Hello and welcome to the Digital Realty Third Quarter 2016 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. John Stewart, Senior Vice President of Investor Relations. Mr. Stewart, please go ahead, sir.

Thank you, Ed. The speakers on today's call will be CEO, Bill Stein; and CFO, Andy Power; Chief Investment Officer, Scott Peterson and Chief Operating Officer, Jarrett Appleby; are also on the call and will be available for Q&A. Management may make forward-looking statements related to future results, including guidance and the underlying assumptions. Forward-looking statements are based on current expectations, that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of the risks related to our business, see our 2015 10-K and subsequent filings with the SEC. This call will contain non-GAAP financial information. Reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website. And now, I'd like to turn the call over to Bill Stein.

Thanks, John. Good afternoon and thank you all for joining us. We had another very productive quarter characterized by healthy leasing activity and solid execution against virtually every objective of our strategic plan laid out here on page two of our earnings deck. As you may have seen, we announced this afternoon that we've appointed Dan Papes as Senior Vice President of Global Sales and Marketing. Dan was most recently President of Unify North America, formerly Siemens Networking Systems, where he had responsibility for managing all aspects of the business with total ownership of the P&L. Dan is a technology industry veteran with a 27-year career with our largest customer, primarily in the outsourcing and managed services business, including roles as Vice President of Global Cloud Services Sales and Vice President of Global Telecommunications Industry Sales. He has experienced leading global sales organizations and he has been responsible for driving significant growth in revenues, deal volume and profitability. We are delighted to welcome Dan to the team and we are confident that he is the right choice to help lead our global sales engine to the next level. I would like to take a moment here to thank Andrew Schaap who ran our scale sales team on an interim basis, along with Tony Rossabi who continues to lead our colocation and interconnection line of business for their leadership and professionalism, while we ran the search for a permanent sales and marketing leader. They are both key assets to our organization and the solid rebound in bookings during the third quarter is a direct testament to their capabilities and the depth of our talent. The third quarter capital allocation highlight was closing on the acquisition of a portfolio of eight highly strategic data centers in London, Amsterdam and Frankfurt, as shown…

Thank you, Bill. Let's begin with our leasing activity on page nine. Our total bookings for the third quarter were a little over $55 million of annualized GAAP revenue, including a $9 million contribution from interconnection. We assigned new leases for space and power totaling $46 million of annualized GAAP rent during the third quarter, including an $8 million co-location contribution. Our third quarter signings speak to our ability to leverage our competitive advantages to win robust yet profitable demand from a diverse global customer set. Third quarter wins included top cloud service providers signing across multiple locations and multiple continents. They also included a smaller, but rapidly growing new customer signing across four different locations within North America alone. In addition, the team delivered an 18% increase in co-location and interconnection signings in the U.S. with our interconnection bookings representing a record quarterly performance since our acquisition of Telx and one of the top three quarters in Telx's history. I would like to pause here to point out that we have revised our headline total bookings presentation to include the contribution from interconnection. We will continue to provide precisely the same information and the same level of granularity, but we will now be including the interconnection contribution in our total bookings to more closely align our presentation with our peers. At the market level, there's a lot of excitement in Chicago these days. And I'm not just talking about the Cubbies. As Bill mentioned, we are nearing delivery and leasing of the last few megawatts on our Franklin Park campus and we have secured the adjacent land parcel to support our continued growth. Subsequent to quarter end, we took assignment of a bespoke co-location reseller customer's PBB lease for 83,000 rentable square feet at 350 East Cermak in downtown…

We will now begin the question-and-answer session. Our first question comes from Jordan Sadler of KeyBanc. Please go ahead.

Thank you and good afternoon. First question comes down to guidance. Some of the assumptions moved around slightly; the one that you touched on was occupancy, and I was hoping maybe you can shed a little bit more light. You may have mentioned this in the prepared remarks, but on the overall reduction there in the assumption? And then, on the other side of things, it seems like you were ahead on a number of metrics and I would have thought ultimately that that would have contributed to better FFO growth on the year on a core basis, at least. Can you maybe just speak to those two points?

Sure. Thanks, Jordan. So, maybe turning to the guidance first. We reiterated the same guidance as the previous quarter of $5.65 to $5.75 core FFO per share. There were some slight adjustments to some of the assumptions. We increased the EBITDA margin, I think, 50 basis points on the low end, a 30 basis point tweak on the G&A. The change to the year-end portfolio occupancy to being down was really a product of a few things. One, we're absorbing obviously the European portfolio assets into the total portfolio occupancy, and that number includes existing vacancy. That portfolio is roughly 66% leased as of the third quarter. Plus in addition to that, as you may have saw, we recently opened up our data tower in Amsterdam at the Science Park, which is a brand new, up to nine megawatts asset, which is part of this transaction that will also bring some vacancy into the quarter. And then the other major driver I'd say is, in connection with the transaction in Chicago in our 350 Cermak building where we took the assignment of a PBB lease, obviously that will go from a 100% occupied 83,000 square feet to a much lower occupied amount with the existing colocation customers in the suite. Net-net, we think that was a great transaction for not only for the exiting customer but really for Digital in terms of getting our hands on very valuable market-ready space in an incredibly hot market. That asset's been north of 96% for numerous years now. And then going to your second question, overall the quarter, I think depending on whose metrics, we either beat by a penny or met consensus estimates, but it was pretty much in line with our forecast. I think there was a handful of positive things that you probably were highlighting. The one thing I would say not negative but something that maybe put a little bit of drag on our third quarter growth was the increase in the G&A, which was probably related to onboarding the European portfolio, which was expected. I think an unexpected growth component of the G&A was some of the overall integration-related work on the onboarding from that acquisition which closed in early July and travel and work to bring that team into the fold, and probably some other activity around the or seasonally-related activity around our Marketplace Live initiative and other events. And the last thing I can think of off the top of my head, we did bring on two new board member during the quarter which has a little bit of incremental cost to the company, but I think they will be well worth it in the long run.

Okay. Thank you.

Our next question comes from Jonathan Atkin of RBC Capital Markets. Please go ahead.

So, the question I had was around interconnection revenues, and I was interested in both the legacy Digital Realty properties as well as legacy Telecity over in Europe, and what are your plans or what's the progress towards phasing in the interconnects towards more of a recurring revenue stream? And then the follow-up is just looking at slide six, the land parcel slide made me wonder a little bit about Santa Clara, and how you view some of the opportunities there including maybe inorganic growth. And then any kind of update on Frankfurt's given that you have a building there and then you also have a new build that you've entered into, and so what are some of the plans that you have in that market? Thanks very much.

So, interconnection, Santa Clara, Frankfurt, I'll do the first one and then I'll toss the last two to Scott. On interconnection, we are obviously integrating and bringing on board not only eight great assets in the Dockland, (34:17) the Science Park and also in Frankfurt, but a really tremendous team and also a new leader to lead our EMEA region. Their interconnection model had a very significant portion of reoccurring revenue spend, or not exact type of productization, but similar recurring revenue model. There will be further alignment across the global portfolio in terms of our interconnection services as we move forward. We've experienced, as you saw, a very strong quarter for interconnection signings quarter-over-quarter. And I think that is hopefully going to continue, and I think you are going to find us continue on those eight parts of the portfolio we're expanding our colocation, interconnection footprint be it in existing Internet gateways where Telx has historical resided, or on our connected campuses like in Ashburn or Richardson or other pockets of the portfolio. And I'll turn the Silicon Valley question over to Scott Peterson.

On Santa Clara, we all know that there is discussion about a portfolio that's available on the market there. And we look at every opportunity in the marketplace, as we all know. We'll always keep an eye on that to see whether we view it as being strategic and how well it integrates into our portfolio and if it represents a good economic value and a good investment for our shareholders. We have a couple of land sites, smaller land sites available for future development in Santa Clara. We continue to look for additional capacity in that market since it's a good market. I think anybody familiar with that would know it's a tough market from a land perspective, so we need to be very creative in terms of acquiring more inventory there. As far as Frankfurt goes, we're very pleased with the level of activity. We're getting in that market. I think it started off very strong, and we'll continue to propose that to a number of customers on that, and so we've been very happy with the progress there so far.

Our next question comes from Paul Morgan of Canaccord. Please go ahead.

Hi, it's Paul Morgan. Just on the Service Exchange rollout and your interconnection, your volumes, how should we think about the timing of the rollout into additional markets? It looks like you've got kind of about half the ones you planned through 2017? Is that a near-term in Europe and the rest of the U.S.? And then that $9 million, 16% of your bookings in the quarter that's a good number. How are you guys thinking about that as a share and as a potential growth rate going forward, especially after the Service Exchange roll out?

Thanks, Paul. This is Jarrett. In terms of the Service Exchange, we're committed to an open environment. We've traditionally won business in the network-to-network, network-to-content, and network-to-enterprise verticals. This really gives us an opportunity to participate in the cloud ecosystem, which requires a new product offering and capability. So day one, we're announcing primarily our North America platform, but we're phasing it where we actually control the portal, we control the customer experience, and this allows our customers to essentially order virtual cross connects. So the phasing is largely deployed. We wanted to have colocation, interconnection, and our scale offerings, and now with the European assets we'll accelerate that as our second phase. So ultimately we'll have 15 markets, 24 data centers by second quarter of next year.

Great. And then my other question...

Maybe I'll...

Go ahead. Sorry, go ahead.

No, no, please, go ahead. If you want to say it again just to make sure we address it appropriately.

No, I was going on to my follow-ups. If you have something more to say on interconnects, that's great.

I was just going to address I think to your question on the $9 million. So that's $9 million of total interconnection signings this quarter, we were $8 million or around $8 million last quarter. I am not sure we're going to continue that pace of quarter-over-quarter acceleration; it's quite rapid. But I think the key is continuing to bring on space at these very interconnection-dense locations as one part to spur additional interconnection revenue, and I think we're doing that by expanding in the likes of 56 Marietta, getting additional inventory in Cermak and other locations. And then I think the next leg of it will be leveraging the interconnection revenue that will come from the enterprise, the cloud, coming off the Service Exchange. But I think that second part will be more of a (39:27) later in the 2017 revenue generation.

Okay. That's helpful color. Thanks. And then just in terms of a couple of markets where you're committing capital for expansion, can you maybe comment on Northern Virginia and Chicago and the competitive environment there? You have some of your peers also doing the same. And I know what you've said about the demand-supply equilibrium now. But if you look into 2017 and 2018, how are you thinking about – give us an update how you're thinking about your preleasing and the future demand-supply balance?

Those were two particular markets, and we have a little bit of a – a little map in the deck of our campuses in Franklin Park in Chicago and obviously in Ashburn, Virginia. And based on pipeline signings we've completed to-date or through the end of the quarter, I should say, plus pipeline, there is a decent potential that we could be finishing out our existing (40:35) campus, the last 9377 building of Franklin Park and the last buildings on our Ashburn campus in the next several quarters, which should dovetail very well with the timing of deliveries of those parcels that are literally adjacent to the campus coming online. So those markets obviously are not without competition, but we seem to win our fair share and having a fairly robust pipeline in those two particular markets.

Our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.

Hey, guys. Just maybe sticking with the Chicago market, you've got some land now in Franklin Park, you've got potential build-out next to the E Cermak and you took back some availability from the PBB tenant. Just curious based on your pipeline demand funnel, where are you seeing I guess more demand? Is it more downtown or is it in the Franklin Park area?

Hey, Vin. It's Andy again. We're seeing the demand in both locations. It's just different types of demand and at obviously different price points. As I just mentioned – on Franklin Park you're typically catering to a customer that is looking for more affordable total cost of ownership, seeking large amounts of space and power, and likely seeking an economic model that's in the low $100s per kilowatts. If you're going down to Cermak, we're signing and filling up space, including the space we just took possession of, at rates that could be more than double that. And that customer is obviously not taking – likely taking one megawatts to two megawatts at a time, is taking smaller quantums. They could be around 300 kilowatts, 400 kilowatts, but they're really taking those small amounts of space and willing to pay those higher prices in order to have the connectivity that our Cermak building offers. So we're seeing I'd say different demand sets in both locations but both seem fairly strong.

Okay. Thanks for that. And then just maybe a question on the bookings trends. Last quarter there was concerns about the slowdown in bookings and then you had also announced some activity in early 3Q and it was discussed as a timing issue. So you take the two quarters together, you're at the $40 million-ish mark, which is relatively close to what it was in the prior couple quarters. Given the fact that you now have additional availability here in Chicago, you've got a new head of sales in place, some other development availability on the European portfolio as well, I guess, should we expect some steady increases in those bookings numbers, or is there any reason to think that we wouldn't see that in the next several quarters?

Yeah. I think that's fair to say. There's no surprises on this end that we were not pleased with the second quarter, but if you look at the third quarter, which was a quarter that quite frankly we were without a global head of sales for two-thirds of it and had a tremendous effort by both Andrew Schaap and Tony Rossabi stepping up to deliver for us. Net-net, I was pretty happy where the third quarter came out. I think there are some key takeaways that when I look through it, it was somewhat in our script. The demand was robust and diverse. We weren't counting on one single customer to do a single 10-meg deal. We had numerous customers, we had cloud service providers, other parts of SMACC, IT service. The demand was in North America but also in Europe. It was probably one of our best signings quarter in Europe for several quarters now. A good chunk of those signings were actually in the London market post the Brexit vote, and those signings came not only from cloud service providers; they came from a disaster recovery firm, they came from an IT service firm. So lots of different demand drivers filling our existing signings in our funnel going into the fourth quarter. I wouldn't tell you I could bank on $55 million again in the fourth quarter, but I think when we have that pretty steady-eddie run rate trend – if you look back, and I think we have on our slide deck like a rolling LTM number that kind of looks how our trends are fairly smooth if you look over a long time period.

Yeah. I think that's – it's Scott here – that's page 21, I believe of the appendix. If you look at that, it does quarter-by-quarter on a trailing 12 months and you'll see that there's a much smoother line there, if you will. We always talk about the business being lumpy. So if you compare that with the signings in the main deck, you'll see how that smoothes out the lumpiness a little bit. The only one to take a look at is you'll see a little bump in early 2014, which is we had – kind of, we had very high signings when we were clearing through that excess inventory that had been built over the prior year-and-a-half or so. So that's a good illustration of how the – if you look over longer timeframes, the lumpiness gets smoothed out.

Our next question comes from Manny Korchman of Citi. Please go ahead.

Hey, guys. Good afternoon. If we think about the situation in Cermak where you took out that PBB customer, how many of those types of scenarios are you looking at across your portfolio where you might step in and do something like that?

Manny, they are always kind of few and far between. It's a product of the expiration schedules of various customers, our demand in those locations. I would say they're somewhat of events where the stars and moon and sun have to align. In Cermak we had a very highly leased, high-demand building with a customer, due to some regulatory constraints was looking to exit that building. Their lease I think only had like a year-and-a-half or so to run on it, so there was a path to a transaction that was beneficial to them and obviously beneficial to us. There is a handful of other pockets in the portfolio where that may apply, but I wouldn't say that is something that we can necessarily count on in any regards.

Okay. And then going back to the occupancy guidance, just to make sure that I and other people on the call understand this correctl, when you say down 150 basis points to 200 basis points, that's versus December 31 of last year, correct?

Correct.

And so right now you're roughly 150 basis points down already. So you're saying that you could go down another 50 basis points from here through year-end. Is that right?

We are saying we'll go down another...

91.4%...

Manny, this is John Stewart. We expect to be flat from here.

Okay. So the 89.9% where you ended is already at that guidance point?

Correct.

All right. Thank you.

Our next question comes from Colby Synesael of Cowen and Company. Please go ahead.

Great, thank you. I want to talk about the color commentary you gave on 2017 growth and how you anticipate it I think moderately slowing down. And I am just curious, is that based on just the trajectory of bookings and what's happened so far in 2016 and how you see that getting installed over the next few months and how that might make it more difficult to achieve the same growth in 2017 already at this point. Is it more a change in your expectation around market dynamics, whether it's in demand or pricing or is it perhaps even just a mix shift in terms of the assets you have now versus what you may have had going into 2016. And then I guess as a part of that, I was wondering if you can give some color on how the eight facilities that you acquired from Equinix/Telecity have been performing in terms of growth maybe over the last year, or any other color you can provide so we get a sense of what those assets look like in terms of their trajectory? Thank you.

Sure, Colby. The answer to your first question, those are some good ideas, but really, foreign currency is the biggest headwind. And as I mentioned in my prepared remarks, we obviously look to hedge that with issuing sterling bonds, euro bonds, multi-currency revolver, and term loan. But there is obviously a spread between the yields on our assets and the cost of that debt. And that's – again, it's earnings translation risk, not economic risk. We're not repatriating capital in a meaningful way that we are having losses, but the FX I would say is the largest driver to that, I would say, sentiment preview. And then on the eight or so – on the eight European assets, five in London, two in Amsterdam, one in Frankfurt, maybe I will let – give Scott a chance to jump in on performance with the underwriting?

Hi, Colby. Thanks. Yeah, so the performance since acquisition, it's only been a short time and so we've been very pleased with that performance. We're on track. If you looked at the performance prior to the acquisition, you saw – I think, your question was performance and specifically vacancy. You saw the vacancy there tick up a little bit and that was primarily the result of two large tenants migrating – customers migrating out of the portfolio, one of which came to us in our portfolio and the other one actually left and went to a – it was a gaming company that went closer to their corporate headquarters, geographically far away. But other than that the stickiness there has been pretty good and the velocity has been good too.

And are those facilities growing at a rate similar, for example, to the Telx portfolio or is it more in line with the traditional DLRs, any color on that?

From a utilization standpoint, probably a little closer to the Telx portfolio, if that's what you are...

I was talking about revenue growth.

Oh, revenue growth, it was – kind of – it's in between where we are and Telx.

Okay. Thank you.

Our next question comes from Sumit Sharma of Morgan Stanley. Please go ahead. Sumit Sharma - Morgan Stanley & Co. LLC: Hi, everybody. Thank you for the transparency and the detail in the supplement and everything. Sort of a basic question in terms of, I guess, one of the things that we are wondering was the pricing per square foot or the GAAP rent per square foot for the new signings was kind of lower, down to $126 a square foot. I am struggling to figure out whether this is just regular way lumpiness and a function of product and geographic mix, or was there some pricing pressure that you saw?

I would say it's more of a mix contribution. We had a significant amount of signings from several customers and I'd say one of our lower price point markets, be it Northern Virginia or Chicago versus prior periods where we might have had more signings in the Silicon Valley or other higher priced markets. Now, the – I wouldn't – it's tough to take the signings from the second quarter as a great comparable data point. That was obviously a very small sample set in terms of signings, but on apples-to-apples basis, I wouldn't say we're seeing tremendous pricing pressure. The rates are held in relatively flat and the $120s due to concentration in North America in those lower price point markets. And at those rates those signings are still as you can see from our active development pipeline generating returns on our invested capital, unlevered returns right in our target thresholds of 10.5% to 12.5%. Sumit Sharma - Morgan Stanley & Co. LLC: Thank you. That's superb. If I could ask one more question. I guess in terms of your business mix which, roughly estimating the retail or the colo portion of the business is now or at least over 1Q and 2Q a little less than 30%. I guess, is there some kind of composition level that you foresee into 2017 or 2018? Do you see that go up to one-third or 35% or 40% in terms of just revenues?

You know, it's – I would say there is no specific targeted mix that we have on the board that we're shooting for. And you are seeing very strong growth on both fronts. Obviously a substantial amount of our external growth had been acquisition of colocation-oriented, interconnection-oriented facilities over the last few years, which obviously moved that needle in addition to the organic growth associated with those acquisitions. But at the same time, a large chunk of our active development pipeline is developing scale projects, be it on our campus in North America and Asia, Australia or in Europe. And that is still a significant component to the growth. So I am not sure I could tell you the percentages are going to diverge one way or another. We're very focused on having the right assets and the right capabilities across all four continents to capture robust and profitable demand. Sumit Sharma - Morgan Stanley & Co. LLC: Very good. Thank you so much.

Our next question comes from Richard Choe of JPMorgan. Please go ahead.

Great. Thank you. Following up on that a little bit, it seemed like – with Q2 being light and 1Q was strong in terms of signings, but 3Q is very strong, it seems like the turnkey flex signings were of a bigger scale, a lot more square footage and I guess the average rent per square foot was a little bit lower. But on the colocation side, it seemed like the pricing was better and it seemed like there is some strength there. So kind of taking all this in, how would you characterize the environment for colocation and, I guess, the turnkey flex products? What are you seeing – where are you seeing strength or weakness?

Sure. So, the turnkey flex product is what we call scale or previously called wholesale. The bulk of the activity in North America or Northern Virginia, Chicago and Dallas was soft obviously with Silicon Valley kind of falling after that in terms of demand. And it's been – it was a robust quarter, and the pipeline for the fourth quarter remains robust as well. It's a significant amount of repeat business. It's a significant amount of multi-site business. It's a business where the customer is signing one-time on multiple continents with us. The size of the deals most recently kind of ranged from, call it, almost 1 meg to almost 4 megs in terms of size of scale deal. So there is some variability in that. Some of the bigger customers are taking bigger deployments. I already touched on some of the pricing trends there. On the colocation and interconnection side, you're really seeing, I think, the combinations of success really strategic internet gateway assets, a talented sales and marketing organization around them, executing on filling those assets up and these assets command higher prices given what they offer to the customers that decide to deploy in these locations. We, again, – we're in – we have a fairly targeted approach to our colocation interconnection efforts. We are not in all 50 states or 100 countries. We picked our spots to be in the internet gateway, the internet hubs or in select connected campuses which have connectivity to the cloud service providers for the enterprise. So, I think, where we picked our spots and how we tackled it, it's been able to generate pretty strong volumes at attractive rates have increase in the last quarter on the colo front.

Great. And one quick follow-up, the European signings are strong. Was that legacy digital or was there any significant contribution from the Telecity-Equinix assets.

The given – most of it is legacy digital. The colocation piece was contributed from the assets and the new team that joined the company. So, the 4 megs and $6.6 million of annualized revenue was legacy digital assets.

And our last question for the call will be from Frank Louthan of Raymond James. Please go ahead. Frank Garreth Louthan - Raymond James & Associates, Inc.: Great. Thank you. So I guess, just my question is more around expectations for Dan. Give us an idea of what do you expect to see change on the sales force and what are sort of his mandate kind of out of the box?

This is Bill. His initial mandate is going to be to fully integrate the Telx Equicity (59:14) and Digital sales teams and create the appropriate efficiencies there, and then develop the right go-to-market, working off of what the team has developed, and then further to push on the partners and alliances front. Frank Garreth Louthan - Raymond James & Associates, Inc.: So with that, if we were to see better growth than sort of what the Street has modeled next year, would that entail hiring more sales people, and what would have to – what would change to see better than Street growth next year?

So Dan hasn't come on board yet, so I'm not going to give him his budget whether it's a lower head count or a higher head count, and we haven't talked revenues yet either. So he starts next week. So, I think, we're premature there. Frank Garreth Louthan - Raymond James & Associates, Inc.: Got it. Okay. Thank you.

And this concludes our question-and-answer session. I would like to turn the conference back over to Bill Stein, CEO for any closing remarks.

Thanks, Ed. I would like to wrap up our call today by recapping our third quarter highlights, as outlined here on page 19. We had another very productive quarter characterized by solid execution, against our strategic plan. We continue to extend our global footprint with the closing of the European portfolio acquisition. We further enhanced our product offerings with the announcement of the launch of our service exchange. We're also continuing to deliver outsized growth in AFFO per share. And finally, we further strengthened our balance sheet with the proceeds from asset sales and a successful forward equity offering used to redeem high coupon preferred equity and secured debt. In conclusion, I'd like to say thank you to the entire Digital Realty team, whose hard work and dedication is directly responsible for this consistent execution against our strategic plan. Thank you all for joining us. And we look forward to seeing many of you at Madrid in a few weeks.

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