Digital Realty Trust (DLR) Q3 2021 Earnings Call Transcript

Digital Realty Trust (DLR 0.63%)
Q3 2021 Earnings Call
Oct 26, 2021, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Digital Realty third-quarter 2021 earnings call. Please note, this event is being recorded. [Operator instructions] Following the presentation, we will conduct a question-and-answer session. [Operator instructions] I would now like to turn the call over to John Stewart, Digital Realty's senior vice president of investor relations.

John, please go ahead.

John Stewart -- Senior Vice President of Investor Relations

Thank you, operator. The speakers on today's call are CEO Bill Stein and CFO Andy Power. Chief Investment Officer Greg Wright, Chief Technology Officer Chris Sharp, and Chief Revenue Officer Corey Dyer are also on the call and will be available for Q&A. Management may make forward-looking statements, including guidance and underlying assumptions.

Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For 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 we turn the call over to Bill, I'd like to hit the tops of the waves on our third-quarter results. We further strengthened connections with customers, landing record new logos and delivering our fourth consecutive quarter with over $100 million of bookings. We also continued to deliver for our customers around the world despite volatility in the global supply chain, leveraging our scale, diversification, and strategic procurement processes to continue to deliver on time and on budget for our customers. We continued to enhance our global platform by expanding into new markets with tremendous growth potential while continuing to expand capacity in existing markets around the world.

We delivered solid financial results, with double-digit revenue growth, leading to a beat in the current quarter and a race to the outlook for the balance of the year. Last but not least, we further strengthened our balance sheet by raising approximately $600 million of low coupon Swiss green bonds and over $1 billion of common equity to fund our future growth. With that, I'd like to turn the call over to Bill.

Bill Stein -- Chief Executive Officer

Thank you, John. Good afternoon, and thank you all for joining us. Our formula for long-term value creation is a global, connected, sustainable framework, and we made further progress on each front during the third quarter. We continued to globalize our business, with significant bookings and solid performance across regions.

Our bookings were diversified by both region and product type, reflecting our unique, full-spectrum global product offering. We also announced our entry into two high potential emerging markets, India and Nigeria, during the third quarter while expanding our connectivity capabilities by working with Zayo to develop the largest open fabric-of-fabrics that will interconnect key centers of data exchange. We are also extending our capabilities for customers to the edge with the announcement of what will be one of a few strategic partnerships in this arena. Let's discuss our sustainable growth initiatives on Page 3.

During the third quarter, Digital Realty was honored to be recognized by GRESB as an overall global sector leader in the technology and science category for exemplary ESG performance, receiving a coveted five-star rating from this leading global ESG benchmarking organization and reflecting Digital Realty's commitment to being a global leader in ESG. We also became a U.N. Global Compact signatory in September, aligning our ESG goals and commitment to the U.N. Sustainable Development Goals with a global initiative.

We also advanced our sustainable financing strategy, raising our first-ever Swiss green bonds and publishing the allocation of $440 million of proceeds from our September 2020 Euro green bond, which funded sustainable data center development projects in four countries across three continents, certified in accordance with leading sustainable rating standards. We are committed to minimizing our impact on the environment while simultaneously meeting the needs of our customers, our investors, our employees, and broader society while advancing our goal of delivering sustainable growth for all of these stakeholders. While on the topic of energy, I'm pleased to report that Digital Realty experienced only a small negative impact from the substantial rise in energy costs during the third quarter. In Europe, where concerns of an energy crisis were most acute, we typically contract for energy supplies a year or more in advance, providing price visibility and certainty for our customers.

Elsewhere around the world, energy costs are typically passed through to customers, minimizing our direct exposure. We continue to keep a close eye on energy prices. But given the resiliency of our business model, we do not expect rising energy costs to impact our reported results by more than a few pennies. Let's turn to our investment activity on Page 4.

We continue to invest in our global platform. As previously announced, we entered into a joint venture with Brookfield to expand PlatformDIGITAL into India, a giant underserved market, with the fifth largest GDP in the world. Like many emerging markets, India presents some unique challenges, underscoring the need for local knowledge and experience. To that end, we were pleased to announce the hiring of Seema Ambastha as CEO for the India joint venture.

Seema has years of experience in the Indian IT sector broadly and in the data center industry specifically where she most recently served as a senior executive leader with the NTT Netmagic data center business across India. We believe the India data center market has the potential to experience significant growth over the next decade, and we're thrilled to have such a strong partner and strong leader in this exciting new venture. During the third quarter, we continued to expand iColo, our Kenyan data center operator, acquiring a land parcel in Mozambique to build a facility position to land subsea cables and other connectivity-focused customers. We also acquired a controlling interest in Medallion Communications, the leading colocation and interconnection provider in Nigeria, in partnership with our existing African partner, Pembani Remgro.

As the African internet economy matures, we expect Nigeria will represent a significant growth opportunity given its large and relatively young population, a growing and diversifying economy, as well as a maturing regulatory environment. Given the connectivity Africa from our existing hub in Marseille, our platform will now offer the market-leading destinations, connecting Africa to Europe and beyond. We're also investing to organically expand our capacity. As of September 30, we had 44 projects underway around the world, totaling almost 270 megawatts of incremental capacity, with over 250 megawatts scheduled for delivery before the end of 2022.

We continue to invest most heavily in EMEA, where we now have 27 projects underway in 15 different markets, totaling 150 megawatts of incremental capacity, most of which is highly connected, including significant expansions in Frankfurt, Marseille, Paris, and Zurich. Our investment in organic development is a reflection of the strength of demand across EMEA. We're being a bit more selective in North America. We're seeing strong demand in Portland, where we have a 30-megawatt facility under construction that is 100% preleased and scheduled for delivery in the first quarter of next year, while we also have significant projects underway in Northern Virginia, New York, and Toronto.

Finally, in Asia-Pacific, we continue to pursue strong, organic development, both on our own and with our joint venture partners. We are adding capacity in Hong Kong that will open this quarter and expect to open Korea's first carrier-neutral facility in Seoul in early 2022. We are building a connected campus in Seoul to provide the full spectrum of solutions for our customers. The larger second facility will accommodate up to 64 megawatts of capacity and will be located within 25 kilometers of our first facility.

Let's turn to the macro environment on Page 5. We are fortunate to be operating in a business levered to secular demand drivers, and our leadership position provides us with unique vantage point to detect developing trends as they emerge globally on PlatformDIGITAL. Just over a year ago, we introduced the Data Gravity Index, our market intelligence tool that forecasts the growing intensity of the enterprise data creation lifecycle and its gravitational impact on global IT infrastructure. Earlier this year, we published an industry manifesto, enabling connected data communities to guide cross-industry collaboration, tackle data gravity head-on, and unlock a new era of growth opportunity.

Recent third-party research continues to support the growing relevance of data gravity. According to ITC, the amount of digital data created over the next five years will be greater than twice the amount of data created since the advent of digital storage. This digital data creation is expected to drive exponential growth in enterprise user data aggregation, storage, and exchange, providing a powerful tailwind for data center demand. We continue to see enterprise and service provider customers deploying their own data hubs and using interconnection to securely exchange data in multiple metros on PlatformDIGITAL to accommodate their own data creation growth.

Recently, for the second consecutive year, Digital Realty was ranked as the only outperformer and global leader by GigaOm for edge colocation. This ranking reflects our continued innovation and the execution of our PlatformDIGITAL roadmap for delivering global differentiated capabilities and value for our customers and partners. We are honored by the strong validation of our platform and our market-leading innovation to capture the growing global demand opportunity from data-driven businesses. With that, I'd like to turn the call over to Andy to take you through our financial results. 

Andy Power -- Chief Financial Officer

Thank you, Bill. Let's turn to our leasing activity on Page 7. For the second straight quarter, we signed total bookings of 113 million. This time, with a 12 million contribution from interconnection.

Deal mix was consistent with the prior four-quarter average, sub-1 megawatt deals plus interconnection represented about 40% of the total, while larger deals represented around 60%. Space and power bookings were also well diversified by region, with EMEA and APAC contributing 45% of our total, about the same as the Americas, with interconnection accounting for the remaining 10%. The weighted average lease term was a little over five and a half years, and we landed a record 140 new logos during the third quarter, with strong showings across all regions, demonstrating the power of our global platform. In terms of specific wins during the quarter and around the world, a leading cloud-native cybersecurity platform is expanding its high-performance computing capabilities by leveraging PlatformDIGITAL in four markets across North America and Europe, connecting with cloud providers, improving performance, and driving down cost.

A market-leading autonomous driving technology developer partnering with Digital Realty to tailor an innovative and unique infrastructure solution for simulation workloads. Two major North American energy firms chose Digital Realty to leverage our geographic reach and rearchitect their network to interconnect with cloud providers and implement security controls as part of their hybrid IT strategy. A public university in the Eastern U.S. is launching a Global Research Initiative with other universities in EMEA and deploying PlatformDIGITAL network hubs across two continents in three cities to help enable this project.

A maker of high-performance computing systems is expanding their footprint by deploying on PlatformDIGITAL across multiple regions to guarantee GDPR compliance while enhancing their security, performance, and sustainability. And finally, a Global 500 fintech provider is expanding their own hybrid IT availability zones into multiple new metros, using PlatformDIGITAL to support their data-intensive and high-performance computing requirements. Turning to our backlog on Page 9. The current backlog of leases signed but not yet commenced rose from 303 million to 330 million, and our third-quarter signings more than offset commencements.

The lag between signings and commencements was down slightly from last quarter at just over seven months. Moving on to renewal leasing activity on Page 10. We signed 223 million of renewal leases during the third quarter, our largest ever renewal quarter, in addition to new leases signed. The weighted average lease term on renewals signed during the quarter was a little over three and a half years.

Renewal rates for sub-1 megawatt deals remain consistently positive, greater than the megawatt renewals were skewed by our largest deal of the core that combined a sizable 30-megawatt renewal with our largest new deal for the quarter, which will land entirely in existing currently vacant or soon to be vacant capacity across Chicago and Ashburn. Excluding this one transaction, our cash mark-to-market would have been a positive 1%. This multifaceted transaction was a prime example of what we mean when we talk about our holistic long-term approach to customer relationship management. We believe we have a distinct advantage when we are competing for new business with a customer that we are already supporting elsewhere within our global portfolio.

And whenever we can, we try to ride a comprehensive financial package across multiple locations and offerings, including both new business, as well as renewals. In terms of first-quarter operating performance, reported portfolio occupancy ticked down by 50 basis points, largely driven by the sale of fully leased assets during the quarter. Upon commencement of the large combination renewal expansion list I mentioned a moment ago, portfolio occupancy is expected to improve by 70 basis points. Same capital cash NOI growth was negative 5.5% in the third quarter, primarily driven by a spike in property taxes in Chicago, where local assessors have adopted a very aggressive posture, along with the impact of the Ashburn churn event in January.

Of the 70 megawatts we got back on January 1st, approximately 80% has since been released to multiple large and growing customers. As a reminder, the Westin Building in Seattle, the Interxion platform in EMEA, Lamda Hellix in Greece, and Altus IT in Croatia are not yet included in the same-store pool. So, these same capital comparisons are less representative of our underlying business today than usual. And while we're still in the early stages of our budgeting process, we are optimistic in terms of where our same-store and allied growth goals for 2022.

Turning to our economic risk mitigation strategies on Page 11. The U.S. dollar strengthened during the third quarter, providing a small FX headwind in the third quarter. As a reminder, we manage currency risk by issuing locally denominated debt to act as a natural hedge, so only our net assets within a given region are exposed to currency risk from an economic perspective.

Our Swiss green bond offering during the quarter is a good example of this. In addition to managing credit risk and foreign currency exposure, we also mitigate interest rate risk by proactively terming out short-term variable rate debt with longer-term fixed-rate financing. Given our strategy of matching the duration of our long-lived assets with long-term fixed-rate debt, a 100-basis-point move in [Inaudible] would have approximately a 50-basis-point impact on full-year FFO per share. Our near-term funding and refinancing risk is very well managed and our capital plan is fully funded.

In terms of earnings growth, third-quarter core FFO per share was up 7% on both a year over year and sequential basis, driven by strong operational execution, cost controls, and a reduction in financing costs from the debt refinancings and redemptions of preferred stock over the past year. To avoid any confusion, our core FFO outperformance excludes the benefit of a nearly $20 million promote fee received in connection with the monetization of our joint venture with Prudential. Heading into the final quarter of the year, we have solid momentum, so we are raising our full-year outlook for revenue, adjusted EBITDA, and core FFO per share to reflect this underlying momentum in our business. Last but certainly not least, let's turn to the balance sheet on Page 12.

We continue to recycle capital by disposing of assets that have limited growth prospects, raising over 100 million in the third quarter for our 20% position in the Prudential JV and some land in Arizona. We also raised approximately 95 million of common equity under our ATM program in July, as well as 950 million of common equity in a September forward equity offering. Our reported leverage ratio remains at six times, but including committed proceeds from the September forward equity offering, the leverage ratio drops to 5.6 times, while our fixed charge coverage improves to six times. We continued to execute our financial strategy of maximizing the menu of available capital options while minimizing the related costs and extending the duration of our liabilities to match our long-lived assets.

Our two capital markets transaction this quarter are examples of our prudent approach to balance sheet management. This successful execution against our financing strategy reflects the strength of our global platform, which provides access to the full menu of public as well as private capital, sets us apart from our peers, and enables us to prudently fund our growth. As you can see from the chart on Page 13, our weighted average debt maturity is over six years and our weighted average coupon is down to 2.2%. Three-quarters of our debt is non-U.S.

dollar-denominated, reflecting the growth of our global platform while also acting as a natural FX hedge for investments outside the U.S. Over 90% of our debt is fixed rate, guarding against a rising rate environment. And 98% of our debt is unsecured, providing the greatest flexibility for capital recycling. Finally, as you can see from the left side of Page 14, we have a clear runway with nominal near-term debt maturities and no bar too tall in the out years.

Our balance sheet is poised to weather a storm but also positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy. This concludes our prepared remarks. And now, we would be pleased to take your questions. Operator, would you please begin the Q&A session? 

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] And our first question comes from Jon Atkin of RBC. Please go ahead.

Jon Atkin -- RBC Capital Markets -- Analyst

Thanks very much. I think I'll ask both of mine upfront. I wondered, first of all, if you could talk about the factors that are affecting your capex to develop incremental capacity? John Stewart, I guess, in the prepared remarks talked about on time and on budget. But going forward, given what's happening with materials costs, I wondered whether you see an opportunity to adjust your pricing on new leases accordingly.

And then the second question is just earlier this month, you acknowledged that you're exploring the potential creation of a Singapore reach -- Singapore REIT, and I wonder if you can just provide an update on that around the timing and scale and rationale of that project. Thanks.

Bill Stein -- Chief Executive Officer

Hey, Thanks, Jon. I'll take your first question, then I'll hand it over to Andy to address the -- to answer the Singapore REIT. First of all, I think you're right about inflation in terms of the opportunity that it presents. I think there's no doubt that it disproportionately, adversely affects our smaller competitors and widens our competitive moat.

Over time, I would expect that rental rate increases will disproportionately accrue to the larger incumbent providers. There are basically two pieces to the inflation issue. The first is the development, the second is operations. On the development side, we are -- our pipeline is on time and it's on budget.

And kudos to Erich Sanchack, who leads our operations and procurement team for the vendor management programs that he's put in place, providing us a fixed pricing for several years out, for diversifying our vendor mix, and for allowing our -- for locking in our general contractors. We have a lot of construction sites around the world, and we're able to move them -- move our GCs around and keep them fully occupied. And I think our global scale, as well as our maturity as a builder, gives us a substantial competitive advantage here. But again, I don't think there's any doubt that the market rents will eventually need to move up to maintain risk-adjusted returns.

And I think that that's both because of the increase in construction costs that show up in the denominator. But I think for our private competitors who are operating with more leverage, I think you're going to see that show up in the higher interest rates. So, to -- I think they're going to have to raise their costs for that reason as well. And I think that the read-through here is actually really positive for our renewals because as our rates on new product increase, our rates will also, I expect, increase for renewal.

So -- but the bottom line there is that modest inflation we think is quite healthy for the business. And in terms of our customers, I -- this shouldn't come as a surprise to them because, you know, to the extent that they're doing it themselves, they're seeing this development in their own supply chains. And relative to the operations or the P&L, I think, as you probably know, our leases provide for a significant pass-through. So, for example, over 90% of our utility costs this last quarter were passed through the customers.

We also had rent bumps, you know, generally between 2% and 3%. And then we have I think the highest operating or the best operating leverage of highest margins in the business. So, what that means is that labor or labor costs, which I think is what's most susceptible to inflationary pressure, is a relatively low percentage of the revenue component in the income statement. And so, with that, I'll hand it over to Andy to talk about the Singapore REIT.

Andy Power -- Chief Financial Officer

Thanks, Bill. So, Jon, you picked up obviously an 8-K we put out there a few weeks ago. We are kind of heading down the path of exploring essentially an IPO of a portfolio on the Singapore market. This is not our APAC business, which has significant amounts of capacity under construction and land and the like.

This is essentially be more analogous to almost like a private capital partner to Digital Realty for stabilized, fully, well-leased, high-quality, core, long-term hold data centers to Digital, and our strategy somewhat analogous to one of our joint ventures that we've done in the past couple of years with that one which was with a Singapore REIT. We're still working through this. It's a long IPO process. There's no certainty on the outcome or completion.

Sizing would be obviously a modest IPO size to begin with, but we do think this option has the merits of being an attractive long-term partner vehicle to Digital Realty.

Jon Atkin -- RBC Capital Markets -- Analyst

Thanks very much.

Operator

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

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Thanks, guys. So, first, I want to follow up, though, on sort of the price increase opportunity. I'm interested specifically in the greater than one-megawatt rents achieved in the Americas this quarter. They seemed, you know, quite the opposite.

I wonder at $80 per kW, it seemed like a low point relative to recent prints. I'm wondering what portion of that is a function of your geography mix, etc.? And then, you know, any color you could around the ability to push rate there.

Bill Stein -- Chief Executive Officer

Jordan, it's definitely a function of geographic mix. It's also a function of an extension that we were doing with an existing customers there where we're providing some rental concession as well. Andy, do you want to add anything to that?

Andy Power -- Chief Financial Officer

Yeah, just maybe just a little more color. I mean, the overall sign was a strong quarter, well north of 100. In North America, as you point out, it was in our prepared remarks. We had a sizable signing where we essentially keep the table with a holistic relationship-oriented solution for our customer, combining a renewal that impacted our mark-to-markets, as well as a new signing.

On the renewal, if you pulled that out of our mark-to-markets, we're part positive 1%, but it was a 30-megawatt signing, so it's a large kind of contributor to that. And on the new signing, I think it was into four or so different data holds. It was spread across both Ashburn and Chicago. It was 100% into existing vacant or to be vacated capacity.

So, a direct flow through to the bottom line, not call it future releasing. And so, we think it was an attractive combination of helping the customer grow with us on our campus, and this is a customer we see future growth in years to come, so happy to support them.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

OK. And then on coming back to that supply chain, I have a little bit of a two-parter, which is, one, how much urgency are you seeing from your larger customers that are looking to procure available inventory and just, you know, have a line of sight to future product and infrastructure? And then second, how far forward have you pre-bought critical construction materials like generators, PDUs, rack units, UPS?

Andy Power -- Chief Financial Officer

So, maybe I'll -- Jordan, it's Andy again, let me -- I'll try to take them in backward order. So, we have call it to approaching 300 -- 270-something of megawatts shovels in-ground, all the way to opening doors as we speak. And we are insulated in terms of our cost in the procurement, whether it's through our VMI programs or through just supplier contracts, and other things we do having been focused on, building new capacity for so many years consistently. Beyond that, we are not fully insulated, but we -- those VMIs I just mentioned do extend.

They're primarily focused in North America. They extend up 2023. So, we do have a fair bit of insulation. We're not whistling by the graveyard on this topic.

Obviously, inflation is here and will impact anyone let's call it in the development arena. But we do believe, given our size and scale as the largest developer and track record, that we're going to fare better than our competitors set, and especially in newer incumbents to development. In terms of urgency, I think our customers are always urgent despite making massive financial decisions. Maybe I'll have Corey jump in a little bit to give you a little bit of flavor on the customer line.

Corey Dyer -- Chief Revenue Officer

Yeah, sure, I can do that. Jordan, on the questions around this with the demand from the shortages in chips, we haven't seen it negatively affect any of our pipeline across the regions. We've actually seen it grow. And then also, we've got some sophisticated customers that are at forward about what was going to happen with the chip shortages and planned accordingly, and therefore, have accelerated some of our opportunities across the globe.

So, at a net perspective, we kind of see it as a positive, and people are thinking through it. Our customers are thinking through it. And on our end, it has really helped us kind of grow our pipeline at this point.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Thank you.

Operator

The next question comes from David Barden of Bank of America. Please go ahead.

David Barden -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Thanks for taking the questions. I'll ask my two upfront, too, if I could. I guess first one would be, Bill, you know, investors have been waiting a long time to kind of see how the big data center companies evolve their edge strategies.

You've already struck a partnership a week or two ago, and it sounds like you're planning on doing some more. I was wondering if you could kind of elaborate a little bit now on what you're looking for and how you settled on this path that you've chosen with Atlas to begin with. And then maybe, Andy, just -- I want to kind of go back to the power thing. You know, 90% pass-through, that leaves about 20 million on the income statement, a few pennies.

You know, it's still about $15 million of exposure. Is that kind of what you're budgeting to potentially happen in 2022? Thanks.

Bill Stein -- Chief Executive Officer

Yeah, I'm going to turn it over to Chris to handle the edge questions. He spends a fair bit of his days on that particular initiative.

Chris Sharp -- Chief Technology Officer

No, I appreciate it, Bill. And thanks for the question, David. Yeah, we definitely have been watching the edge for some time now. We do see, you know, it's still in its early stages of being a material opportunity.

But one of the things that we've done is partner with AtlasEdge that we think they can provide a significant value in extending our platform deeper into the metro. And so, that's something that we're looking at learning and understanding how to gain more intelligence in their new types of infrastructure they're bringing to market. And quite frankly, it expands and enhances our core-to-edge strategy so that our partners and our customers can get the benefit of extending their existing infrastructure out to the edge when it matures over time. I would also say that a critical piece that I think you picked up on, David, which is great, is that we, at Digital, we're open, right? This is one of many partners and relationships that we're going to continue to prosecute because we see that there's many types of avenues out into accessing this edge infrastructure, but you're going to see a lot of partnerships over the course of the next couple of quarters where we'll further invest and refine exactly how we're going to prosecute that edge opportunity. 

Bill Stein -- Chief Executive Officer

Andy?

Andy Power -- Chief Financial Officer

And then, David, on the second question, so just review a few facts. So, 90%, you know, are just P&L, 90% of the power is reimbursed overall. We do pursue a hedging strategy primarily on our deregulated markets where you see potential greater volatility. We're about 85% hedged with contract durations ranging from one to three years.

We also, as you know, are incredibly focused on sustainability. Our green power procurement is a massive part of that playbook. And we pride ourselves in what we've done on that efforts to cut further green our portfolio, including power purchase agreements. Some of those have essentially offsetting the impact if in the event the power prices are to surge, that call it provide an incremental hedge to power costs.

So, where we see it in the event that this elevated power scenario plays out for the duration of 2022, we look at it as just a couple cents, which call it every penny is just almost $3 million. So, not -- I wouldn't say a material headwind at this time.

David Barden -- Bank of America Merrill Lynch -- Analyst

Perfect. Thanks, Andy.

Operator

The next question comes from Simon Flannery of Morgan Stanley. Please go ahead.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thank you very much. Good afternoon. Andy, I just want to clarify, you made a comment that you were optimistic on 2022 same-store NOI growth.

Does that mean you can -- you think it's going to be positive or better than this year? Any clarity you have there. And then just more broadly, Bill, can you maybe just talk about in leasing has been consistently strong this year. How does the pipeline look and how does the competitive environment look going forward?

Andy Power -- Chief Financial Officer

Thanks, Simon. So, listen, we are in the middle of budget season, and I got my head of FP&A to my right on the heels, stepping my foot really painfully if I get out of my skis here. But that being said, listen, we've got the same-store pool that's going to materially grow. And I think it's in a positive direction with the addition of Interxion, the Westin Building, Altus IT, our business in Athens.

We've required higher pricing power components added to the mix. We're also making great progress on really seeing the capacity that was vacated at the beginning of this year. A huge portion of signings that I mentioned we did this quarter has been falling into vacant or vacated capacity, so quicker resumption of cash flow from that space that sat idle for a portion of 2021. So, net net, I think there's a few things that kind of point to this kind of more positive trajectory in the same-store pool, hence my comment about optimistic on where we're going for 2022.

Simon Flannery -- Morgan Stanley -- Analyst

Thank you. 

Bill Stein -- Chief Executive Officer

Corey is best situated to address the pipeline.

Corey Dyer -- Chief Revenue Officer

Yeah, and then also from a pipeline perspective, Simon, I would just tell you that PlatformDIGITAL and just our thought leadership around data gravity is really taking hold. All right? Our enterprise pipelines growing across all regions. So, really happy with that. Gartner was forecasting solid growth in enterprise IT spend.

Just feels like we're in kind of the early innings of the IT transformation for the enterprises. As mentioned in the opening remarks, this quarter represented a new high for us in new logos, that 140 new logos. So, think about that as a proxy for enterprises continuing to decide to buy and partner with us. So, we feel good about the demand signals in our pipeline going forward.

Hopefully, that answers your questions, Simon.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thank you. 

Operator

The next question comes from Matt Niknam of Deutsche Bank. Please go ahead.

Matt Niknam -- Deutsche Bank -- Analyst

Hey, thanks for taking the questions. Both of these are maybe piggybacking a little bit on the back of Simon's questions. But first, on the competitive landscape, I'm just wondering, you mentioned upfront being a little bit more selective as it relates to investment in the U.S. Just wondering if you can update us on the competitive landscape you're seeing from both public and private peers, whether that's changed much at all in the last three months.

And then secondly, as we think about core FFO or maybe even AFFO per share growth next year, I don't want to jump the gun. I know we may get an outlook in three months' time, but, Andy, if there's any updates in terms of how you're thinking about that bottom-line growth into '22, that'd be great. Thanks.

Andy Power -- Chief Financial Officer

Sure. So, Matt, maybe I'll do in reverse order here for just in order of efficiency here, make sure everyone gets questions. So, core FFO, we're not -- we didn't pulled forward our 2022 guidance dramatically. But I think we're definitely pleased with how we're putting up results this year that has got call it double-digits top line, cuts 7% year-over-year performance of the bottom line.

We've now raised our guidance. So, we're just over the 5% call it year over year for 2021. And you heard from Corey and Bill and the others, we're confident in the pipeline. So, we think -- we're looking to kind of like grow the bottom line higher next year than this year.

So, that's a continuation of things I've been saying for pretty much every quarter of '21. But sorry, no sneak preview on '22 guidance just yet. On competitive landscape, I think that refers to leasing competitive landscape and is there any changes on the backs of M&A or whatever in our space? I mean, Corey should chime in here, but by and large, I don't think I've seen any dramatic change. I think the trend has been our friend, for now, several quarters of more and more customers attracted to a global platform across 25 countries, 50 metropolitan areas, spanning to four customer spectrum, supporting those -- most of those 4,000 customers in the retail-oriented environments, all the way up to the dedicated data holds for hyperscalers who we have in call it north of 45 different locations.

And I've not seen any dramatic change in that. And I think you can see that now in several quarters of consistent call it results. But, Corey, I don't know if you have any different observations.

Corey Dyer -- Chief Revenue Officer

No, I would just add to it that yeah, we've had consistent results for a long time. To your point on our scale, we see all the competition out there. Our win rates and our cap rates are improving. So, yeah, I would just pile on to what you said and the success we're having and what we're seeing in the pipeline the demand. 

Matt Niknam -- Deutsche Bank -- Analyst

Great. Thank you. 

Operator

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

Michael Rollins -- Citi -- Analyst

Thanks, and good afternoon. Two questions if I could. You know, first, just a little bit more on the edge strategy. Just curious how you're contemplating the edge in the North America market and is that something that you're looking to, you know, create some further progression on, you know, in the near term or is that more of a longer-term ambition? And then just going back on some of the portfolio and pricing commentary.

Just curious, when you have these large multi-megawatt deals where you're discounting to get new business, or you have some, you know, repricing risk, is it because some of the need to the customers are changing? Is it just market rents? Like what are some of the factors that are driving that and how should investors think about just what might be left in the portfolio to get through on that basis? Thanks.

Andy Power -- Chief Financial Officer

Thanks, Mike. Maybe, I'll take the second question, then hand it off to Chris to talk about what's next on the edge. So, I mean, listen, we're always in active relationship or in a dialogue with our customers, but especially our largest customers who we're supporting in so many different markets and really the full suite of products from network-oriented deployments, hybrid IT, all the way out to their true massive cloud compute. And we just want to -- we try to come to the table with holistic solutions.

If they have a renewal that's coming in the coming years, we make sure that's part of the conversation, right? And it often leads to situations like -- which recently transpired in the last quarter where they may not take some of the new business out to search of the market or say you know what, I've got already deployed on your campus and then growing these addition data holds is the right move. So, it's really a holistic relationship-oriented approach. As it relates to, I think, the heart of your question, yes, we don't like having any mark-to-market go down at all, so a negative 5% quarter is not great. But in the scheme of things, we're still holding our guidance for the full year.

We had a positive zero-point -- slight -- very modest positive last quarter, and we're seeing strength in the fourth quarter. And we've been saying for some time, we think the front review of these expirations are getting better in terms of the mix, more higher pricing power footprints, as well as more international footprints where we have a greater pricing power on these renewals. And that's putting aside incremental uplift potential from this inflation-related impact that Bill kind of highlighted that should manifest itself over time. Chris, do you want to tackle the edge?

Chris Sharp -- Chief Technology Officer

No, absolutely. Thanks, Michael, for the question. It gives me an opportunity. I just want to also commend Giuliano as getting the role of CEO over at AtlasEdge.

It's a great opportunity for him, and we'll continue to work closely with him. So, I appreciate the question, Michael. But going one step further, and I think you're spot on in that we often talk about the edge evolving from the core out deeper into the metro. And I think one aspect of that is no two markets are equal, so there's definitely varying degrees of capabilities in each of the markets globally.

So, Europe is one. In a general sense, North American and APAC. We absolutely are pursuing different types of partnerships within all of these markets because, quite frankly, our largest customers are looking for a global solution. And so, we're always looking at what is the best path to enable our customers in the most efficient way possible.

That's at the core of what is our edge thesis that we continue to refine and that's what we referenced even in the prepared remarks, I think in Bill's section, about you'll see other partnerships in different markets just to really helping us prosecute that opportunity when it matures over time.

Operator

The next question comes from Frank Louthan of Raymond James. Please go ahead.

Frank Louthan -- Raymond James -- Analyst

All right, great. Thank you. What is sort of the development yield that you're targeting on that releasing, particularly the new customer that kind of drag down the greater than a megawatt leasing? And then I've got a follow-up.

Andy Power -- Chief Financial Officer

The -- honestly, Frank, they're backfilling vacant capacity, so it wasn't like we respectfully building out new building. I think a good chunk of that is legacy DFT capacity, which we did a stock-for-stock deal. And hence, it was kind of a currency exchange. So, I don't think the development -- and when -- I don't think the development yield will be the right way to look at it.

You can look at the -- given its size, it was the preponderance of the North America signings in the plus-one megawatt category, which was in -- we always want rates to be higher, but we're -- those are two markets where I would say that we -- I think we guard a fair economic rate for that capacity, and we're refilling something that's already built in our capitalization. We're paying tax -- real estate taxes on it. We're operating the capacity, so it's going to flow through our bottom line where -- and we've not changed I would say our development target returns on the call it 270 megawatts that we have under construction that actually inched up a smidge this last quarter.

Frank Louthan -- Raymond James -- Analyst

All right, great. So, the follow-up, Bill, you mentioned that you could see inflation work in your favor in the releasing. When should we expect that? I guess it didn't help as much this quarter. Or is that going to help more broadly for, you know, iColo and smaller deals as opposed to more hyperscale deals?

Bill Stein -- Chief Executive Officer

Yup, Frank. I mean, that's -- I don't think that's going to be -- it's not going to show up next quarter or the quarter after I think. But I do think if you see stay in inflation, it's going to start flowing through to our competitors' construction costs. So, I think it'll show up in higher interest rates, and I think it'll put upward pressure on rents across the board, which will affect not just our new leasing but renewal leasing.

But it's hard to put a specific time on it. Certainly, not going to be in the next quarter or two.

Operator

The next question comes from Eric Luebchow of Wells Fargo. Please go ahead.

Eric Luebchow -- Wells Fargo Securities -- Analyst

Hey, thanks for taking the question. Curious on what you see in the enterprise funnel. We've heard there are some larger deals coming to the market, particularly in the financial services arena. Have you seen deal requirements across enterprise picking up in size and do you see an acceleration in deal flow could give you the opportunity to do even better, you know, in that arena as we go forward? And then just one more question.

You've said in the past, capital recycling may start to moderate in the coming years, but given the, you know, the cap rate on the Prudential joint venture sale, some 5%, are there opportunities to maybe some more noncore markets or assets in the coming years? Thanks.

Andy Power -- Chief Financial Officer

Corey, why don't you hit the first one, and Greg and I can tag-team the second one.

Corey Dyer -- Chief Revenue Officer

Yeah. So, Eric, thanks. The question I think was on enterprise demand and continuing that, as well as possible deals we have for the quarter. I'm not going to talk through specific deals, but we do see an uptick in requirements, as well as uptick in the size of the requirements, which is what you were specifically asking.

When you think through our full spectrum of offerings and opportunity that we have for the enterprises, that uniquely positions us around PlatformDIGITAL and how you're going to handle the data gravity and the opportunities around that. So, yeah, we're seeing some larger footprints go in across call it our 300 kW band and 600 kW band that speaks to people thinking through data performance hubs for us and data hubs out there for us to improve their enterprise solutions. So, yeah, we're seeing that across the board. Hopefully, I -- did I get you your answer, Eric? 

Eric Luebchow -- Wells Fargo Securities -- Analyst

Yes. Yeah, that's great. Thank you. That's great.

Greg Wright -- Chief Investment Officer

Eric, and with respect to capital recycling, I guess what I would say is, you know, things are still consistent to what we set up two years ago. And a few years ago, we said we were going to sell a few billion dollars of assets over a few years. And again, the reasons that we were recycling out of those assets and redeploying that capital into more core strategic assets remains, whether they were assets that weren't core to our business or certain markets that weren't core to our business. That's why we're selling assets.

We're not just selling assets because there's, you know, strong cap rate activity in the market. Now, that obviously helps. But again, if an asset is core to us, we're not going to sell it just because cap rates are getting better. But again, it does, you know, put a little wind at our back to the extent we are selling assets now given the improved pricing we're seeing in the market.

And you're right, we saw strong pricing in our portfolio disposition in Europe this past year. And now, on the Prudential deal, we saw very strong pricing, as you said, on the stabilized assets. It was mid-force. Of which, you know, we were fortunate to recognize almost $20 million promote out of that transaction as well.

So, look, you're point is right, pricing is strong. We think that bodes well for the sector and for, you know, big owners of assets like ourselves. But, you know, maybe I'll turn it over to Andy to go ahead and see if he's going to add.

Andy Power -- Chief Financial Officer

Just one thing. Just two buckets there, selling outright noncore asset that Greg did a great job of describing, streamlining our portfolio, aligning with the growing customers' long-term growth assets. And then what I think was touched on one of the first or second questions on also evolving our capital sources in terms of core assets and raising private capital. All of this with initiative of trying to accelerate our bottom-line growth through capital efficiency.

Operator

The next question comes from Eric Rasmussen of Stifel. Please go ahead.

Eric Rasmussen -- Stifel Financial Corp. -- Analyst

Yeah, thanks for taking a question. Just two. First, on the Africa JV. You know, you announced that yesterday with Pembani.

Can you just provide any additional color around how big these data centers are, maybe some details around the acquisition? And then, you know, as you look to what sort of investment are you're looking to make as you look to expand in that market?

Greg Wright -- Chief Investment Officer

Sure. Hey, Eric, it's Greg again. Look, I think when you look at the transactions, right, the transactions we've talked about here are clearly a company called Medallion Communications in Nigeria, and the total consideration for that project was 29 million. We partnered with Pembani on that.

So, the amount of capital we have is even less. And, you know, another transaction we disclosed was the acquisition of the land parcel in Mozambique, again, with Pembani. That was for $3 million. So, I mean, look, these are clearly -- what I would say is these are small seeds that we're planting in these highly connected assets because they are, they're highly connected communities of interest, and we're doing it with a smart local partner in Pembani.

And when you look at a market like Nigeria, right, it's got the largest GDP and population in Africa. And the size of that investment, as I said, is very small for a company our size. And as I mentioned, Mozambique is even smaller. And we did that one to gain location that, again, will play a critical role with the subsea cable activity that will encircle Africa.

You know, I think as you think about it, right, you look and see in Europe, right, we have Marseille in Western Europe, right, which is a highly connected hub. Then we -- you know, we've done the transaction with Lamda Hellix in Greece, which we believe is going to become a highly connected hub. And as you look at that, so you have Marseille to the west, you have Greece to the east. And as you move down into Africa, right, you look at Nigeria on the west, you look at Kenya in the east, right, and then you look at Mozambique that goes down to the south.

And we really view this as really one large like crossroads of connectivity if you will that we think are going to bode well long term for the company.

Eric Rasmussen -- Stifel Financial Corp. -- Analyst

Great, thanks. Look forward to hearing more about it. And then maybe just on the Q3 leasing. It held steady at 113 million.

You know, as the U.S. and I think hyperscale is somewhat, were there any limitations with capacity in certain markets? Was there anything else that you could really call out, you know, as we think about Q3 results?

Andy Power -- Chief Financial Officer

No. Eric, I don't think there was any limitations. We always have room for more leasing in any given quarter. And I know Corey is also chomping at the bit for more inventory to sell into quickly.

But, listen, I think it was a pretty -- very healthy quarter. You look at the geo mix call it well spread across each of the regions. You look at the enterprise mix with the less than a megawatt and interconnection call it 40%, record 140 new logos. That record 140 had a record contribution from on -- lease record with six quarters from North America.

And I think No. 2 from EMEA contribution. You could see from the new logos or some of the logos we called out in my prepared remarks call it light or rolled enterprise, global power firms, and universities to burgeoning technologies like autonomous driving. So -- and I think the -- on the hyperscale side, a little bit similar.

Some of the call it house names at Digital, growing with us and to existing inventory, as well as some call it next generation hyperscalers landing with us in Tokyo, which I think was our second or third largest sign. So, broadly, pretty healthy. And we're not done yet for 2021.

Operator

The next question comes from Colby Synesael of Cowen. Please go ahead.

Colby Synesael -- Cowen and Company -- Analyst

Hi, great. Thanks for fitting me in. A few questions. One on renewals, renewal spreads down, you know, negative 5.6%, still guiding to slightly negative for the year.

Do you think renewal spreads can be positive in 2022? Second question, just a little bit of clarification. Are you saying that your biggest deal, which I guess was a combination of Chicago and Northern Virginia, was for 30 megawatts, or was that what the megawatts were that were renewed? And then Facebook just put out their earnings last night. They increased their capex budget for 2022 by over 50% to somewhere I think near $30 billion. Given that that could have positive implications for the data center space, and then forgive me, but you just did an ATM, you have an 18-month draw on that.

The ATMs you've done in the past have been 12 months. I'm curious why you pushed it out to 18. Thank you.

Andy Power -- Chief Financial Officer

So, Colby, I think that's four questions, well over our two limit, but it's been [Inaudible] to -- 

Colby Synesael -- Cowen and Company -- Analyst

Some of them I like five seconds.

Andy Power -- Chief Financial Officer

So, we're not going to get them all rapid-fire here. Listen, I think that we've been saying for some time we think we're moving to better territory on the cash mark-to-market, and I think the -- we've seen our guidance, including the fourth quarter, relative to where we are trending already reported for the year speaks to that, and I think I've been saying that for some time that I think we're heading to better territory. So, again, we're not done with the budget and certainly not our guidance for 2022, but it feels like we're -- based on the mix of both product and geos and composition, we're in a better territory than we were certainly at the beginning of this year on that stat. We did across four or so suites, so different buildings, across roughly half and half Ashburn and Chicago, a total of about 30 megawatts of new signings with the same customer that also did roughly 30 megawatts of renewals in the same quarter.

And you could see this was a really super high renewal quarter overall for us. We usually been doing like 100 megawatts or just shy of that in the plus one megawatt LTM standpoint. So, you see I think we had 53 or something in that category this quarter, so a high renewal activity quarter. So, hopefully, that paints a picture on those two.

Undrawn forward equity offering, yeah, we -- listen, we -- the equity offering was, again, opportunistically derisking our development capex plan. And we're able to extend the duration of that contract, so we have greater flexibility to essentially feather it in to our sources or uses overtime at the right time for the business, which hopefully better -- is better measured and help contributes to our earnings growth in the ensuing years. Facebook capex increasing, I don't think we have got any inside information on that. They're a large customer.

We've done -- we did new business with them in the last quarter. But they -- I don't see how it could be a negative necessarily, but I don't want to over-index that it sounds super positive to the industry. 

Operator

The next question comes from Ari Klein of BMO Capital Markets. Please go ahead.

Ari Klein -- BMO Capital Markets -- Analyst

Thanks for squeezing me in here. Andy, earlier on the call, you kind of mentioned inflation is here. How is that flowing through from a lease pricing standpoint? Are there any terms that are changing text deal or against inflation, you know, maybe some kind of change in that [Inaudible] structure?

Andy Power -- Chief Financial Officer

Yeah. All right. So, I mean, inflation, I believe inflation is here if you've filled up your car or purchase milk at the grocery store. I think Bill's comments to one of the questions, it didn't mean like overnight the data center industry you've got a rate reset.

I think we've seen inflationary pressures prior to this hard cost inflation happened where markets just got tighter as they ran up to the physical boundaries of infrastructure, right? So, our Santa Clara northern -- or Santa Clara is an example that. I mean, our releasing success has been certainly a healing to the Ashburn market. We saw this in Frankfurt, Singapore. Saw this in terms of supply limitations driving up price in which we've raised pricing there at least five times I think in the last 12 months.

And I think Bill's commentary is that, listen, as this continues to hit car costs and delivery or access to the infrastructures to bring on new supply, which is we believe is going to be disproportionately impacting smaller subscale newer entrants, that means there are customers have less options in terms of their providers. And I think that as our costs get inflated, we're going to have to examine our rates and on a market-by-market supply and demand and costing basis. And listen, I think we're due the -- going to do best out there in terms of insulating our customers from this. But I know -- I think if this period continues for a long time, we haven't had inflation realistically since call it the end of the Carter administration.

So, we're in new territory for many of us. But I think it's -- I think we're going to fare better in the end of the day. And we are insulated in terms of we have rent escalators fix pumps in most of our contracts. And I think our scale and purchasing power on an operating side, as well as the build cost side, provides insulation in addition to some of the other risk mitigations we mentioned earlier in the call.

Ari Klein -- BMO Capital Markets -- Analyst

Thanks for that. And then just on that large renewal, how did that mark-to-market rate compare to actual market rates, or is it some percentage above market rates?

Andy Power -- Chief Financial Officer

I would -- I believe it's probably 10-ish percent above new signings in apples-to-apples comparable markets. We typically see renewals have greater pricing power than new deals just on the customer has a strong preference to not risk infrastructure or workload on a move.

Ari Klein -- BMO Capital Markets -- Analyst

And that 10% kind of the normal range that you see? 

Andy Power -- Chief Financial Officer

It could be higher than that actually. I would say it's probably that's maybe on the skinnier side. But it all depends on the facts and circumstances of the [Inaudible], the utilization of the infrastructure, the customers' growth plans, the workload. Is it B2C? Is it B2B? All these things kind of go into the factors that drive the commercial outcome on those.

And with 30 megawatts all at once, right? So, 30 megawatts of new signs for 30 megawatts of renewals, all with a stroke of a pen.

Operator

This concludes our question-and-answer session. I'd now like to turn the call back over to CEO Bill Stein for his closing remarks. Please go ahead. 

Bill Stein -- Chief Executive Officer

Think you, Andrea. I'd like to wrap our call today by recapping our highlights for the third quarter as outlined here on the last page of the presentation. One, our value proposition is clearly resonating with customers. PlatformDIGITAL attracted a record number of new logos.

We had another quarter of strong new bookings and a record level of renewals. Most importantly, customers know that we will do what we say. Even when global supply chains are stressed, Digital Realty delivers. Two, we're continuing to extend our global platform.

We are investing organically to enhance our global footprint while expanding our platform into India, along with additional strategic connectivity destinations circling the African continent. Three, we generated double-digit revenue growth during the third quarter. Once again, exceeded consensus expectations. And once again, we raised our full-year outlook.

Last but not least, we further strengthened our balance sheet, locking in attractively priced long-term debt, and supplementing it with equity capital that will be drawn down over the next 18 months to support our global development program. I'd like to once again thank the Digital Realty front-line team members in critical data center facility roles who have kept the Digital world turning. I hope that you all stay safe and healthy, and we hope to see many of you virtually in a couple of weeks at [Inaudible] and hopefully in person again sometime soon. Thank you.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

John Stewart -- Senior Vice President of Investor Relations

Bill Stein -- Chief Executive Officer

Andy Power -- Chief Financial Officer

Jon Atkin -- RBC Capital Markets -- Analyst

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Corey Dyer -- Chief Revenue Officer

David Barden -- Bank of America Merrill Lynch -- Analyst

Chris Sharp -- Chief Technology Officer

Simon Flannery -- Morgan Stanley -- Analyst

Matt Niknam -- Deutsche Bank -- Analyst

Michael Rollins -- Citi -- Analyst

Frank Louthan -- Raymond James -- Analyst

Eric Luebchow -- Wells Fargo Securities -- Analyst

Greg Wright -- Chief Investment Officer

Eric Rasmussen -- Stifel Financial Corp. -- Analyst

Colby Synesael -- Cowen and Company -- Analyst

Ari Klein -- BMO Capital Markets -- Analyst

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