Good afternoon and welcome to the Digital Realty First Quarter 2022 Earnings Call. Please note this event is being recorded. I would now like to turn the call over to Jordan Sadler, Digital Realty's Senior Vice President of Public and Private Investor Relations. Jordan, please go ahead.

Thank you, operator and welcome, everyone, to Digital Realty's first quarter 2022 earnings conference call. Joining me on today's call are CEO, Bill Stein; and President and CFO, Andy Power. Chief Investment Officer, Greg Wright; Chief Technology Officer, Chris Sharp; and Chief Revenue Officer, Corey Dyer are also on the call and will be available for Q&A. Management may make forward-looking statements, including guidance and underlying assumptions on today's call. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our 10-K and subsequent filings with the SEC. This call will contain non-GAAP financial information. Reconciliations to net income are included in the supplemental package furnished to the SEC and available on our website. Before I turn the call over to Bill, let me offer a few key takeaways from our first quarter. First, we kicked off the year on a high note with record bookings of $167 million, led by strength in the leases greater than 1 megawatt and supported by steady bookings in the 0 to 1 megawatt and interconnection category. Second, we saw a notable and broad-based improvement in our re-leasing spreads in the quarter, reflecting a healthier pricing environment but also the active engagement we are having with customers on the Digital Realty value proposition. Third, we remain poised to continue our expansion in Africa with plans to close our investment in Teraco later this quarter. And finally, our core FFO per share results exceeded consensus' expectations despite FX-related headwinds. With that, I'd like to turn the call over to our CEO, Bill Stein.

Thanks, Jordan and welcome to the Digital team. Our formula for long-term value creation is a global, connected, sustainable framework and we made further progress on each front during the first quarter. First, we continue to globalize our business with the announcement of our definitive agreement to acquire a majority stake in Teraco in early January. We also continue to grow our business organically around the world. We posted another record quarter of global bookings totaling $167 million of annualized rent, including our second highest quarter in each of the Americas and Asia Pacific regions, together with another solid quarter in EMEA. Bookings this quarter were led by strong results in the greater than 1 megawatt category, particularly in the Americas, while sub-1-megawatt bookings remain steady and in line with our 2021 average. Let's discuss our sustainable growth initiatives. We are committed to minimizing our impact on the environment and simultaneously meeting the needs of our customers, our investors, our employees and broader society while advancing our goal of delivering sustainable growth for all stakeholders. During the first quarter, Digital Realty was named one of America's Most Just Companies and third overall in the real estate industry by Just Capital and CNBC. We also maintained our status as a member of the FTSE4Good Index which measures the performance of companies demonstrating strong ESG practices, continuing our record of recognition for our leading sustainability initiatives. During the first quarter of 2022, Digital Realty continued our diversity, equity and inclusion efforts through our employee-led DEI council which seeks to promote inclusion and create opportunities for each of our employee communities. Through the DEI council, Digital Realty has expanded its philanthropy and community engagement activities with strategic donations and partnerships with global charitable organizations. Digital Realty has also taken a stand in solidarity with the people of Ukraine and those impacted by the Russian invasion. We do not have any data centers or operations in Russia or Ukraine and our company will abide by sanctions against Russia. Until the peaceful and legal resolution of this conflict, we will not invest in Russia. Furthermore, we are funding philanthropic organizations to support Ukrainian refugees, those displaced within Ukraine and the growing humanitarian crisis. Let's turn our investment activity to our development. We continue to invest in our global platform. We acquired land in 3 markets for organic development, including the first location for our joint venture with Brookfield in India, along with 2 parcels in Europe to support the strong demand in that region. After the quarter, we purchased 3 additional land parcels in Europe, including a beachhead in Barcelona, marking our organic entry into this complementary Mediterranean metro. Our active development pipeline reached an all-time high in the quarter with 44 projects underway supporting over 300 megawatts of IT capacity in 28 metros around the world. 58% of this capacity is already presold, reflecting strong customer demand. We've expanded our development in the Americas, adding further capacity in New York, Northern Virginia and Toronto. Demand remains very strong in EMEA and we are continuing to invest across this region with active development projects in 17 of our 18 markets. Frankfurt is still the most active development market in EMEA, followed by Paris. We continue to make good progress toward closing the Teraco transaction which we still expect to close in the first half of this year. Let's turn to the macro environment. We are fortunate to be operating in a business levered to secular demand drivers. We are also proactively managing risks to help insulate Digital Realty against the impact of the current inflationary and rising interest rate environment. We are well protected against the impact of rising energy costs given the pass-through nature of substantially all of our customer contracts and we are effectively managing against rising input costs through our vendor-managed inventory program and the expansion of our prepurchase equipment pool. We are constructively engaging with new and existing customers on the impact of rising costs which is translating into better pricing. This is partly reflected in the broad-based and improved cash leasing spreads we experienced in the first quarter but is also showing up in new lease transactions across most of our markets. Our leadership position provides us with a unique vantage point to detect secular trends as they emerge globally. Our customers continue to solve the most complex IT infrastructure and data integration challenges. We see a growing trend of multinational companies across all segments deploying and connecting large private data infrastructure footprints on our platform across multiple regions and metros globally. Recently, industry research firm, IDC, updated their global data sphere forecast for 2025, predicting the annual data creation rate will exceed 180 zettabytes per year or roughly triple the 2021 rate. IDC concludes that companies of all sizes will need to prioritize data sharing and security to improve business resiliency and create a differentiated experience for their customers. Earlier this week, we published our inaugural Global Data Insights survey with strategic insights from 7,200 companies across 23 countries and 9 industries about the role of data in their business agenda. According to the survey, 70% of these companies are prioritizing secure data exchange in their current plans. The global data survey will augment our Data Gravity Index to provide telemetry for our customers, partners and their respective industries as they evolve their business platforms to harness the power of data and co-located infrastructure to unlock a new era of growth through connected data communities. In addition, Digital Realty recently joined the iMasons Climate Accord as a founding member. This coalition of leading companies is united in their views on carbon reduction in digital infrastructure. The group will establish an independent governing body to define an open standard that provides transparency, traceability and measurement of progress toward reducing carbon from sourced power and embodied carbon found in materials, products and operations of digital infrastructure. This is another great example of our commitment to the continuous innovation and execution of our platform digital roadmap to provide a sustainable and differentiated value proposition for our customers, partners and the broader industry. Given the resiliency of the demand drivers underpinning our business and the relevance of our platform in meeting these needs, we believe that we are well positioned to continue to deliver sustainable growth for customers, shareholders and employees whatever the macro environment may hold in store. With that, I'd like to turn the call over to Andy to take you through our financial results.

Thank you, Bill. Let's turn to our leasing activity. As Bill noted, we signed total bookings of $167 million with an $11 million contribution from interconnection during the first quarter. This is our second consecutive quarterly record and the seventh time in the last 8 quarters we have delivered bookings over $100 million. While our new business was healthy across product types, larger deals accounted for 70% of the quarter's bookings, while sub-1 megawatt plus interconnection accounted for 30% of the total. The weighted average lease term on new leases was more than 7 years. Demand was particularly strong in the Americas with Northern Virginia and Toronto leading the way. Fundamentals continue to tighten in both metros, as reflected by the high levels of pre-leasing on our development pipeline. In EMEA, Frankfurt remains the standout, while in APAC, demand remains robust in Singapore and Japan. Nearly 1/3 of our sub-1-megawatt plus interconnection bookings were exported from one region to another, reflecting the value customers realize from our global platform. North America was the most common export region, with most of those exports landing in EMEA followed by Asia Pacific and Latin America. We landed 128 new logos during the first quarter, maintaining the momentum we have built over the last several quarters which has been a strong validation of our platform and global strategy. In terms of specific wins during the quarter and around the world, Zenlayer, a global edge cloud provider, is expanding on our platform across 3 continents to improve its geographic coverage, scale and access to customer communities across various industries. A Global 2000 consumer financial services firm continued to expand with Digital Realty, leveraging our platform's full suite of capabilities, including rationalizing data centers, implementing IT controls and interconnecting with key business communities. Box Technologies, a leading innovator of high-performance desktop-as-a-service applications, is deploying on our platform, supporting enterprise data architecture applications, serving the manufacturing, construction and engineering industries. A leading IT company is leveraging our full product spectrum by utilizing our connectivity offerings to support data exchange across 3 metros in North America and Latin America to improve performance and scalability and reduce costs. Magnite, a global independent advertising platform is expanding our platform in multiple metros across EMEA to enable their hybrid IT transformation. And a Global 2000 reinsurer selected our platform for mainframe migration with seamless connectivity to top cloud providers and robust security being key drivers. Turning to our backlog, the current backlog of leases signed but not yet commenced grew by 15% from $378 million to a record $436 million, driven by the strong first quarter signings which outpaced commencements. The lag between signings and commencements moderated to 7 months with nearly 2/3 of our $436 million backlog scheduled to commence later this year. Moving on, we signed $177 million of renewal leases during the first quarter at a positive 3.3% cash re-leasing spread. Renewal rates were positive across the board and spread in the black across product types in all 3 regions. 2/3 of total renewals were sub-1-megawatt deals, resulting in a smaller sample size for the 1-megawatt category in the quarter. Excluding one larger short-term extension, our cash renewal spread would have been positive 2.5%. We are encouraged by the positive trajectory on renewal spreads as well as constructive engagement with customers on the current inflationary environment and our highly compelling value proposition. In terms of operating performance, portfolio occupancy ticked down by 30 basis points sequentially, driven by previously reported churn events, most of which has already been re-leased. Consistent with our full-year guidance, same capital cash NOI growth was negative 3.1% in the first quarter, primarily driven by 220 basis points of FX headwinds, the timing of no move-outs and a customer bankruptcy. The U.S. dollar continued to strengthen over the last several months and FX represented a 200 to 250 basis point drag on the year-over-year growth in our first quarter reported results from the top to the bottom line. Our operations, along with our capital funding and locally denominated debt act as a natural hedge, so only our net assets within a given region are exposed to currency risk from an economic perspective. Turning to our risk mitigation strategies. A little less than 60% of our first quarter operating revenue was denominated in U.S. dollars, followed by approximately 25% in euros and roughly 5% each in Singapore dollars and British pounds. In addition to managing credit risk and foreign currency exposure, we also mitigate interest rate risk by proactively terming out short-term variable rate debt with longer-term fixed-rate financing. Given our strategy of matching the duration of our long-lived assets with long-term fixed-rate debt, a 100 basis point move in SOFR would have roughly a 75 basis point impact on full-year FFO per share. Our near-term funding and refinancing risk is very well managed and our capital plan is fully funded. In terms of earnings growth, first quarter core FFO per share of $1.67 was flat on both a year-over-year and sequential basis. Despite FX headwinds, a $0.01 impact related to a customer bankruptcy and a difficult comp due to the contribution of assets to our digital core REIT. In terms of the quarterly run rate, we expect the split between the first half of the year and the second half of the year to be approximately $49.51. In other words, as you can see from our bridge chart, we expect to dip down a couple of pennies in the second quarter due to normalized OpEx spending and near-term dilution from closing the Teraco transaction before bouncing back in the second half of the year as leases from a record backlog commenced. Most of the drivers underlying our guidance remain unchanged but given the improving pricing environment, we are bumping up our outlook for cash re-leasing spreads for the full year to slightly positive compared to flat last quarter. We are maintaining our existing core FFO per share range of $6.80 to $6.90 despite the customer bankruptcy and stiffer FX headwinds. Given the continued strength of the U.S. dollar, we expect currency headwinds could represent a 250 to 300 basis point drag on full-year 2022 revenue and core FFO per share growth. Last but certainly not least, let's turn to the balance sheet. We were active again in the capital markets during the first quarter. We took advantage of favorable market conditions to lock in EUR 750 million at 1.375% for 10.5 years. And later in the quarter, we completed a dual tranche Swiss bond offering, raising a total of CHF 250 million at a blended coupon of approximately 1.25%. We used a portion of the net proceeds to redeem 450 million of bonds at 4.75%. Reported leverage ratio is 6.3x while fixed charge coverage is 5.5x. Adjusting for the proceeds from the forward equity offering last September, our pro forma leverage ratio drops to 5.9x, while fixed charge coverage improves to 5.7x. We continue to execute our financial strategy of maximizing the menu of available capital options while minimizing the related cost and extending the duration of our liabilities to match our long-lived assets. This successful execution against our financing strategy reflects the strength of our global platform which provides access to the full menu of public as well as private capital, sets us apart from our peers and enables us to prudently fund our growth. As you can see from our chart, our weighted average debt maturity is over 6 years and our weighted average coupon is 2.2%. A little over 3/4 of our debt is non-U.S. dollar denominated, reflecting the growth of our global platform while also acting as a natural FX hedge for investments outside the U.S. Over 90% of our debt is fixed rate, guarding against a rising rate environment and 99% of our debt is unsecured, providing the greatest flexibility for capital recycling. Finally, our balance sheet is poised to weather a storm but also positioned to fuel growth opportunities for our customers around the globe, consistent with our long-term financing strategy. This concludes our prepared remarks and now we will be pleased to take your questions.

Our first question will come from Jon Atkin with RBC Capital Markets.

Two questions. I wanted to find out a little bit about the elevated demand and the record leasing. And I wondered how much of that you might attribute to in the greater than 1 megawatt category, any kind of a shift in the mix between building, self-building and leasing on the part of the hyperscalers. And then the second question around pricing, given higher costs and some of the developments that you mentioned, do you see this as really having the impact of protecting your target development yields given the higher cost or perhaps aiming to enhance your target yields?

Well, Corey will start off. Jon, thanks for the question on the ad product demand. I'll pick up hyperscale and I think Bill will tackle the second part of your question.

Yes. So we'll be pretty comprehensive here with our answer to you, Jonathan. I would tell you that with regard to the enterprise demand, we've got customers that are being driven to the business needs and opportunities that are in front of us. Bill mentioned earlier we just published our Global Data Insights survey with data becoming a critical agenda topic for all the businesses and it raised really 5 key things. Data was pervasive, it's the business agenda, it requires aggregation and control and it's localizing and it's a data first strategy that wins. And so we're seeing that is really what's driving a lot of the demand across the enterprise. As far as where is it happening from a regional perspective, I would say North America is probably middle innings with a healthy bullpen that you ought to have in it. And then, I'd tell you that EMEA is probably third inning, maybe anything behind APAC, a little behind that as customers are still really waking to the data opportunity that's right above all of us and it was really highlighted in the index that we just did in that survey. I'd also tell you that we had really strong exports across all regions which was great. And then we're seeing an uptick in all the multi-market and multi-region wins. So really happy with the enterprise. I'll let Andy give you a little bit of perspective on the hyperscalers.

Thank you, Jon. I believe we have now recorded several quarters, around 7 or 8, exceeding $100 million in gap, indicating consistent demand in the hyperscale sector. In the fourth quarter, there was another record set, and these figures are significantly higher than the previous averages of $100 million. Regarding your question about self-build versus procuring from Digital Realty or other providers, I don't believe we've reached a point where self-builds are off the table. However, in today's climate, characterized by increased volatility, supply chain challenges, and a war in Eastern Europe, having a global platform that supports hyperscale growth across 50 metropolitan areas in 26 countries offers substantial value to our hyperscale customers. Their demand has remained steady over the past several quarters, with some fluctuations, and our forecast continues to look strong.

Relative to pricing, Jon, pricing dynamics are clearly market-specific and will depend on both supply and demand in each market. So when demand exceeds supply, we've been able to raise our prices. And this is reflected in our results. For example, if you look at our first quarter leasing results in Northern Virginia, our average prices were about 6% higher than just last quarter in the fourth quarter. That market is increasingly tightening. We're also fortunate to be in a position where we're well insulated from the increased costs on our current development pipeline and that's because of our contracts with suppliers and our vendor-managed inventory program. So this has helped us not just in terms of cost but to assure that we have the supply to continue around the world.

And then lastly, just on the bankruptcy filing from earlier in April that had some implications for the digital core REIT and then kind of a letter of guarantee from you. This has been kind of going on for a couple of years but any sort of an update with respect to that customer and your direct exposure? Are they current on payments, what are you sort of anticipating with respect to that tenant?

Sure, we can take an extra question. The customer in question had a small amount of pre-petition outstanding receivables. They were consistently on time with their payments and were mostly up to date, with a couple of million outstanding, particularly in the U.K. when they entered bankruptcy. They will undergo a process under U.K. administration, as well as in the U.S. and Canada, which will take several months. If we look at the bigger picture, this customer was affected by two main issues. One was that a segment of their business, disaster recovery for offices, was impacted by the shift to remote work during the pandemic, and the other was the high power prices in Europe contributing to liquidity challenges. I don't see this as a widespread issue among our customer base, particularly the first point I mentioned. This customer will navigate through their bankruptcy process. In general, we are taking proactive steps to streamline and focus our portfolio on core assets with strong and sustained demand, including multi-customer facilities rather than standalone ones. We entered the colocation interconnection business a few years ago not only for growth but also to be prepared in case some of our colocation resellers faced financial difficulties, allowing us to support their end customers if leases were rejected.

Our next question will come from Michael Rollins with Citi.

So one follow-up and one question. So on the follow-up, when you're talking about leasing, can you unpack the opportunities to lease up the existing inventory? And how much of the bookings that you're seeing go towards that and where occupancy on the existing portfolio can get over the next 12 to 24 months? And then just a second question, I think it's Page 20 in the supplemental, the same-store numbers. How does that look if you were to put that on a constant currency basis in terms of the rental performance on the revenue side? And how does that look over the next 12 months as you talked about the pricing opportunities and some of the positive renewals that you're seeing?

Thank you, Michael. I'll address some of the numerical questions raised and then pass the leasing question to Corey. In our earnings presentation, we provided figures both as reported and in constant currency. We also adjusted for variances in year-over-year comparisons. The second set of bars on that chart shows our same-store cash NOI down by 3%, which aligns with our guidance. On a constant currency basis, it decreased by 90 basis points. The impact from the bankruptcy customer is about $4 million to $5 million, which accounts for nearly 70 basis points of that negative 90. These figures are based on NOI, and I don't have the revenue equivalent right now. This same group is also affected by elevated property taxes compared to last year. More importantly, we are actively re-leasing vacated space, which connects to your first question. We are focusing increasingly on leasing whenever we can and building infrastructure to enhance revenue contribution from that capacity. Having existing clients who are looking to expand is often easier than acquiring new customers. Regarding leasing that capacity, if we consider the leases already signed this quarter or last that haven’t commenced occupancy yet, it could raise our same-store occupancy by about 80 basis points, meaning the leases are signed, just waiting for customers to move in over the year. This will reflect in our 2022 results for part of the year and fully in 2023. As I mentioned, we are prioritizing re-leasing vacant spaces and providing incentives when possible. Additionally, some industry-wide supply-demand dynamics, coupled with our execution strategy, are helping us fill those spaces more quickly. We have leased over 20 megawatts of that vacated capacity, which is a significant increase compared to the velocity of the previous year.

Our next question will come from Matt Niknam with Deutsche Bank.

Just two, if I could. First, on some of the strength in hyperscale, I'm just wondering, it's beyond just 1Q. Are you sensing any pull forward of demand from customers given looming concerns around supply chain constraints? Or do you sense that the strength here is more sustainable? And then just to go back to Michael's question also on one of the slides, Slide 11, I think you outlined core FFO per share growth on a normalized sort of constant currency basis this year would be north of 7%. I know, Andy, I think in the past, you've talked about mid- to high single core FFO per share growth on a forward basis. Just wondering, all else equal, as we start thinking about 2023, without giving specific guidance, is that sort of 7-ish percent rate that's on the Slide 22 a good sort of framework or start point to think about as we think beyond this year?

Matt, this is Corey. I'll take the first question about the supply chain impacts and then also the hyperscale demand. Our sales and marketing engine just continues to build up our demand and our pipeline growth, right? And I would tell you that the supply chain, inflation, energy costs have not really been a factor in that. Our customers really are thinking through what they do and how they source those materials so that they're setting up their commencement dates ahead of it with us. So they're just being really thoughtful about it and thinking through these concerns. And what I think it's done is actually had us create better dialogue with our customers to think through how we're going to solve this and create probably a little bit more demand for us as they think through it but it hasn't negatively impacted it at all. As far as the hyperscale demand, we're still experiencing really strong demand from the hyperscalers across all regions. They work with us to help their speed to market. We're with them increasingly around their business impacts around this data opportunity the CSPs are helping all the enterprises with. We're seeing larger deal sizes at CSPs as they work to keep up with demand. So we have a really healthy pipeline for the remainder of the year. And I'd also say there's probably a dozen or so of these CSPs and more of them emerging in Asia and across the board. It's also helping us increase our demand on our pipeline for it. So really happy with both of those and where we're seeing the trajectory.

Matt, regarding your second question, we just reported our first quarter results for 2022, so we are not ready to provide guidance for 2023 yet. However, on a constant currency basis, our core FFO per share is now above 7%. This year, we are facing extraordinary foreign exchange headwinds, with fluctuations in the past few years typically in the 2 to 5% range, and now we're looking at a nearly 9% difference. Usually, these fluctuations present headwinds or could be tailwinds in the 50 to 75 basis points range, but we're currently seeing over 200 basis points of headwinds. Our goal has been to accelerate our bottom line earnings growth. Last year, we initially projected a 4% growth but achieved 5%. This year, we started with a 5% guidance, which we are reaffirming during this call, despite the foreign exchange impacts and a customer bankruptcy. Our aim is to consistently achieve mid- to high single-digit growth in our bottom line.

Our next question will come from Simon Flannery with Morgan Stanley.

Andy, I wondered if you could just talk about the balance sheet a little bit. You talked about bringing the pro forma leverage down to 5.9x. How are you thinking about, given the sort of interest rate environment, the uncertainty? Where do you want to have that over the next few years? And I think you still have guidance for dispositions during the year. Again, how are you thinking about both the sizing of dispositions and what vehicles you might use for that?

Thanks, Simon. So first and foremost, better to be lucky than smart. We are out of the gates with a sizable EUR 750 million bond literally the first, I think, business day of 2022 and priced 10.5-year paper in the 1-plus percent, call it, category. So pleased with that. Followed that up with even more volatile start to the year, a Swiss bond offering which, again, both of those, I think, diversifying our source of capital, increasing our FX hedge, locking in long-duration debt at attractive cost of capital. We also increased our revolving credit facility by an incremental $750-ish million during the quarter, just a full start of liquidity given the broader uncertainty in the backdrop. We still have not drawn down or close to $1 billion equity forward just yet. We look to close on Teraco in the next couple of months or so, or actually probably a month or two, I guess. And then the back half of the year in terms of capital sources on the leverage side to again keep us in line in terms of our targeted net debt to EBITDA. We will obviously evaluate equity as an alternative but right now at these current levels, I think the continued disposition of non-core assets as well as incremental contributions of core assets from our portfolio to our digital core REIT in the back half of the year are going to be our primary funding mechanisms. We've made some great progress, obviously getting Digital Realty through its first earnings season and also working on identifying that next leg of assets to continue to grow and diversify and strengthen Digital Realty.

Great. How are you viewing the M&A multiples in light of the current interest rate environment? Has there been any change?

Yes. Simon, it's Greg. Look, to date, I'd say the private market seems to be lagging the public markets a little bit and I don't think that's uncommon. I think the public markets usually lead. But look, I think if rates stay up over time, you should start to see multiples come down. But right now, we see a lot of stuff out there but it feels as though the private market multiples have been a little sticky high at this point.

Our next question will come from Eric Rasmussen with Stifel.

So we've heard some very large deals in the first quarter. What's changed in the market that would lead to these massive deals? And then maybe with that, how do you plan for this?

I assume you're observing large leases and significant multiple megawatt agreements. The trend of increasing customer requirements in the hyperscale sector has been developing over time, rather than being a sudden shift. You likely noticed this in the first quarter of this year or the last quarter of the previous year, as well as in other quarters last year and the year before. It appears that cloud adoption is continuing broadly, with the opening of new regions and the introduction of new services. There's a significant wave of digital transformation among cloud customers, who, in spite of the economic volatility and uncertainties, are committed to securing infrastructure that will future-proof their operations. It seems that consistently achieving record quarters isn't necessarily a surprising outcome, but the pace of demand in the hyperscale area does not appear to be slowing. Additionally, this steady demand backdrop has made it more challenging to be a provider. We face inflationary pressures, supply chain difficulties, labor issues, and even some restrictions in certain regions, which affect demand. To navigate these challenges, it’s essential to approach this industry with a long-term perspective. With Digital Realty operating in this space for nearly 20 years, we have built the scale and capital resources necessary to support our customers through both prosperous and difficult times. It's crucial to ensure we have the capacity to support their growth, including extensive contiguous expansion options. Securing our supply chains is also vital to deliver on time and within budget whenever possible, establishing ourselves as a trusted infrastructure partner. These elements are fundamental to our strategy.

Great. And then maybe just my second question. As it relates to the development pipeline which is very active, besides the chip shortages, what's happening on the construction side, whether it's getting the right materials or having the proper staffing, especially considering the demand backdrop and maybe even increased competition in some markets that you might be seeing.

Yes, Eric. This is Chris. Yes, it's something that we've been constantly looking at. And just to echo Andy's comments a little bit earlier, we've always looked at long-term engagements with our construction teams and with our suppliers. And so the continued development pipeline that we've been putting to market really paid off, right, where we keep the same crews on the projects and we roll into new projects and just watching how that grows. I'd also say we have the gold standard in vendor-managed inventory for building out a lot of this infrastructure. So even before some of the supply constraints hit us, we started ramping up the budgets for that. I think one of the other great things with being with digital is we've been able to expand the program to be able to support our customer needs. And so now it's become a differentiator in the market where we're able to provide some customer equipment to help them procure their infrastructure. It's something that we've been able to plan ahead of and we're constantly looking at different routes to market with, particularly the chip shortages and things like that, looking at the secondary markets, where leveraging a lot of secondary equipment that's been refurbished and providing a warranty against it, has allowed a lot of customers to overcome some of those challenges. It's something that we're very proud about.

Our next question will come from Eric Luebchow with Wells Fargo.

Curious about your development pipeline. It looks like you're almost 60% pre-leased across the entire globe and over 80% in North America. So are you fairly comfortable with your inventory position today? Or if we do see a continuation of this large hyperscale demand, might you end up toward the higher end or even above the development CapEx guide you laid out?

Thanks, Eric. Our schedule is always evolving as we add new projects and remove those that are being completed and commissioned for customers, which are pre-leasing at high rates. This includes a mix of office spaces, colocation products, and our large-scale dedicated data halls. We aim to stay ahead by focusing on the development phases that take the longest, starting with land procurement, as I previously mentioned, and then moving to shelf spaces. Chris also addressed our overall infrastructure and build-outs. When looking at our current stabilized portfolio, which has available spaces we are actively leasing, along with our shelves and delivery schedules, I feel confident. There are always a market or two that can be a bit tighter than I would prefer, but particularly on the hyperscale side, larger deals often involve early stage contracting for those projects. This means you don't need a completed data hall to sell that capacity, so having a land bank and shelves ready to go is advantageous in itself.

And just 1 follow-up on the renewal spreads on mark-to-market. Do you think we're at the point now where those should continue to only improve after this year? And how much of that might be due to just improving the broadly improving pricing environment or perhaps a kind of better mix of leases in the next couple of years, either more international, more enterprise and fewer above-market leases?

Yes, we have been addressing this for a while. Over the past few quarters, our mix has definitely helped as we've worked through some of our largest customers and major expirations, moving from a North American focus to a more international mix, with less than a megawatt connections becoming a larger part of the equation. Last year, we performed slightly better than our guidance, although still negative. This year, we expect to be flat, which represents a sequential improvement compared to last year. In this quarter, we're seeing a few factors. I wouldn't completely rule out the possibility of experiencing a negative cash mark-to-market on certain products in the coming quarters, as we are not fully positive yet. However, we did see positive results across the board in the less than a megawatt categories, which represents the largest part of our business, showing an increase of more than 2.5%, a significant shift. For the entire portfolio for 2022, we are now guiding for slight positivity. While I can't guarantee that we will never face a negative cash mark-to-market again, the trend is definitely moving in a positive direction, which I believe is due to a combination of our mix and the overall pricing improvement, suggesting that pricing is gradually shifting back in favor of Digital Realty.

Our next question will come from Frank Louthan with Raymond James.

This is Rob on for Frank. Where did you guys end the quarter on a quote of varying heads? And have you seen any hiring issues in sales or across any other parts of the business to help maintain growth?

We've got about 130 quota-bearing heads. If you think about all the sellers we really have, there's more than that after you get to it because we've got a whole team of SAs and SEs, all of our management team. I'm here looking at it. So it puts us closer to, I'd say, effectively more like 200 when you get to that point. But yes, we're seeing it do really well and we're excited about the team and how they're performing and how they're engaging with our customers. I'm sorry, was there another follow-up?

I think the hiring and ability to hire for that opportunity.

Yes, we have successfully increased our hiring. When salespeople consider where they want to work, they focus on the potential for future prospects. Our unique global platform gives us a competitive edge, and I believe we are distancing ourselves from the competition. There are only a couple of us in this space. For salespeople in the data center or internet networking businesses, this is an excellent opportunity. Our team is earning more and achieving success, and I think they view it positively moving forward. I apologize for not understanding the rest of your question, but that summarizes our current position, and I am pleased with it. Thank you.

Our next question will come from David Guarino with Green Street.

Bill, maybe going back to that comment you made earlier, it was really helpful on Nova going up 6% on the rental rate. Did you clarify if that was on renewal or new leases? And assuming it is on new leasing, I just wanted to talk on that healthy pricing environment. Do you think it's just a temporary boost for the sector given we've got this lack of leasable capacity? Or would you say we've truly turned a corner and rental rates are going to start trending higher from here on out?

David, let me clarify the numbers. What we saw was not a cash mark-to-market; it was based on like-for-like new rates, which shows progress in overall market rates. We aimed to present the information as accurately as possible, considering the size of deals and various nuances involved. I was in the market last week, and overall demand is extremely strong and continuous. We've performed quite well there, not just in the last quarter but over several quarters. Additionally, there are constraints in increasing capacity in that market, especially regarding access to power and permitting, which will likely lead to healthier rates in the future. Regarding our operating portfolio, it's around 91% leased, though this figure doesn't include some signed but not commenced leases. When those are counted, we reach about 94% occupancy. I have 16 out of 86 megawatts under construction, and we are nearing completion on a couple of buildings in the legacy digital DFT and lab campus, while also preparing for growth in our Western lands or digital Dulles location.

That's helpful. And I guess the kind of the gist of the question really is we've had these periods historically in the sector where demand goes lumpy for certain periods. I'm just kind of curious, if that happens again, if we kind of don't repeat this record new levels of industry-wide leasing activity, do you think we resume to downward pressure on asking rents, I guess? I just want to get your perspective on if this is a temporary phenomenon we're seeing this quarter and last quarter?

It seems to me that the fluctuations have decreased. If you look at our quarterly leasing statistics over the past several quarters, they've become more varied and consistent. Considering the demand over the last few quarters along with the overall supply situation, it doesn't seem like we're approaching peak rates anytime soon. We still have a long way to go before returning to those peak levels, but I believe we're on a more positive path for the foreseeable future.

Our next question will come from David Barden with Bank of America.

This is Alex on for Dave. Andy, maybe just my first one here. I think last quarter, you noted the Teraco acquisition was going to give around a partial year contribution of $100 million in revenues and $70 million in EBITDA. Just wanted to double-check to see if there are any updates there and just confirm that that's already baked in the guidance? And then secondly, I know we've kind of touched on global M&A before but just kind of thinking about the state of the market and any specific geographies of interest.

On the Teraco, I don't think there are any updates. We're still expecting to close around the same time frame, and our underwriting numbers haven't changed since the announcement. Let me follow up online to verify those numbers with your model to ensure accuracy, as I don't remember the exact figures I provided in the previous call regarding the partial calendar year contribution. Regarding your second question, Alex, was that about leasing or M&A? I just want to clarify...

Yes, Alex, it's Greg. I believe you inquired about the current state of the global M&A market. I would say it remains strong at the moment, as there is substantial private capital pursuing deals. We've seen news about ongoing transactions. As I noted earlier, the multiples for these deals have remained high. However, with that being said, there is a significant amount of private capital, and we are beginning to see private investors, including infrastructure funds, recognize the quality of this asset class, such as the creditworthiness of customers, asset quality, and business growth prospects. It truly feels like there is a trend towards these assets becoming a core investment category compared to others. There has been a noticeable shift in this area. Regarding our strategy, this quarter probably gives the best representation of our approach and where we see the most favorable risk-adjusted returns. You heard Andy and Corey discuss supply proofing, but we have also entered two new markets through land acquisitions, one in Chennai and one in Barcelona this quarter. Additionally, we have strengthened our supply proof markets in Zurich, Paris, Frankfurt, and Dublin. When looking at all this together, we have a total of 385 megawatts of developable capacity. Analyzing this on a risk-adjusted basis, we believe it's the right strategy for us. Geographically, we are still aiming to selectively strengthen our presence in specific areas of Eastern Europe. As mentioned before, we continue to focus on expanding in Asia-Pacific and selectively enhancing our footprint in the Americas. This summarizes our current thinking.

Our next question will come from Aryeh Klein with BMO Capital Markets.

Just going back to the same-store NOI growth, it was down 3% in the quarter end. It sounds like the trends are supportive of improvement. But the full year guidance suggests that it kind of remains in this down 3% range for the remainder of the year. Is that just FX? Or is there something else at play?

Well, obviously the FX has gone against our favor for the year but we've had some success in the first quarter relative to our budget a little bit on the OpEx side but we are absorbing a customer bankruptcy which is going to be in your headwind to that. Hence, we're holding our guidance for same-store cash NOI for the year.

Got it. And maybe I missed it but the bankruptcy, is that in the FFO outlook? And what's the impact from that, if it is?

Bankruptcy, aside from a non-core straight-line right add-back that's not in core FFO, we basically already absorbed about almost $4 million of a hit for the first quarter due to, call it, pre-petition receivables which I mentioned earlier on the call. We've made an assumption as to an additional, call it, $6 million of headwind for the remainder of the year because, quite honestly, we're kind of just handicapping the outcome of events because the customer is going to go through the court process and either accept or reject leases. The last time this go around, I think almost all of the leases were accepted. I'm not sure that will be the case this go around. Then there's the scenarios as to if a lease is rejected and their end customers could be essentially absorbed by Digital Realty.

Our next question will come from Irvin Liu with Evercore ISI.

Just one for me. Maybe Andy can answer this. I wanted to ask about the FX spot rate movement. You mentioned that bonds denominated in local currencies act as a natural profit hedge. And we do see this reflected on Slide 11. There's a 3-point revenue headwind but only a 2.3-point FFO headwind. Historically, is there any way to think about how well local currency denominated bonds offset some of these FX headwinds for FFO? And would you consider any durative instruments looking ahead to help you smooth out some of these headwinds?

Sure, I apologize for repeating myself, but I wanted to address this point, which I mentioned during the Q&A. Over the last three years, our business has been about 40% international. Historically, the headwinds and tailwinds have fluctuated between 50 to 75 basis points with much less volatility than what we're experiencing this year. By utilizing non-U.S. dollar financing, including euros, Swiss francs, or pounds, and through our multicurrency revolver, we are tapping into natural lending sources, often leading to long durations of loans. This strategy creates both asset and cash flow liabilities to counterbalance the euros and pounds we earn from revenue. While we aim for investment returns of around 9 to 12 percent, the current modest rates introduce some leakage. We have been increasingly shifting our debt to non-U.S. dollar currencies, which now make up 75% of our debt since all our equity and common dividends are in U.S. dollars. This creates a natural hedge for our U.S. dollar exposure. I support this strategy as it provides numerous benefits, including access to diverse capital sources at competitive rates and a natural foreign exchange hedge. While it doesn't completely eliminate P&L volatility, we are becoming more international and cautiously entering slightly more volatile markets like Latin America and Africa. We remain open to good ideas and will consider additional foreign currency derivatives in the future if needed to further reduce any P&L volatility from foreign exchange.

That concludes the Q&A portion of today's call. I'd now like to turn the call back over to CEO, Bill Stein, for his closing remarks. Bill, please go ahead.

Thank you, Matt. I'd like to wrap up our call today by recapping our highlights for the first quarter as outlined here on the last page of our presentation. Our value proposition is clearly resonating with customers. We posted our second straight record bookings quarter with $167 million of annualized rent while attracting 128 new logos. Our sales momentum is exceedingly strong and the benefits of our platform continue to grow. Digital Realty's operational excellence is second to none and customers are relying on us to solve their needs for data center solutions today while providing a clear path for their expanded needs tomorrow. Our customers trust us with their mission-critical applications and Digital Realty delivers. We're continuing to extend our global platform. In early January, we announced a definitive agreement to acquire a majority stake in Teraco to establish Digital Realty as the leading colocation and interconnection provider in Africa by positioning ourselves at key points of interconnection and subsea cable landing locations. We are also expanding organically with over 300 megawatts of new capacity under development. We posted strong core FFO per share results exceeding consensus estimates despite foreign exchange and other headwinds against us. We maintained our core FFO per share guidance for the year and our constant currency core FFO per share forecast represents more than 7% year-over-year growth. Last but not least, we remain very adept at sourcing attractive capital, raising over $1 billion of European debt at a blended 1.3% coupon and weighted average term of 9 years while redeeming higher cost U.S. dollar-denominated debt during the quarter. I'd like to once again thank the Digital Realty frontline team members in critical data center facility roles who have kept the digital world turning. I hope you all are safe and healthy and we hope to see many of you again in NAREIT and other in-person events. Thank you.

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