Apr 26, 2012
Executives
Pamela M. Garibaldi - Vice President of Investor Relations & Corporate Marketing Michael F.
Foust - Chief Executive Officer and Director A. William Stein - Chief Financial Officer, Chief Investment Officer and Secretary
Analysts
Jordan Sadler - KeyBanc Capital Markets Inc., Research Division Chris Caton - Morgan Stanley, Research Division Gabriel Hilmoe - UBS Investment Bank, Research Division Emmanuel Korchman David Rodgers - RBC Capital Markets, LLC, Research Division William A. Crow - Raymond James & Associates, Inc., Research Division Omotayo T.
Okusanya - Jefferies & Company, Inc., Research Division Vincent Chao - Deutsche Bank AG, Research Division Lukas Hartwich - Green Street Advisors, Inc., Research Division George D. Auerbach - ISI Group Inc., Research Division Jeffrey Spector - BofA Merrill Lynch, Research Division James C.
Feldman - BofA Merrill Lynch, Research Division
Operator
Good morning, my name is Holly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Digital Realty Trust 2012 First Quarter Earnings Conference Call.
[Operator Instructions] I would now like to turn today's conference over to Ms. Pamela Garibaldi.
Please go ahead, ma'am.
Pamela M. Garibaldi
Thank you, and welcome to the call, everyone. By now, you should have received a copy of the Digital Realty earnings press release.
If you have not, you can access one in the Investor Relations section of our website at www.digitalrealty.com or you may call (415) 738-6500 to request one. Before I begin, I'd like to remind everyone that the management of Digital Realty may make forward-looking statements on this call.
Forward-looking statements 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. Forward-looking statements may include discussions of strategy, plans, future events or trends, including statements related to supply and demand for data center space, and the company's future financial and other results.
For a further discussion of the risks and uncertainties related to our business, see the company's annual report on Form 10-K for the year ended December 31, 2011, and subsequent filings with the SEC including the company's quarterly reports on Form 10-Q. 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 FFO, AFFO, core FFO, EBITDA, adjusted EBITDA, NOI and same-store NOI. Digital Realty is providing this information as a supplement to information prepared in accordance with GAAP.
Explanation of such non-GAAP items and reconciliations to net income are contained in the company's supplemental operating and financial data package for the first quarter of 2012 furnished to the SEC, and this information is available on our website. Now I'd like to introduce Michael Foust, CEO; and Bill Stein, CFO and Chief Investment Officer.
Following their remarks, we will open the call to your questions. Questions will be limited to one per caller to manage it in a timely manner.
If you have additional questions, please feel free to return to the queue. I'll now turn the call over to Mike.
Michael F. Foust
Great. Thank you, Pamela.
Welcome to the call, everyone. I will begin my remarks today with an overview of our operating results, followed by a brief review of our markets and current acquisition and development activities.
Following my prepared comments, Bill Stein will go through our financial results. Following our record leasing results in the fourth quarter of 2011, we had a relatively modest first quarter, which was in line with our expectations.
As I have previously mentioned, our leasing activity tends to be seasonal with stronger results often occurring later in the year. During the quarter, we signed 94,000 square feet of Turn-Key space at an average lease rate of $163 per square foot, with an average rate for U.S.
Turn-Key leases at $136 per square foot. Over the past 5 quarters, average rental rates per square foot for Turn-Key in the U.S.
have ranged from between $122 to $176 per square foot. Rental rates have historically varied by building and by market and by customer application.
Therefore, we do not feel that the sample size of lease in the first quarter indicates a Turn-Key in overall Turn-Key lease rates. Excluding colocation, the average term for leases signed in the first quarter for Datacenter space was 148 months or 12.7 years, exceeding our average range of 7 to 10 years for the second straight quarter.
Other leasing highlights during the quarter include a signed lease for an entire 47,000 square foot building at our Datacenter Park Dallas property in Dallas, which continues to be a very good market for us. The building was leased on a PBB basis to a leading information management and data security company.
On the West Coast, we signed new leases in San Francisco and Los Angeles with one of our top 10 customers, supporting the growth of their colocation interconnection business. In London, we continued to see steep demand with 2 new leases signed at our Redhill facility, where we are now nearly fully leased.
In addition, we're on track to complete the first phase of the redevelopment of our Chessington property later this year in suburban London. In Asia-Pacific, we signed 2 new leases at our Singapore property with a strong funnel of prospects for the balance of the building.
We've also signed our first lease in Hong Kong and plan to issue a press release on this in the coming weeks. In addition to the current Build-to-Suit projects underway, we're actively pursuing a number of new opportunities.
Because of their size and complexity, the timing in these deals tend to be lumpy. Leveraging our experience in size selection acquisitions, building design and construction management, our dedicated Build-to-Suit team is focused on working closely with prospective customers to create tailored data center solution to meet their specific requirements.
We're also expanding our co-location offering in certain of our Internet gateway data centers and other select DLR facilities. Our goal is to convert underutilized space and facilities where we believe we can achieve a higher ROI if converted to co-location space.
This space is typically located in buildings and markets that are currently under-served. Turning to our lease renewal activity.
We're quite pleased with our continued success, signing over 264,000 square feet of space for an average of 2% increase in GAAP rents. Rentals included approximately 78,000 square feet of Turn-Key space, an average GAAP rental rate per square foot of $186.
This compares to the $187 per square foot for the expiring leases. The small $1 per square foot decrease was primarily driven by 2 leases that renewed at a property we acquired in 2010 that had in place above market rents.
The new rates yield very attractive returns on this asset. We also renewed approximately 120,000 square feet of Powered Base Building space at rates that increased by 20.5% on a GAAP basis.
Overall, tenant retention remains very high. On a square foot basis, 95% of expiring Turn-Key space renewed in the first quarter.
On a revenue basis, Turn-Key leases renewed at approximately 96% of GAAP, with an average lease term of 104 months. Again, on a square foot basis, 100% of expiring Powered Base Building leases renewed in the quarter at over 120% of GAAP rents, with an average lease term of 82 months.
Portfolio occupancy was unchanged at 94.8% in the first quarter compared to the fourth quarter. During the quarter, we added over 1 million square feet of space to the portfolio through our acquisitions and development programs, which includes 70 PODs in Singapore and new space in Phoenix, arguably 2 of our strongest markets for new prospects, along with Dallas.
Same-store occupancy was relatively unchanged at 94.4% compared to 94.6% in the fourth quarter. First quarter same-store NOI increased to $176.5 million, up 2.4% from $172.4 million in the previous quarter.
Same-store cash NOI, which we define as same-store NOI adjusted for straight line rents and adjusted for noncash purchase accounting adjustments, was $159.7 million in the first quarter, up 2.4% from $155.9 million in the third quarter. We continue to track over 2 million square feet of prospective data center demand across our active markets.
Along with positive absorption, our pipeline is consistent with a steady stream of new customer requirements we see coming to the market. Many of these requirements come from customers new to DLR.
While the sales cycle with the new customer is typically longer, the investment time in securing new logos has historically proved significant -- provided us with significant long-term growth opportunity for our businesses. Many of these new customers end up expanding in multiple locations with us.
I will now briefly run through some of the supply/demand statistics we're tracking in a few of our major U.S. markets, which we received the most questions.
As you know, our strategy is to maintain a disciplined approach to managing inventory market-by-market by utilizing our flexible POD Architecture that's designed to deliver data center space in approximately 1 to 2-megawatt increments. This enabled us to meet customer just-in-time requirements across our global portfolio while limiting our financial exposure in any one market.
Moving east to west. In the New York, New Jersey Metro, we're tracking nearly 41 million megawatts of potential demand.
That's an increase of 10 megawatts from what we were tracking last quarter. We believe this reflects pent-up demand from financial services, as well as system integrators and managed services cloud providers that support the financial vertical.
As a matter of fact, the financial vertical represents over 18% of our average base rents today. This compares with approximately 25.8 megawatts of available supply that's either built out or currently under construction in the market.
At DLR New Jersey/New York exposure buildout space remains relatively small with 3 Turn-Key PODs, about 3.5 megawatts currently available. However, we do have the capability to accommodate virtually any requirement with our existing redevelopment inventory that we're poised to develop with entitlements.
In Northern Virginia, we're tracking approximately 37.7 megawatts of current potential demand. This compares to approximately 35.9 megawatts of available supply that's either built out or under construction.
In our view, Northern Virginia's currently the most comparative market in the country. As a result, we're seeing some downward pressure on rent in that area.
Again, we have a very manageable current exposure in this market with 3.9 megawatts of available built out supply in the digital portfolio. As I mentioned earlier, Dallas continues to be a very active market for us, limited available built out supply.
We've identified approximately 21.2 megawatts of demand compared to about 8.7 megawatts of new built out supply. Finally, in Silicon Valley, we're currently tracking 12.8 megawatts of demand, which is up significantly from the 3.6 megawatts we discussed in our last call.
This increase is consistent with our experience with the growth of IT and Internet enterprise customers in the Valley, which can be dramatic and difficult to predict. Our exposure at present is very manageable with just under 4 megawatts of available supply, including 3.5 megawatts we have under construction currently.
Turning to our acquisitions program. We acquired the large Convergence data center and office campus in Lewisville, Texas and the DFW Metroplex during the quarter.
This property consists of over 819,000 square feet, it's 99% leased and it presents attractive features and new development potential with excess entitled land and utility substation under its construction. We also announced earlier this month that we are under contract to acquire our first property in Hong Kong, a very robust yet quite under-served global market.
And we're doing this with our joint venture partner, Savvis. We plan to begin construction following the closing of the acquisition expected to occur in June with completion of the first PODs expected early in the second quarter of 2013.
We have a strong pipeline of additional acquisitions. They're in various stages of negotiation for both income-producing, as well as development properties.
As you know, our development program is a very important component of our business that fills much of our growth. During the first quarter, we completed approximately 153,000 square feet of turnkey facilities with over 35% pre-leased and 53,000 square feet of Powered Base Building that was 100% leased.
At quarter-end, we are under construction on turnkey space, totaling about 485,000 square feet. This includes 326,000 square feet in the U.S., 44,000 square feet in Europe and approximately 114,000 square feet in Singapore and Australia.
Approximately 25% of this space-under-construction's pre-leased. For Powered Base Building space, we're under construction at about 638,000 square feet, including 503,000 square feet in the U.S., 48,000 square feet in Asia-Pac and 88,000 square feet under construction in Europe, which includes the new Chessington redevelopment property in London that we acquired in third quarter of 2011.
Lastly, we had approximately 275,000 square feet of Build-to-Suit space under construction in the U.S., which is 100% pre-leased. Including the preconstruction work in common area building improvements, the total construction work-in-progress invested in the first quarter was $305 million.
The estimated cost to complete ongoing March 31 work-in-progress was $447 million. This concludes my prepared remarks.
Now I'd like to turn the call over to our CFO, Bill Stein.
A. William Stein
Thank you, Mike. Good morning, and good afternoon, everyone.
I will begin by reviewing our financial strategy and capital markets activity and then discuss our financial performance and guidance. Last week, we announced the closing of a USD $750 million equivalent unsecured multicurrency term loan, which can be increased by $100 million to $850 million.
It matures in April 2017 and includes the ability to borrow in U.S. dollar, Singapore dollar, Australian dollar and Hong Kong dollar, as well as euro, pound sterling and Japanese yen denominations.
We accessed the bank term loan markets to take advantage of attractive 5-year borrowing interest rates and to place debt on foreign subsidiaries, which allows us to naturally hedge our growing international balance sheet. In line with our overall capital strategy, the term loan also enhances our financial flexibility to accommodate our growing global investment program and to provide immediate liquidity for potential acquisitions.
We've made an initial draw of USD $525 million equivalent to U.S. dollars, Singapore and Australian dollars, as well as British pound sterling and euros, and have up to 90 days to draw the remaining $225 million.
Over the next several months, we expect to execute interest rate swaps to hedge at least half of our total exposure. Including the term loan, year-to-date, we've raised nearly $989 million of new capital.
Additional financings include the 6 5/8 series cumulative redeemable preferred stock offering of 7.3 million shares in April, raising net proceeds of $175.8 million, which is the lowest yielding perpetual preferred stock that the company has ever issued, and the issuance of 957,000 shares of common stock under our at-the-market equity distribution program, with net proceeds totaling $262.7 million at an average price of $66.19. All of these shares were issued in January, prior to our last earnings call.
We currently have approximately $54 million of availability remaining on the ATM program. We have $1.7 billion of immediate liquidity, which includes $68 million in short-term investments, funds that can be drawn on our global revolving credit facility and the delayed draw on the term loan.
If these liquidity were fully utilized, we would remain in compliance, with all covenants contained in the global revolving credit and term loan facilities of Prudential Shelf Facility and other unsecured debt. During the quarter, we paid up 2 European secured loans totaling $73.4 million.
We have $79.5 million of remaining principal amortization and debt maturities in 2012. This includes a $16 million secured loan that we expect to retire this week, as well as a $52.8 million secured loan that we expect to retire in September.
In 2013, we have $247.6 million of ongoing principal amortization and debt maturities unsecured debt, which we plan to retire with proceeds from the revolver. These activities are consistent with our practice of lowering overall cost of debt.
As of the end of the day yesterday, the balance on our $1.5 billion global revolving credit facility was $20.7 million, and we held unrestricted cash of $68 million. Our net debt to adjusted EBITDA ratio was 4.7x at quarter-end, up from 4.4x at the end of the fourth quarter last year.
Pro forma for the recently issued preferred equity net debt to adjusted EBITDA was 4.6x. This increase is due to a higher level of borrowings on our global credit facility.
Our GAAP fixed charge ratio increased to 3.4x at the end of the first quarter compared to 3.2x in the previous quarter. Let me now turn to the quarter's financial results.
All per share results are on a diluted share and unit basis. As stated in today's earnings release, first quarter 2000 (sic) [2012] FFO was $1.06 per share, up 3.9% from the fourth quarter 2011 and first quarter 2011 of $1.02 per share.
Adjusting for items that do not represent ongoing expenses or revenue streams, first quarter 2012 core FFO was $677,000 higher than reported FFO or essentially unchanged at $1.06 per share. This reflects a 2.9% increase from fourth quarter 2011 core FFO of $1.03 per share.
Adjusted funds from operations, or AFFO, for the first quarter of 2012 was $102.8 million, up over 8% from $94.9 million in the previous quarter. The diluted AFFO payout ratio for the first quarter of 2012 was 82.8%, up from 81.9% the last quarter.
Adjusted EBITDA at quarter-end of $172 million grew by 5% from $163.6 million last quarter and by 15% from $150.1 million in the first quarter of 2011. Turning now to the income statement.
Net operating income increased by $9.5 million to $182.6 million in the first quarter of 2012 from $173.1 million last quarter. This increase was primarily due to incremental revenue from new leasing and acquisitions.
As we discussed on our last quarter, fourth quarter 2011 property taxes included a favorable tax assessment, a portion of which was passed on to tenants. G&A increased by 14.4% to $14.3 million in the first quarter compared to $12.5 million last quarter, primarily due to 2011 year-end accrual adjustments of $1.4 million, which lowered the fourth quarter 2011 run rate.
Tax expense was $721,000 in the first quarter of 2012 compared to a tax benefit in the previous quarter of $1.2 million. This increase of $1.9 million was primarily due to the fourth quarter true-up of about $1.8 million of deferred taxes relating to foreign operations and taxable REIT subsidiary activities.
Finally, we are not revising our 2012 FFO guidance range of $4.34 to $4.40, or its underlying assumptions. While we do not give quarterly guidance, I would like to remind you that I discussed at our Investor Day in January that we expect growth in 2012 recognized revenue, NOI and FFO resulting from new leasing to be back-end loaded in the year.
Also, because of the success of our recent term loan and the preferred equity offering, we do not expect to issue additional capital in 2012. Most of our acquisitions volume exceeds our current guidance assumption of $300 million to $400 million.
Our 2012 outlook remains positive. A combination of our leasing funnel, investment opportunities and access to attractively priced capital make us well positioned to capture a variety of market opportunities and we are tracking worldwide in order to increase shareholder value.
We look forward to sharing our progress with you in the months and quarters ahead. This concludes our formal remarks.
Mike and I will be happy to take your questions. Operator?
Operator
[Operator Instructions] And your first question comes from the line of Jordan Sadler, KeyBanc Capital Markets.
Jordan Sadler - KeyBanc Capital Markets Inc., Research Division
I'm just -- I wanted to follow up on the bit about acquisitions in the pipeline. Mike, it sounds like it's strong both on the income side and otherwise.
I'm curious if you would have interest at the enterprise level. It's been telegraphed that Cincinnati Bell is looking to monetize CyrusOne, and I know it's in different markets.
I'm wondering if that would even be on the radar for you guys?
Michael F. Foust
Well, we're always looking at opportunities both on individual assets, portfolio, corporate levels. So we're definitely open to any opportunity.
Our understanding is that they're pursuing an IPO for the CyrusOne division, so we'll just have to see how that plays out.
Jordan Sadler - KeyBanc Capital Markets Inc., Research Division
Okay. And just a follow-up, any -- can you maybe just give us a little bit of color on the recent departure of the Head of Sales and has -- there's been any disruption in leasing at all as a result of sort of that transition?
Michael F. Foust
No, no disruption at all. Yes, we're fortunate that we have a very strong team of leaders and -- in place, as well as the -- we have the local sales team and our listing brokers and asset managers who all work together.
So we don't expect to skip a beat in that regard. I mean, we hate to see Brent leave, great guy.
But the organization moves on because we have built a very deep organization here.
Jordan Sadler - KeyBanc Capital Markets Inc., Research Division
Did he have a non-compete?
Michael F. Foust
No.
A. William Stein
Non-compete aren't enforceable in California, Jordan. It's a matter of public policy.
Michael F. Foust
And law.
Operator
And your next question comes from the line of Chris Caton, Morgan Stanley.
Chris Caton - Morgan Stanley, Research Division
I have a question on the redevelopment pipeline, 2 parter. First, in Boston, you started -- as you mentioned last time that you're expanding your Needham project.
Can you give us more detail on that? And then second, you had talked about wanting to expand activities in Chicago on the last call as well, and wondered if you're pursuing development or redevelopment opportunities that may show up in the future or is that going to be more like an acquisition?
Michael F. Foust
Sure, yes. The Needham site is underway.
In fact, I was just out there week before last and we're going full bore. I believe we'll be delivering somewhere approximately 150,000 square feet of new construction in that facility and that will nicely augment the existing operating site there in Needham.
So we're very excited about that market. And in Chicago, we're definitely pursuing opportunities there to create more product for the customer demand that we're seeing in the Chicago market, so we are actively pursuing development opportunities in that area.
Chris Caton - Morgan Stanley, Research Division
And just to follow-up on Boston, what type of customer verticals are you servicing in Needham? And is there anything specific or is it general?
Michael F. Foust
Boston is a good regional market. So the great majority of your demand is coming from New England and Boston region.
So it's financial services, including large money managers, banks, life companies, healthcare -- you have such a strong healthcare market in that area -- and other corporate headquarter types in that area.
Operator
Your next question comes from the line of Gabriel Hilmoe, UBS.
Gabriel Hilmoe - UBS Investment Bank, Research Division
Yes, just given the capital plan in terms of acquisitions and development, can you talk a little bit about where you expect the focus to be over the next few years, beyond what's in the current pipeline whether it's domestic, overseas? And kind of what you expect the portfolio to look like kind of on a pro forma basis?
Michael F. Foust
Well, we'll continue to focus on a combination deploying capital. It's difficult to look out beyond the next 24 months specifically, but certainly, the major markets in the U.S.
where we're seeing continued demand, and that would be places like New Jersey, Dallas, Phoenix, Bay Area, Boston, Chicago -- I mean, these are all the, among others, the important markets for us. So I think you'll continue to see the majority of growth because the United States is so large with so many markets.
But you'll see increased volumes certainly in Asia-Pac. We're quite excited about the Australian markets we're in: Sydney and Melbourne.
We think Singapore has very good long-term potential for us. We think Hong Kong has very long-term potential for us.
So I think you'll see us deploying significant capital in those areas. And we'll selectively continue participating in the major markets in Europe and especially London, Paris, Dublin and Amsterdam in particular will continue to be areas of focus for us.
Gabriel Hilmoe - UBS Investment Bank, Research Division
And can you quickly -- can you just give the cash release in spreads and assigned turnkey notes in the quarter?
Michael F. Foust
We've been focusing on the GAAP and we want to be consistent and keep giving out the GAAP numbers, but I don't have the cash at my fingertips.
Operator
Your next question comes from the line of Michael Bilerman, Citi.
Emmanuel Korchman
It's Manny here with Michael. Just a couple of questions for you.
In Hong Kong, I know previously you had discussed buying in-place assets and now you've gone in this JV to do a development, just wondering if that's a change in strategy or just taking the opportunity do something with Savvis?
Michael F. Foust
No, this is actually exactly the strategy we've been pursuing to find existing building that has the power and the fiber available that we could redevelop as data center space. So actually this is -- what we've been pursuing for the last couple of years defined that kind of an asset would be really adaptable for data center use.
And the park that we're in is really attractive place because of the significant amount of power that's available and the tremendous fiber access and other corporate data centers, Hong Kong Stock Exchange, et cetera. So it's really a very attractive location and what we've had our eye on for some time.
Emmanuel Korchman
Okay. And then turning to the U.S.
for a second, if we look at the supply that you have in any given market, how would you classify that SME? Is it more sensitive to price and if you price it correctly you have a tenant that would come in and take in any of that space or is it really a demand -- a trigger thing from the tenant where if they need the space they'll come and pay whatever price you're asking for?
Michael F. Foust
Well, I wouldn't say -- I'd say it's kind of customer demand is specific to markets. So in different markets, no surprise New York/New Jersey is very heavily financial service oriented.
Silicon Valley is very tech, social networking oriented. Dallas, you've got a wide range of corporate enterprise, a number of different verticals, as well as IT services in there.
So it really just depends on the particular market and the mix of customer demand. And then, pricing is generally driven by supply and demand dynamics and relationships.
Operator
And your next question comes from the line of Dave Rodgers, RBC Market.
David Rodgers - RBC Capital Markets, LLC, Research Division
A question for you on the colocation business. With regard to your 2012 Investor Day presentation, you had a slide in there, I think, that said you wanted to double the size of colo from 5% to 10% of revenues.
Can you kind of talk about why you're making that push into that side of the business? How far along that is and when that hurdle is to be reached?
And then, I guess, the second question along with those lines would be, are you doing this yourselves? Are you pushing into the interconnect business or this is just another way to kind of create space for resellers in your portfolio?
Michael F. Foust
Well, it's really an opportunity for us to create value at the asset level in existing Internet gateway buildings that employ the high connectivity with having many networks and ISPs and other assets that we think blend themselves well for the colocation. The smaller footprint business -- it's really, we look at it kind of the spectrum of size of customer requirements, maybe a big company, but in a particular geography, they may need a small footprint.
We have space available that we think we can add a lot of value on a property level by building it out and leasing to the smaller footprint requirements. So it's really an asset-driven strategy.
And being able to utilize our in-place operating staff, because we do have folks that are operating these facilities and doing a very good job of it. So kind of piggybacking on the business we have now which if you look at total gross revenues of our current colo business, it's about $55 million, and we'd like to see that double in 3 to 4 years.
That may be a little ambitious, but I think with the space we have available, it's something that we can achieve in. And the -- again, the margins are very good because they are smaller footprint deals.
David Rodgers - RBC Capital Markets, LLC, Research Division
Would these be add-on spaces to Telex or somebody else who manages that gateway site within the larger facility or were you guys pushing ahead and do this on your own? And will we see you get into more interconnect business in the future?
Michael F. Foust
Well, the colo space that we refer to is space that we're managing and leasing ourselves. We've pretty much given other folks, who are large customers of ours, first crack at the space.
And more often than not, if folks -- other service providers want the space, we're happy to lease it to them more on a wholesale basis, if you will. But it's phased out that we see we could -- that follow right now that we can add a lot of value with and add value at the asset level.
The interconnect business, it's probably something we'll continue to do in certain locations where we don't have a Telex meet-me-room setup, but it's really more focusing on space power warm hands and being more network neutral on the network side.
Operator
And your next question comes from the line of Bill Crow, Raymond James.
William A. Crow - Raymond James & Associates, Inc., Research Division
A couple of questions here. Mike, could you talk about the sensitivity on the demand side in Europe, given the economic issues they're having there?
Michael F. Foust
Sure. I mean, we're certainly not seeing as much demand as we're seeing in, generally, in the U.S.
markets and the Asia-Pac markets we're in. But I don't want to give the impression that nothing's going on.
I think in markets like London and Amsterdam, we're going to see continued good demand requirements. Amsterdam is such a big network location and London with corporate and financial services, it's pretty robust.
I mean, we're seeing a lot of demand in London right now, and probably almost 32 megawatts of potential demand. Even in Paris, we're seeing requirements out there, different stages of purchasing of between 12 and 13 megawatts.
So it's certainly not totally quiet. So we'll continue to be very focused and bringing on space, utilizing our POD Architecture so we don't get ahead of demand with supply.
And I think we're very well positioned to nab, hopefully, more than our fair share of those requirements. We'll be very incremental as we bring new space on in London, Paris and Dublin.
And we are looking for another project in Amsterdam because we're fully leased in that market.
William A. Crow - Raymond James & Associates, Inc., Research Division
And then at your Analyst Day, you talked about potentially entering Latin America, following your customers, if you will. Any update on that opportunity?
Michael F. Foust
We are doing some consulting work with our digital design services in Mexico City with a customer on a development that they're doing. And we're definitely only in conversation mode regarding Brazil, although that continues to be an intriguing opportunity and what I think we will explore in more earnest here this year.
Nothing to announce at this stage.
William A. Crow - Raymond James & Associates, Inc., Research Division
And then Bill, if I can ask you one question, we all heard you at the Analyst Day at the back-end loaded year. I think consensus is $1.17 for the fourth quarter.
Do you have any commentary on that? Obviously, it's important as we start thinking about '13.
A. William Stein
I mean, I think, we don't give -- as you know, we don't give quarterly guidance. I'd say, given the slope of the growth in the year, the $1.17 would be right.
Operator
Your next question comes from the line of Tayo Okusanya.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
[indiscernible] the acquisition pipeline a little bit if you could just -- if you could give some color on -- if most of that is focused internationally or domestically, that would be helpful.
Michael F. Foust
For income properties, it's primarily U.S. And so that's what we're seeing most of the prospects for us for income acquisitions.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
Great. And then also the development -- the joint venture in Hong Kong, any sense -- if we could get a -- just a better sense of pricing, what kind of development yields you expect and just how much is spent on it and how much it actually cost to develop it out?
Michael F. Foust
We're not prepared to give out that information at this point, partially for competitive reasons and as well as we do have a partner in this, especially for competitive reasons. We don't want to give out those kind of metrics.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
Okay, that's helpful. Then, thanks for your commentary on Northern Virginia and pricing in that market.
Could you give us a sense on what you're seeing in New Jersey and Santa Clara pricing-wise?
Michael F. Foust
I'd say New Jersey and Santa Clara are holding pretty steady. And those we did see in Santa Clara, Silicon Valley, a decline in the second half of last year.
I think it's holding steady at those levels. Definitely in Virginia, with a couple of players choosing to be very aggressive on lease rates, that's probably the biggest decline that we've seen.
We've been fortunate. I mean, we've been working to meet the market and still maintain double-digit yields on our investments by and large.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
That's helpful. And just one more quick question.
With a lot of the talk around the Pacific Northwest becoming a hotter data center market, how do you think of that relative to the current assets you own and whether that's going to create incremental competition on a going forward basis?
Michael F. Foust
We've been very active in Seattle and expanding our portfolio there with our new developments and continue to build out the existing Westin Building as well with our partner, Price Properties. And they're fabulous partners.
So we're really excited in looking at other opportunities working with them to expand the Seattle footprint. And we're currently underway -- well underway on a Build-to-Suit for NetApp in Hillsborough, Oregon which is suburban Portland, which is another very attractive submarket for corporate data center users.
So we'll continue to look at that Greater Portland area as well. Potentially, to do some, maybe even do some, spective element and continue on with the Seattle business which continues to expand.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
Got it. And then Silicon Valley, you gave us the typical stats of the demand you're tracking and your current inventory in the market, but you didn't give us a sense of what market supply is.
Michael F. Foust
Yes, let's see. I think Silicon Valley, we're looking at a current supply under construction of either existing or under construction around 20 megawatts perhaps.
I'd have to -- I don't have my notes in front of me on that one offhand.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
I'll follow up offline on that one. And then just -- I'm sorry, just one more question.
Build-to-Suit, just kind of curious what your outlook is at this point whether you're still kind of seeing a strong demand for that?
Michael F. Foust
Yes, we are seeing good demand. These are a little bit trickier opportunities.
And tricky, I mean, because they take a lot of face-to-face planning work with the customers because these are more customized solutions, sometimes including site selection and acquisition as well. So I think this is going to be -- continue to be a growing area for us because we're so uniquely positioned with our site selection, our design, our project management our supply chain management.
So it's hard for me to put a number on it like what percentage of our overall growth is going to represent, but they do tend to be larger requirements. So I think in 2013 and 2014, we'll definitely see the impact of that work.
Operator
Your next question comes from the line of Vincent Chao, Deutsche Bank.
Vincent Chao - Deutsche Bank AG, Research Division
Just a question on back to the acquisition pipeline, particularly the income-producing. In the past you've talked about sort of the pipeline in a dollar terms, in terms of what you're tracking, is that something that you can talk about here?
Michael F. Foust
Yes, I mean I think we're looking at various phases of prospecting probably around $750 million of suspect deals. Like I said, they're in various stages of review.
And that's both income and for development projects.
Vincent Chao - Deutsche Bank AG, Research Division
Okay. And it sounds like those are probably smaller -- not really portfolios you're looking at, is that correct?
Michael F. Foust
Yes, tend to be one-off individual deals.
Vincent Chao - Deutsche Bank AG, Research Division
Okay. And then Bill, maybe on the term loan, you said I think 50% of it you'd look to fix on a -- via swaps.
Can you just talk about what your expectations would be if you were to fix that today, what kind of rates you'd get?
A. William Stein
I actually said at least 50%. The swap rate is very -- fair bit by currency.
So the U.S. dollar would swap basically mid-2s.
In fact, just about everything swaps mid- to high-2s. Well, mostly mid-2s, except for the Aussie dollar which would swap mid-5s.
Vincent Chao - Deutsche Bank AG, Research Division
Okay. And then just -- sorry, I'm bouncing about around a little bit here -- on the colo discussion.
To get to the 10% over time and your doubling of the revenues from where you are today, do see yourself having the infrastructure today to do that or do you need to staff up to get to those levels?
Michael F. Foust
We have the great majority of that staff in place because, well, these are buildings we're already operating. So we can utilize a lot of that facility staff.
And so we've been adding in terms of management, as well as leasing and marketing. Those are the main areas that we've been adding to the staffing.
Operator
Your next question comes from the line of Lukas Hartwich, Green Street Advisers.
Lukas Hartwich - Green Street Advisors, Inc., Research Division
Mike, this is a question for you. I'm just curious how competitive you think your older spaces?
Is there still demand for lower power density product or does that stuff just get redeveloped?
Michael F. Foust
Well, I think you're making an assumption that's necessarily lower power density, which isn't the case relative to new product. So the power densities are -- tend not to be an issue.
And I think you see on our renewals that we're renewing a very high percentage. And typically, the power -- what we label as Powered Base Building renewals because that's where the customers put in the improvements have been renewing over the last couple of years at least in the high-90s percent.
I think this quarter was 100% at 20% uplift in overall rent. So as you see by the renewal activity, that continues to be very valuable space.
Operator
And your next question comes from the line of George Auerbach, ISI Group.
George D. Auerbach - ISI Group Inc., Research Division
Bill, I guess 2 related questions on balance sheet. First, you mentioned that you won't need any new capital this year, but given where unsecured debt rates are when your stock is trading on an applied cap rate basis, I guess, how do you think about maybe some earnings dilution versus locking in long-term financing?
And second, given the spread between your stock price and/or I think most people have your NAV, why not accelerate the ATM issuance, the kind of capture that spread will lock in the financing?
A. William Stein
George, right now, we're effectively sitting on cash. We have still $220 million, $230 million to draw on the term loan.
So we're going to take that down over the next 90 days, which is what the term loan provides for. As far as the long-term market is concerned, the rates are certainly attractive.
And our strategy there is consider a swap lock of out, probably, 12 months and that would really at least for a portion of our long-term financing needs in the first quarter of next year. So basically lock in at today's treasury.
We can't hedge the spread but we can hedge the -- against the treasury. I think on the equity, we'll be opportunistic.
So there is no need to issue equity, and that's the point I want to make. If we exceed our acquisition targets, it would raise equity so that the acquisition is leveraged neutral, and it may make sense to issue some equity as well.
But I'm not going to issue equity and just put the cash on the balance sheet.
George D. Auerbach - ISI Group Inc., Research Division
I guess I was thinking more in terms of not drawing down as much in the term loan, just given with the stock kind of the 6s on an applied basis, does that sort of make sense in a long-term basis?
A. William Stein
We really have to take the term loan within 90 days. That's how it's structured -- the balance of it.
Operator
And your next question comes from the line of James Feldman, Bank of America.
Jeffrey Spector - BofA Merrill Lynch, Research Division
It's actually Jeff Spector. Just a question on the seasonality that you talked about at the beginning of the call.
Can you just explain again how that impacts the new leased rents on the turnkey for the quarter?
Michael F. Foust
Well, it's kind of a more on a timing basis and a market basis. So these rates can vary pretty widely by market.
And in terms of the overall volume, it's timing, and activities generally seems to be a little more back-end loaded for us as in terms of new signings. And the lease rates are going to vary pretty considerably market by market.
And the type of asset as well and the type of applications, whether it's a smaller footprint for a very dense trading or whether it's a more typical power density for more general corporate applications.
Jeffrey Spector - BofA Merrill Lynch, Research Division
And so, does that mean that the development yields are still intact even though, let's say, that new lease rent was slightly lower than what we saw in the fourth quarter?
Michael F. Foust
I think we're definitely in that 11 to 13 range domestically for stabilized returns, higher internationally. So it's -- our yields are good, very good.
Jeffrey Spector - BofA Merrill Lynch, Research Division
And then just focusing a little bit more on that. Can you give us any additional information since the quarter-end?
Anything new that have surprised you to give us a little bit more comfort that the first quarter was just seasonal? I mean, we've seen results from some of your peers today and we saw some strong numbers in the data center industry.
Is there anything you've seen since the quarter-end to give us some additional comfort?
Michael F. Foust
Well, since the quarter ended like 3 weeks ago, but we are seeing good activity. And the leasing -- if you look at -- you can't -- the activity is very good.
And you can't just separate out the first quarter from the fourth quarter. It's -- we're seeing a trend with very good activity over the last 4 quarters.
So I think if you look in totality, the trajectory is good and we're in a number of different markets. So having the diversity of product and customer verticals, I think, will definitely benefit our shareholders.
James C. Feldman - BofA Merrill Lynch, Research Division
And this is Jamie. So the -- your JV with Savvis in Hong Kong, now we were a couple of quarters into their acquisition by CenturyLink, is there anything different in that structure now that, that's a combined company or any kind of different way that they're working with you guys than when they were on their own?
Michael F. Foust
No. I mean, they're very good customer, obviously, of ours and along with other folks.
But they are combined with the Savvis and Qwest combination in the CenturyLink, they're our largest customer. And we continue to look at opportunities with them across U.S.
and in some of these international location sites. I wouldn't say this represents a different trend other than continue to, hopefully, be able to be a good partner and help them expand their footprint domestically, as well as internationally.
James C. Feldman - BofA Merrill Lynch, Research Division
And then just one final detailed question on the colocation leases you said that they're much longer now than they used to be. Is there a reason for that?
Anything we should think about when we see that?
Michael F. Foust
Well, I think what we're saying, the non-colocation leases continue to be very long-term. I believe we're well over 10 years, and so I think for the larger footprint leases, we continue to see a good term.
So tenants are committing to long-term. So we like that because we think that reflects a higher asset value and in very predictable cash flow stream, earnings stream from our asset base.
[Technical Difficulty]
Operator
That does conclude the question-and-answer portion of today's call. I'll turn the call back over to Mike Foust for closing remarks.
[Technical Difficulty] Sir, please go ahead with the closing remarks. I'll turn the call back over to you, Mr.
Foust.
Michael F. Foust
Yes, sorry for the telecom glitch there. Looks like we had a crossed line.
But, I definitely appreciate everybody's time and good questions today. And I want to congratulate our team for very good financial results and the good efforts across the globe in driving our new customer relationships and driving what we think will be a very good year of results for Digital Realty.
Thank you again.
Operator
Thank you. This does conclude today's conference call.
You may now disconnect.