Pamela Matthews – Director IR Mike Foust – CEO Bill Stein – CFO, CIO

Jordan Sadler – Keybanc Capital Markets Ian Wiseman – Merrill Lynch Michael Bilerman – Citigroup [Irwin Guzman] – Citigroup Omotayo Okusanya – UBS Frank [Greywitt] – [Reeve] [Shri Anaka] – Oppenheimer

Thank you and good morning and afternoon to everyone. By now you should all have received a copy of the Digital Realty Trust earnings press release.

If you have not, you can access one in the investor relations section of Digital’s website at www.digitalrealtytrust.com or you may call 415-738-6500 to request a copy. Before we begin I would like to remind everyone that the management of Digital Realty Trust may make forward looking statements on this call that are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially from expectations.

You can identify forward looking statements by the use of forward looking terminology such as believes, expects, may, will, should or similar words or phrases. You can also identify forward looking statements by discussions of future events or trends or discussions that do not relate solely to historical matters, including statements related to the future demand for [Davis Interspace], access to debt and equity capital, lease commencements, growth drivers, ability to achieve financial and performance objectives, the company’s liquidity, redevelopment activity and the company’s expected financial results for 2008 including projected FFO per share, the signing and commencement of leases, rental rates, 2008 acquisitions and acquisition [cap] rates, the acquisition mix between vacant properties and income producing properties, total capital expenditures and general and administrative expenses.

For a further discussion of the risks and uncertainties related to our business, see the report and other filings by the company and the United States Securities and Exchange Commission, including the company’s annual report on form 10K for the year ended December 31, 2006 and subsequent filings and the company’s annual report on form 10K for the year ended December 31, 2007, which we anticipate filings with the SEC later this week. The company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise.

Additionally, this call will contain non GAAP financial information including funds from operations or FFO, adjusted funds from operations or AFFO and earnings before interest, taxes, depreciation and amortization or EBITDA. Digital Realty Trust is providing this information as a supplement to information prepared in accordance with generally accepted accounting principles.

Explanations of such non GAAP items and reconciliation to net income are contained in the company’s supplemental operating and financial data for the fourth quarter of 2007 as filed with the Securities and Exchange Commission and this information is available on the company’s website at www.digitalrealytrust.com. Now I’d like to introduce Mike Foust, CEO and Bill Stein, CFO and Chief Investment Officer.

Following management’s brief remarks, we will open the call to your questions. To manage the call in a timely manner, questions will be limited to two per caller.

If you have additional questions, please feel free to return to the queue. I will now turn the call over to Mike.

Great, thank you Pamela [audio interrupt], good morning and good afternoon and welcome everyone. I’ll begin with a brief overview of Digital Realty Trust then I’ll discuss the current state of our industry, our strong fourth quarter and full year 2007 accomplishments.

Following my remarks, Bill Stein will address our financial performance and overall liquidity. First a brief introduction, Digital Realty Trust is the leading owner and manager of technology real estate.

Our portfolio currently contains 71 properties totaling 12.6 million rentable square feet. Excluding one property, the Westin Building in Seattle that’s held as an investment in an unconsolidated joint venture, our properties are located in 26 metro areas across North America and Europe.

The portfolio now includes approximately 2 million square feet of space held for redevelopment, a very important source of growth for the company. DLR provides a variety of data center facilities solutions including turnkey data center powered base building and build to suit data centers for domestic and international corporate customers.

Our properties serve a wide range of industry vertical markets including information technology, internet enterprises, financial services, telecom network providers, energy companies and generally Fortune 1000 firms. DLR has delivered strong earnings growth resulting in attractive shareholder returns and earlier this week, DLR was recognized by The Wall Street Journal as a top performing REIT based on the three year average shareholder return.

It is clear that two major concerns face the commercial real estate industry in light of the current economic environment, namely tenant demand and access to capital to finance growth. The good news for DLR is that corporate demand for new data center space remains very strong and due to the coordinated efforts of our technical sales, engineering, design and construction and operations teams, this market demand is being converted into strong absorption of our turnkey data center, powered base building and build to suit products.

Representing a variety of industries, DLR tenants continue to take significant amounts of new space in our facilities. Recent expansions and new customers include Computer Sciences Corp, Facebook, CBS, HSBC and Aircom, Irelands incumbent telecom service provider.

Contributing to our growing portfolio is the expansion of our European presence. In January we announced a ground breaking for a major new build to suit facility for HSBC on a development side of suburban London that we acquired in early 2007.

In Dublin, Ireland, we recently executed a new lease with Aircom for both turnkey data center and powered base building space in the new 124,500 square foot facility that is nearing completion. In addition, we acquired two new properties in suburban London, adding approximately 150,000 gross square feet of redevelopment space in a very important market.

Looking more broadly at DLR customers who are a top IP service of the [co-location] providers, both Savvis and Equinex expressed similarly positive views on demand outlook for their data center based services. Savvis reported solid revenue growth, expanding margins and strong EBITDA growth.

They expanded their operating footprint significantly in 2007 in DLR owned properties and their customers are absorbing space in their new data centers at a good pace. Equinex reported strong results for 2007 with over 30% organic growth in revenue, a large increase in EBITDA and strong absorption.

The company increased its 2008 guidance based on its outlook for continued customer demand in the US and internationally. Both companies appear to have experienced little impact to date from the current capital market’s challenges.

In fact, several of our customers report increased interest in potential cost savings and enhanced productivity from outsourcing data center facilities. In addition, fundamental business needs drive demand for expanding IT services and corporate data center facilities.

These include the complexity and cost to build new facilities, regulatory and securities compliance requirements and the increase in adoption of online applications, including securities and commodities trading, risk management analysis, content distribution social networking and webhosting in general. Further underscoring the steady demand for data center space was the pace of our leasing activity during the fourth quarter, with over 429,000 square feet of new leases signed, our biggest quarter to date.

These leases included 245,000 of turnkey data center, 112,000 square feet of powered base building and over 72,000 square feet of non technical space. For the full year 2007, we signed leases totaling 998,000 square feet, including 435,000 square feet of turnkey data center space, 419,000 square feet of powered base building and 144,000 square feet of non technical space.

Note that our leasing shifted towards a more even mix of turnkey and powered base building in the second half of the year and we expect that trend to continue into the first half of 2008. Leases commencing in the portfolio in the fourth quarter totaled over 150,000 square feet of which over 125,000 square feet was data center space, including 16,000 square feet of turnkey and approximately 109,000 square feet of powered base building.

The remaining 25,000 square feet was non technical space. For the full year, leases commenced on approximately 761,000 square feet, including nearly 134,000 square feet of turnkey space, over 550,000 square feet of powered base building and 77,000 square feet of non technical space.

Key to our success is our proven ability to identify and acquire value add opportunities in top tier markets and to convert the redevelopment inventory in the high quality turnkey and powered base building data centers. We currently are underway on construction projects in high demand markets in the US and Europe that will add approximately 637,000 rentable square feet of additional space to our operating portfolio and this space will come online through the third quarter of 2008.

Of this space, approximately 533,000 square feet is turnkey data center and 104,000 square feet is build to suit data center space. In addition, the HSBC build to suit of 120,000 square feet is projected to come online mid 2009.

Portfolio occupancy excluding space held for redevelopment was 94.7% at the end of the fourth quarter compared to 95.1% for the previous quarter and 95% for the same period in 2006. As of February 25 this month, occupancy was back up to 95%.

We expect the occupancy to fluctuate slightly quarter to quarter, primarily due to the lag in commencement after lease execution as we convert redevelopment space into value add turnkey and powered base building data centers and added to the operating portfolio out of the redevelopment inventory. At times, facilities will be completed during the quarter, added to the portfolio and then leases might commence in the next quarter.

Turning now to our acquisition program, during the fourth quarter 2007, we acquired three properties in Europe totaling $83.5 million. On December 10 we acquired Cressex 1 located in suburban London.

This property totals approximately 52,000 square feet of redevelopment space of which 21,000 feet will be converted into a turnkey data center. On December 12 we acquired Naritaweg 52, a fully leased 63,000 square foot data center facility in Amsterdam.

On December 21 we acquired units 1, 2 and 3 in the Foxboro Business Park, a three building complex also located in suburban London. Unit 1 consists of a 20,000 square foot data center facility fully leased to a global geophysical company.

Unit 2 is fully leased, a 31,000 square foot warehouse and unit 3 consists of over 96,000 square feet of redevelopment space, capable of supporting about 58,000 square feet of turnkey data center. This brings our 2007 full year acquisitions to $363 million which added 1.6 million square feet to our portfolio, including 615,000 of redevelopment space.

The weighted average cap rate for the income producing properties was 8.52%, slightly higher than our 2007 guidance of 8.25%. Subsequent to the end of the year in February, we acquired 365 Randolphville road, a 270,000 square foot redevelopment project located in Piscataway, New Jersey, very near our 3 Corporate Place facility.

This new property is capable of supporting the development of up to 150,000 square feet of improved data center space, bringing new [more] product to a market experiencing strong demand. We plan to make base building improvements and upgrades to the power with plans for an initial build out of two turnkey data centers, totaling 20,000 square feet of raised floor.

Overall we’re very proud of our success that we achieved in 2007 which is clearly reflected in our strong financial results. We believe that our expertise and financial strength will continue to produce superior results in 2008 and we greatly appreciate the efforts of our outstanding team of professionals as well as the supportive comments of our investors and business partners.

As I mentioned earlier in my remarks, in addition to demand, access to capital is the second major concern facing our industry. I would now like to turn the call over to our CFO Bill Stein who will discuss our capital requirements, the success of our capital market activities and our strong fourth quarter and full year 2007 financial results.

Bill.

Thanks Mike, good morning everybody. I’d like to begin with a review of our fourth quarter and year end 2007 financial results and will conclude my comments with a discussion of our overall liquidity.

Following my remarks, we will open the call to your questions. EBITDA was $53.9 million in the fourth quarter, up 17.9% from $45.7 million for the fourth quarter of 2006.

For the full year 2007, EBITDA was $221 million, up 36.7% from $161.7 million in 2006. FFO on a diluted share and unit basis was $0.53 in the fourth quarter of 2007, up 10.4% from $0.48 in the same quarter last year and up 3.9% from $0.51 in the third quarter of 2007.

For the full year, FFO was $2.05 per diluted share and unit, up almost 26% from $1.63 in 2006. Let me remind you that our most recent FFO guidance for 2007 was $2.02-$2.04.

Adjusted funds from operations or AFFO for the fourth quarter 2007 was $27.1 million or $0.37 per diluted share and unit. The AFFO ratio for the fourth quarter was 83.8%, this compared to a third quarter AFFO of $24.5 million or $0.35 per diluted share and unit.

The AFFO payout ratio for the third quarter was 81.8%. The increase in the fourth quarter payout ratio reflects the 8.3% increase in the dividend in the fourth quarter and an increase of $1.3 million in capitalized leasing commissions in the quarter due to the increased number of lease signings.

Reconciliation of FFO to net income, AFFO to FFO and FFO and EBITDA to net income for these periods is included in our supplemental operating and financial data furnished to the SEC and available on our website. Total operating revenues for the fourth quarter were $105.9 million, up 1.1% from $104.8 million in the third quarter of 2007 and up 29.1% from $82 million in the fourth quarter of 2006.

Total operating revenues for the full year 2007 were $395.2 million, up 45.2% from $272.1 million in 206. This increase, the increases in rental revenues and [tenal] reimbursement revenues for the quarter and the full year compared to the same periods in 2006 were primarily due to properties that we acquired during the 12 month period ending December 31, 2007 and overall leasing activity.

Net income for the fourth quarter was $5.6 million, up from $5.1 million in the third quarter of 2007 and down $6.4 million for the same period of 2006. Net income available to common shareholders for the quarter was $254,000 compared to net loss available to common shareholders of $224,000 in the third quarter of 2007 and net income available to common shareholders of $3 million or $0.06 per diluted share for the same period in 2006.

Net income available to common shareholders for the full year was $21.3 million or $0.34 per diluted share compared to $17.6 million in 2006 or $0.47 per diluted share. Net income in both 2007 and 2006 includes gains on sales of assets.

We do not include gain on sales of assets in our FFO. Same store NOI increased 5.4% to $49.4 million in the fourth quarter of 2007 from $46.9 million in the third quarter of 2007 and increased 12.6% from $43.9 million in the fourth quarter 2006.

Same store NOI adjusted for straight line and FAS 141 adjustments which we refer to as same store cash NOI increased to $43.4 in the fourth quarter, up 6.4% from $40.8 million in the third quarter of 2007 and up 13.9% from $38.1 million in the fourth quarter of 2006. These increases were primarily the result of new leasing and our properties commencing during the 12 month period.

I will now review specific items included in the statement of operations to provide additional detail on the results for the quarter. For the fourth quarter tenant reimbursements decreased to $20.6 million from $22.1 million in the third quarter of 2007 due to the yearend true up of common area maintenance and a reduction in property taxes resulting from a favorable tax assessment at our 350 East Cermak property in Chicago.

Total operating expenses for the fourth quarter were $84.9 million, up 1.8% from $83.4 million in the third quarter of 2007 due primarily to a recently launched domestic property maintenance program. These increases were partially offset by the favorable tax assessment at our 350 East Cermak property in Chicago.

Total operating expenses were up $23.8 million in the fourth quarter or 39% versus the fourth quarter of 2006 due to new properties acquired during the year, the domestic property maintenance program and increasing utility expenses. Utility expenses increased because of rate increases and higher utilization by our tenants at several properties.

G&A which is a component of total operating expenses was $8.2 million in the fourth quarter of 2000, up from $7.8 million in the previous quarter. The increase was primarily due to higher consulting and legal expenses.

G&A increased $1.7 million in the fourth quarter of 2007 from $6.5 million in the fourth quarter of 2006 primarily due to higher marketing expenses, travel expenses resulting from our expansion in Europe and the increase in the number of our employees. At year end we had 153 employees compared to 109 at year end 2006.

Turning now to our balance sheet, during the fourth quarter we capitalized $4.2 million of interest related to construction projects, excluding our share of a consolidated joint venture which compares to $3.1 million in the third quarter. In addition we capitalized approximately $1.9 million in compensation expenses compared to approximately $1.2 million in the third quarter of 2007.

In this year’s 10K, we are including a disclosure of construction work in progress as of December 31, 2007, we had $289 million of construction work in progress. As Mike mentioned in his comments, the availability of capital is a significant concern for real estate companies as access to capital has become constrained over the past year.

Digital Realty Trust is in a capital intensive business and capital is essential to our ability to continue to acquire and redevelop properties. Over the course of 2007 and through early 2008, we were not only able to maintain our capital base and financial flexibility, but enhance it.

As I mentioned on previous calls, in April 2007 we raised $169.1 million of net proceeds from a convertible preferred stock offering. In August of 2007, in anticipation of liquidity challenge that were then affecting the capital markets that became much more severe later in the year, we increased the size of our credit facility to $650 million, obtained more favorable covenants, lower pricing and a longer maturity.

One October 22nd the company completed a follow on public offering of a little over 4 million primary shares of common stock generating net proceeds of approximately $150 million. And subsequent to year end, we just completed an underwritten public offering of 13.8 million shares of series D cumulative preferred stock which generated approximately $333.6 million of net proceeds.

We also utilized net proceeds from both of these offerings to temporarily repay borrowings under our revolving credit facility, to fund acquisitions, development and redevelopment activities and for general corporate purposes. As of Tuesday, yesterday, we have $44.7 million outstanding on our credit facility, including outstanding letters of credit.

Based on the covenants in our credit facility, we have a total borrowing capacity of over $780 million consisting of $605 million of immediate liquidity under the credit facility and assuming we first borrow this entire amount, additional secured debt capacity of approximately $175 million. If this capacity were fully utilized, our pro forma debt to total enterprise value would be approximately 36.5%.

Our total debt at year end was $1.4 billion and our ratio of debt to total enterprise value was 30.6%. Our fixed charge coverage ratio was 2.4 times and our debt service coverage was 3.4 times.

Pro forma for the convertible preferred offering, our leverage ratio would be 23.1% and debt service would be 4.1 times. As of December 31, our weighted average cost of debt was 5.8% and the weighted average maturity was 5.8 years including debt extension options.

A description of how we calculate these ratios can be found on our supplemental operating and financial data furnished to the SEC and available on our website. During 2008, we have three scheduled mortgage maturities.

The 350 East Cermak mortgage had a balance of $97.9 million at December 31. The initial maturity of this mortgage is June 9 and there are two, one year extensions available.

Currently we are exploring refinancing options which include both secured and unsecured debt. The 375 Riverside mortgage had a balance of $8.6 million at December 31 and matures on December 1, 2008.

We are currently planning to repay this mortgage and add this property to the borrowing base [put] in the revolving credit facility. Finally, the 1500 Space Park Drive mortgage had a balance of $5.5 million at December 31 and matures on April 15.

We are currently planning to repay this mortgage with funds from the revolving credit facility. We believe that our track record of accessing well priced debt and equity capital from several different sources, particularly in difficult markets is a powerful competitive advantage.

We also believe that we have sufficient equity capital to fund out currently planned acquisition and redevelopment program for the year when combined with your planned activities in the debt markets. Finally, as noted in our earnings release, we are not changing guidance at this time.

This concludes our formal remarks. We would now be happy to take any questions that you might have.

Good morning, first question is regarding leasing activity, I know you did a good job disclosing it before this release and you’ve got a little bit more color around the edges this time around. I’m curious to know what the total leased but not yet commenced space was at January 1, 2008.

Is that the 403,000 or might there have been something else that was leased and not commenced from a prior quarter?

Let’s see, I believe the 403,000 is just leases from actually the fourth quarter and I think our actual backlog is something more kind of around 435,000, I’m sorry, 530,000 square feet of total backlog. So I believe the 403,000 square feet of backlog were just leases signed in the fourth quarter, but there are some other leases from the third quarter that will be commencing in 08.

Okay and then on top of that there were some additional leases signed year to date I could presume?

Yeah and we’ll have more activity as we go through the rest of the quarter as well obviously.

No, understood, but the 530 just to be clear does not include anything that was done since January 1, 08?

That’s correct.

Yes, just signings in 07.

That had not yet commenced. And the average rate and expected timing of those commencements?

Well roughly we’re expecting about 80% of that will commence in the first quarter at an average rate of, average GAAP rate of around $95.00, another 6% in the second quarter at an average cap rate of $85.00 and then the balance in the third quarter at an average cap rate around $70.00.

Okay around 70. And just to stay with this for a second, the timing is mid quarter convention safe and then the margin.

Mid quarter convention is fine I suppose for your forecast if that’s…

Is that what you guys are, I mean is that kind of a pretty safe number I mean for the first quarter, 80% of it is in the first quarter?

Let’s see, that’s safe, I mean that’s safe.

And then just the margin on the and maybe you could break it out if you want to break it out if it’s easier just to say margin on the turnkey space, because I know the other stuff is triple that.

Yeah the power base is triple that.

You know, we’d have to go back and look at that and maybe include that in supplemental because every site is different, I don’t think we’ve aggregated them together to look at the margin on an aggregate basis. Because primarily what we’re looking, I mean besides looking at our operating margin, operating cost, we’re looking at return on investment and of invested capital and you know primarily we’re looking at on average mid teen returns on invested capital of these projects.

And that 530, does that include HSBC?

No.

It does not. Last question is just on, in your commentary Mike you mentioned that sometimes you move some of the redevelopment space I guess on the books and the timing is different, it comes on the books in anticipation of the lease commencement.

Was there anything special about this quarter in terms of the amount that was moved on the books that was vacant space? Meaning was it more sizable than what you would traditionally move on?

It’s probably been a little more as, approaching, it’s around 95,000 square feet or so that moved into the operating portfolio from the redev inventory. And so about 53,000, about 93,000 square feet moved into the portfolio and since the end of the year about 53,000 of that has been, you know have leases commenced on it.

So our convention is when we complete a turnkey space, we move it into the operating portfolio regardless of whether it’s leased or not and so you know as you can tell that backlog if you will gets or that new operating portfolio space gets leased up quickly.

Okay I’ll jump back in the queue.

Yes, good afternoon, a quick question for you, you talk a lot about the demand in the marketplace. You’re seeing a pretty broad level of demand across a number of industries, can you just talk a little bit about the trends in market rents you’ve seen you know over the last year or so and are you getting any pushback whatsoever on rents in this environment today from tenants.

Sure, you know we’re seeing you know I would say 2006 and 2007 through the end of 2007, we’ve probably seen rents increase by about 20% on average. And that would be both powered base building as well for turnkey stays.

I don’t know if I’d necessarily continue to expect 20% growth in 2008. But I could see rates you know being pretty steady and at this current level and you know maybe going up 5-10%.

You know with that said, the biggest pushback for us is kind of the trade off where customers may look to build their own space rather than outsource the facility if rates get too high. But you know with that said, there’s a lot of benefit for expediency in having the space available as well.

So we’re not seeing pushback and in some markets like Chicago especially, London, you know New York metro area, we’re seeing a lot of strength in lease rates.

So where would that put your mark to market today?

You know I would say and this is a real guesstimate, probably around 25% uplift.

And second question, obviously you talk about the difficult financing environment and you know we’ve seen a dearth or lack thereof of trades in the marketplace, can you maybe just talk to us about your underwriting process today and what your return expectations are today on an unlevered basis for new acquisitions.

Sure and you know we’re being really targeted, looking at opportunities where you know there might be an attractive turn on a stabilized asset as well as looking you know to fill in our inventory of redevelopment space as we lease up in the high demand markets. You know, this year our guidance is around 8% on a cash cap rate.

You know I could see maybe that going up somewhat. You know we’ve got a combination of you know this property type becomes more accepted in the marketplace.

So you know we’ve seen some stabilized assets trades you know even the second half of the year at 6.5-7 caps. So you know I don’t see stabilized assets jumping up to 9 cap areas in many cases.

But you know I could see some creep up, 8.25-8.5%.

That’s on an unlevered basis?

Correct.

Okay, thank you.

Hey guys, [Irwan Guzman’s] on the phone with me as well. I wanted to go over the capital issue and you talked a little about how precious capital is for you and done a good job at sort of getting the balance sheet and getting the capital on the books to be able to go out and fund acquisitions and redevelopment and new development.

Obviously a piece of your, big part of your business is funding tenants and tenants being able to use your balance sheet and your capital as you build out their space. So the question that I have is has there been a change in the tenant’s desire for you to be funding more of the improvement?

And how are you in sort of this difficult financing environment looking at the rate at which you are charging for tenants being able to leverage your balance sheet?

Sure, we’ve seen the mix kind of move more toward kind of a 50/50 breakdown between the powered base building which is the more highly improved shell versus the full turnkey whereas in the first half of the year, especially skewed by the Savvis leases, it was much more to a powered base building. So we are seeing a trend at least in the short term where tenants are looking for more turnkey space where it’s about equal to the amount of powered base building.

And I think that trend is going to continue into the first half of 2008 based on our pipeline. You know in terms of amortization of and how we’re pricing overall, you know it varies by project, varies by tenant credit if we’re doing a build to suit.

Bill you might want to address that in a little more detail.

Well it certainly has made, led to some interesting discussions with build to suit tenants because as our, as cost of funding goes up we obviously go back to them and say well guess what we’re going to have to bump this a little bit. So and it’s totally a function as you might imagine of the credit quality of the prospective tenant.

Right and so how much have you, I mean we’ve seen a complete widening out of spreads, probably 2-300 basis points at least. Is that what you’re sort of going back to these tenants and have deals fallen through because you’re charging excess rates or they’re happy to pay whatever it is?

We haven’t seen deals fall through and we have been at least in our internal imputed amortization rates, we’ve definitely increased them you know between 100-200 basis points depending on the circumstance.

Right and just clarity on this 530,000 square feet, how much of that is coming out of the 1.7 million redevelopment space, how much of its vacant sort of normal just out of the core portfolio and then how much maybe you know new development and does any of it relate to future roll as occurring in 08?

None of its related to future roll, so it’s all incremental new.

Okay.

Probably in redevelopment.

Yeah, it’s all…

So the 530 is out of that 1.7 million square feet of redevelopment space that you show?

Right, which is now run at 2 million feet with a couple of the recent acquisitions.

Keep in mind that redevelopment space goes up and down based on you know new properties acquired and completions.

Right but I’m just trying to isolate this 530 that you’ve already leased.

It came out of redevelopment.

And have you spent the capital to build out that space already or the capital still needs to be spent?

Again, some cases the capital needs to be spent.

But it’s in large part, it has been com, you know I don’t think we have much left to complete for that tranche of lease out.

But you know this is, it’s pretty significant in terms of annualized rental income, it would just be helpful to sort of get a picture of whether the capital has been spent or not.

Well you know for the 80% that is commencing in the first quarter, you know logically most of that would be spent.

Right.

That balance, we’re positioning up projects for these guys before the leases are commenced.

Okay and then [Irwin] just had one question. Yes I was wondering the 300,000 square feet, you previously mentioned that you were expecting to deliver 300,000 square feet of redevelopment space between the first quarter and the second quarter and the 92,000 square feet that came in implies that there’s a total over 200,000 that would be starting in this first quarter.

Is that still on pace?

I think maybe those numbers might be off a little bit that you just mentioned.

Well maybe another way of asking is the 600,000 square feet plus that you have under active redevelopment right now, is that sort of apples to apples with the 530,000 square feet of leasing as yet to commence? [Overlay] that 600,000.

No, that’s additional. That’s additional product that we’ll be bringing online the first three quarters of the year.

Okay so that’s right now un-leased right?

Correct.

And I’m just wondering you know as the amount of redevelopment activity you have has grown, has your sort of attitude on preleasing changed a little bit and how much are you comfortable building out on spec at one time?

You know in a typical asset, we’ll build one or two pods, which is roughly 10,000 square feet of raised floor space, roughly 18-20,000 feet of rentable square feet. And that’s been, that’s served us pretty well.

It validates the building and it provides a quick time to market for the corporate users who invariably needed the space yesterday and it’s pretty powerful in the marketplace to be able to move people in you know expediently.

Okay since that 530,000 is in addition to the 600,000 that you’re currently building, is it safe to assume that that’s pure occupancy growth from here forward, those leases that will be commencing?

Yes.

Okay, thank you that’s it.

Let me add a little bit to that question or to the answer. The downturn or potential downturn in the economy, we’ve found so far has led to increased interest in our product.

When you think about the financial institutions as a vertical, clearly they’ve lost a lot of capital in the last couple quarters which you know they still have needs, they still have IT application needs that need to be housed somewhere but they now really don’t have as much capital as they once had for capital investment. So they’re far more interested in an operating lease solution which we can provide.

Ian has actually asked my questions already, so thank you very much.

Thanks, Bill just another way of sort of slicing the capital question, I think the guidance this year was for $700 million of capital spending and I think that was roughly split almost evenly between acquisitions and capital and other capital spending on redevelopment and I guess recurring cap ex. How much of the $350 odd million for capital spending outside of acquisitions has been spent?

Given where we are in the year [overlay].

Let’s maybe in the context of your $44 million outstanding on your line of credit.

Yeah, not very much at all, but I do think maybe where you’re going is at this point we are anticipating a shift in the mix. So there will be more of our investment capital directed to redevelopment we think than acquisitions.

Now if we see cap rates suddenly back up, we may change that again. But right now I think that there could be, there’s likely would be more than 340 headed towards redoubt but we would just back off the acquisition budget.

We still plan to stay within the 700 at this point unless there’s some significantly, a very attractive opportunities out there.

Yeah, that’s a good point. Our leasing pipeline continues to expand and you know we’re seeing a lot of good opportunities and very attractive returns to continue to build the organic leasing out of the redevelopment inventory.

So we’re keeping a very close eye on that and I think we’re being very prudent how we’re allocating capital to the best returns. And as long as that demand profile continues to remain strong we have no reason, that it won’t be, we’ll allocate more capital to the higher returning activities.

That does affect the timing of revenues since you know you have to build it generally before you can recognize but if you notice a lot of the signed leases from last year are commencing the first quarter so. We think they balance each other out which is why we’re not changing guidance.

You think the capital goes out the door pretty evenly though?

It’ll be front end loaded, I think we said about 60% in the first half on cap ex.

Yup and then just coming back to the 530,000 feet, Mike you said that’s basically going to be an occupancy gain rather than out of the redevelopment inventory. Does that mean that the expense load is already being reflected in the 4Q numbers and so there will be no incremental expenses?

No, I think the way to look at the great majority of that space is coming out of the redevelopment inventory. So you will have an uptick in occupancy but remember your denominator is going to get bigger now because it’s space coming out of the redev into the operating portfolio.

And also the expenses on all of that right now is being capitalized. It’s not being picked up in the [overlay].

And I think further is that a lot of this, a great majority of this is turnkey data center space which are gross leases, plus electric. So our operating, as those come online our operating expenses will go up but revenues will go up significantly to much, much obviously to cover that and because returns are quite attractive on these.

So the, keeping in mind the turnkey space carries with it operating expenses net of electric and utilities that you know that will add to operating expenses but will be you know obviously way more than covered by the very attractive rents we’re getting.

But if 80%, so 400,000 square feet in the first quarter, okay, comes online leased, should we also expect a light amount of redevelopment space to shift from that redevelopment column over to the net rentable square footage that’s in the stabilized column?

Its 340,000 square feet, so the percentages are by revenue, not by square footage.

Okay, what’s the aggregate revenue represented by the 530?

By the 530?

Yeah, I mean it’ll be, you know we’re projecting to be during the year around $38 million of revenue recognized in the year.

$37-$38.

From the backlog you mentioned, from the [overlay]. Okay.

And so those percentages I gave you reflect the revenue contribution in each quarter.

That’s really helpful, thank you. Alright that’s it.

Hey guys, were there any one time items on the JV line this quarter?

No.

The 289 of construction and progress, does that include land, redevelopment and development declared?

Yes.

And then how about some of buildings that aren’t under, that were purchased that aren’t currently under development, do you throw that in that bucket as well or are they sitting somewhere else?

No those wouldn’t be there.

Okay so that would be in addition?

Yeah.

I’m sorry if you said this already, but is there a breakdown between the power base building and the turnkey for that 530,000 square feet?

There is a breakdown, I don’t think we’ve disclosed it.

Do you wish to?

We’ll think about it. [Overlay].

I will say it’s definitely the trend and if you look at our fourth quarter leasing, you’ll see that trend on leases executed much more toward 50/50 in terms of the data center space between turnkey and powered base build out.

It’s heavily weighted [unintelligible] and I could give you a percentage.

And you were nice enough to give the GAAP revenue numbers, do you care to provide what the cash number is?

By the way it’s 85% turnkey of the 500 plus.

And actually as far as thee expenses go, that’s just a normal building expense right of roughly a $10 per square foot number?

For the turnkey?

Yeah.

On a per square foot basis annual?

Yeah.

Well no for the turnkey you’re going to see operating expenses higher. Now that might be, the $8-$10 would be your taxes, insurance, cam, your traditional real estate and then if it’s turnkey that we are operating for the customer, then you’re probably going to see probably another $20-$25 on top of that per square foot annually to cover managing the space, the preventative maintenance programs, you know that sort of thing, staffing.

Now you know you’re also getting rents you know that are $150-$180 a foot for that.

Great, thank you very much.

Yeah, Bill the $37-$38 million, that’s an annualized number or that’s just for the full year?

That’s the expected contribution for 08 so it’s not annualized. You know I’m going to hedge a little bit on that because these, that amount is going to be a function of when leases commence and that’s a function of when projects are delivered.

Right, so thinking about this from another perspective, you walked [out] through $95 for 80%, $85 for 6% and then the 14% balance at $70, so let’s say the weighted average is sort of in the mid $80’s gross revenue. Does it effectively go down to the 70% margin to NOI?

Is that a fair sort of number to start running for this 530,000?

You’re doing a blend or just on turnkey?

On the blend on the 530,000 space that will contribute $37.5 million of revenues this year, what does that drop down to the NOI line? I mean is fair to assume a 70% NOI margin on that space?

Yeah, it’s close enough.

And then from the perspective you talked about that $290 million of capital that’s been invested in redevelopment, development and land today, how much of that $290 million relates to the 530,000 square feet?

By the way, that at year end and I think that would be virtually all [for] 530 because it’s construction work in progress. So none of that stuff’s been delivered.

But don’t you have, don’t you have land, other money that you’ve spent on development that would be in the $290?

That part’s separate. You know there may be some of that $290 may be for space that doesn’t have signed leases but I’d say most of it is.

Just given you know when you look at the…

But you also had I mean if you look in your supplemental page 26, the redevelopment space under construction in the quarter, the 637,000 square feet. I thought in a previous response you said the 530,000 is not part of that?

So wouldn’t that have costs associated with it in the $290 million?

Well that’s space under construction in the quarter.

Right, which I thought was separate from the 530,000 square feet of leasing, of leases that are going to commence. I just don’t want to make sure we’re, you know, I don’t want to keep on double counting and I want to make sure that we’re parsing it out right and really get a clearer picture of what.

Well I think that the 530 is space that’s included in the signing on the quarter that will commence in the year.

Right but then it’s all coming out of the redevelopment square footage. And this says there was 637,000 square feet under construction in the quarter.

Is the 530 in there or it’s not in there?

It is, you can see it on the page 26.

So this turnkey data, this 533 is what we’re talking about now, turnkey data center, doesn’t include any of the built to suit?

Well there is one, well. Some of that, so within the 637 that’s under construction, you know there’s, let’s call it 100,000 that doesn’t have signed leases I think would be the best way to of looking at it.

Clearly the built to suits are signed so within the 533 there’s 100,000 that’s sort of unaccounted for at this point.

And then if you do the math, your return of the $290 relates to the 533,000 square feet and you take an $85 revenue number and you put a 70% margin, your return would only be about 11%. So what am I missing, how does that not compare to the 15 plus returns that you’re talking about?

A couple of those projects are build to suits for Aircom, build to suits for a couple of our smaller spaces. Now the Aircom build to suit, you know we’re probably looking more at you know 10-11% on that one for example.

But the built to suit is not in the 533,000 square feet, I thought the built to suit was…

The built to suit is in it.

The Aircom is.

All of the signings are in the 637 and clearly when you talk about build to suits of 103, those are all signed leases.

Right.

So really we’ve got 100,000 roughly of…

Turnkey data center space.

Turnkey that we don’t have signed leases, I think that’s the best way to think about it.

Yes, yeah and I think it’s like 98,000 feet.

So then if you think about 100 being in sort of the you said what the 10% range? The balance of that square footage should give the returns, you’re saying underwriting close to a 15%?

14-15%, yeah.

Okay so there must be some other things in the $290 million that don’t relate to the 530 I guess is what it comes down to?

Well for example I think, I think [Wellen] would be in that number which you know doesn’t commence until 2009.

Because we have engineering costs, A&E, engineering which are very high and the land acquisition which was a pretty substantial number for and that’s the HSBC build to suit.

Right. And then when you’re saying you were capitalizing some of the op ex, you’re also capitalizing the interest so when most of this 530 comes on, bring on the revenues and then start charging you interest on the space, on the capital that you spent.

You’re saying operating expenses?

And the operating expenses. You talked about the Cermak, the property taxes and the benefit that you got.

Was there any offset, how much was that gain and was there any sort of negative offset to that benefit in the quarter?

Negative, it was, some of it was passed through.

So I think about two-thirds fell to the bottom line for us.

And there was nothing else negative in the quarter that would have taken the numbers down?

No, I mean that took numbers up actually because that reduced operating expenses.

Right so two-thirds and it was about $3 million?

Yeah I mean I mentioned in my remarks that we had an initiative that we started in the year picked up in the fourth quarter for a new maintenance contract in our turnkey data centers. That added some expense line item.

Okay, thank you.

Yeah, good afternoon and thanks for taking my question. A couple questions, yes could you talk about the demand environment out there, I know you guys had you know this not being a whole lot of impact with respect to on the from the macro concerns but has there been any changes with respect to the verticals that you’re seeing in demand during the past six months or during the past one month.

And my second question is about pricing. You know I’m just trying to understand the difference in pricing that you guys disclosed here on a per square foot basis.

If I’m seeing the rental rate per square foot for power based or turnkey data center space that has been commenced during the quarter as opposed to that have been signed during the quarter, it appears that the pricing per square foot for the ones that have been signed is slightly lower than what has been commenced. You know am I reading this correctly or you know what exactly is the difference there?

Thank you.

Well I think you’re seeing snapshots in time with different product in different markets so I think it’s helpful to look at kind of the trend over the entire year and if you look at where we are with leases that were signed in the quarter, you know that could represent some space that’s in markets where we’re getting low 30’s offset by markets like Northern New Jersey where we’re in the low 40’s, so it’s kind of more of a timing market by market. But overall, you know we’re seeing that significant uplift where markets where we were maybe in the low to mid 30’s today were in the high 20’s a year before.

Markets like Northern New Jersey where we’re in the low 40’s with our latest deals done. A year ago we were in the low 30’s.

So it’s kind of more the mix of the specific spaces that are coming on line at any one time.

Got it, what about on the demand front?

Oh yeah, well you know it’s really interesting, we’re seeing a lot of demand from a variety of verticals, content distribution, social networking represented by Facebook and expansions of CBS, are quite strong. The system integrator IT services companies, you know folks like Computer Sciences and some of the other major companies that we have in our pipeline with whom we’re working.

You know the increase Savvis portfolio and their absorption and then interestingly we’re seeing a lot more inquiries over the last three or four months from financial services. And I think that’s being driven because a lot of the applications are regulatory requirements, a lot of companies are still trying to catch up from believe it or not, Sarbanes-Oxley and SEC requirements that were promulgated a couple years ago.

There’s a lot of trading applications that we’re seeing, both from Wall Street and Chicago based and London based financial institutions where you know securities trading, commodities trading are coming online. And we’re also seeing some grid computing applications for Wall Street firms that are looking to expand their risk management computational capability in this environment that’s driving need for more space on the data center side.

So you know we’re seeing some other corporates too where in light of reducing headcount, they’re making further investments in their data processing capabilities and increasing productivity in that way. So you know it’s interesting to see that you know there’s a lot of ways that companies may actually be saving money through expanding their data centers and through outsourcing to Digital Realty.

Got it, just one other question. Could you talk about how many bandwidth providers on an average do you have in some of your turnkey data centers and how important is that to customers who are signing up with you apart from power?

So when you look at our internet gateway portfolio and those are the building that are the hub telecommunication network locations for a city, for a region. And there, the large number, the 30-40 carriers or more in a particular building such as 350 Cermak, another good example would be 2323 Brian Street in Dallas, 600 West 7th in LA, 200 Paul Avenue in San Francisco.

I mean those, that high density of carriers creates a very interesting value proposition for customers both other carriers as well as corporate trading platforms and the like. In our standalone corporate data center facilities, typically two to four carriers is sufficient and desirable.

So there is redundancy and some pricing power on the part of the customer. Where you really get the unusual situations which are the internet gateways, you know those are very high value added for the customers and for our pricing.

Got it and is that a major driver for customers to come and co-locate in your data centers or you now do they really care about it or no?

They definitely care about it and we’re seeing you know reflected in premium pricing that we have you know especially in places like 350 Cermak and 200 Paul Avenue, even in Dallas, because being able to access you know directly without going through third party carriers is pretty attractive and for some of these very low latency applications, such as someone who’s creating applications, it’s very desirable.

Great, thanks so much.

Just one point of clarification again, sorry to beat a dead horse here on that 530. Do you have a capital number that ties back to the 530,000 feet, what the total cost of redevelopment was?

No, I can’t give you that right now.

I mean we do but we don’t have it aggregated that way.

Okay, I assume interest was capitalized on that 530 throughout the full fourth quarter on the cost of it? There’s, all the full capital that was spent and that remained in construction work in progress.

Interest was capitalized yes to the extent that construction work was done. Some of these signings might have occurred later in the quarter and at that point we might have started construction on our projects, so that’s why it’s hard to say.

At what point do you stop capitalizing on redevelopment space?

At commissioning basically, [unintelligible] occupancy so but you know the commissioning of the data center is a fairly elaborate process.

Do you not have the flexibility to kind of hold that over for a little while until or is there any wiggle room there or are you kind of as soon as it receives the full CO or commissioning it comes off the capitalization ticker.

Not really, we don’t. We’ve taken a conservative approach here on capitalization of interest [unintelligible] operating expenses.

Okay, thank you.

Great, really appreciate everyone’s interest and the good give and take on the call and as always we’re available for follow up and just want to continue to emphasize that we see ourselves in a very strong demand environment for our product and a little but unusual relative to some other areas of the economy but I think our product does create cost savings and efficiencies for companies and helping with productivity. So thanks very much everyone.