) | — | (12,495 | ) | — | |||||||||
| Net income attributable to common shares | $ | 28,524 | $ | 19,062 | $ | 90,231 | $ | 54,533 | |||||||
| Earnings per share – basic: | |||||||||||||||
| Net income attributable to common shares | $ | 0.38 | $ | 0.29 | $ | 1.24 | $ | 0.83 | |||||||
| Weighted average common shares outstanding | 75,232,413 | 65,041,159 | 72,212,874 | 65,190,737 | |||||||||||
| Earnings per share – diluted: | |||||||||||||||
| Net income attributable to common shares | $ | 0.37 | $ | 0.29 | $ | 1.23 | $ | 0.82 | |||||||
| Weighted average common shares outstanding | 76,095,994 | 65,561,891 | 73,072,127 | 65,918,976 | |||||||||||
| Dividends declared per common share | $ | 0.47 | $ | 0.42 | $ | 1.41 | $ | 1.26 | |||||||
| DUPONT FABROS TECHNOLOGY, INC. | |||||||||||||||
| RECONCILIATIONS OF NET INCOME TO NAREIT FFO, NORMALIZED FFO AND AFFO (1) | |||||||||||||||
| (unaudited and in thousands except share and per share data) | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Net income | $ | 40,966 | $ | 30,393 | $ | 138,220 | $ | 87,867 | |||||||
| Depreciation and amortization | 27,493 | 26,433 | 79,659 | 77,645 | |||||||||||
| Less: Non real estate depreciation and amortization | (221 | ) | (202 | ) | (615 | ) | (503 | ) | |||||||
| Gain on sale of real estate | 231 | — | (22,833 | ) | — | ||||||||||
| NAREIT FFO | 68,469 | 56,624 | 194,431 | 165,009 | |||||||||||
| Preferred stock dividends | (3,630 | ) | (6,811 | ) | (17,405 | ) | (20,433 | ) | |||||||
| Issuance costs associated with redeemed preferred shares | (3,668 | ) | — | (12,495 | ) | — | |||||||||
| NAREIT FFO attributable to common shares and common units | 61,171 | 49,813 | 164,531 | 144,576 | |||||||||||
| Severance expense and equity acceleration | — | 546 | 891 | 6,124 | |||||||||||
| Loss on early extinguishment of debt | 1,232 | — | 1,232 | — | |||||||||||
| Issuance costs associated with redeemed preferred shares | 3,668 | — | 12,495 | — | |||||||||||
| Normalized FFO attributable to common shares and common units | 66,071 | 50,359 | 179,149 | 150,700 | |||||||||||
| Straight-line revenues, net of reserve | (133 | ) | 4,260 | (1,174 | ) | 13,410 | |||||||||
| Amortization and write-off of lease contracts above and below market value | (98 | ) | (585 | ) | (320 | ) | (763 | ) | |||||||
| Compensation paid with Company common shares | 1,581 | 1,326 | 4,871 | 3,955 | |||||||||||
| Non real estate depreciation and amortization | 221 | 202 | 615 | 503 | |||||||||||
| Amortization of deferred financing costs | 1,016 | 904 | 2,780 | 2,240 | |||||||||||
| Improvements to real estate | (874 | ) | (1,185 | ) | (3,972 | ) | (2,433 | ) | |||||||
| Capitalized leasing commissions | (184 | ) | (14 | ) | (3,634 | ) | (2,026 | ) | |||||||
| AFFO attributable to common shares and common units | $ | 67,600 | $ | 55,267 | $ | 178,315 | $ | 165,586 | |||||||
| NAREIT FFO attributable to common shares and common units per share – diluted | $ | 0.68 | $ | 0.61 | $ | 1.88 | $ | 1.78 | |||||||
| Normalized FFO attributable to common shares and common units per share – diluted | $ | 0.73 | $ | 0.62 | $ | 2.04 | $ | 1.85 | |||||||
| AFFO attributable to common shares and common units per share – diluted | $ | 0.75 | $ | 0.68 | $ | 2.03 | $ | 2.03 | |||||||
| Weighted average common shares and common units outstanding – diluted | 90,056,833 | 81,066,670 | 87,721,185 | 81,429,886 | |||||||||||
(1) Funds from operations, or FFO, is used by industry analysts and investors as a supplemental operating performance measure for REITs. We calculate FFO in accordance with the definition that was adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. FFO, as defined by NAREIT, represents net income determined in accordance with GAAP, excluding extraordinary items as defined under GAAP, impairment charges on depreciable real estate assets and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We also present FFO attributable to common shares and OP units, which is FFO excluding preferred stock dividends. FFO attributable to common shares and OP units per share is calculated on a basis consistent with net income attributable to common shares and OP units and reflects adjustments to net income for preferred stock dividends.
We use FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared period over period, captures trends in occupancy rates, rental rates and operating expenses. We also believe that, as a widely recognized measure of the performance of equity REITs, FFO may be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes real estate related depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited.
While FFO is a relevant and widely used measure of operating performance of equity REITs, other equity REITs may use different methodologies for calculating FFO and, accordingly, FFO as disclosed by such other REITs may not be comparable to our FFO. Therefore, we believe that in order to facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income as presented in the consolidated statements of operations. FFO should not be considered as an alternative to net income or to cash flow from operating activities (each as computed in accordance with GAAP) or as an indicator of our liquidity, nor is it indicative of funds available to meet our cash needs, including our ability to pay dividends or make distributions.
We present FFO with adjustments to arrive at Normalized FFO. Normalized FFO is FFO attributable to common shares and units excluding severance expense and equity accelerations, gain or loss on early extinguishment of debt, gain or loss on derivative instruments and write-offs of original issuance costs for redeemed preferred shares. We also present FFO with supplemental adjustments to arrive at Adjusted FFO (“AFFO”). AFFO is Normalized FFO excluding straight-line revenue, compensation paid with Company common shares, below market lease amortization and write-offs net of above market lease amortization and write-offs, non real estate depreciation and amortization, amortization of deferred financing costs, improvements to real estate and capitalized leasing commissions. AFFO does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indicator of our operating performance or as an alternative to cash flow provided by operations as a measure of liquidity and is not necessarily indicative of funds available to fund our cash needs including our ability to pay dividends. In addition, AFFO may not be comparable to similarly titled measurements employed by other companies. We use AFFO in management reports to provide a measure of REIT operating performance that can be compared to other companies using AFFO.
| DUPONT FABROS TECHNOLOGY, INC. | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands except share data) | |||||||
| September 30, 2016 | December 31, 2015 | ||||||
| (unaudited) | |||||||
| ASSETS | |||||||
| Income producing property: | |||||||
| Land | $ | 103,183 | $ | 94,203 | |||
| Buildings and improvements | 2,942,410 | 2,736,936 | |||||
| 3,045,593 | 2,831,139 | ||||||
| Less: accumulated depreciation | (635,324 | ) | (560,837 | ) | |||
| Net income producing property | 2,410,269 | 2,270,302 | |||||
| Construction in progress and property held for development | 282,184 | 300,939 | |||||
| Net real estate | 2,692,453 | 2,571,241 | |||||
| Cash and cash equivalents | 61,821 | 31,230 | |||||
| Rents and other receivables, net | 12,852 | 9,588 | |||||
| Deferred rent, net | 124,139 | 128,941 | |||||
| Lease contracts above market value, net | 5,361 | 6,029 | |||||
| Deferred costs, net | 26,752 | 23,774 | |||||
| Prepaid expenses and other assets | 41,422 | 44,689 | |||||
| Total assets | $ | 2,964,800 | $ | 2,815,492 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Liabilities: | |||||||
| Line of credit | $ | — | $ | — | |||
| Mortgage notes payable, net of deferred financing costs | 111,875 | 114,075 | |||||
| Unsecured term loan, net of deferred financing costs | 248,983 | 249,172 | |||||
| Unsecured notes payable, net of discount and deferred financing costs | 836,732 | 834,963 | |||||
| Accounts payable and accrued liabilities | 31,671 | 32,301 | |||||
| Construction costs payable | 46,549 | 22,043 | |||||
| Accrued interest payable | 6,199 | 11,821 | |||||
| Dividend and distribution payable | 43,678 | 43,906 | |||||
| Lease contracts below market value, net | 3,144 | 4,132 | |||||
| Prepaid rents and other liabilities | 73,178 | 67,477 | |||||
| Total liabilities | 1,402,009 | 1,379,890 | |||||
| Redeemable noncontrolling interests – operating partnership | 569,662 | 479,189 | |||||
| Commitments and contingencies | — | — | |||||
| Stockholders’ equity: | |||||||
| Preferred stock, $.001 par value, 50,000,000 shares authorized: | |||||||
| Series A cumulative redeemable perpetual preferred stock, no shares issued and outstanding at September 30, 2016 and 7,400,000 shares issued and outstanding at December 31, 2015 | — | 185,000 | |||||
| Series B cumulative redeemable perpetual preferred stock, no shares issued and outstanding at September 30, 2016 and 6,650,000 shares issued and outstanding at December 31, 2015 | — | 166,250 | |||||
| Series C cumulative redeemable perpetual preferred stock, 8,050,000 shares issued and outstanding at September 30, 2016 and no shares issued and outstanding at December 31, 2015 | 201,250 | — | |||||
| Common stock, $.001 par value, 250,000,000 shares authorized, 75,576,481 shares issued and outstanding at September 30, 2016 and 66,105,650 shares issued and outstanding at December 31, 2015 | 76 | 66 | |||||
| Additional paid in capital | 792,004 | 685,042 | |||||
| Retained earnings (Accumulated deficit) | — | (79,945 | ) | ||||
| Accumulated other comprehensive loss | (201 | ) | — | ||||
| Total stockholders’ equity | 993,129 | 956,413 | |||||
| Total liabilities and stockholders’ equity | $ | 2,964,800 | $ | 2,815,492 | |||
| DUPONT FABROS TECHNOLOGY, INC. | |||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (unaudited and in thousands) | |||||||
| Nine months ended September 30, | |||||||
| 2016 | 2015 | ||||||
| Cash flow from operating activities | |||||||
| Net income | $ | 138,220 | $ | 87,867 | |||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||
| Depreciation and amortization | 79,659 | 77,645 | |||||
| Gain on sale of real estate | (22,833 | ) | — | ||||
| Loss on early extinguishment of debt | 1,232 | — | |||||
| Straight-line revenues, net of reserve | (1,174 | ) | 13,410 | ||||
| Amortization of deferred financing costs | 2,780 | 2,240 | |||||
| Amortization and write-off of lease contracts above and below market value | (320 | ) | (763 | ) | |||
| Compensation paid with Company common shares | 4,871 | 7,990 | |||||
| Changes in operating assets and liabilities | |||||||
| Rents and other receivables | (3,203 | ) | (492 | ) | |||
| Deferred costs | (3,649 | ) | (2,045 | ) | |||
| Prepaid expenses and other assets | (2,051 | ) | 1,741 | ||||
| Accounts payable and accrued liabilities | (1,139 | ) | 3,407 | ||||
| Accrued interest payable | (5,622 | ) | (4,136 | ) | |||
| Prepaid rents and other liabilities | 11,095 | 4,526 | |||||
| Net cash provided by operating activities | 197,866 | 191,390 | |||||
| Cash flow from investing activities | |||||||
| Net proceeds from sale of real estate | 123,545 | — | |||||
| Investments in real estate – development | (179,799 | ) | (154,165 | ) | |||
| Acquisition of real estate | (53,105 | ) | — | ||||
| Acquisition of real estate – related party | (20,168 | ) | (8,600 | ) | |||
| Interest capitalized for real estate under development | (7,765 | ) | (8,557 | ) | |||
| Improvements to real estate | (3,972 | ) | (2,433 | ) | |||
| Additions to non real estate property | (1,012 | ) | (622 | ) | |||
| Net cash used in investing activities | (142,276 | ) | (174,377 | ) | |||
| Cash flow from financing activities | |||||||
| Line of credit: | |||||||
| Proceeds | 60,000 | 120,000 | |||||
| Repayments | (60,000 | ) | (180,000 | ) | |||
| Mortgage notes payable: | |||||||
| Repayments | (2,500 | ) | — | ||||
| Unsecured notes payable: | |||||||
| Proceeds | — | 248,012 | |||||
| Payments of financing costs | (5,625 | ) | (4,730 | ) | |||
| Issuance of common stock, net of offering costs | 275,470 | — | |||||
| Issuance of preferred stock, net of offering costs | 194,252 | — | |||||
| Redemption of preferred stock | (351,250 | ) | — | ||||
| Equity compensation proceeds (payments) | 8,269 | (7,611 | ) | ||||
| Common stock repurchases | — | (31,912 | ) | ||||
| Dividends and distributions: | |||||||
| Common shares | (101,555 | ) | (82,665 | ) | |||
| Preferred shares | (21,490 | ) | (20,433 | ) | |||
| Redeemable noncontrolling interests – operating partnership | (20,570 | ) | (19,436 | ) | |||
| Net cash (used in) provided by financing activities | (24,999 | ) | 21,225 | ||||
| Net increase in cash and cash equivalents | 30,591 | 38,238 | |||||
| Cash and cash equivalents, beginning of period | 31,230 | 29,598 | |||||
| Cash and cash equivalents, ending of period | $ | 61,821 | $ | 67,836 | |||
| Supplemental information: | |||||||
| Cash paid for interest | $ | 48,537 | $ | 41,735 | |||
| Deferred financing costs capitalized for real estate under development | $ | 445 | $ | 584 | |||
| Construction costs payable capitalized for real estate under development | $ | 46,549 | $ | 21,534 | |||
| Redemption of operating partnership units | $ | 49,547 | $ | 598 | |||
| Adjustments to redeemable noncontrolling interests – operating partnership | $ | 141,947 | $ | (106,959 | ) | ||
| DUPONT FABROS TECHNOLOGY, INC. | |||||||||||||||||||||||||
| Operating Properties | |||||||||||||||||||||||||
| As of October 1, 2016 | |||||||||||||||||||||||||
| Property | Property Location | Year Built/ Renovated | Gross Building Area (2) | Computer Room Square Feet ("CRSF") (2) | CRSF % Leased (3) | CRSF % Commenced (4) | Critical Load MW (5) | Critical Load % Leased (3) | Critical Load % Commenced (4) | ||||||||||||||||
| Stabilized (1) | |||||||||||||||||||||||||
| ACC2 | Ashburn, VA | 2001/2005 | 87,000 | 53,000 | 100 | % | 100 | % | 10.4 | 100 | % | 100 | % | ||||||||||||
| ACC3 | Ashburn, VA | 2001/2006 | 147,000 | 80,000 | 100 | % | 100 | % | 13.9 | 100 | % | 100 | % | ||||||||||||
| ACC4 | Ashburn, VA | 2007 | 347,000 | 172,000 | 100 | % | 100 | % | 36.4 | 97 | % | 97 | % | ||||||||||||
| ACC5 | Ashburn, VA | 2009-2010 | 360,000 | 176,000 | 99 | % | 99 | % | 36.4 | 100 | % | 100 | % | ||||||||||||
| ACC6 | Ashburn, VA | 2011-2013 | 262,000 | 130,000 | 100 | % | 100 | % | 26.0 | 100 | % | 100 | % | ||||||||||||
| ACC7 | Ashburn, VA | 2014-2016 | 446,000 | 238,000 | 87 | % | 87 | % | 41.6 | 90 | % | 90 | % | ||||||||||||
| CH1 | Elk Grove Village, IL | 2008-2012 | 485,000 | 231,000 | 100 | % | 100 | % | 36.4 | 100 | % | 100 | % | ||||||||||||
| CH2 Phases I/III | Elk Grove Village, IL | 2015-2016 | 245,000 | 116,000 | 100 | % | 100 | % | 19.3 | 100 | % | 100 | % | ||||||||||||
| SC1 Phases I-II | Santa Clara, CA | 2011-2015 | 360,000 | 173,000 | 100 | % | 100 | % | 36.6 | 100 | % | 100 | % | ||||||||||||
| VA3 | Reston, VA | 2003 | 256,000 | 147,000 | 94 | % | 94 | % | 13.0 | 95 | % | 95 | % | ||||||||||||
| VA4 | Bristow, VA | 2005 | 230,000 | 90,000 | 100 | % | 100 | % | 9.6 | 100 | % | 100 | % | ||||||||||||
| Subtotal – stabilized | 3,225,000 | 1,606,000 | 97 | % | 97 | % | 279.6 | 98 | % | 98 | % | ||||||||||||||
| Completed, not Stabilized | |||||||||||||||||||||||||
| CH2 Phase II | Elk Grove Village, IL | 2016 | 74,000 | 35,000 | 76 | % | 76 | % | 6.3 | 77 | % | 77 | % | ||||||||||||
| Subtotal – not stabilized | 74,000 | 35,000 | 76 | % | 76 | % | 6.3 | 77 | % | 77 | % | ||||||||||||||
| Total Operating Properties | 3,299,000 | 1,641,000 | 97 | % | 97 | % | 285.9 | 97 | % | 97 | % | ||||||||||||||
(1) Stabilized operating properties are either 85% or more leased and commenced or have been in service for 24 months or greater.
(2) Gross building area is the entire building area, including CRSF (the portion of gross building area where our customers' computer servers are located), common areas, areas controlled by us (such as the mechanical, telecommunications and utility rooms) and, in some facilities, individual office and storage space leased on an as available basis to our customers.
(3) Percentage leased is expressed as a percentage of CRSF or critical load, as applicable, that is subject to an executed lease. Leases executed as of October 1, 2016 represent $367 million of base rent on a GAAP basis and $374 million of base rent on a cash basis over the next twelve months. Both amounts include $18 million of revenue from management fees over the next twelve months.
(4) Percentage commenced is expressed as a percentage of CRSF or critical load, as applicable, where the lease has commenced under GAAP.
(5) Critical load (also referred to as IT load or load used by customers' servers or related equipment) is the power available for exclusive use by customers expressed in terms of megawatt, or MW, or kilowatt, or kW (One MW is equal to 1,000 kW).
DUPONT FABROS TECHNOLOGY, INC.
Lease Expirations
As of October 1, 2016
The following table sets forth a summary schedule of lease expirations at our operating properties for each of the ten calendar years beginning with 2016. The information set forth in the table below assumes that customers exercise no renewal options and takes into account customers’ early termination options in determining the life of their leases under GAAP.
| Year of Lease Expiration | Number of Leases Expiring (1) | CRSF of Expiring Commenced Leases (in thousands) (2) | % of Leased CRSF | Total kW of Expiring Commenced Leases (2) | % of Leased kW | % of Annualized Base Rent (3) | ||||||||||||
| 2016 | — | — | — | % | — | — | % | — | % | |||||||||
| 2017 | 4 | 33 | 2.1 | % | 5,146 | 1.8 | % | 1.9 | % | |||||||||
| 2018 | 20 | 177 | 11.1 | % | 33,448 | 12.0 | % | 12.7 | % | |||||||||
| 2019 | 25 | 316 | 19.9 | % | 56,104 | 20.1 | % | 21.8 | % | |||||||||
| 2020 | 15 | 182 | 11.4 | % | 31,754 | 11.4 | % | 11.6 | % | |||||||||
| 2021 | 16 | 284 | 17.9 | % | 50,092 | 18.0 | % | 17.1 | % | |||||||||
| 2022 | 10 | 140 | 8.8 | % | 24,509 | 8.8 | % | 8.8 | % | |||||||||
| 2023 | 8 | 92 | 5.8 | % | 13,305 | 4.8 | % | 4.3 | % | |||||||||
| 2024 | 8 | 112 | 7.0 | % | 19,279 | 6.9 | % | 7.3 | % | |||||||||
| 2025 | 4 | 47 | 3.0 | % | 7,750 | 2.8 | % | 3.5 | % | |||||||||
| After 2025 | 13 | 207 | 13.0 | % | 37,178 | 13.4 | % | 11.0 | % | |||||||||
| Total | 123 | 1,590 | 100 | % | 278,565 | 100 | % | 100 | % | |||||||||
(1) Represents 32 customers with 123 lease expiration dates.
(2) CRSF is that portion of gross building area where customers locate their computer servers. One MW is equal to 1,000 kW.
(3) Annualized base rent represents the monthly contractual base rent (defined as cash base rent before abatements) multiplied by 12 for commenced leases as of October 1, 2016.
| DUPONT FABROS TECHNOLOGY, INC. | ||||||
| Leasing Statistics - New Leases | ||||||
| Period | Number of Leases | Total CRSF Leased (1) | Total MW Leased (1) | |||
| Q3 2016 | 2 | 16,319 | 2.42 | |||
| Q2 2016 | 4 | 72,657 | 12.52 | |||
| Q1 2016 | 7 | 160,686 | 33.11 | |||
| Q4 2015 | 12 | 193,373 | 32.37 | |||
| Trailing Twelve Months | 25 | 443,035 | 80.42 | |||
| Q3 2015 | — | — | — | |||
| Leasing Statistics - Renewals | ||||||||||||||
| Period | Number of Renewals | Total CRSF Renewed (1) | Total MW Renewed (1) | GAAP Rent change (2) | Cash Rent Change (2) | |||||||||
| Q3 2016 | 2 | 16,400 | 3.41 | 1.2 | % | 3.0 | % | |||||||
| Q2 2016 | 4 | 21,526 | 2.72 | 3.5 | % | 2.9 | % | |||||||
| Q1 2016 | 1 | 2,517 | 0.54 | 14.9 | % | 3.0 | % | |||||||
| Q4 2015 | 1 | 8,461 | 1.49 | (2.1 | )% | (10.0 | )% | |||||||
| Trailing Twelve Months | 8 | 48,904 | 8.16 | |||||||||||
| Q3 2015 | 1 | 2,700 | 0.57 | 24.2 | % | 3.0 | % | |||||||
Booked Not Billed
($ in thousands)
The following table outlines the incremental and annualized revenue excluding direct electric from leases that have been executed but have not billed as of September 30, 2016.
| 2016 | 2017 | Total | ||||||||||
| Incremental Revenue | $ | 1,790 | $ | 12,208 | ||||||||
| Annualized Revenue | $ | 8,496 | $ | 24,416 | $ | 32,912 | ||||||
(1) CRSF is that portion of gross building area where customers locate their computer servers. One MW is equal to 1,000 kW.
(2) GAAP rent change compares the change in annualized base rent before and after the renewal. Cash rent change compares cash base rent at renewal execution to cash base rent at the start of the renewal period.
DUPONT FABROS TECHNOLOGY, INC.
Top 15 Customers
As of October 1, 2016
The following table presents our top 15 customers based on annualized monthly contractual base rent at our operating properties as of October 1, 2016:
| Customer | Number of Buildings | Number of Markets | Remaining Term | % of Annualized Base Rent (1) | |||||||||
| 1 | Microsoft | 9 | 3 | 7.0 | 26.0 | % | |||||||
| 2 | 4 | 1 | 4.1 | 20.1 | % | ||||||||
| 3 | Fortune 25 Investment Grade-Rated Company | 3 | 3 | 4.2 | 11.1 | % | |||||||
| 4 | Rackspace | 3 | 2 | 8.8 | 8.9 | % | |||||||
| 5 | Fortune 500 leading Software as a Service (SaaS) Provider, Not Rated | 4 | 2 | 6.6 | 7.6 | % | |||||||
| 6 | Yahoo! (2) | 1 | 1 | 1.6 | 6.0 | % | |||||||
| 7 | Server Central | 1 | 1 | 4.9 | 2.5 | % | |||||||
| 8 | Fortune 50 Investment Grade-Rated Company | 2 | 1 | 3.7 | 2.0 | % | |||||||
| 9 | Dropbox | 1 | 1 | 2.3 | 1.6 | % | |||||||
| 10 | IAC | 1 | 1 | 2.6 | 1.5 | % | |||||||
| 11 | Symantec | 2 | 1 | 2.7 | 1.3 | % | |||||||
| 12 | GoDaddy | 1 | 1 | 10.0 | 1.1 | % | |||||||
| 13 | UBS | 1 | 1 | 8.8 | 1.0 | % | |||||||
| 14 | Anexio | 3 | 1 | 7.3 | 0.9 | % | |||||||
| 15 | Sanofi Aventis | 2 | 1 | 4.8 | 0.9 | % | |||||||
| Total | 92.5 | % | |||||||||||
(1) Annualized base rent represents monthly contractual base rent for commenced leases (defined as cash base rent before abatements) multiplied by 12 for commenced leases as of October 1, 2016.
(2) Comprised of a lease at ACC4 that has been fully subleased to another DFT customer.
| DUPONT FABROS TECHNOLOGY, INC. | ||||||||||||||||||||||||||||||
| Same Store Analysis | ||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||
| Same Store Properties | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| 30-Sep-16 | 30-Sep-15 | % Change | 30-Jun-16 | % Change | 30-Sep-16 | 30-Sep-15 | % Change | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||
| Base rent | $ | 80,466 | $ | 73,500 | 9.5 | % | $ | 76,929 | 4.6 | % | $ | 234,243 | $ | 212,576 | 10.2 | % | ||||||||||||||
| Recoveries from tenants | 42,011 | 33,210 | 26.5 | % | 39,215 | 7.1 | % | 116,933 | 96,254 | 21.5 | % | |||||||||||||||||||
| Other revenues | 573 | 395 | 45.1 | % | 435 | 31.7 | % | 1,427 | 1,135 | 25.7 | % | |||||||||||||||||||
| Total revenues | 123,050 | 107,105 | 14.9 | % | 116,579 | 5.6 | % | 352,603 | 309,965 | 13.8 | % | |||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||
| Property operating costs | 37,351 | 29,870 | 25.0 | % | 35,022 | 6.7 | % | 105,157 | 85,819 | 22.5 | % | |||||||||||||||||||
| Real estate taxes and insurance | 4,445 | 4,286 | 3.7 | % | 4,677 | (5.0 | )% | 13,208 | 13,525 | (2.3 | )% | |||||||||||||||||||
| Other expenses | 49 | 13 | N/M | (50 | ) | N/M | 106 | 53 | 100.0 | % | ||||||||||||||||||||
| Total expenses | 41,845 | 34,169 | 22.5 | % | 39,649 | 5.5 | % | 118,471 | 99,397 | 19.2 | % | |||||||||||||||||||
| Net operating income (1) | 81,205 | 72,936 | 11.3 | % | 76,930 | 5.6 | % | 234,132 | 210,568 | 11.2 | % | |||||||||||||||||||
| Straight-line revenues, net of reserve | 794 | 2,534 | N/M | 1,338 | N/M | 339 | 8,325 | N/M | ||||||||||||||||||||||
| Amortization of lease contracts above and below market value | (98 | ) | (585 | ) | N/M | (106 | ) | (7.5 | )% | (320 | ) | (763 | ) | N/M | ||||||||||||||||
| Cash net operating income (1) | $ | 81,901 | $ | 74,885 | 9.4 | % | $ | 78,162 | 4.8 | % | $ | 234,151 | $ | 218,130 | 7.3 | % | ||||||||||||||
| Note: Same Store Properties represent those properties placed into service on or before January 1, 2015 and excludes CH2. NJ1 is also excluded since it was sold in June 2016. | ||||||||||||||||||||||||||||||
| Same Store, Same Capital Properties | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| 30-Sep-16 | 30-Sep-15 | % Change | 30-Jun-16 | % Change | 30-Sep-16 | 30-Sep-15 | % Change | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||
| Base rent | $ | 60,388 | $ | 60,271 | 0.2 | % | $ | 59,518 | 1.5 | % | $ | 180,153 | $ | 178,842 | 0.7 | % | ||||||||||||||
| Recoveries from tenants | 29,024 | 24,427 | 18.8 | % | 27,163 | 6.9 | % | 81,440 | 73,684 | 10.5 | % | |||||||||||||||||||
| Other revenues | 380 | 343 | 10.8 | % | 360 | 5.6 | % | 1,092 | 1,007 | 8.4 | % | |||||||||||||||||||
| Total revenues | 89,792 | 85,041 | 5.6 | % | 87,041 | 3.2 | % | 262,685 | 253,533 | 3.6 | % | |||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||
| Property operating costs | 26,300 | 22,210 | 18.4 | % | 24,303 | 8.2 | % | 73,976 | 65,893 | 12.3 | % | |||||||||||||||||||
| Real estate taxes and insurance | 2,700 | 2,281 | 18.4 | % | 2,995 | (9.8 | )% | 8,134 | 6,761 | 20.3 | % | |||||||||||||||||||
| Other expenses | 17 | 9 | N/M | (68 | ) | N/M | 52 | 29 | 79.3 | % | ||||||||||||||||||||
| Total expenses | 29,017 | 24,500 | 18.4 | % | 27,230 | 6.6 | % | 82,162 | 72,683 | 13.0 | % | |||||||||||||||||||
| Net operating income (1) | 60,775 | 60,541 | 0.4 | % | 59,811 | 1.6 | % | 180,523 | 180,850 | (0.2 | )% | |||||||||||||||||||
| Straight-line revenues, net of reserve | 3,020 | 4,244 | (28.8 | )% | 3,538 | (14.6 | )% | 7,890 | 12,718 | (38.0 | )% | |||||||||||||||||||
| Amortization of lease contracts above and below market value | (98 | ) | (585 | ) | N/M | (106 | ) | (7.5 | )% | (320 | ) | (763 | ) | N/M | ||||||||||||||||
| Cash net operating income (1) | $ | 63,697 | $ | 64,200 | (0.8 | )% | $ | 63,243 | 0.7 | % | $ | 188,093 | $ | 192,805 | (2.4 | )% | ||||||||||||||
| Note: Same Store, Same Capital properties represent those properties placed into service on or before January 1, 2015 and have less than 10% of additional critical load developed after January 1, 2015. Excludes CH2, SC1 and ACC7. NJ1 is also excluded since it was sold in June 2016. (1) See next page for a reconciliation of Net Operating Income and Cash Net Operating Income to GAAP measures. | ||||||||||||||||||||||||||||||
| DUPONT FABROS TECHNOLOGY, INC. | ||||||||||||||||||||||||||||||
| Same Store Analysis - Reconciliations of Operating Income | ||||||||||||||||||||||||||||||
| to Net Operating Income and Cash Net Operating Income (1) | ||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||
| Reconciliation of Operating Income to Same Store Net Operating Income and Cash Net Operating Income | ||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| 30-Sep-16 | 30-Sep-15 | % Change | 30-Jun-16 | % Change | 30-Sep-16 | 30-Sep-15 | % Change | |||||||||||||||||||||||
| Operating income | $ | 56,380 | $ | 42,978 | 31.2 | % | $ | 49,975 | 12.8 | % | $ | 155,466 | $ | 119,098 | 30.5 | % | ||||||||||||||
| Add-back: non-same store operating loss | (418 | ) | 6,138 | (106.8 | )% | 2,315 | (118.1 | )% | 4,522 | 20,413 | (77.8 | )% | ||||||||||||||||||
| Same Store: | ||||||||||||||||||||||||||||||
| Operating income | 55,962 | 49,116 | 13.9 | % | 52,290 | 7.0 | % | 159,988 | 139,511 | 14.7 | % | |||||||||||||||||||
| Depreciation and amortization | 25,243 | 23,820 | 6.0 | % | 24,640 | 2.4 | % | 74,144 | 71,057 | 4.3 | % | |||||||||||||||||||
| Net operating income | 81,205 | 72,936 | 11.3 | % | 76,930 | 5.6 | % | 234,132 | 210,568 | 11.2 | % | |||||||||||||||||||
| Straight-line revenues, net of reserve | 794 | 2,534 | N/M | 1,338 | N/M | 339 | 8,325 | N/M | ||||||||||||||||||||||
| Amortization of lease contracts above and below market value | (98 | ) | (585 | ) | N/M | (106 | ) | (7.5 | )% | (320 | ) | (763 | ) | N/M | ||||||||||||||||
| Cash net operating income | $ | 81,901 | $ | 74,885 | 9.4 | % | $ | 78,162 | 4.8 | % | $ | 234,151 | $ | 218,130 | 7.3 | % | ||||||||||||||
| Reconciliation of Operating Income to Same Store, Same Capital Net Operating Income and Cash Net Operating Income | ||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| 30-Sep-16 | 30-Sep-15 | % Change | 30-Jun-16 | % Change | 30-Sep-16 | 30-Sep-15 | % Change | |||||||||||||||||||||||
| Operating income | $ | 56,380 | $ | 42,978 | 31.2 | % | $ | 49,975 | 12.8 | % | $ | 155,466 | $ | 119,098 | 30.5 | % | ||||||||||||||
| Less: non-same store operating (income) loss | (14,583 | ) | (1,617 | ) | N/M | (9,153 | ) | 59.3 | % | (31,837 | ) | 3,318 | N/M | |||||||||||||||||
| Same Store: | ||||||||||||||||||||||||||||||
| Operating income | 41,797 | 41,361 | 1.1 | % | 40,822 | 2.4 | % | 123,629 | 122,416 | 1.0 | % | |||||||||||||||||||
| Depreciation and amortization | 18,978 | 19,180 | (1.1 | )% | 18,989 | (0.1 | )% | 56,894 | 58,434 | (2.6 | )% | |||||||||||||||||||
| Net operating income | 60,775 | 60,541 | 0.4 | % | 59,811 | 1.6 | % | 180,523 | 180,850 | (0.2 | )% | |||||||||||||||||||
| Straight-line revenues, net of reserve | 3,020 | 4,244 | (28.8 | )% | 3,538 | (14.6 | )% | 7,890 | 12,718 | (38.0 | )% | |||||||||||||||||||
| Amortization of lease contracts above and below market value | (98 | ) | (585 | ) | N/M | (106 | ) | (7.5 | )% | (320 | ) | (763 | ) | N/M | ||||||||||||||||
| Cash net operating income | $ | 63,697 | $ | 64,200 | (0.8 | )% | $ | 63,243 | 0.7 | % | $ | 188,093 | $ | 192,805 | (2.4 | )% | ||||||||||||||
(1) Net Operating Income ("NOI") represents total revenues less property operating costs, real estate taxes and insurance, and other expenses (each as reflected in the consolidated statements of operations) for the properties included in the analysis. Cash Net Operating Income ("Cash NOI") is NOI less straight-line revenues, net of reserve and amortization of lease contracts above and below market value for the properties included in the analysis.
We use NOI and Cash NOI as supplemental performance measures because, in excluding depreciation and amortization, impairment charges on depreciable real estate assets and gains and losses from property dispositions, each provides a performance measure that, when compared period over period, captures trends in occupancy rates, rental rates and operating expenses. However, because NOI and Cash NOI exclude depreciation and amortization, impairment charges on depreciable real estate assets and gains and losses from property dispositions, and capture neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of NOI and Cash NOI as a measure of our performance is limited.
Other REITs may not calculate NOI and Cash NOI in the same manner we do and, accordingly, our NOI and Cash NOI may not be comparable to the NOI and Cash NOI of other REITs. NOI and Cash NOI should not be considered as an alternative to operating income (as computed in accordance with GAAP).
| DUPONT FABROS TECHNOLOGY, INC. | |||||||||||||||||||||||
| Development Projects | |||||||||||||||||||||||
| As of September 30, 2016 | |||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| Property | Property Location | Gross Building Area (1) | CRSF (2) | Critical Load MW (3) | Estimated Total Cost (4) | Construction in Progress & Land Held for Development (5) | CRSF % Pre- leased | Critical Load % Pre- leased | |||||||||||||||
| Current Development Projects | |||||||||||||||||||||||
| ACC7 Phase IV (6) | Ashburn, VA | 96,000 | 52,000 | 8.2 | $72,000 - $74,000 | 68,156 | 41 | % | 49 | % | |||||||||||||
| ACC9 Phase I | Ashburn, VA | 163,000 | 90,000 | 14.4 | 126,000 - 132,000 | 29,718 | — | % | — | % | |||||||||||||
| ACC9 Phase II | Ashburn, VA | 163,000 | 90,000 | 14.4 | 126,000 - 132,000 | 29,156 | — | % | — | % | |||||||||||||
| CH2 Phase IV | Elk Grove Village, IL | 9,000 | 7,000 | 1.2 | 8,000 - 8,600 | 7,574 | 100 | % | 100 | % | |||||||||||||
| SC1 Phase III | Santa Clara, CA | 111,000 | 64,000 | 16.0 | 160,000 - 165,000 | 63,945 | 100 | % | 100 | % | |||||||||||||
| 542,000 | 303,000 | 54.2 | 492,000 - 511,600 | 198,549 | |||||||||||||||||||
| Land/Shell Held for Development (7) | |||||||||||||||||||||||
| ACC8 | Ashburn, VA | 100,000 | 50,000 | 10.4 | 4,248 | ||||||||||||||||||
| ACC10 | Ashburn, VA | 270,000 | 130,000 | 27.0 | 8,017 | ||||||||||||||||||
| ACC11 | Ashburn, VA | 150,000 | 80,000 | 16.0 | 4,775 | ||||||||||||||||||
| CH3 | Elk Grove Village, IL | 305,000 | 160,000 | 25.6 | 11,071 | ||||||||||||||||||
| OR1 | Hillsboro, OR | 489,000 | 245,000 | 48.0 | 6,023 | ||||||||||||||||||
| OR2 | Hillsboro, OR | 489,000 | 245,000 | 48.0 | 6,022 | ||||||||||||||||||
| TOR1 | Vaughan, ON | 600,000 | 223,000 | 46.0 | 43,479 | ||||||||||||||||||
| 2,403,000 | 1,133,000 | 221.0 | 83,635 | ||||||||||||||||||||
| Total | 2,945,000 | 1,436,000 | 275.2 | $ | 282,184 | ||||||||||||||||||
(1) Gross building area is the entire building area, including CRSF (the portion of gross building area where our customers’ computer servers are located), common areas, areas controlled by us (such as the mechanical, telecommunications and utility rooms) and, in some facilities, individual office and storage space leased on an as available basis to our customers. The respective amounts listed for each of the “Land Held for Development” sites are estimates.
(2) CRSF is that portion of gross building area where customers locate their computer servers. The respective amounts listed for each of the “Land Held for Development” sites are estimates.
(3) Critical load (also referred to as IT load or load used by customers’ servers or related equipment) is the power available for exclusive use by customers expressed in terms of MW or kW (One MW is equal to 1,000 kW). The respective amounts listed for each of the “Land Held for Development” sites are estimates.
(4) Current development projects include land, capitalization for construction and development and capitalized interest and operating carrying costs, as applicable, upon completion. Future development projects/phases include land, shell and underground work through the opening of the phase(s) that are either under current development or in service.
(5) Amount capitalized as of September 30, 2016. Future development projects/phases include land, shell and underground work through the opening of the phase(s) that are either under current development or in service.
(6) ACC7 Phase IV was placed into service on October 1, 2016.
(7) Amounts listed for gross building area, CRSF and critical load are estimates.
| DUPONT FABROS TECHNOLOGY, INC. | ||||||||||||
| Debt Summary as of September 30, 2016 | ||||||||||||
| ($ in thousands) | ||||||||||||
| September 30, 2016 | ||||||||||||
| Amounts (1) | % of Total | Rates | Maturities (years) | |||||||||
| Secured | $ | 112,500 | 9 | % | 2.1 | % | 1.5 | |||||
| Unsecured | 1,100,000 | 91 | % | 4.9 | % | 5.4 | ||||||
| Total | $ | 1,212,500 | 100 | % | 4.7 | % | 5.1 | |||||
| Fixed Rate Debt: | ||||||||||||
| Unsecured Notes due 2021 | $ | 600,000 | 49 | % | 5.9 | % | 5.0 | |||||
| Unsecured Notes due 2023 (2) | 250,000 | 21 | % | 5.6 | % | 6.7 | ||||||
| Fixed Rate Debt | 850,000 | 70 | % | 5.8 | % | 5.5 | ||||||
| Floating Rate Debt: | ||||||||||||
| Unsecured Credit Facility | — | — | % | — | % | 3.8 | ||||||
| Unsecured Term Loan | 250,000 | 21 | % | 2.0 | % | 5.3 | ||||||
| ACC3 Term Loan | 112,500 | 9 | % | 2.1 | % | 1.5 | ||||||
| Floating Rate Debt | 362,500 | 30 | % | 2.0 | % | 4.1 | ||||||
| Total | $ | 1,212,500 | 100 | % | 4.7 | % | 5.1 | |||||
Note: We capitalized interest and deferred financing cost amortization of $1.7 million and $8.2 million during the three and nine months ended September 30, 2016, respectively.
(1) Principal amounts exclude deferred financing costs.
(2) Principal amount excludes original issue discount of $1.7 million as of September 30, 2016.
| Debt Principal Repayments as of September 30, 2016 | ||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Year | Fixed Rate (1) | Floating Rate (1) | Total (1) | % of Total | Rates | |||||||||||||||||||
| 2016 | $ | — | $ | 1,250 | (4 | ) | $ | 1,250 | 0.1 | % | 2.1 | % | ||||||||||||
| 2017 | — | 8,750 | (4 | ) | 8,750 | 0.7 | % | 2.1 | % | |||||||||||||||
| 2018 | — | 102,500 | (4 | ) | 102,500 | 8.5 | % | 2.1 | % | |||||||||||||||
| 2019 | — | — | — | — | % | — | % | |||||||||||||||||
| 2020 | — | — | — | — | % | — | % | |||||||||||||||||
| 2021 | 600,000 | (2 | ) | — | 600,000 | 49.5 | % | 5.9 | % | |||||||||||||||
| 2022 | — | 250,000 | (5 | ) | 250,000 | 20.6 | % | 2.0 | % | |||||||||||||||
| 2023 | 250,000 | (3 | ) | — | 250,000 | 20.6 | % | 5.6 | % | |||||||||||||||
| Total | $ | 850,000 | $ | 362,500 | $ | 1,212,500 | 100.0 | % | 4.7 | % | ||||||||||||||
(1) Principal amounts exclude deferred financing costs.
(2) The 5.875% Unsecured Notes due 2021 mature on September 15, 2021.
(3) The 5.625% Unsecured Notes due 2023 mature on June 15, 2023. Principal amount excludes original issue discount of $1.8 million as of September 30, 2016.
(4) The ACC3 Term Loan matures on March 27, 2018 with no extension option. Quarterly principal payments of $1.25 million began on April 1, 2016, increase to $2.5 million on April 1, 2017 and continue through maturity.
(5) The Unsecured Term Loan matures on January 21, 2022 with no extension option.
| DUPONT FABROS TECHNOLOGY, INC. | |||||||
| Selected Unsecured Debt Metrics(1) | |||||||
| 9/30/16 | 12/31/15 | ||||||
| Interest Coverage Ratio (not less than 2.0) | 5.3 | 4.8 | |||||
| Total Debt to Gross Asset Value (not to exceed 60%) | 33.6 | % | 35.9 | % | |||
| Secured Debt to Total Assets (not to exceed 40%) | 3.1 | % | 3.4 | % | |||
| Total Unsecured Assets to Unsecured Debt (not less than 150%) | 240 | % | 245 | % | |||
(1) These selected metrics relate to DuPont Fabros Technology, LP's outstanding unsecured notes. DuPont Fabros Technology, Inc. is the general partner of DuPont Fabros Technology, LP.
| Capital Structure as of September 30, 2016 | |||||||||||||||||
| (in thousands except per share data) | |||||||||||||||||
| Line of Credit | $ | — | |||||||||||||||
| Mortgage Notes Payable | 112,500 | ||||||||||||||||
| Unsecured Term Loan | 250,000 | ||||||||||||||||
| Unsecured Notes | 850,000 | ||||||||||||||||
| Total Debt | 1,212,500 | 23.8 | % | ||||||||||||||
| Common Shares | 85 | % | 75,576 | ||||||||||||||
| Operating Partnership (“OP”) Units | 15 | % | 13,810 | ||||||||||||||
| Total Shares and Units | 100 | % | 89,386 | ||||||||||||||
| Common Share Price at September 30, 2016 | $ | 41.25 | |||||||||||||||
| Common Share and OP Unit Capitalization | $ | 3,687,173 | |||||||||||||||
| Preferred Stock ($25 per share liquidation preference) | 201,250 | ||||||||||||||||
| Total Equity | 3,888,423 | 76.2 | % | ||||||||||||||
| Total Market Capitalization | $ | 5,100,923 | 100.0 | % | |||||||||||||
| DUPONT FABROS TECHNOLOGY, INC. | |||||||||||
| Common Share and OP Unit | |||||||||||
| Weighted Average Amounts Outstanding | |||||||||||
| Q3 2016 | Q3 2015 | YTD 3Q 2016 | YTD 3Q 2015 | ||||||||
| Weighted Average Amounts Outstanding for EPS Purposes: | |||||||||||
| Common Shares - basic | 75,232,413 | 65,041,159 | 72,212,874 | 65,190,737 | |||||||
| Effect of dilutive securities | 863,581 | 520,732 | 859,253 | 728,239 | |||||||
| Common Shares - diluted | 76,095,994 | 65,561,891 | 73,072,127 | 65,918,976 | |||||||
| Weighted Average Amounts Outstanding for FFO, Normalized FFO and AFFO Purposes: | |||||||||||
| Common Shares - basic | 75,232,413 | 65,041,159 | 72,212,874 | 65,190,737 | |||||||
| OP Units - basic | 13,810,197 | 15,419,237 | 14,478,959 | 15,419,566 | |||||||
| Total Common Shares and OP Units | 89,042,610 | 80,460,396 | 86,691,833 | 80,610,303 | |||||||
| Effect of dilutive securities | 1,014,223 | 606,274 | 1,029,352 | 819,583 | |||||||
| Common Shares and Units - diluted | 90,056,833 | 81,066,670 | 87,721,185 | 81,429,886 | |||||||
| Period Ending Amounts Outstanding: | |||||||||||
| Common Shares | 75,576,481 | ||||||||||
| OP Units | 13,809,998 | ||||||||||
| Total Common Shares and Units | 89,386,479 | ||||||||||
DUPONT FABROS TECHNOLOGY, INC.
2016 Guidance
The earnings guidance/projections provided below are based on current expectations and are forward-looking.
| Expected Q4 2016 per share | Expected 2016 per share | ||||||||||||||
| Net income per common share and common unit - diluted | $0.42 to $0.45 | $1.64 to $1.67 | |||||||||||||
| Depreciation and amortization, net | 0.31 | 1.22 | |||||||||||||
| Gain on sale of real estate | — | (0.26 | ) | ||||||||||||
| NAREIT FFO per common share and common unit - diluted (1) | $0.73 to $0.76 | $2.60 to $2.63 | |||||||||||||
| Severance and equity acceleration | — | 0.01 | |||||||||||||
| Loss on early extinguishment of debt | — | 0.01 | |||||||||||||
| Issuance costs associated with redeemed preferred shares | — | 0.15 | |||||||||||||
| Normalized FFO per common share and common unit - diluted (1) | $0.73 to $0.76 | $2.77 to $2.80 | |||||||||||||
| Straight-line revenues, net of reserve | 0.01 | — | |||||||||||||
| Amortization of lease contracts above and below market value | — | (0.01 | ) | ||||||||||||
| Compensation paid with Company common shares | 0.02 | 0.08 | |||||||||||||
| Non real estate depreciation and amortization | — | 0.01 | |||||||||||||
| Amortization of deferred financing costs | 0.01 | 0.05 | |||||||||||||
| Improvements to real estate | (0.02 | ) | (0.07 | ) | |||||||||||
| Capitalized leasing commissions | (0.01 | ) | (0.05 | ) | |||||||||||
| AFFO per common share and common unit - diluted (1) | $0.74 to $0.77 | $2.78 to $2.81 | |||||||||||||
| 2016 Debt Assumptions | ||||||
| Weighted average debt outstanding | $1,223.0 million | |||||
| Weighted average interest rate (one-month LIBOR avg. 0.46%) | 4.82 | % | ||||
| Total interest costs | $58.9 million | |||||
| Amortization of deferred financing costs | 4.3 million | |||||
| Interest expense capitalized | (10.0) million | |||||
| Deferred financing costs amortization capitalized | (0.6) million | |||||
| Total interest expense after capitalization | $52.6 million | |||||
| 2016 Other Guidance Assumptions | ||||||
| Total revenues | $520 to $525 million | |||||
| Base rent (included in total revenues) | $343 to $347 million | |||||
| General and administrative expense | $22 to $23 million | |||||
| Investments in real estate - development (2) | $280 to $300 million | |||||
| Improvements to real estate excluding development | $6 million | |||||
| Preferred stock dividends, excluding write-off of issuance costs of redeemed preferred shares | $21 million | |||||
| Annualized common stock dividend | $1.88 per share | |||||
| Weighted average common shares and OP units - diluted | 89 million | |||||
| Acquisitions of income producing properties | No amounts budgeted | |||||
(1) For information regarding FFO and Normalized FFO, see “Reconciliations of Net Income to FFO, Normalized FFO and AFFO” in this earnings release.
(2) Represents cash spend expected in 2016 for CH2 Phase II, which was placed into service on April 1, 2016; CH2 Phase III, which was placed into service on July 1, 2016; ACC7 Phase III, which was placed into service on June 1, 2016; ACC7 Phase IV which was placed into service on October 1, 2016; ACC9 Phases I and II, CH2 Phase IV and SC1 Phase III, which are currently in development; and TOR1 Phase I (Toronto), OR1 Phase I (Hillsboro, OR) and CH3 Phase I, which are planned future developments that require Board approval.
Note: This press release supplement contains certain non-GAAP financial measures that we believe are helpful in understanding our business, as further discussed within this press release supplement. These financial measures, which include NAREIT Funds From Operations, Normalized Funds From Operations, Adjusted Funds From Operations, Net Operating Income, Cash Net Operating Income, NAREIT Funds From Operations per share, Normalized Funds From Operations per share and Adjusted Funds From Operations per share, should not be considered as an alternative to net income, operating income, earnings per share or any other GAAP measurement of performance or as an alternative to cash flows from operating, investing or financing activities. Furthermore, these non-GAAP financial measures are not intended to be a measure of cash flow or liquidity. Information included in this supplemental package is unaudited.
| DuPont Fabros Technology, Inc. 401 9th Street, NW, Suite 600 Washington, D.C. 20004 (202) 728-0044 www.dft.com NYSE: DFT | |