Good afternoon and welcome to the Digital Realty Second Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to John Stewart, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Andrea. The speakers on today's call are CEO, Bill Stein; and CFO, Andy Power; Chief Investment Officer, Greg Wright; and Chief Technology Officer, Chris Sharp, are also on the call and will be available for Q&A. Management may make forward-looking statements, including guidance and the underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. 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. Before I turn the call over to our CEO, Bill Stein, I'd like to hit the tops of the waves on our second quarter results. First and foremost, consistent execution against our customer success initiatives drove all-time high new logos, our second highest interconnection and renewal leasing and our third highest total bookings. Second, we leveraged our global platform to prudently allocate capital, where we were able to achieve the most attractive risk-adjusted returns around the world, creating significant value for shareholders. Third, we extended our sustainability leadership with the publication of our inaugural ESG report, an official recognition as an ENERGY STAR partner. Last but not least, we capitalized on favorable market conditions to execute an opportunistic $900 million liability management trade, clearing our runway out to 2022 and extending our weighted average duration by nearly half the year while ratcheting our weighted average coupon down by 10 basis points. And now, I'd like to turn the call over to Bill.

Thank you, John. Good afternoon and thank you all for joining us. The durability of Digital Realty's global platform was on full display in the second quarter of 2019. And our team was incredibly productive over the past 90 days. We delivered the third highest bookings in the Company's history. Demonstrating the strength of our globally diversified portfolio, we also signed the second highest volume of interconnection bookings as well as renewal leasing and we expanded our colocation offering into the Asia-Pacific region with a multi-market new transaction and customer expansion. We also landed an all-time high number of new logos this quarter, an encouraging indication, our efforts to penetrate enterprise demand are bearing fruit and a promising sign for future interconnection revenue growth prospects. Along those lines, I'm pleased to announce that we will be hosting MarketplaceLIVE at Spring Studios in New York on November 7, a daylong event connecting the community that builds the cloud network and Internet infrastructure. The event attracts a broad swath across the tech ecosystem and we are expecting over 600 attendees from network engineers and start-ups to solution architects and cloud service providers to CIOs at Fortune 500 companies. We further extended our global platform during the second quarter and we took steps to secure our supply chain with several strategic land acquisitions shown here on Page 3 of our presentation. We closed on three smaller strategic land parcels in Northern Virginia to further physically connect our market leading campus footprint. We also re-entered Paris with new capacity based on significant verified customer demand. And earlier this afternoon, we announced that we are under contract to acquire a parcel in Frankfurt, building upon the success of our sales in the second quarter as well as the recent investment and our coverage of Western…

Thank you, Bill. Let's begin with our leasing activity here on Page 9. We signed total bookings of $62 million including $6 million from our Latin America platform, Ascenty at our pro rata share and a $9 million contribution from interconnection. We signed new leases for space and power totaling $53 million with a weighted average lease term of a little over five years, including an $8 million colocation contribution. As Bill mentioned, this was our third best total bookings quarter and our second best interconnection quarter. I'd also like to clarify that Ascenty's second quarter bookings are in addition to the leases signed in the first quarter with a leading global cloud provider to anchor our entry into Chile. We also expanded our digital realty colocation offering into the Asia-Pacific region with a multi-market new transaction and customer expansion, as you can see from the leasing activity table in our press release. Although this was a relatively small transaction, hopefully, it is a Harbinger of bigger things to come as we move towards officially launching our first fully productized colocation offering in the region later this year. In general, we are winning a greater share overall as well as larger and multi-market and multi-geo colocation deals, reflecting our growing traction within the enterprise segment and these customers' global hybrid cloud use cases. Some of these wins are landing in non-productized colocation data centers. Even though these customers are consuming remote hand services and interconnection solutions commonly associated within colocation facilities. As product lines continue to blur, we are contemplating changes to our disclosure to provide insight consistent with the way we run the business. We will keep you apprised as we contemplate future changes to our disclosure with an eye towards maintaining transparent shareholder friendly communication while balancing continuity…

[Operator Instructions] And our first question comes from Jon Atkin of RBC. Please go ahead.

I have a couple of operational questions. I guess, first by region, in the major U.S. markets, so I'm wondering, where you see the leasing or demand pipeline, the strongest or quarter-to-date bookings geographically where that has been strongest? I think Bill mentioned a couple of examples in the script. And then on Asia and specifically Korea, I wondered, how you kind of view the puts and takes about deploying capital in that market given the large role that could shape or play in accommodating the hyperscale demand so far in that market and what is arguably lower colocation pricing, than in rest of Asia. And then finally on Europe, I just wondered the new land parcel in Hattersheim and expectations around how quickly one could potentially develop capacity there? Finally, just London, I don't think you mentioned that in your script, but any kind of updated views on the demand dynamics in the London market? Thanks.

I'll try to weave the questions into a couple coherent answers, and I think we're going to probably ping-pong around the team here. So first off, U.S. markets, I would say this, the second quarter was accentuated with some pockets of strength in some more unusual places. As well some places where we've been pretty consistent kind of working from East to West, the Northern New Jersey, New York metro market that is continue to tighten. And we saw few wins in the financial services and other related verticals in that market during the quarter hop down to Dallas our Richardson campus. We continue to expand with both our existing and new customers landing on that campus and quite pleased with the progress on that market. And then over to the West Coast Santa Clara, obviously a very, very tight market we had both enterprise related and also top cloud service provider wins during 2Q. Looking a little bit into crystal ball more into back half of the year, I would say the Toronto market, where we had some great wins earlier in the year continues to be very tight. I think we're very well positioned with our campus location in that market. A brand new asset and we've had a few customers landing and also looking to expand in that location. We are looking at the incremental opportunities in - New York metro area. And also two markets, obviously a little bit more challenge for both Northern Virginia and Chicago. Bill related some of the good news on Chicago. So we're hoping for some green shoots there and in Northern Virginia we're also working on some capacity, some existing customers looking to expand with adjacency as well as some new customers looking to land on our market leading campus. I think you touched on London and Europe, maybe I'll hit that and then hand off Korea to Bill or maybe Craig can chime in on Frankfurt portion. So maybe on the front end, the Frankfurt-market as we mentioned has been one of our hottest markets, we initially ended that market just a few years ago. I think our first anchor customer was a top 3 CSP. We subsequently grew with an enterprise customer. And if you could see the absorption on our leasing table and developments, that was certainly our star for the quarter and we’re rapidly running out of capacity in that market. Maybe Greg, do you want to talk about some of the activity in our other release there in terms of expanding.

Well, first of all - I think one of the question, was in terms of Frankfurt - sorry I think one of the first question was in terms of Frankfurt in terms of potential timing. Look the contract is subject to conditions including power zoning and planning and that will probably take roughly 24 to 30 months, but again in terms of the layout of the site and the potential for the site. As we said, it's only 3 miles from the Frankfurt airport. We're very excited about that. And lastly over in Europe, London we’re pretty excited about opening up our Cloud House in Docklands’ campus strategy, a highly interconnected series of buildings in the Docklands of London. And we've been working on some strategic colocation story and wins in that market. We also have had some increase on our Crawley Campus and in some other pockets within the London portfolio. So seeing some good opportunities in that market as well, Bill, maybe you want to kick back to John's questions on Korea.

I think Korea could be - we think Korea is going to be pretty similar to Japan in terms of how it plays out. We're not - we haven’t decided yet whether we're going to pursue that on our own or with a partner, but clearly we went into Osaka several years ago. Created a connected campus that's worked out extremely well for us and likewise, we've been building up in Tokyo. So Seoul is really the next leg of that strategy.

Our next question comes from Michael Funk of Bank of America/Merrill Lynch. Please go ahead.

And I guess the first one is kind of follow-up Bill, earlier this year, I think you made some comments that looking to the second half, your trajectory for bookings that with a funnel look looked relatively strong and I think there has been some mixed commentary out there across the industry. So maybe, just an update, on your earlier comments in this year, about the second half of 2019?

I'm sure, Michael. Well I mean, I think - that our performance hopefully in the second quarter is consistent with what we said in March, when we said we weren't going to write-off the balance of the year and I think clearly that's not the case. I think if you look at the second quarter versus first, there is a clear positive momentum and acceleration. It's our third highest bookings quarter, as Andy said, with a record number of new logos, standing at 57. And frankly, we expect continued improvement during the balance of the year. It's great to be able to leverage our global footprint. And that's how that's working out. So we expect that international is going to play a major role in the back half of the year. But we still would see a fair share of bookings coming out of North America. To sum up, we remain highly confident in the long-term - demand drivers for our business. Those being big data, mobile and Internet of Things and we really like our position given the strength of our global diversified platform.

And just related question as well, thinking about the new market entry and the expansion that you announced today. Maybe just kind of walk through - I guess the intelligence, the thought process and even the - that the mind of the customer relationships and what you know about their expansion and how that maybe direct some of that new market entry. And the I guess the visibility that gives you into entering the new markets like South Korea and expanded in Frankfurt?

Well this new market entry, and the expansion into - expansion Frankfurt, the re-entry into Paris. It's all based on conversations that we have with our customers. So it's - we're not going into these markets on a purely speculative basis. It is more than one customers do.

Our next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.

So just wanted to - you touched on Northern Virginia a little bit in your prepared remarks as being oversupplied. And you also alluded to that potentially creating some opportunities I’ll be curious about those opportunities if you could sort of talk about anything that you're seeing there. And then separately Andy in contrast as you were talking about some of the market strength in the back half you mentioned Northern Virginia, which kind of surprised me a little bit as it sounds like that's got the potential to pick up a little bit. Are you - you’ve good line of sight there in the second half or is that just you see customers kicking around some requirements and expecting to land somewhere, potentially with you guys.

So, in regards to my commentary, I was speaking to our dialogues with our customers and so, not on a speculatively basis, really what we're seeing in terms of opportunities. Listen, Northern Virginia Ashburn obviously the largest market in the world. It's been the most robust and diverse. At the same time, it's become one of our most competitive markets and we're certainly seeing some pricing pressure on new opportunities while at the same time, some of our larger customers have been in code digestion mode for the first half of this year. We think that this market is going to work through this current supply demand challenge and we're optimistic on the market. We think these hyperscales are going to resume their growth and we are seeing some green shoots around some of these private outfits, not just in that market, but broadly speaking. Some of the private outfits who have entered the market in the last 12 to 18 months, who will either not move forward with speculative capacity or we have even seen signs where some of our selling land that they previously bought to build data center capacity. In the meantime, we're just being picking our spots so we're trying to find places where we compete beyond price, where our unique global platform can add substantial value that is customers who need a global partner in the full product suite. It's our installed and growing customer base on our Northern Virginia campuses that wants to grow with adjacency. And then lastly, it's customers to place value on the longest runway for growth for their deployments in that market, which they find in our campuses.

So on the opportunity side, it sounds like there maybe some land parcels for example that maybe you guys might be able to pick up. And then separately on the leasing front, it sounds like you've got capacity coming online and even though that you have tenants who have been waiting like passes deliver which could lineup well for you guys in the second half. Is that fair?

Well, I would just put some finer details, but I don't think we're - I think we’ll feel pretty good of our supply chain in Ashburn and other markets. And it’s these much more tighter markets be it a Paris or Frankfurt, South Korea, new market entry where we're focused on the land. So I don't see us other than the small parcels that really physically connected the campuses and added incremental Ingress/Egress to an existing campus partially owned. I don't see this picking up those land parcels. I do see as a good sign as potential competitor, the tide of potential competitors subsiding a little bit here, which helps overall backdrop. But going back to the demand that I was referencing, it hits all those highlights I was talking about, it was international customers looking for global partners across the full product spectrum. It's customers that landed in like certain building already on our campus and wants to grow 1 megawatt or 2 megawatts right next door. It's the larger customers who - we’ve already built the entire shell for and they're building out their capacity and call it three, six megawatt chunks and I have kind of anchored all their infrastructure on our campus. And lastly it specific customers that say, this is not my first time to lay my workload. I need to find a partner that is going to give me a really long runway for growth and they find that with Digital Realty. So all those are kind of examples I can think of mine of either opportunities we land in recent quarters or opportunities we're working on right now, in a still fairly competitive Ashburn market.

Our next question comes from Erik Rasmussen of Stifel. Please go ahead.

I'm just going to circle back with Nova once again. You talked about the supply demand imbalance and then more supply coming online. And then still sort of the market in digestion mode, but just trying to balance that and understand your thoughts on maybe and the confidence level you’ve seen some pick up. Obviously you're going to have some supply - your own supplier capacity coming online. But what is that then do in terms of pricing I mean are we really looking at a challenge to get to that low end of your pricing range in that market, and development yields?

That's a market where there are certain private smaller location operators that are solely competing on price. That will likely in deals just to fill capacity and my guess is will be a short-lived run in our business quite honestly, given the competition. We're picking our spots. We're trying to find customers that really value our product offering and not just going to the lowest common denominator on price and we've been winning on those merits for some time. So obviously that's a market where the pricing has been under pressure given the relative supply demand backdrop. What I would - Eric what my comment really goes to is I don't think demand is bearing as some might suspect, and that's based on conversations we're having live with our customers. And we're going to pick our spots and be competitive and work through a potential temporary dislocation this market. And in fact, when you look at this in the broader digital realty, platform backdrop I think it's just a small piece of our puzzle as you saw from a quarter where we sequentially increased the signings 24 plus percent put up our bronze medal or number three in our records and Ashburn really didn't play to master amount to those signings at all. So I think we're going to work through this and come out the other side of this just fine.

And maybe just on the same cash NOI forecast. You reduce that to the mid-single digits versus high-single digits. How should we think about this and beyond this year and then will the headwinds from the legacy DFT business be completed this year?

Sure so the - what I would say on that front. So we - got a couple things going against us in terms of the same-store pool. Obviously that the FX which we highlighted in the script, we also had the customer bankruptcy that we reserve for last quarter and it's going to flow through this quarter. There also - we also had a tough comp in terms of real estate property taxes. Quarter a year ago had some benefits. This quarter we started accruing for one of our central regions. If you net that out, it's not quite as bad on a kind of same-store basis, I think negative 5 is like closer to negative 2.5 when you kind of do the normalizations on both periods and the negative, it's really due to in our largest exploration year and despite quite strong retention. We've had some down time when released in capacity. As we also highlighted in our script quite pleased with the trajectory of the new signings the 57 new logos, great interconnection signings, multimarket, multi-GO colocation APAC. But there was one point, it's the signed commences, close to eight months. So in year 2019 contribution that might flow through that same-store pool is not as great as we'd like it to be in - the flip side of that that leaves inventory for our sales reps to be selling moving ready space in some hot markets and you could see in our self we will have capacity sitting available in a market like Amsterdam, which is obviously tightening on the backdrop of some of the municipality, moratoriums. Osaka, which has been a harder market and even three meg sitting in Frankfurt. We're quite honestly will probably be a food fight over that last capacity on that campus. And then lastly, I would just say while the same-store pool is very valid and very instrumental looking our financials, our dialogs with our customers is a total commercial package. So we're often tying in multiple product lines, new signings and renewals and a complex commercial solutions for our customers. So some often like a little bit in this quarter and certainly in the prior quarter, we may give a customer some relief on existing contract, but we're winning incremental on a share of their business and good returns and it's a win-win for the customer benefiting from platform digital and a commercial win for the company.

Our next question comes from Michael Rollins of Citi. Please go ahead.

First, if you could talk a little bit about just broadly the cloud impact that you're seeing on your business in terms of just the direction of bookings as well as what you're seeing on churn and the pace of migrations to the cloud from your customers? And then secondly if you could talk a little bit about what happened in terms of - I think it was the renewal rate in the PBB business and just maybe what caused the dip there? Thanks.

Mike, I'll take your first question, Andy will take your second. Relative to the cloud, it's been - as you might expect a significant source of demand for us, and we haven't seen the pickup in churn that some of the others have you mentioned some of our peers have mentioned on the calls, I mean look this we've mentioned this is the third-highest booking quarter we've had huge number of international wins, 57 new logos, which was a record, second highest volume in cross connect bookings and we really do see the world. moving to a hybrid multi cloud architecture. And Digital is focused on the enterprise and we think our offerings such as the Service Exchange really enable to shift to a hybrid multi cloud. If cloud ultimately resides in a data center and they leave they sit in an awful lot of our data centers and they're signing many long-term deals with us. So we think we're really, really well positioned to benefit from the growth in cloud demand, but we're also very focused on attracting enterprise customers to sit both in our data center and connect to the clouds on our campuses. Andy do you want handle the second?

And Michael, just so I make sure I address your second question. You mind repeating that you said the renewal rate on the PBB?

Yes. So if I look at the page 22, I'm sorry, 21 this quarter. I think the PBB retention ratio dropped to that 22.6% from the LTM of 93.5% and was curious if there is anything specific that cause the drop there?

Yes. I think what you have is a little bit of a small sample set as you can see, especially on the square footage 39,000 versus almost 2 million a square feet in the prior quarter. So it's literally only four renewal contracts that happened this quarter. So 1, 1.5 depending on the square footage rating renewed. I believe that was a customer in our Houston footprint, not a large market for Digital Realty or a major focus and I think we only have a site or two in that market, but I would say it's pretty much an anomaly. And as you recall from last quarter, those power based buildings are typically very high retention rates and use the longest duration renewals given the fact that the customer is often putting even more substantial capital commitment into that capacity. So I don't think there is a trend or anything in that renewals time.

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

First up on the price renewal change the mid-single digits versus previously the high-single digits. Is that specifically because the legacy DuPont customer has not yet been renewed and is there now an expectation that they will not renew in 2019? And then secondly, there is some things that seem like they would drive your core FFO guidance up. So there is a one-time U.K. tax benefits in the first quarter, it seems like the equity forward didn't come in as linearly as maybe what was anticipated, and then obviously, as we just mentioned the reduction in the renewal spread, are the offsets to why that might not have happened, if I have them correctly, the FX, the bankruptcy, the top real estate property taxes and then the longer book-to-bill. And then just lastly, a higher level question, what does the capacity look like for the back half of this year in terms of available megawatts, if you will, in the markets where you're seeing the most demand. Do you have enough capacity effectively available you think in the markets where you're seeing the most demand to sustain the level of momentum you saw in the second quarter? Thank you.

Thanks, Colby. I think there is a bunch of numbers questions in here. So let me try to tackle all three and no specific order. So actually, maybe I'll work in reverse order because it might be easier. So available capacity, I think we're set up pretty nicely in terms of available capacity in the back half of the year and you can see that either and what's on our development cycle in terms of unleased capacity or you can see in the pre-stabilized, just delivered and highlights in that - in those markets are as I mentioned, Frankfurt, Osaka, Amsterdam, London. These markets in our Latin America platform as well. So I think we're set up pretty nicely in terms of available capacity, they're coming on, back half of this year. But as you know, as we move into the back of this year, we're also working on capacity that's even coming on line in early 2020. So and many of these tighter markets be the Tokyo and others, the customers really stretching out the timelines been coming to us even earlier given there such limited capacity. What I'd like more in some of those markets, of course, Frankfurt’s a market where we just seen a rapid acceleration. So and it's a tightening market hence it's been tough to get land parcels and quite pleased with a global investment team is great work and timing that down on the heels of our success. But net-net, I think we're in a pretty good space for back half of 2019 going into 2020. Markets coming online and with capacity in the backdrop attractive demand. Going to - I think your guidance question, if you net out the outcome on the guidance, we obviously beat our internal numbers in the first quarter,…

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

Thank you, Andrea. I'd like to wrap up our call today by recapping our highlights for the second quarter, as outlined here on the last page of our presentation. We advanced our top priority of deepening connections with our customers, delivering all-time high new logos, our second best renewal leasing in interconnection bookings and our third highest total bookings in our history. We extended our global footprint and took steps to secure our supply chain with several strategic land acquisitions. We re-entered Paris, we secured our second campus in Frankfurt and announced our entry into South Korea. We also underscored our commitment to delivering sustainable growth for all stakeholders with the publication of our inaugural ESG report and our official recognition as an Energy Star Partner. Last but not least, we further strengthened our balance sheet with redemption of high coupon debt and preferred equity and the opportunistic issuance of another $900 million of long-term capital. As I do every quarter, I'd like to conclude today by saying thank you to the entire Digital Realty family, whose hard work and dedication is directly responsible for this consistent execution. Thank you all for joining us. I hope you enjoy the dark days of summer and hope to see many of you at marketplace live in New York in November.

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