Digital Realty Financial Model

• Total assets: Approximately $40 billion to $45 billion.
• Key asset categories: Investments in real estate (land, buildings, improvements), Construction in progress (CIP), and Investments in unconsolidated joint ventures.
• Goodwill & intangibles as % of total assets: Approximately 15% to 20%, stemming from historical acquisitions (e.g., Interxion, DuPont Fabros).
• Working capital profile:
• Days Sales Outstanding (DSO): 30 to 45 days.
• Days Inventory Outstanding (DIO): Not applicable.
• Days Payable Outstanding (DPO): 45 to 60 days.
• Net working capital as % of revenue: Typically negative 5% to negative 10%.
• Working capital dynamics: The company operates with negative working capital, using accrued payables for construction and utilities to partially fund operations.
• PP&E: Real estate is depreciated over 10 to 50 years (buildings) and 3 to 20 years (improvements).
• Right-of-use assets / operating leases: Material for ground leases in certain international markets, representing approximately 3% to 5% of assets.

• Capex as % of revenue: 40% to 50% (highly capital intensive).
• Maintenance capex vs. growth capex: Maintenance capex is minimal (2% to 4% of revenue); the vast majority is growth capex for new data centre development.
• Major capex programmes underway: Expanding capacity in Northern Virginia, Frankfurt, and Osaka, with a global development pipeline exceeding 500 MW.
• Capitalised software / development costs: Capitalised interest and internal leasing commissions are material additions to the real estate balance.
• M&A pattern: Historically a transformational acquirer, but recently pivoted to organic development and capital recycling via joint ventures.
• Typical acquisition multiple paid: 18x to 25x EBITDA for prime data centre portfolios.

• Total debt: Approximately $18.4 billion.
• Debt/EBITDA ratio: Current net debt-to-Adjusted EBITDA is 4.9x, with a long-term target of 5.0x to 5.5x.
• Credit rating: Investment grade (BBB / Baa2).
• Key debt instruments: Unsecured global bonds (Euro and USD denominated), multi-currency revolving credit facility, and term loans.
• Maturity profile: Well-laddered with average maturity around 4.5 to 5 years.
• Interest rate profile: Predominantly fixed rate (over 80%), with a weighted average coupon of approximately 3.0% to 3.5%.
• Covenants: Standard REIT covenants including total debt to total assets (must be under 60%) and fixed charge coverage (currently 4.5x, must be over 1.5x).
• Share repurchase programme: Inactive; the company frequently issues equity via At-The-Market (ATM) offerings to fund development.
• Dividend policy: Progressive dividend policy, yielding approximately 3.0% to 4.0%, with a payout ratio of 70% to 80% of Adjusted Funds From Operations (AFFO).

• Operating cash flow conversion: OCF is typically 2.0x to 2.5x Net Income due to massive non-cash depreciation add-backs.
• Free cash flow margin: GAAP Free Cash Flow is consistently negative due to heavy development capex.
• Major non-cash items: Depreciation and amortisation, straight-line rental revenue, and equity-based compensation.
• Working capital cash flow impact: Generally a mild source of cash as the company stretches payables on large construction projects.
• Capex intensity: Requires constant access to debt and equity capital markets to fund the gap between operating cash flow and development capex.
• Cash tax rate vs. GAAP effective tax rate: Near zero. As a REIT, the company pays minimal corporate income tax provided it distributes at least 90% of taxable income to shareholders.

1. Assumptions: Macro drivers, leasing spreads, development yields, utility recovery rates, and capital market assumptions.
2. Portfolio & Development: Tracks operating MW capacity, occupancy percentage, construction in progress (CIP), and expected delivery dates.
3. Revenue Build: Calculates Rental revenues, Tenant reimbursements, and Interconnection and other revenue based on capacity and pricing.
4. Income Statement: GAAP P&L down to Net Income Available to Common Stockholders.
5. FFO & AFFO: Reconciles Net Income to Funds From Operations (FFO), Core FFO, and Adjusted Funds From Operations (AFFO).
6. Balance Sheet: Tracks Real Estate at Cost, Accumulated Depreciation, Debt, and Equity.
7. Cash Flow Statement: Standard three-section cash flow, highlighting the funding gap.
8. Debt & Equity Schedule: Models debt maturities, interest expense, ATM equity issuance, and dividend payments.
9. Valuation: Net Asset Value (NAV) build based on applying cap rates to forward Cash NOI, plus a DCF of AFFO.

1. `Operating Capacity (MW) = Prior Period Capacity + New Development Deliveries - Asset Dispositions`
2. `Billed Capacity (MW) = Operating Capacity x Occupancy Percentage`
3. `Rental Revenue = Billed Capacity x Average Rent per MW x 3 months`
4. `Tenant Reimbursement Revenue = Utilities Expense x Tenant Recovery Ratio (historically 85-95%)`
5. `Interconnection Revenue = Total Cross-Connects x Average Monthly Fee x 3 months`
6. `Net Operating Income (NOI) = Total Operating Revenues - Utilities - Rental Property Operating - Property Taxes - Insurance`
7. `Cash NOI = NOI - Straight-Line Rent Adjustments - Amortisation of Above/Below Market Leases`
8. `EBITDAre = Net Income + Interest + Taxes + D&A + Impairments - Gain on Sale of Real Estate`
9. `Adjusted EBITDA = EBITDAre + Transaction Expenses + Equity-Based Compensation`
10. `FFO = Net Income Available to Common Stockholders + Real Estate D&A - Gain on Sale of Real Estate`
11. `Core FFO = FFO + Transaction Expenses + Loss on Early Extinguishment of Debt + FX Losses`
12. `AFFO = Core FFO - Recurring Capital Expenditures - Straight-Line Rent Adjustments - Capitalised Leasing Commissions`
13. `Funding Gap = AFFO - Dividends Paid - Development Capex`
14. `New Equity Required = MAX(0, Funding Gap - Net New Debt Issued)`

The Portfolio & Development sheet is the engine of the model. It dictates the timing of new capacity which feeds directly into the Revenue Build. The Revenue Build populates the top line of the Income Statement. The Income Statement feeds Net Income into the FFO & AFFO sheet. The FFO & AFFO sheet determines the cash available for dividends and capex, which feeds the Cash Flow Statement. The resulting cash deficit in the Cash Flow Statement triggers the Debt & Equity Schedule to issue new ATM equity or draw on the revolver. This creates a circularity: new debt increases interest expense on the Income Statement, which lowers Net Income and FFO, thereby increasing the funding gap.

• Revenues and operating metrics (occupancy, MW) are positive.
• Expenses on the Income Statement are negative.
• Assets, Liabilities, and Equity on the Balance Sheet are positive.
• Cash inflows are positive and cash outflows (including capex and dividends) are negative on the Cash Flow Statement.
• Contra-assets (like Accumulated Depreciation) are negative on the Balance Sheet.

• Failing to model the 6 to 8 month lag between signing a lease (bookings) and the lease commencement date, which overstates near-term revenue.
• Confusing GAAP Rental Revenue with Cash Rental Revenue; straight-line rent adjustments must be deducted to calculate true cash yields.
• Underestimating the impact of utility cost pass-throughs; higher utility costs inflate both revenue and expenses, which mathematically compresses the EBITDA margin percentage even if gross profit dollars are unaffected.
• Ignoring the contribution from unconsolidated joint ventures, which are reported below the operating line but are a critical and growing component of Core FFO.
• Mismodelling capitalised interest; during heavy development periods, a significant portion of interest expense is capitalised into the real estate balance rather than expensed on the P&L.
• Foreign currency translation can swing reported revenue by 2% to 4% YoY; the model should include a constant-currency toggle for accurate operational benchmarking.
• Assuming all capex is maintenance; maintenance capex is very small, while development capex drives the balance sheet and requires external funding.
• Forgetting to deduct preferred stock dividends when bridging from Net Income to Net Income Available to Common Stockholders.

• Net Debt to Adjusted EBITDA must remain between 4.5x and 5.5x; flag if the model forces leverage above 6.0x.
• Fixed charge coverage should remain above 3.5x.
• Dividend payout ratio should be 70% to 85% of AFFO; flag if it exceeds 100%.
• Adjusted EBITDA margin should remain in the 50% to 54% range.
• Same-Capital Cash NOI growth should be between 3.0% and 6.0%.
• Total Assets must equal Total Liabilities plus Equity in every period.
• Tenant reimbursement revenue should closely track 85% to 95% of utility expenses.
• Development yields (Cash NOI generated by new deliveries divided by Development Capex) should solve to 8% to 11%.

• Filings: SEC EDGAR for Digital Realty (DLR) 10-K, 10-Q, and 8-K filings.
• Investor Relations: Digital Realty's quarterly financial supplements and earnings presentations (crucial for operating metrics like MW capacity and leasing spreads).
• Key Peers: Equinix (EQIX), Iron Mountain (IRM), American Tower (AMT).
• Industry Data: datacenterHawk and Synergy Research Group for wholesale pricing, market vacancy rates, and hyperscale demand trends.
• Consensus Estimates: FactSet or Bloomberg for Core FFO and AFFO consensus estimates.

• Digital Realty Q4 2025 Earnings Release and Financial Supplement (February 2026)
• Digital Realty 2024 Annual Report on Form 10-K
• Digital Realty Investor Relations Website (https://investor.digitalrealty.com)
• datacenterHawk Q4 2025 Market Reports