Digital Realty Trust, Inc.
Q4 2020 Earnings Call Transcript

Published: 12 Feb 2021

[Operator:]

Good afternoon, and welcome to the Digital Realty Fourth Quarter 2020 Earnings Call. Please note this event is being recorded. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and callers will be limited to one question plus a follow-up. Due to time constraints, we will conclude promptly at the bottom of the hour.

[John Stewart:]

Thank you, Andrea. The speakers on today's call are CEO, Bill Stein; and CFO, Andy Power. Chief Investment Officer, Greg Wright; Chief Technology Officer, Chris Sharp; and EVP of Sales and Marketing, Corey Dyer, are also on the call and will be available for Q&A. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For 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, I'd like to hit the tops of the waves on our fourth quarter results. We delivered high-quality quarterly bookings in terms of total volume as well as the product mix, geographic split and the number of new logos landing on PlatformDIGITAL. We extended our global platform entering Greece with the acquisition of the leading colocation and interconnection provider in Southeastern Europe and securing customer growth in existing markets around the world with key land purchases and new builds. We delivered solid financial results with core FFO per share $0.08 ahead of consensus, driven by operational outperformance. Finally, we further strengthened the balance sheet, lowering our weighted average cost of debt with the redemption of high-coupon debt and preferred equity, while extending our weighted average duration with the issuance of attractively priced long-term capital. With that, I'd like to turn the call over to Bill.

[William Stein:]

Thanks, John. Good afternoon, and thank you all for joining us. The fourth quarter capped off a transformational year for Digital Realty. We acquired several highly connected assets, including the Westin Building in North America and Interxion in EMEA, along with the leading colocation and interconnection providers in Southeastern Europe, significantly expanding our platform in EMEA, while trimming non-core assets in North America. We delivered record bookings for the full-year, an extraordinary performance under any set of circumstances, but particularly amid the headwinds of a global pandemic. Our business is increasingly global. In 2020, we nearly doubled the number of countries where Digital Realty has a presence and EMEA accounted for more than half our fourth quarter bookings. The first time ever a majority of our bookings has been outside the Americas.

[Andrew Power:]

Thank you, Bill. Let's turn to our leasing activity on Page 8. We signed total bookings of $130 million in the fourth quarter, including a $12 million contribution from interconnection. Network and enterprise-oriented deals of one megawatt or less totaled $31 million, building upon the consistent momentum throughout the year and demonstrating the growing success of PlatformDIGITAL as we continue to capture a greater share of enterprise demand. The weighted average lease term was over eight years. We secured 120 new logos during the quarter with more than half of those new logos landing in EMEA, again, demonstrating the power of our global platform. EMEA accounted for more than half of our fourth quarter bookings while Asia Pacific contributed over 15%. As Bill mentioned, this was the first time the majority of our bookings were outside the Americas. In terms of specific wins during the quarter and around the world, a rapidly growing cloud-based cybersecurity provider selected PlatformDIGITAL for multiple environments in London and Boston to facilitate modernization and embrace high performance compute technology while maintaining an exceptional user experience. In New York, the Digital Realty’s teams’ deep understanding of a global retailers growth strategy enabled us to tailor a solution for their Americas markets on PlatformDIGITAL. We also overcame lockdowns and international travel restrictions to demonstrate to a digital telecom provider as they can leverage PlatformDIGITAL to meet their current and future growth requirements in existing and targeted markets at their required pace.

[Operator:]

We will now open up the call for questions. And our first question comes from Jon Atkin of RBC. Please go ahead.

[Jonathan Atkin:]

Thank you. So the first question regards - is regarding leasing and you talked about logo capture, but I wondered of your largest kind of multi-megawatt deals, any kind of highlights by geography or type of company? And then the second question kind of gets to M&A and divestitures and new market entry and kind of any – any kind of a highlights to call out in terms of your appetite for any of those types of projects heading into 2021?

[Andrew Power:]

Hey. Thanks, Jon. I can probably kick it off on the question on the multi-megawatt side, and then I'll probably hand it over to Greg to speak to M&A. So I'm very pleased with the results overall in terms of 4Q. I think the diversity of the platform really shine through in both categories, not only the less than a megawatt in interconnection, but also on the scale or hyperscale plus. If you do a quick kind of run through the regions, EMEA, first time more than 50% of the signings, it was very diverse. There were six different markets across the EMEA that did a north of a megawatt deal each. So it was London, Paris, Marseille and two others that escaped my mind. And then over in the Americas, we had both in Ashburn and also in Hillsborough, and the cast of characters for all these are the combination of the major CSPs, SaaS providers and, call it, B2C hyperscalers as well. And then last but not least, I'm pleased with the results in both Brazil and we signed our second customer in Santiago, Chile, in the hyperscale arena, another top CSP. And then last but not least, had a project with a top three CSP down in Sydney. So really diverse contribution from numerous major metros. And I'll turn it over to Greg to pick up on the M&A piece.

[Jonathan Atkin:]

Actually just continuing on that, as you look at the pipeline into 2021, whether you, Andy or Corey would want to comment, but is there any kind of change in procurement activity or just dialogue with your customers that gives you particular confidence around repeating some of this recent momentum?

[Andrew Power:]

I’ll toss that to Corey.

[Corey Dyer:]

Hey, Jonathan, this is Corey. I appreciate it. Just broadly on the sales funnel, I'll just tell you that we're happy with the momentum and the success we had in 2020. We see that continuing. I think Andy mentioned to you the regional variances that we've had, meaning first time that EMEA is our largest region for sales and for bookings there. So that was really good and positive. So we feel good about it. And then regarding the industries, I think you might ask about those that are work that are taking advantage of the current work from home are doing more and more quickly with us. And so we're happy about that and how we're supporting them. And then also we're seeing strength from those industries that were strong prior to the pandemic, cloud, digital media, et cetera. And then those that are being kind of suffering a little bit from it, we're seeing them maintain their IT services and they still got to continue to have our support to go after their mission-critical needs. So we're happy about it. And as we mentioned earlier, year-on-year record growth from new logos, standalone, really good success from digital and Interxion as we combine the two groups. So real happy with the funnel. Hand it back to you – over to Greg, sorry. Go ahead, Greg.

[Greg Wright:]

Why don't I take it? Okay. Thanks, Corey. Hey Jon. Hope you're well. Let me – I guess in the order, let's go to M&A first, then we can talk about the divestures, which are somewhat related. Like I think with respect to M&A, as we've said before, like we remain focused on integrating Interxion, while doing a few tuck-in acquisitions as we would call them like Altus IT in Croatia and Lamda Hellix in Greece. Look, we think the M&A is likely to be more episodic than annual. I think we've already said that. And look, as we look at the M&A environment right now, we would say it's probably gotten more competitive over the past year as additional capital is coming to the space. But we also think this could serve to benefit us as we seek to dispose of assets in our capital recycling program. I think, look, with respect to our divestitures or capital recycling, our criteria for asset sales remains consistent with our prior commentary. We're seeking to sell non-core assets and select non-core markets. Today, we follow these criteria and dispose of various PBB assets and other quality standalone assets. That really just are not part of our Connected Campus strategy. We're about $1.5 billion through the multi-year guidance we gave, which was to sell a few billion of assets over a few years. The good news for us is we don't need to sell these assets. So we have the ability to be strategic and only offer these assets when it’s likely that we are going to receive a fair market value for the assets. And we do expect that these assets sales that will recycle their capital will provide some of the capital needed for our development program this year and going forward. Again, that's really the state of play. Again, tuck-in acquisitions are going to be more focused deals that are strategic, as both Croatia and Greece where there are highly connected assets in the regions. The assets, combined with the management teams, provide a strong launching pad for further activity in the region. And that's really the way we look at it and we'll continue to try to find similar deals like these two to the extent we can.

[Operator:]

The next question comes from Michael Funk of Bank of America. Please go ahead.

[Michael Funk:]

Yes. Thank you all for the questions. A few, if I could. First, I noticed the GAAP base rent per square foot step down across the regions quarter-over-quarter. Can you comment on that?

[Andrew Power:]

Hey, Michael. So I think there's a few - two items to note in there in particular. And I think you're mostly talking about the greater than megawatt because I thought we had pretty strong pricing power on a less than a megawatt category, more enterprise network workloads landing in those sites. On the greater than a megawatt piece, it's a little bit of apples and oranges in comparing each market quarter-over-quarter. You’re probably better off going back to the second quarter in terms of more of an apples-to-apples comparison volume. And then in the fourth quarter, we had a particular deal structure that make that skew that stat lower in terms of reported results. You may recall a year or two ago in the Ashburn market, we did a almost build-to-suite type project, where we built a rather large 36 megawatts Shell for a customer that was paying us for that Shell on a long-term lease. And then we dropped down and built out suites in six megawatt or still increments over time. So as those – as the takedowns of those suites happen, you're only getting a fraction of the entire economic cost for that customer flowing through our leasing stats because we already recognized the signing and already realizing the return on the Shell. And that phenomenon happened actually in North America and also in Asia Pacific, this particular market. Strategically, I mean, it's great tool in our toolkit that I would say not all competitors can really have, really given a customer the runway that they desire and the timing flexibility and digital with it scale and breadth of portfolio and as well as our land banks are able to kind of structure those types of transactions that I think is a strategic advantage for those types of customers.

[Michael Funk:]

And then Andy, on the FFO growth bridge you provided, maybe how it actually quantify the impact from the potential sales, the $600 million to $1 billion. Can you quantify that for us?

[Andrew Power:]

Yes. So we reiterated really the same quantity of capital cycle for this year as last year. We feel good near-term on the lower end of that range. It's a contributor to the, call it, 4Q to 1Q, bridging the quarterly rhythm of core FFO. Just kind of rough math. If we kind of just hit the low end of that range, $600 million, use the same type of cap rate we are using for the last outright sale. We did call it a mid to low-six cap. You call it about $40 million of NOI and our share count could be as high as 2%. Now that's assuming you sold the entirety of those assets the first day of the year, and you didn't have any redeployment of proceeds. So when you kind of use the appropriate calendarization based on our expectations and also redeploy those proceeds, either paying down debt near-term or in lieu of really equity, I would call it a ballpark in 50 to 100-ish type basis point headwind to our year-over-year growth that is.

[Operator:]

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

[Matthew Niknam:]

Hey guys. Thank you. but has not happened yet. I just want to clarify. And then secondly, more related to hyperscale in the U.S., if someone could just give an update on the pricing competitive backdrop you're seeing within hyperscale and whether deals are getting any more or less competitive than they've been in the past? Thanks.

[Andrew Power:]

Sure. So two elements. First on your base. We definitely had some outperformance in the fourth quarter that we highlighted in the prepared remarks. Some of that was, call it, operational-related just commencing revenue faster, but some of it was out of our control and FX was a tailwind. As you saw the U.S. dollar kind of plummet and then retrench into 2021. So that makes a little bit of an apples to oranges comparison between 4Q and the run rate for 2021. The answer to your question on the dispositions, other than a small one-off asset for, I think, $6 million, we have not executed on any of the next leg of capital recycling yet that we framed as a – at a low range of $600 million to high range of $1 billion, and we expect the low end of that range to be executed upon in the pretty near-term future here. Hence, when you sell that quantity of assets even at a 6, 6.5 cap rate, you have immediate loss of that income. Just to remind you Matt and then the broader audience, the dilution or near-term, we think, a) is offset by longer-term accretion. We're selling non-core slower growing parts of our portfolio and using that capital often in lieu of equity to fund our growth. And two, that dilution is baked within the approximate 4% year-over-year growth. So we're arriving at that year-over-year growth comparison off outperformance at the last and back half of this year and absorbing that dilution. So it's not incremental to the guidance that we've already laid out.

[Matthew Niknam:]

Got it. And on the hyperscale?

[Andrew Power:]

Thank you for reminding me the first question. Matt, your question was about hyperscale pricing and the like.

[Matthew Niknam:]

Yes. Pricing and competitive nature because we've heard maybe some anecdote thing, it was maybe on the margin. Things were beginning to get a little bit better. But I'm just curious to get your take in terms of what you've seen.

[Andrew Power:]

Yes. I think the – a couple of data points that I would say point to our continued confidence in the opportunity set and really differentiated offering that I think allows us to outshine our competitors, especially any fledging, we're newer competitors. One, you've seen now a string of quarters in a row where we have a global platform offering for the hyperscalers and to address their pain points, future-proof their growth and deliver operational excellence across now, 49 metros, six continents, 24 countries. So the trend has been our friend in terms of success there. I think if you look to our development pipeline that stepped up about 13% quarter-over-quarter, now 220 megawatts or so under development, still about 55-ish percent pre-leased. You've got to imagine there's a lot of hyperscale business in that. I think the returns have been pretty steady in that category, if not stepped up in certain regions. I'm not saying or blushing off that there is – some of this business is competitive. I think our most competitive market is certainly the U.S. In that market, I think our value proposition has allowed us to – even in a challenged market like Ashburn do particularly well with all of our customers, but hyperscalers in particular. And I think if you then look where the pipeline is going and where the growth for our business is going, we're seeing more and more opportunities to generate higher returns from both our colocation and interconnection offering, but also serving those hyperscalers in places where we have a really differentiated value proposition. Certainly tighter markets like Santa Clara in the U.S., but international markets like Frankfort, Marseille, Brazil and Singapore as well. So listen, not saying that hyperscale became an easy business overnight, but feel very good about what we're delivering to those customers.

[Operator:]

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

[Jordan Sadler:]

Thank you. Good afternoon. Andy could you just elaborate on the downtime on vacancy a little bit that sort of baked into the sequential nickel decline you're pointing to on Page 13. I'm not sure if that factored into the 1.3% churn you saw in the fourth quarter, or if that's sort of hitting elsewhere?

[Andrew Power:]

Yes. I would say that the fourth quarter actually – and then I'll get to the first part of your question, Jordan. The fourth quarter actually was pretty pleased with the customer retention and pricing dynamic in both categories in terms of pricing, in both categories in terms of retention and potentially called in the 80s and positive mark-to-markets for both above and less than a megawatt. The impact that we see hitting 2021, but certainly the first quarter of 2021 really goes back to what I mentioned in our call a quarter ago. We ended the year with our largest amount of non-retained capacity in any given market, just under 17 megawatts coming back to us. It literally came back to us the first of the year. The customer had both physical and economic occupancy of the suite until the year changed. It's across multiple suites, across numerous campuses in Ashburn. We're going to – we're refurbing that capacity and getting it back out to the market. Of that 17 megawatts, I can tell you, we've already released to a new customer. They haven't commenced yet, but they've signed for it, 2.3 megawatts, we're likely to take another 2.3 megawatts suite and convert that to productized colocation given the success of our offering in the market. And then we've got a pretty strong pipeline for those other opportunities of vacancy. And it is a bit serendipitous in our favor that we've had such success in Ashburn. Despite the broader market challenges is that we're being able to focus all our efforts in re-leasing that capacity because our newest building doesn't come online until roughly the July 1. So really it's that downtime until we get the new customers and new shapes and forms, certainly taking a temporal hit to 2021 in the first quarter.

[Jordan Sadler:]

And what's the biggest chunk of the 17-meg. You mentioned 2.3 is already been re-leased. They're not contiguous, but biggest contiguous chunk. And then just back to the $0.05. Is that – the bulk of that coming from this departure? And how will this hit 1Q, maybe you talk about 1Q and 2021 churn guidance overall?

[Andrew Power:]

So let me try to unpack a few there. So the biggest hall is the 2.3 megawatts, but there's numerous contiguous halls. So if we wanted to – if a customer wanted to have numerous contiguous halls, which certain customers value that. I think we can string six or so of those together. I'm sorry that can't be right. I'm looking at the wrong schedule here. We're going to – we can string, I think, three of those together of contiguous data halls, but each POD is roughly a 2.3 POD. That is the largest driver to the $0.05, in terms of quarter-over-quarter step down. And then Jordan could you just remind me the second part or the third part of your question there.

[Jordan Sadler:]

Just churn. So what do you think if churn was 1.3 in 4Q, what would it be in 1Q and then just maybe full-year expectation while we're at it?

[Andrew Power:]

So that's a greater than a megawatt capacity churn, or less than a megawatt capacity churn looks like it's going to be basically in line. And I don't have the implied first quarter churn. I think the 80s steps down on a full-year basis to call it like 69% for the full portfolio in the greater than a megawatt territory. But you can use 17 megawatts as a proxy, and you can see our quantities of expirations. I don't have all the ingredients to give you the exact math on the first quarter measurement right here.

[Operator:]

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

[Jonathan Petersen:]

Great, thanks. Just a couple from me. So the recurring CapEx and the fourth quarter looks a little elevated. I wonder if there's just anything that we should be thinking about there and how it will trend in the next year on a quarterly basis.

[Andrew Power:]

Yes. Not just for recurring CapEx, but I would say some of the OpEx as well. You're seeing some of the COVID fluctuations. If you look at the – I think it's scheduled $28 million recurring CapEx step down to – as low as $34 million in the first quarter of 2020, $38 million in the second quarter of 2020, then $53 million and $83 million. So we did have a little bit of a catch-up period in terms of call it timing. As you can see, Jon, our guidance for the current CapEx for all of 2020 is roughly the same numbers as prior year. So $220 million, I believe, or $230-ish million. So we have a little bit of fourth quarter catch-up in there. Just the only major items we had – we had some refresh capital and some second generation space and I think we’re converting to colocation, when a customer had exited. So that kind of hits – that's not first-generation so it hits through the recurring CapEx. I think that's a product of, call it, maturation of our portfolio and customer to new types of customers in different shapes and forms. But I wouldn't – you can't just analyze that as next year. You've got look to our guidance table for more appropriate view for the full-year 2021.

[Jonathan Petersen:]

Okay. All right. And then I kind of ask about market rents. I mean, do you guys have a sense maybe if we just think about your greater than one megawatt tenant. Do you have a sense of where the mark-to-market is on in place rents versus market rents? And then, I know you talked about your leasing spreads being relatively flat this year. But I mean, based off the market dynamics that you're seeing, what are your expectations for rent growth over this year and over the next few years? Are we to a point where we can start to see rents start to grow again?

[Andrew Power:]

I think, there's a couple relevant data points to look at that. Obviously the activity we are seeing coming through our renewal activity both in the fourth quarter as a trajectory throughout the year. And we had consistent progress to the point where we had positive plus one megawatt cash renewal spreads in 4Q. Some of the stronger markets were renewed and shining through there. Santa Clara was a standout in that renewal. We have not – our guidance includes a slightly negative outlook for the cash mark-to-markets, but, I know we used the language there instead of exact numbers. I think our language is less conservative than it was last year. So I think we're moving into better territory. If you look at just the lease expiration schedule in 2021, I think we're getting into a better place both in volume mix and mark-to-market relative to leasing history. You called out particularly the greater the megawatt category, which is called 7.5-ish percent of our expirations down from a high, call it over 10% at one point. It's pretty diverse with no market other than Ashburn being even greater than 1%. And the mix and geographically, you're seeing a sizeable part component from not only Santa Clara, our titers U.S. market, but also our international markets in the coming contracts. And then last but not least just looking at the new signings because more of a forward indicator of what to come, by and large in the greater than megawatt category I saw – we saw pretty good firmness in the pricing. And I would – as I say strengths in Americas were, call it New York, Chicago, excuse me, I’m looking at the wrong schedule. In the greater than a megawatt, you had pretty much stability in both Northern Virginia and Portland. Again, it goes back to that structure I mentioned previously where the customers taking down shells at pre-committed rates at their discretion. So really not room for negotiation there and a desire for them to grow with adjacency. And then EMEA, we saw strength in the greater than megawatt plus category for Zurich, and Marseille were particular standout markets. And then last but not least, Singapore, that market has been a star. And I think you're going to see that continue into 2021. And that is certainly a market where we're doing a sizeable amount of megawatt plus activity as well.

[Operator:]

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

[Michael Rollins:]

Thanks, and good afternoon. Curious, probably two things if I could. The first is if we turn to Page 25 of the supplemental, you provide the development yield by region that you're expecting. And just curious for your take on the movement over the last few quarters where it seems like North America has moved up a little bit. EMEA is down a little bit. Asia-Pac near the level on this page. And where do you see that going over the next couple of years based on the activity and the demand in the pipeline? And just separately, curious to go back to one of the comments, I think Bill made it at the beginning of the call, describing that some of the larger customers are choosing a select number of global data center partners. And curious just on that theme, are you seeing a greater percentage of your large customers embraced multiple providers? Or are you seeing more of a winner-take-all evolution where one data center provider could take the disproportionate share of business from some of these customers? Thanks.

[Andrew Power:]

I’m going to give Bill the honors to answer the second part of the question first, and then I'll come back and do the numbers questions on development cycle on Page 26.

[William Stein:]

Yes. Thanks for the question. We're definitely seeing a shrinking of the number of participants in the business. I think that clearly plays to our strengths, but I think that COVID in particular has demonstrated the importance of having a very credible counterparty on the other end of these partnerships and we’ve received excellent feedback from our partners, particularly among the hyperscalers about our procedures around not just COVID, but some of the other social unrest that has occurred in the last several quarters.

[Andrew Power:]

And then Michael on your second question, I mean, I think there's a few observations and some of this is repetitive. The development pipeline, one, you're missing it from here because it's a unconsolidated self-managed joint venture is not on the schedule. But we've seen tremendous activity in Latin America, including a continued growth in Brazil. Not only our first, but second customer in San Diego, Chile and probably expect us to experience the same in terms of our second customers landing into New Mexico City. On this schedule, the volume has stepped up about 13% to 221.5 megawatts. The pre-leasing has remained roughly intact at 55%. If you go market-by-market, I think you're accurate in seeing this trend of a larger and larger share of our new capacity capital going outside the United States. The Americas region is a little muted because we delivered capacity. That was 100% pre-leased in Ashburn and the shell which will show up with megawatts on the schedule. I think in a quarter or so, just hasn't popped in here, but I still think the thesis is constant. And you're seeing also a year-over-year improvement on the yields in the Americas. And I think another relevant data point is the non-U.S. markets are also becoming more diverse. In EMEA, as I rattle off at the very beginning of the call, rather ineloquently was across six different EMEA markets with north of a megawatt signings. You can see on the schedule from Amsterdam to Zurich, numerous markets with capacity coming online. And I think the same phenomenon is going to happen. Ours continue to happen in the APAC region as well.

[Michael Rollins:]

Thanks.

[Operator:]

The next question comes from Sami Badri of Credit Suisse. Please go ahead.

[Sami Badri:]

Hi, thank you. The first question is on interconnection. You reported the interconnection and the backlog. But can you just give us some color in terms of how that backlog is mapping the respective region? That's the first one. And then the second one is, may Bill, Andy, anyone can really address this. Has digital adopted maybe a different philosophy on speculative construction versus only building with pre-leases in hand? Has kind of the playbook changed a little bit just given the very rapid and high volume leasing that tends to come pretty big cycles that we've seen as the strategy kind of changed a little bit? And I'll leave it at that.

[Andrew Power:]

Bill, do you want to – again, we'll try to do the same format. You take the second question first on strategy and then I can go back to the interconnection details.

[William Stein:]

Sure. So I would say that the strategy today is we don't really go into any of these new markets without a pre-lease in hand, without an anchor. So that's what we've done in Chile. That's what we've done in Mexico. Now we did buy existing businesses, obviously in Croatia and Greece, so that's different. But in general, I think we're looking for one of our good customers that it may – and probably more than one to tell, so they really want us to, to go into that market, and then an anchor lease with us. As far as existing markets are concerned, those are used. Those are almost always expansions with existing customers. And that business to be quite Candace is a fast and furious. In some instances I would say the challenge is just keeping up with the demand in existing markets with particularly the hyperscalers.

[Andrew Power:]

And then Sami on your question on interconnection. So quite pleased with the interconnection signing contribution. Yes, it's stepped down quarter-over-quarter, but it was up 4% from the prior quarter and 3Q was quite outsized winter in terms of interconnection signings. The cast of characters are similar in terms of the type of verticals industry-wise that we experienced in the past. Regionally some of the start, I would say the EMEA region, it was definitely a standout in this category not just in the fourth quarter, but on the full-year basis. I believe their interconnection revenue was called up into the double-digits type growth trajectory. I also – I know you quite asked this question, I also really look at these things part and parcel with the less than a megawatt signings because they also often go hand-in-hand in terms of our most interconnection rich type customers, day one and certainly post-landing with digital. I would say we put up the third quarter or fourth quarter in a row of consecutive growth in that category of a really strong 3Q. We put a record the interconnection and less than a megawatt or colocation type signings category. Those are also led by EMEA, but APAC played a great role. We've launched now our colocation offering in Osaka and Singapore and Hong Kong and our first carrier-neutral offering in Seoul, South Korea are right around the corner. So great early days in that category as well regionally. So we're definitely expanding the breadth of the product offering across more and more markets and pleased with the success we're seeing in both the interconnection and the, call it, enterprise and network-oriented less than a megawatt category.

[Sami Badri:]

All right. Thank you, Bill and Andy. And actually just one quick follow-up and this is pertaining mainly to Europe. And since you guys have now kind of integrated Interxion and you've looked at some of the pricing in each of the respective market. Do you expect the cadence or at least the stabilization of pricing or I mean, maybe that's the wrong way to phrase it? The right way to phrase it is marking it up slightly, right, to reflect pricing that looks more comparable to U.S. market. You guys see – the rate at which you guys are increasing, is that starting to moderate or is pricing relatively flat and consistent and not really changing or evolving much in Europe? I just want to understand kind of like what's going on from a local type of pricing perspective. And I think I'm mainly referring to the zero to one megawatt type leases specifically.

[Andrew Power:]

Thanks, Sami. That was a very elegant way of asking, if you're going to increase cross-sell prices in Europe, I think. But I'm going to pass this over to Chris in a second. But I think we're very focused on delivering as much value to our customers in terms of increased performance, increased security, increased efficiency, and do that in a global platform offering here in PlatformDIGITAL. So it's not a episodic one market, has to match another market. We're very attuned to the customer needs and also supply demand nature in each market. But maybe Chris, do you want to talk to – touch a little bit about our product roadmap and how pricing relates to that?

[Christopher Sharp:]

Absolutely. I appreciate it, Sami. Definitely we look at driving value to our customers through our global interconnected platform, which Bill stated in his prepared remarks, but double our Cross Connect count in 2020 is pretty impressive. And particularly to EMEA, we’re constantly watching exactly how our communities of interest have really grown there with network dense highly connected assets as a part of PlatformDIGITAL, but we absolutely align our Cross Connect pricing based on the market dynamics within EMEA. And we'll continually evolve our platform to ensure that pricing is aligned with the value that we see these communities of interest continually getting out of the platform. But one of the things that we're very happy about is we continually see the attach rate within each of these markets continually increasing and it's core to our platform going forward, that we removed complexity from the customers so they can get access to that value in a more simplistic fashion. So you'll see that play out over the coming year and exactly how we achieved that. But it's something that we're constantly watching and making sure that the customers are getting the true value that they need in a very simplistic fashion.

[Operator:]

That concludes the question-and-answer portion of today's call. I'd like to turn the call back over to CEO, Bill Stein for his closing remarks. Bill, please go ahead.

[William Stein:]

Thank you, Andrea. I'd like to wrap up our call today by recapping our highlights for the fourth quarter as outlined here on the last page of our presentation. First, we've further strengthened our connections with our customers, meeting more of their needs beyond the U.S. and reaching a much broader set of enterprise customers with our enhanced colocation and interconnection product offerings. We delivered extremely solid current period financial results, delivering full-year FFO per share that was nearly 4% above our initial guidance. We extended our global platform, providing customers with a gateway into Southeastern Europe and runway for growth around the world with strategic land purchases and new development starts. And last but not least, we further strengthened our balance sheet, extending our average duration while further ratcheting down our average cost of debt by locking in attractive pricing on long-term capital and retiring high-coupon debt and preferred equity. I'd like to conclude today's call by saying thank you to the entire Digital Realty family, but particularly our frontline team members in critical data center facility rules who have kept the digital world turning in the midst of this global pandemic. I hope all of you stay safe and healthy, and we hope to see many of you in person again later this year. Thank you.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.