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

Thank you, Dan. The speakers on today’s call will be CEO, Bill Stein; and CFO, Andy Power; Chief Investment Officer, Scott Peterson; Chief Operating Officer, Jarrett Appleby; and SVP of Sales and Marketing, Matt Miszewski are also on the call and will be available for Q&A. Management may make forward-looking statements related to future results, including 2016 guidance and the underlying assumptions. Forward-looking statements are based on current expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of the risks and uncertainties related to our business, see our 2015 10-K and subsequent filings with the SEC. This call will contain non-GAAP financial information. Explanations and reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website. And now, I’d like to turn the call over to Bill Stein.

Thanks, John. Good afternoon and thank you all for joining us. I’d like to begin today with the discussion on governance. We recently announced that Laurence Chapman has been named Vice Chairman of the Board of Directors in keeping with our commitment to sound corporate governance practices and longer-term succession planning. The Board expects to appoint Laurence as Chairman of the Board at its next Annual Meeting in May 2017. Many of you have had the opportunity to interact with Dennis Singleton, who has served as our Chairman since April 2012 when the Company’s founder resigned from the Board. Dennis led the Board during a period of significant transition, including a change in CEO as well as several other executives, a change in Board composition, and two strategic acquisitions that have meaningfully enhanced the Company’s growth profile and product mix. It is expected that Dennis will continue to serve on the Company’s Board of Directors after he steps down as Chairman. In addition, I’m pleased to announce that Mark Patterson has joined our Board effective yesterday. Many of you may also be familiar with Mark. He was formerly the Global Head of Real Estate Investment Banking at Merrill Lynch and prior to that he was the Global Head of Real Estate Investment Banking at Citi Group. He serves on the board of UDR as well as General Growth. We are absolutely delighted to welcome Mark to our Board. The governance principle behind these changes is balancing fresh thinking and new perspectives with experience and continuity. I would also like to remind you that we maintain a destaggered Board. The majority of our Directors fees are paid in stock. Each of our Directors maintains a sizable investment in the Company. The Board and Senior Management are required to meet minimum stock…

Thank you, Bill. Let’s begin with our leasing activity on Page 8. We signed new leases totally $15 million of annualized GAAP rent during the second quarter, including a $6 million colocation space and power contribution. Interconnection contributed an additional $8 million and our total bookings for the second quarter were a little over $22 million of annualized GAAP revenue. While this is towards the lower end of our recent activity levels. We are taking a much more selective approach to landing the right mix of customers to maximize the long-term value of our global connected campus footprint. We are winning diverse demand across attractive verticals including cloud service providers both big and small along with other growing segments of digital economy, IT service providers and other large sophisticated users. You’ll note the appearance of a Fortune 50 hyper-scale cloud service provider on our top twenty customer list this quarter. At the same time we also added more than forty new logos for the second consecutive quarter. Long story short we are focused on landing demand from a diverse and growing customer set. Along those lines, I am pleased to report that during the month of July we have already signed an additional $20 million of total bookings, including space, power and interconnection. This activity has included significant singings across all three geographic regions including a healthy mix of large enterprise software cloud providers, hyper-scale cloud providers, IT service providers and financial service customers. The total bookings figure includes $6 million of annualized colocation and interconnection bookings. In fact, the month of July has already been the best month for Telx since our acquisition. While we are not satisfied with the level of large footprint leasing during the second quarter. The pipeline for the second half is sizable and we…

Yes, sir. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Jordan Sadler of KeyBanc. Please go ahead.

Hi, good afternoon. I wanted to follow-up on the rent question. You talked about positive releasing spreads and the mark-to-market across the portfolio rising. Can you talk a little bit about the trends in rents you’re seeing in your markets and given essentially rising occupancies across most portfolios and very high pre-leasing rates amongst the development this out there?

Yes, Jordan, it’s Matt Miszewski. Thanks for the question. In keeping in alignment with what Andy have stated in his opening remarks and especially in our core markets but more broadly as well we see stable to slightly improving rates, which also happen to be coupled with some of the great work that Jarrett’s team is involved we’ve been focused on cost containment in design and construction. So that we expect as the programs that we’re developing right now move forward to have even better performance from a pricing perspective. As our ecosystem development work that’s underway right now starts to take hold. The pre-leasing rates that in these markets similarly look good. Internationally in particular rates look fairly strong. So strength in Chicago, in Ashburn, in Dallas and in Singapore which is great given the new facility that we just launched.

So it sounds like you are trying to, I mean, rates are stable now, but you are trying to dry them a little bit with some of the new programs. I guess as a follow-up, A, if you guys could characterize the funnel, it sounds like while this quarter was not the most robust in terms of total leasing volume, it sounds like there is a significant pipeline behind it. July was big. How would you characterize the funnel? Since you’re being selective, how would you characterize the funnel in terms of high margin versus lower margin opportunities?

Great question Jordan and really since before the acquisition of Telx but really with the acquisition of Telx and working closely with that team we’ve been focused on making sure that the funnel is not just full, but it’s full of the right opportunities in the right target accounts. Given our targeted focus on SMACC continuing, social mobile, analytics cloud and content, but especially inside that cloud and social verticals our funnel has been slightly - it has slightly improving margins in it currently and I do say currently because its pipeline and we have to close, but we’re pretty happy that we’ve been able to slightly expand the margin inside the funnel as we start to work together with multiple products. In addition but we’ve been working together very, very closely with multiple clouds - large cloud service providers to make sure that we can match value for value going forward given their demand and given our capacity and given the pipeline, the pipeline margins this would give the pipeline margins for the rest of this fiscal year and moving into Q1 of 2017 potentially better outcome.

Thank you.

And our next question comes from Jonathan Atkin of RBC Capital Markets. Please go ahead. Mr. Atkin, is your line on mute?

Sorry about that. So I was interested the remaining milestones that you have perhaps on the operations side. You talked about integrating the sales force and retiring the brand, but what remains to be done with the Telx integration as well as what would be some of the initial milestones as you look at the European assets that you just acquired?

Thanks, Jonathan, this is Andy. In terms of remaining milestones I would say unifying the brand under one brand across the Company is a big one, one global sales force is another big one that is going on, both of those going on really right now. Remaining milestones other than, obviously, meeting or exceeding our underwriting targets probably be more back of the house oriented in terms of accounting systems that will eventually be fully united and kind of HRIS systems. I think in terms of facing the customer and driving more revenue, the two that we mentioned on this call are the biggest that are kind of nearing the end zone. On the European portfolio acquisition, quite frankly its early days, we are delighted to receive approval from the commission and ultimately closing the acquisition what is I guess a handful of days or weeks ago. We think we got a really talented team along with some very attractive assets coming on board. We have onboarded some consulting help to kind of help us simulate the 130 team members and assets with our existing franchise in Europe. So we probably have more to post you on that integration coming next earnings call, but just a handful of weeks of post closings, so far so good.

And then my second question or follow-up would be just on Telx and progress on some of the West Coast assets. If I look at your supplemental and kind of at the property level, it seems like it’s been fairly slow initial process in seeing increasing utilization there. So I just wondered if you had any commentary on how that’s progressing.

It may have not flow through to our supplemental because until a commencement happens on a lease, it won’t show up in a utilization stat and some of those buildings are kind of portions of our building, so you can’t always see it transparently. We have seen some traction increase not on the East Coast, but also the West Coast. I’m not sure that’s kind of coastal specific, I think it’s more a testament to onboarding more QBRs and we have several on-ramp that newly joined the Company. And they’ve, quite frankly, the new QBRs have driven a lot of new logos and customers which is what I would say attributed to Telx’s successor in the quarter which was certainly backend loaded more towards June and the beginning of the quarter and then that success is certainly spilled over in the month of July.

And our next question comes from Lukas Hartwich of Green Street Advisors. Please go ahead.

Thank you. Hey, guys. You kind of touch on this already, but I’m just curious how long do you to think it’s going to take to integrate fully the recent Equinix deal and then also along with that, does that kind of limit your ability to do other acquisitions or do you feel like you still have capacity to do other deals?

Maybe just to rehash Lukas on the first part then I’ll hand it back to Bill and Scott on other deals. I mean quite frankly, we’re fortunate very similarly to our Telx acquisition in buying a very strategic and complimentary collection of assets and team members. In Europe, previously our position was much more anchored around our scale leasing and more campus oriented products. What we’ve closed on with the eight assets and that team is prized assets in the Dockland of London or the size parker Amsterdam or actually in Frankfurt it works very well with the land we purchased and a sales force oriented towards selling that small footprint, higher price point, colocation and interconnection oriented offering. So that’s what makes this one a little bit easier, is that there is no expense synergies being sought here. We actually want to put additional resources to support the sales force. It’s very complementary with the existing team over there. They’ll be moving into our office on Gracechurch Street within the month where we had a little space to fit the corporate team. And so I don’t have a date to fill, but I think this one could actually integrate more efficiently or more timely than Telx. And I’ll turn it back over to Bill and Scott to handle the back half of your question.

Hey, Lukas. So as Andy said, actually I feel like we’re further along on the equity assets than Telx at the same time just because of the nature of the acquisition, so I think it should take less time. So looking at the M&A environment, there are certainly quite a few opportunities out there. I think that been written about. And Scott and his team are constantly scanning landscape and looking at those opportunities and we will see what happens. Scott, do you want to add anything to that.

Yes. I would agree we’re focused on integration. We want to be good stewards of our shareholder capital. I think one of the great aspects of these two acquisitions is these platforms give us a lot of flexibility. We can grow the platforms organically. We could grow through M&A, but we have a lot of flexibility and that allows us remain disciplined in our future M&A activity.

Great. That’s very helpful. Thank you.

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

Great. Thank you. I wanted to start with the leasing numbers, the $15 million in the quarter. Would you characterize that more a function, and it being lower than what you’ve been doing, which you characterize that more a function of you’re not chasing the deals that are out there because you think that the returns don’t meet your criteria? Did you not necessarily have capacity in the markets where some of the bigger deals were being won this particular quarter? Or is it that you actually are bidding and you’re losing out perhaps to others? And then I guess just a follow-up to that, in your prepared remarks, Bill, you mentioned that you don’t think that the cloud demand has crested yet and I guess that ties into some of the color that Matt gave in the first as it relates to the funnel and how you think you could see some strong demand I guess in the back half of this year and then into the first quarter and that could give higher margin. I was wondering if you can just give a little bit more specificity around what areas or what gives you the confidence that you guys will actually be involved with some of the cloud demand in the back half of the year? Thanks.

Thanks for the question and thanks for fitting five questions into one question.

That’s a south-side skill.

Yes. You had south-side got that skill. That’s right. So I would certainly characterize it as you did. I was not pleased with what I call below average scale product signings in the quarter. We do think that the pace was due to a couple of things that you mentioned, but also the normal lumpiness that’s become part of our business especially given the new hyper-scale demand that’s out there. But also as you said a more selective approach to making sure that we land the right mix of customers at the maximum - to maximize the long-term value that we think we have inside of our ecosystem. So this means, as you said one of the potential reasons for that number is our continued commitment to a disciplined approach to our underwriting criteria and focusing really on top tier markets and not focusing on tertiary markets where some customers may have a desire to go and then maintaining a disciplined underwriting and pricing regimen to protect long-term value. And on your second question, really the overall demand remains strong. It’s evident by the July that we’ve had so far in both sections of our global business as well as the healthy pipeline that I talked about which has the potential for margin expansion as we move on. We do think that we’re on track now to resume normal levels in the second half across all parts of the business in 2016. Specifically though with regard to your question about demand and cloud demand remaining strong especially where we are in our global markets where we operate. It’s important to remember that that cloud business is still one of the fastest growing segments landing in our industry and from analysts from right scale all the way through to Gartner they all tend to agree that we are actually in the early innings of this new cloud ecosystem breaking out. We are also starting to see the green shoots. We’re seeing mass adoption of a diversity of cloud players not just the major cloud players and early adopters that are out there which we think and to get your last question. We think we’re uniquely situated to be able to land. We do believe that we’re the only Company in this space that is very focused on providing great scale solutions for folks who need scale solutions including those cloud service providers, but also providing colocation right next to it at a latency that can’t be beat as well as the security that comes with the power of private networking or interconnection products. So we really think that the secular demand drivers in the cloud industry are continuing to push them and we are uniquely situated to be able to address it.

Thank you.

And our next question comes from Jon Petersen of Jefferies. Please go ahead.

Great. Thank you. I guess just to follow-up on the leasing volumes, I mean, I know you can certainly have bad quarters. But this is essentially three quarters in a row where your volumes have been below some of your wholesale peers. I’ll just name them, like DuPont and CyrusOne. And so I guess given your comments on focusing on profitability over velocity, I guess that it kind of begs the question if the achievable profitability or the yields on these facilities have declined permanently and you guys just need to move your rents down to compete better.

Sure. Let me timing this is Andy. Since matching dress and some of these already. So a couple topics one timing why I’d always love to have a better fiscal second quarter rather have a better deal on July 1, then a less attractive deal on the June 30. So I think you saw a little bit of that with the volume of sign that just got signed the first few days or weeks of the month of July. And just to put a little more meat on the bone that’s going from a diversity of different types of customers. It’s included hyper-scale top three cloud providers, a sizable chunk from other cloud providers that aren’t in the top three and then another chunk from the rest of what we call smack of the digital economy or IT services or other transaction verticals. So we’re seeing that our demand signings in the second quarter and July from diverse growing customer sets. The other thing I think that to draws the distinction, it is not just about pricing the profitability to we’re really focused on driving the long-term growth in the cash flow and attractiveness in value of our assets our campuses and our gateways with a diversity of different customers versus some of our peers who may be more focused on being in non-core market to us or doing a full build to suit with one customer in one shot. So we always want more exposure and more signings at the right rates from the top cloud providers but we’re focused on collective portfolio and drove that cash flow and value our assets.

And Jon just to give you a little bit of color. While we had a good quarter with regard to those top cloud service providers still 37% of the revenue we closed year-to-date has come from other cloud service providers. So we have a diversity of cloud exposure including 50 new logos that were landed year-to-date inside the smack verticals. So we’re fairly happy with that diversity.

Okay, and then just thank you for that. And then just kind of an unrelated question. On the guidance, I’m just trying to reconcile the $0.10 increase in the quarter. Obviously closing the EquiCiti assets, I would think, is what is driving the underlying increase. You also have cash rent growth. Now you’re expecting it to be positive rather than flat so all these kind of positive moves and yet I don’t see any change to top-line revenue. Help me kind of understand why we are not seeing anything increment there?

Sure. So the breakdown on the $0.10 is really kind of a third, a third, a third story. The first third is kind of outperformance which we’ve already mentioned topline G&A, OpEx. That we kind of got in the bag from the performance in the quarter. The second, third is kind of flow through from that operational performance into the back half of the year and the last third is due to the big question. Overall net accretion from the act the - buy the European portfolio acquisition and the funding with the asset sales and the equity and also the repayment of the debt and preferred. So the third, a third, a third, a third, the first two-third operational related the last third more or more accretion from our most recent investment. On the topline the two things what’s kind of held us back from kind of nudging that up at this time, one was the - we are going to lose some revenue when we sell our fully leased property at St. Denis here fairly shortly. And two we do have some FX headwinds in the top revenue line item which or heads when it comes down to core FFO per share gains but on that top line of our guidance going to use the growth.

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

Hi, everyone. Just want to go back to the Equinix asset acquisitions. You made a point of pointing out the number of employees that you picked up there, including 15 sales professionals. I’m just wondering at this point, have all the key players been sort of locked down in terms of them staying or is there still risk of some of those guys leaving the platform?

Hey, Vince. The key guys are intending to stay through the balance of the year. And we’re working on contracts for them that will tie them up beyond that.

I would add is that this particular team really of their own volition went into this process along with these data assets to kind of essentially at the EU request set up a standalone business that could stand on its own if it had to. So talented individuals across multiple departments coming together with the strong leaders and quite fortunately landed in our hands. We’re the complimentary buyer no synergies expected, so very little overlap of any and we are able to kind of - we think the combination of our European portfolio plus data assets and teams, one plus one we feel is greater than two there.

Okay, yes. Thanks for that, and then just going back to some of the pricing commentary that we’ve been talking about today, and just looking at some of the data that you provide across the supplemental that might point to improving pricing, I’m looking at sort of the development yields that you’re expecting are up a little bit, I think, from last quarter. I don’t know if that is mix or not, but then the cash spread commentary also would point to maybe a little bit better market pricing. I’m just curious what kind of market price improvement are you expecting for this year and maybe next year if you have that?

You know, I quite frankly we’re fairly cautious when it comes to kind of a going out too far in terms of future rank growth here. I could say at the larger end of the scale, the biggest buyers they are buying bulk and taking on numerous megawatts have the greatest pricing power and their rates are certainly flat. They’re not seeing any type of rent spike. If you walk down to the other side of the spectrum and look at our smallest footprint colocation, I think you can look at the cash release and spreads which is up now 5% for the second quarter and it was a pretty sizable this quarter actually amount of leases - just in terms of colocation that rolled up, so we were able to roll these customers up 5%. And they are able to generate some pricing power. Between those two goalposts its very market and customer episodic.

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

Hi, guys. If we look at page 16 of the supplemental, the NAV, the components of NAV, and we look at the first section which is the cash NOI by property type, it looks like there is some significant movements between the business segments. And I’m just wondering if that was just a change in reporting or if there’s something going on with either the revenues or the margins impacting each business, specifically with colo non-tech and then leased Internet gateway coming down pretty significantly about 16%, 18% quarter-over-quarter?

Manny, I am trying to flip to get that Page and are following this financial supplemental. I think the only - I think we may be more accurately mapping towards the NOI buckets this quarter than previously. I’m not aware of a dramatic change quarter-over-quarter.

That’s fine. We call follow-up offline on that one.

Sorry about that.

No, that’s all right. The other question I had for you, if you look at sort of the very, very short lease to commencement timing in this quarter, which certainly different than we have seen in the past, does that give you any concern that you’re not filling the backlog? And if we look at the July 30, excuse me, the post June 30 leasing that you spoke about, is that more similar to the four to six to seven month commencement or is that also kind of here now, take now sort of lease up?

I think the short number is just a smaller sample size that actually closed during the quarter. So I think you can get back to the previous bars on what the signs in July in the rest of the quarter. So I mean, we like the short side to commencement because the cash flow comes quicker, right versus kind of the leaving something that you have to build and come online in a year to two years, but I don’t think one and a half months is definitely an anomaly.

Manny, it was a disproportionate focus on market ready inventory that we were still clearing out, so I’ll agree with Andy that while I would love the 1.5 to stick a little bit. You should expect to see revert to the norm coming up especially given July.

And the next question comes from Matthew Heinz of Stifel. Please go ahead.

Hi. Thanks. Good evening. In terms of the large, megawatt, multi-megawatt cloud signings we’ve seen this year, I’m curious to hear your thoughts on how competitive those bids are, what factors are going into those who are landing these deals, and I can appreciate kind of the diversity of your leasing mix here and the lumpiness of those signings, but it does appear that the rates you’re signing are substantially above where we’re hearing those other deals getting done. I am curious to just kind of hear your thoughts on the competitive environment behind those larger deals?

Yes. Thanks, Matthew. So the competitive environment is I would characterize it as strong for especially what we turn the hyper-scale opportunities that are out there about 3.5 megawatts and above. And as you know we’re certainly not new to the cloud service provider environment. We continue to get our fair share each and every quarter, but most importantly our focus on is on getting them at the right returns for Digital Realty, so we stay very focused on that. With the competitive bids, it does put a certain amount of power in these cloud service providers hands and we find that the closeness that we have with a number of them and extending to all of them as we move forward gives us the ability to have that value for value conversation that I referenced earlier. So we know that they have a high degree of value on things like inventory availability and large scale inventory availability as well as connectivity to colocation facility. And as we unearth those opportunities with cloud service providers they see the value, they match the value and it allows us to not just go to the lowest price, but to go to the best value for Digital Realty. And so that’s really been our focus and it’s going to continue to be.

Okay. Thanks. And just one more as a follow-up on the guidance, I’m wondering what you are assuming for revenue contribution and EBITDA this year from the EquitCiti transaction, and I guess with the revenue, again, with that number not moving, are you assuming that there’s just offset there from some portfolio sales and FX? Just a little deeper on the revenue guide if you would please?

Hey, Matt. Could you hear that answer to that last question?

I couldn’t hear it at all. We can follow-up offline.

So in terms of the underwriting the second part of your question we’re still believe in our underwriting of the 13 times EBITDA that we announced when we made the acquisition announcement last May. So nothing’s changed in terms of outlook there and that’s what’s included in our revised guidance for 2016. In terms of revenue it’s really about the gain from a partially a period on the pre-portfolio has been offset by FX headwinds and revenue loss associated with the safety knee asset. And also the portfolio assets that we’ve now closed on. So both of those disposed, we lose some revenue in the back half of the year and we have some ethics headwinds offsetting other revenue gains from the European portfolio. How that one do.

That works just fine. Thank you.

And our next question comes from Jonathan Schildkraut of Evercore ISI. Please go ahead.

Great. Thanks for squeezing me in here. I guess two questions. Most have been asked and answered. First, Andy, maybe you could be a little bit more precise in terms of timing of the equity distribution from a share count perspective. Is it fair to assume, then, you’ll issue for modeling purposes, the shares at September 30? Is that the way we should think about it in sort of going through and coming out with our FFO numbers? And then I guess my second question, I will come back actually for that if you could help me first?

Sure. So the whole reason with the timing is really just the moving parts on the sources and uses and we didn’t have 100% clarity when we were very able to close out for us to dispose and we think the safety need dispose will close shortly but it could be at the beginning of August could be at the end of August and we can repay that preferred debt till late summer anyways. So what we did is we closed on the revolver short-term we used revolver closing the acquisition short-term. And then when all the dust settles on all these other uses of capital. We plan to pull down all if not all or substantial all of the equity which is 14.3 million shares including the over a lot option that was exercised. Probably I want say maybe probably before September 30 maybe the beginning of September is my guess when all the dust settles here?

Okay. That’s helpful. And then you know you said during your prepared comments, and Matt actually said in answering Colby’s question that you guys were very selective in your choosing of customers and so I just wanted to know exactly what that meant. Does that mean that you’re not taking the same customers as some of the other guys who are taking these hyper scale deals or that - I’m not sure what that meant?

I think just to clarify and I will let Matt clarify as well had some a counter. I don’t think that we have lots of great customers over 2000 customers now could in our most recent acquisition. I don’t think we’re choosing customers that we don’t want to do business with and I regard I think all of our customers are great and we want to continued more business and grow our customer base. I think it’s making sure we pick our spots on the right opportunities. So buildings on our campus or within are gateways that we can fill with the diversity of different take and small cloud service providers other parts of our smack vertical, IT service providers, corporate enterprise that all want to thrive and continue the growth space and there. We find that is a better opportunity to land versus it on the core market or outside the core market especially not going after a kind of one big swath of leasing slash capital and almost like single tenant build to suit opportunities. We think the former versus a lot us more attractive to what we put our capital.

And in Jonathan just real quick. I mean there’s that there are a couple of places where we are being more selective moving forward. As you know from the most recent Investor Day our focus on serving enterprise customers through the channel is certainly one of those cases, which actually makes the terms that that those organizations except a little bit easier on us and make the economics a little bit better for us as well as for the end customers down the road. The second piece is that the ecosystem development that we’re undergoing right now will really drive who we pursue in terms of end target customers. We’ve moved to a new account targeting solution that allows us to hit not just the top cloud service providers, not just the massive cloud service providers but really about 500 targeted accounts that we can focus on and then also focus on the channel. So that’s the targeting that I was really referring to. And the final piece is we do continue to have a great strategy of building up incredible campuses. And so we want to make sure that we have multi data center campus facility and so we need to attract those types of customers and I’ll let Jarrett.

Yes. I think partnering up with the partner in Alliance Group there’s a couple unique things. One having colocation now on the campus in Ashburn and Richardson next to the leading cloud service providers is high value we’re seeing severely wins in that. We do need that service exchange that provides those new connectivity options. And the second is we’re getting multi-site deals in the ecosystems because we’ve expanded our cage capability in many of the buildings that we own that Telx is in and that’s now bringing more magnets in who bring their customer base in with them. So those are a big push that will have from our product and delivery. And then finally with the new land we have acquired we’re now using our new design and can design and delivery capability. Now in Greenfield campuses at even larger scale and so you’re seeing that next generation of product in places like Ashburn and Dallas.

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

Great, thank you. I just wanted to follow-up on a clarification. Given the EquitCiti asset probably is a little bit lower margin that the core business and it’s staying in guidance, what gave you the confidence to raise up the guidance range for adjusted EBITDA to 56 to the 58?

Hey, Richard this is Andy. Even with the absorption of - you’re correct lower margin than existing digital. Based on the outperformance we’ve seen on the EBITDA side or expense side year-to-date and what we’re trending for the remainder of the year. We think we’re going to be able to absorb that portfolio and continue to maintain - I should say deliver slightly higher than previously disclosed EBITDA margin. There is a little bit of an order of magnitude going on here with the portfolio being $900 million and relative to digital size.

Makes sense. And then for the development CapEx guidance, it’s been very light for the past few quarters. It seems like it really would have to accelerate to even get to the low end, let alone midpoint or high end. Is that the right way to think about that?

On the development CapEx spend. I think you’re right. We’re probably if you look to those two goal posts we’re probably close to the low end than the high end. But I won’t put it out of reach yet. But I would say we’re probably guide into a little bit on that spend towards the low end.

And our next question comes from Sumit Sharma of Morgan Stanley. Please go ahead.

Thank you for taking my question. I was wondering if you could provide more color on the four assets you sold. Just trying to get a sense of whether these were non-core or more on the opportunistic side of things given the low 6 cap rate. Any color you could provide would be really helpful?

Yes. Scott here. Yes, it’s fair to determine or to call them non-core, St. Louis is a non-core secondary market, that asset was better placed in the hands of somebody pursuing that strategy. And then the two Northern Virginia assets, well that is a core market; those assets would not be considered core assets to our ongoing strategy.

Okay. Fair enough. And in terms of the SS NOI guidance phase, the 2.5 or 3.5 on constant currency basis to 5, assuming there’s 3% escalators on all of your rents, I guess there has to be somewhere in there that just seems pretty significant asking rent hike around the 10% range. Just trying to get a sense of what kind of asking rents are you seeing and who is driving that kind of thing?

Sure. I would say - so our bumps are 2% to 3%, but not all 3% just to be clear. So I think the reason we really changed increased our same capital cash NOI growth. We’re doing a little bit better on the retention. Doing a little bit better on a cash mark-to-market then from a quarter ago and that kind of translates into that kind of a 3 to 3.5 constant currency growth rate. You are not - that space and there’s a pretty demonstrative footnote at the top does not have the Telx colocation, mark-to-market really running through it, as we want to really reflect the true chain capital stabilized portfolio, so you’re not getting the 5% plus mark-to-markets like we’re seeing on the colo side yet. Next year we’ll be in that pool, but right now this is just really retention and modest mark-to-market from the - are more of our scale leases expiring and for those and those 2% to 3% rate bumps and then managing the OpEx prudently.

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

Thank you, Dan. I’d like to wrap up our call today by recapping our second quarter highlights as outlined here on Page 19. We had another very productive quarter characterized by solid execution against our strategic plan. In particular, we further advanced our global footprint with the European portfolio acquisition. We also delivered solid current period financial results. We beat the Street by $0.04 with better than expected results above and below the NOI line. We also delivered outsized AFFO per share growth during the quarter. The quality of our earnings is improving and the growth in cash flow is accelerating. We raised guidance by $0.10 with an improving outlook for most of our key metrics and solid progress towards our three-year target of 200 basis points of EBITDA margin expansion. Finally, we further strengthened our balance sheet with proceeds from asset sales and a successful forward equity offering that coincided with our inclusion in the S&P 500 index. In conclusion, I’d like to say thank you to the entire Digital Realty team whose hard work and dedication is directly responsible for this consistent execution against our strategic plan. Thank you all for joining us and have a great summer.

Ladies and gentlemen, the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.