Digital Realty Trust, Inc. Bank of America 2026 Media,Communications & Entertainment Conference
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Thank you again for being here with us today. Michael Funk, Bank of America. Really happy to have Jordan Sadler from Digital Realty. We were just saying before we walked in that we're going to have Digital Realty, I think, speaking three times in the next week and a half at Bank of America. So thank you again for being here with us this afternoon for the first of the three presentations. I do not know if you had any kind of safe harbor that you wanted to read off first, Jordan, or anything else?
No safe harbor per se, but please do visit our investor relations website in the event anybody has any questions about some of the numbers or statistics or data we put out here today.
Okay, perfect. I appreciate that. I wanted to start with the core FFO growth because the commentary, the language, it evolved last quarter.
Yes. Right? The way that you talked about the growth rate.
Prior to last quarter, or I will get this partly wrong and you can correct me, but I think that the narrative was more of a high single digit for longer and steady narrative, and I am paraphrasing. Then, last quarter, I think you talked about double-digit growth for 2027 and beyond, right? So leaning more into development-based growth and other factors driving higher growth. What was the genesis of that change in language or communication, if I am framing that right?
Yeah. If I may, I am going to back it up a couple of years to maybe tell a little bit of the story to how we got to where we are.
Please, yeah. Give the background.
Just to give a little bit of a context, and thank you again, Michael Funk, for all that you do and your coverage for us and spreading the word and for having us out here today and setting up meetings with folks. Just backing it up to 2024, February 24, which was the fourth quarter of 2023 earnings conference call where we gave guidance for 2024, which was in the low single digits bottom line growth.
Right? Which was not a super satisfactory number in the context of what was going on in the world.
But you were still coming through negative release and spread.
Is that right? We were coming through.
Right. There's plenty of things dragging on us.
Yeah. Rising rates obviously were a big impact.
We had delevered tremendously, 2 turns. From virtually 7 times at March 31, 2023, to 5 times by the end of the year. So that 2 turns delevering was definitely impactful in dragging on us in 2024 as well. So that low single digits growth number we put out there was not super satisfactory in a construct or a world where NVIDIA was seeing explosive growth and AI was ripping and taking hold. On the earnings conference call, you may recall, Matt sheepishly gave the low single digits growth guide. But when asked about the algorithm, what does growth look like longer term, he said mid-single digits. Right? He walked through a construct where in 2025, he was pointing folks to basically 5% growth.
Roll forward through 2024 and into early 2025. At the outset of 2025, he ended up giving guidance for the year that was a little bit better than he had originally forecast. He said we're probably going to do closer to 6% this year. Right? So it was a little bit better. Things had come along. Obviously, the environment was helpful. Our leasing got better, our leasing spreads got better, to your point. Our development started to come along. Rates certainly weren't helping, but the business was definitely getting better and we were executing. Roll forward to the beginning of this year. We ended up delivering 10% bottom line growth versus the 6% we expected last year. For this year, we were saying, "Hey, we think we can do really well again this year. Things are really strong. We are building a really nice backlog and we have got momentum in all aspects of our business, which I will get to.
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