Good afternoon, and welcome to the Digital Realty Second Quarter 2019 Earnings Conference Call. All participants will be in listen only mode. Please note today's event is being recorded. I would now like to turn the conference over to John Stewart, Senior Vice President of Investor Relations. Please go ahead.
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 are also on the call and will be available for Q and A. Management may make forward looking statements, including guidance and the 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 ks 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 our CEO, Bill Stein, I'd like to hit the tops of the waves on our 2nd quarter results. 1st and foremost, consistent execution against our customer success initiatives drove all time high new logos, our 2nd highest interconnection and renewal leasing and our 3rd highest total bookings. 2nd, we leveraged our global platform to prudently allocate capital where we were able to achieve the most attractive risk adjusted returns around the world creating significant value for shareholders.
3rd, we extended our sustainability leadership with the publication of our inaugural ESG report and official recognition as an Energy Star partner. Last but not least, we capitalized on favorable market conditions to execute an opportunistic $900,000,000 liability management trade, clearing our runway out to 2022 and extending our weighted average duration by nearly half a year while ratcheting our weighted average coupon down by 10 basis points. And now, I'd like to turn the call over to Bill.
Thank you, John. Good afternoon, and thank you all for joining us. The durability of Digital Realty's global platform was on full display in the Q2 of 2019, and our team was incredibly productive over the past 90 days. We delivered the 3rd highest bookings in the company's history, demonstrating the strength of our globally diversified portfolio. We also signed the 2nd highest volume of interconnection bookings as well as renewal leasing and we expanded our co location offering into the Asia Pacific region with a multi market new transaction and customer expansion.
We also landed an all time high number of new logos this quarter, an encouraging indication our efforts to penetrate enterprise demand are bearing fruit and a promising sign for future interconnection revenue growth prospects. Along those lines, I'm pleased to announce that we will be hosting Marketplace Live at Spring Studios in New York on November 7, a day long event connecting the community that builds the cloud, network and Internet infrastructure. The event attracts a broad swath across tech ecosystem and we are expecting over 600 attendees from network engineers at startups to solution architects at cloud service providers to CIOs at Fortune 500 Companies. We further extended our global platform during the 2nd quarter and we took steps to secure our supply chain with several strategic land acquisitions shown here on Page 3 of our presentation. We closed on 3 smaller strategic land parcels in Northern Virginia to further physically connect our market leading campus footprint.
We also reentered Paris with new capacity based on significant verified customer demand. And earlier this afternoon, we announced that we are under contract to acquire parcel in Frankfurt, building upon the success of our sales in the 2nd quarter as well as the recent investment in our coverage of Western Europe. We closed on a land parcel in Tokyo through our MC Digital Realty Japan partnership. Finally, we also announced early this afternoon we are entering South Korea with plans to develop a carrier neutral facility in the Sangam Digital Media City in Northwest Seoul. We announced the grand openings of an expansion in Dublin in May, the second phase of our Osaka Connected Campus in June and most recently we announced that our Latin America platform Ascenty opened 4 fully leased facilities in Sao Paulo during the Q2.
We continue to build upon our industry leading commitment to sustainability with the publication of our inaugural ESG report and we were officially named an Energy Star partner. We continue to invest in our human capital with several key hires. We achieved the Amazon Web Services service delivery designation for AWS Direct Connect. And last but not least, we further strengthened our balance sheet, locking in our lowest ever 10 year U. S.
Dollar bond coupon and opportunistically terming out our 2020 2021 maturities. Let's turn to market fundamentals on Page 4. Following the record absorption in 2018, the primary data center metros in North America have been relatively quiet in 2019, especially given the tough year over year comparison in Northern Virginia, which is not only the largest data center market in the world, but it's also the most competitive with the broadest selection of existing competitors and the deepest pool of new entrants trying to stake a claim. Loudoun County is ground 0 and Ashburn is the most desirable submarket. Even for prime locations, however, the supply demand pendulum has swung away from providers in favor of customers with various new entrants bringing speculative supply online, while the most voracious consumers remain in digestion mode.
We believe we have a set of significant competitive advantages in Northern Virginia, given the scale of our footprint, the head start from selling to an installed customer base with a strong desire to grow adjacent to their existing deployments and the longest runway to support their growth. Ultimately, we believe it's a question of when, not if hyperscale procurement cycles enter their next phase of growth and the pendulum can swing back the other direction quickly. In the meantime, we do expect the current supply demand dynamic will lead to dislocation in the market, which we believe will create investment opportunities for disciplined, well capitalized competitors. The New York metro area in contrast has seen a recent resurgence in demand and the market has gradually tightened as excess inventory has been slowly absorbed, while new deliveries have been sparse. In Dallas, there are a number of competitors with available supply, but we continue to enjoy good success in Dallas, particularly on our Richardson campus where existing customers consistently expand with us despite the availability of competitive supply elsewhere in the metroplex.
Recent developments in Chicago have been particularly encouraging. State of Illinois recently passed legislation creating data center tax incentives that push Chicago back on par with other jurisdictions that have actively encouraged data center investment. Although we have not signed any major new leases in Chicago since Governor Pritzker signed the bill on June 28, we have seen an immediate uptick in customer interest. We are optimistic this bill will spur a rebound in demand. We commend Governor Pritzker and the Illinois State Legislature for their leadership in adopting this legislation as well as the Digital Realty Central region portfolio management team, which worked extensively behind the scenes along with the business and labor communities to advance this bipartisan legislation.
Supply remains scarce in Santa Clara, which is arguably the tightest market in the U. S. And generally commands a pricing premium relative to most other domestic metros. During the Q2, we saw strong demand from cloud and from enterprise in Santa Clara. Back across the pond, recent market leadership in Europe has shifted from London to Frankfurt, which has been the standout metro in 2019.
Following our success with an enterprise customer on our Frankfurt campus last quarter, we signed a major cloud service provider brand new to our Sausenheim campus with a large and growing deployment. Although requirements in Europe remain smaller than the U. S, partly due to data sovereignty considerations, they are getting bigger. The leading global cloud providers remain the primary consumers and these cloud providers continue to exhibit a clear preference for expanding adjacent to their initial deployments. So landing the initial deployment is key.
Our global connected campus strategy is uniquely positioned to capitalize on this consumption pattern. You may have seen that Amsterdam recently placed a 12 month moratorium on data center construction. This is a developing situation and the potential impact on future projects is not entirely clear. However, from our perspective, various entry just got higher and Amsterdam incumbents such as ourselves have a competitive advantage. We believe we are very well positioned given the network density of our interconnection hub at Amsterdam Science Park.
In place permits on project currently under construction at our De President campus and visibility to incremental capacity adjacent to, but not subject to either of the municipalities that have imposed the moratorium. Across the Asia Pacific region, demand remains robust in our key markets, driven primarily by global cloud service provider requirements. We have seen notable strength in Osaka, where we landed a major Japanese integrated communication service provider as a new logo, further validating our connected campus strategy for the Kansai region. Similarly promising pipeline supports our ongoing campus development projects in Tokyo, Singapore and Sydney. On the supply side, market inventory remains mostly in check and we remain bullish on our prospects in the region given our first mover advantage into Osaka, barriers to entry in Tokyo, government involvement in Singapore and rapidly growing cloud adoption in Sydney.
While the IT infrastructure landscape across the Asia Pacific region continues to mature, we see a significant runway for growth for years to come. Finally, we continue to see a strong pipeline of demand for our platform in Latin America, specifically focused across Brazil and now Chile from leading global cloud providers along with new potential customers. We are quite pleased with the performance to date and believe we are poised to continue to capture an outsized share of demand in this region characterized by significant upside from growing Internet adoption, along with limited availability of institutional quality data center capacity. On balance, we believe customers view our global platform and comprehensive space, power and interconnection offerings as key differentiators in the selection of their data center provider. Let's turn to capital allocation on Page 5.
The data center sector is maturing as an asset class and we have seen an uptick in fresh capital targeting the sector. This has had the natural effect of compressing returns, particularly in the U. S. This trend is somewhat of a double edged sword. On the one hand, it has very positive implications for the value of our existing portfolio.
On the other hand, it also makes it harder for us to achieve external growth through acquisitions. We believe our global platform represents a competitive advantage in terms of capital allocation as well as access to capital. We have a unique ability to allocate capital where we see the most attractive risk adjusted returns around the world, while also tapping the broadest, lowest cost pools of capital in the countries where we operate. In addition, we are adapting to the growing demand within the data center investment sales market by seeking to harvest capital for mature assets in the U. S.
And redeploy the proceeds into higher growth opportunities elsewhere. We believe we have a unique ability to allocate capital where we see the most favorable risk adjusted returns on a global basis, and we believe our current investment activity is creating meaningful value for shareholders. Let's turn to the macro environment on Page 6. The global economic expansion keeps plodding along. In the U.
S, the recovery is now in its 11th year and earlier this month became the longest expansion on record. Nonetheless, both fiscal and monetary policy remain supportive and the U. S. Remains a relative bright spot in terms of global economic growth. As you've heard me say many times before, data center demand is not directly correlated to job growth.
We are fortunate to be operating in a business levered to secular demand drivers, both growing faster than global GDP growth and somewhat insulated from economic volatility. To put a finer point on the secular demand drivers underpinning our business, I'd like to draw your attention to Page 7. As you can see, McKinsey estimates that digital transformation will add $13,000,000,000,000 to global GDP by 2,030, driving demand for distributed digital infrastructures that we are uniquely positioned to address, thanks to our fit for purpose global footprint and interconnected scale. During the Q2, we saw early indicators of digital transformation demand on our platform. We captured a record number of new logos led by our enterprise vertical as these customers begin to deploy and connect components of their digital infrastructure globally.
Given the resiliency of the demand drivers underpinning our business and the relevance of our portfolio to meeting these needs, we believe 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 begin with our leasing activity here on Page 9. We signed total bookings of $62,000,000 including $6,000,000 from our Latin America platform Ascenty and our pro rata share and a $9,000,000 contribution from interconnection. We signed new leases for space and power totaling $53,000,000 with a weighted average lease term of a little over 5 years, including an $8,000,000 co location contribution. As Bill mentioned, this was our 3rd best total bookings quarter and our 2nd best interconnection quarter.
I'd also like to clarify that Ascenty's 2nd quarter bookings are in addition to the leases signed in the Q1 with a leading global cloud provider to anchor our entry into Chile. We also expanded our digital realty colocation offering into the Asia Pacific region with a multi market new transaction and customer expansion, as you can see from the leasing activity table in our press release. Although this was a relatively small transaction, hopefully it is a harbinger of bigger things to come as we move towards officially launching our first fully productized colocation offering in the region later this year. In general, we are winning a greater share overall as well as larger and multi market and multi geo colocation deals, reflecting our growing traction within the enterprise segment and these customers' global hybrid cloud used cases. Some of these wins are landing in non productized colocation data centers even though these customers are consuming remote hand services and interconnection solutions commonly associated within colocation facilities.
As product lines continue to blur, we are contemplating changes to our disclosure to provide insight consistent with the way we run the business. We will keep you apprised as we contemplate future changes to our disclosure with an eye towards maintaining transparent, shareholder friendly communication while balancing continuity against the evolution of our business. During the Q2, we delivered solid leasing volume up 24% sequentially with balanced performance across sectors, products and geographies. We are also seeing an acceleration of our channel business with healthy double digit growth relative to the first half of twenty eighteen. We added an all time high 57 new logos during the Q2 led by strength in our enterprise segment, which accounted for 40 new logos.
This was also a record quarter for new logos sourced through our channel partners who contributed more new logos in the first half of this year than they contributed all of last year. We are gaining traction within the enterprise segment of customers deploying hybrid multi cloud connected deployments globally through direct and partnership business combining the best of our ecosystems. 2nd quarter highlights include HCL, an alliance partner is one of the largest next generation technology companies that help enterprises reimagine their businesses. HCL selected Digital Realty to host their Oracle Demantra infrastructure and SAP Cloud Environments. This deployment is on behalf of a top 10 U.
S.-based food and beverage company with over $10,000,000,000 in revenue and a global distribution network. Digital Realty's global platform paired with HCL's expertise and product management, market analytics and sales force management solutions enables HCL's customer to be highly responsive to the evolving taste of consumers worldwide. We continue to benefit from our strategic partnerships including IBM, A major global automobile manufacturer is relocating their corporate headquarters to be closer to their strategic alliance partners. As part of the relocation, the auto manufacturer is leveraging IBM Direct Link Dedicated Hosting to enable their VMware environment to harness the power and flexibility of the IBM Cloud. This hybrid cloud deployment enables fast direct connectivity of its legacy finance application built on an IBM mainframe to the virtualized environment hosted on the IBM Cloud through a Digital Realty fiber cross connect.
The strategic partnership between Digital Realty and IBM enabled a seamless migration plan for the customer and secured the win for both companies. A large global multi conglomerate manufacturing and services company chose Digital Realty to deploy its edge networking node in our London data center. This company is working with our partner IBM to right size their data center footprint and manage their accelerating cloud sprawl and ballooning costs. The client chose Digital Realty as a key component of this complete digital refresh to utilize the speed, security and reliability of IBM Direct Link dedicated capabilities in our London location. By connecting to the multi zone regional hub IBM has deployed in our data center, our client can move vast amounts of data quickly and securely between co located and cloud based resources allowing them to deliver any application globally where and when it
is needed. We
continue to see traction with our global interconnection platform. Mavenir, the only end to end cloud native network software provider for cloud service providers is redefining network economics through automation products and solutions. By leveraging Digital Realty Service Exchange, Mavenir is able to offer diverse passing with multiple ways to connect data center environments and ensure 99.999 percent uptime across their strategic global locations, positioning them for continued expansion of their global service delivery. Let's turn to the composition of our customer base on Page 12. Don't forget the cloud lives in a data center.
In fact, it probably lives in a digital realty data center as you can see from the global accounts that make up over 1 third of our customer base. The network segment makes up over 25% of our customer base and these pipes that connect customers to the cloud aren't going anywhere regardless which workloads eventually migrate to the cloud. Resellers account for 15% of our total revenue. We think our reseller concentration is a little bit unique not least because we have over 9 years of remaining lease term with these customers and these customers are typically deployed in multiple markets around the world with us as their global partner of choice. Last but not least, enterprise represents a little less than 25% of our total pie.
Here again, we think our concentration is a little bit unique. The financial services sector has long been our largest enterprise vertical. These customers are highly regulated, typically risk averse and symbiotic repeat buyers as evidenced by the new business we did during the Q2. 3 of our top 10 deals were with existing financial services customers. We also see the growth in FinTech being relevant to our platform as they evolve their architectures to achieve efficient data analytics out of their hybrid multi cloud architectures.
All of which is to say, it's a hybrid multi cloud world and we believe our fit for purpose portfolio is uniquely well suited to solve for the full supply chain. Turning to our backlog on Page 13. The current backlog of leases signed but not yet commenced stepped down from $144,000,000 as of March 31st to $127,000,000 at the end of the second quarter, primarily due to the deconsolidation of Ascenty. I'd like to point out that we've shown here the backlog for our consolidated portfolio, which ties to the top line of our P and L and we have also reflected our pro rata share of the backlog from unconsolidated joint ventures, which runs through the equity and unconsolidated JV line item at the top of the bars on this chart. During the Q2, the lag between signings and commencements was slightly above our long term historical average at 8 months.
Moving on to renewal leasing activity on Page 14, we signed $125,000,000 of renewals during the quarter in addition to new leases signed. This was the 2nd highest quarterly renewal leasing volume in our history following the all time high of $138,000,000 in 4Q 'eighteen. Incidentally, the $116,000,000 in 1Q 'nineteen is now the 3rd highest, so our top 3 renewal quarters have all come within the last 9 months. As you may recall, 2019 was our historical high watermark in terms of lease expirations. Halfway through the year, we have reduced our expirations down from 23% of total revenue as of 3Q 'eighteen to less than 10% remaining as of June 30, while also extending out contracts expiring beyond 2019.
The weighted average lease term on renewals signed during the Q2 was nearly 5 years, while cash rents on renewals rolled down 5.8%. We have delivered positive cash and GAAP re leasing spreads in each of the past 4 years. And although rents have been rolling down in 2019, our renewal leasing activity has been in line with our expectations both in terms of volume as well as rate. As I previously mentioned, we believe we have a distinct advantage when we are competing for new business with a customer we are already supporting elsewhere within our global portfolio. And whenever we can, we try to provide a comprehensive financial package across multiple locations and offerings, including both new business as well as renewals.
In terms of 2nd quarter operating performance, overall portfolio occupancy slipped 80 basis points to 87.8% due to the customer bankruptcy we mentioned last quarter as well as development deliveries placed in service in Frankfurt and Osaka, 2 of our tightest global metros. Same capital cash NOI was down 5%. This includes a 90 basis point FX headwind and you may also recall that we flagged last quarter that we faced a particularly tough comparison in the Q2 due to a sizable property tax refund we collected in the Q2 of last year. We faced somewhat of a double whammy on the property tax line as we were hit with dramatically higher assessments in the central region this quarter in addition to the refund in the year ago quarter. We intend to vigorously contest these unreasonable assessments and we have an excellent track record of prevailing on appeal as evidenced by the sizable refund collected in the Q2 of last year.
In the meantime, however, we are required to accrue based on the higher assessed values, which unfortunately produces some volatility in the property tax line item. The U. S. Dollar remains elevated relative to prior year exchange rates and FX represented roughly 100 basis point headwind to the year over year growth in our reported results from the top to the bottom line as shown on Page 15. Turning to our economic risk mitigation strategies on Page 16.
We manage currency risk by issuing locally denominated debt to act as a natural hedge. So only our net assets within a given region are exposed to currency risk from an economic perspective. In addition to managing 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 a long term fixed rate debt, a 100 basis point move in LIBOR would have less than a 50 basis point impact to 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, core FFO per share was down 1.6% year over year or essentially flat on a constant currency basis, primarily due to a tough comp from the sizable property tax refund in the Q2 of last year. As you can see from the bridge chart on Page 17, we do expect the quarterly run rate to dip back down in the second half of the year, primarily due to stiffer foreign currency headwinds as the dollar has continued to strengthen over the course of the year along with a higher share count from settling the forward equity offering. As you may have seen from the press release, we are reiterating 2019 core FFO per share guidance, although there are few puts and takes in the drivers this quarter. As you may recall, we raised the range for net income by $0.25 last quarter to reflect the non core activity running through the P and L, most notably the unrealized gain on the contribution of Ascenty to the joint venture with Brookfield. We are bringing the net income range back down by $0.15 this quarter to reflect the loss on early retirement of debt from the opportunistic refinancing of our 2020 2021 bond maturities at a 60 basis point savings as well as a non cash Topic D42 charge from the redemption of our Series H preferred stock, which we replaced with our new Series K preferred at a 150 basis point tighter coupon.
Both of these financing charges are added back to core FFO. Moving up the guidance table from the net income line, under the balance sheet section, we've updated our assumptions to reflect the actual outcomes on the refinancing I just mentioned. We have also raised our recurring CapEx guidance by $15,000,000 The higher recurring CapEx guide is not due to higher capital spending on the physical plant, but is entirely due to capitalized leasing commissions on several strategic renewal transactions and is directly associated with locking in long term contractual cash flow streams. Last but not least, our expectation for cash releasing spreads has improved from down high single digits to down mid single digits due to the evolving commercial terms on the mix of renewal transactions we currently expect to execute this year. We are keenly aware of the highly competitive dynamic, particularly in select U.
S. Markets, but nonetheless the cash rent roll down on our 2019 vintage expirations does not appear to be as pronounced as previously believed. In addition, although we are pleased with the trajectory of our quarter over quarter improvement in bookings, including a 24% increase this past quarter, most of this activity has been concentrated in facilities still under construction. Given the 8 month lag between signings and commencements, bookings won't really move the top line needle in calendar year 2019, although the composition of our recent activity does position our sales team with incremental move in ready opportunities to be offering customers in the back half of this year. Last but certainly not least, let's turn to the balance sheet on Page 18.
Net debt to EBITDA stood at 6.1x as of the end of the second quarter, while fixed charge coverage remained healthy at 4.2 times. Pro form a for our settlement of the forward equity offering, net debt to EBITDA remains in line with our targeted range at 5.5x, while fixed charge coverage is just under 4.5x. In addition to proceeds from the forward equity offering, we expect to begin to realize the latent cash flow capacity from signed leases including the 24 megawatts Ascenty just delivered, which are coming online in the Q3, but which are not contributing to our last quarter annualized credit stats. Over time, we also expect to use proceeds from our capital recycling program to maintain our target leverage profile. In terms of Q2 capital markets activities, as previously mentioned, in early April, we completed the redemption of all $365,000,000 of our 7.3eight Series H preferred stock, which we replaced with $210,000,000 of permanent capital under our Series K perpetual preferred at 5.85%, a savings of over 150 basis points.
In June, we capitalized on favorable market conditions to raise 900,000,000 dollars of 10 year U. S. Dollar bonds at 3.6%, the lowest coupon we have ever achieved on a dollar denominated 10 year paper. This was an opportunistic liability management exercise and we used the proceeds to tender for our 3.4% notes due 2020 and our 5.25 percent senior notes due 2021. A little over 80% of the outstanding bonds were tendered during the 2nd quarter and we settled the redemption of the remaining 20% in mid July.
This successful execution against our financing strategy is a reflection of our best in class 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 the debt maturity schedule on Page 19, the recent financings have extended our weighted average debt maturity by nearly half a year to 6.4 years and lowered our weighted average coupon by 10 basis points to 3.3%. A little over half of our debt is non U. S. Dollar denominated, acting as a natural FX hedge for our investments outside the U.
S. Over 85% of our debt is fixed rate to guard against a rising rate environment and 99% of our debt is unsecured, providing the greatest flexibility for capital recycling. Finally, as you can see from the left side of our Page 19, we have a clear runway with virtually no near term debt maturities and no bar too tall in the out years. 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. Andrew, would you please begin the Q and A session?
We will now begin the question and answer session. And our first question comes from Jon Atkin of RBC. Please go ahead.
Thanks. I have a couple of operational questions, I guess, first by region. In the major U. S. Markets, I'm wondering where you see the leasing or demand pipeline, the strongest or quarter to date bookings geographically where that has been strongest.
I think Bill mentioned a couple of examples in the script. And then on Asia and specifically Korea, I wondered how you kind of view the puts and takes of deploying capital in that market given the large role that the cable play in accommodating the hyperscale demand so far in that market and what is arguably lower colocation price seen than in rest of Asia? And then finally on Europe, I just wondered the new land parcel in Hatchersheim and expectations around how quickly one could potentially develop capacity there? Finally, just one thing I don't think you mentioned that in your script, but any kind of updated views on the demand dynamics in the London market? Thanks.
Thanks, John. I'll try to weave the questions into a couple of coherent answers and I think we're going to probably ping pong around the team here. So first off, U. S. Markets, we I would say this the second quarter was accentuated with some pockets of strength in some more unusual places as well as some places where we've been pretty consistent kind of working from east to west.
The Northern New Jersey, New York Metro market that is continued to tighten and we saw a few wins in the financial services and other related verticals in that market during the quarter, hop down to Dallas, our Richardson campus, we continue to expand with both existing and new customers landing on that campus and quite pleased with the progress on that market. And then over to the West Coast, Santa Clara, obviously, a very, very tight market. We had both enterprise related and also top cloud service provider wins during 2Q. Looking a little bit into crystal ball and more into back half of the year, I would say the Toronto market where we had some great wins earlier in the year continues to be very tight. I think we are very well positioned with our campus location in that market, a brand new asset and we've had a few customers landing and also looking to expand in that location.
We are looking at the incremental opportunities in that New York metro area and also 2 markets obviously a little bit more challenging both Northern Virginia and Chicago, Bill related some of the good news on Chicago. So, we're hoping for some green shoots there. And in Northern Virginia, we're also working on some capacity, some existing customers looking to expand with adjacency as well as some new customers looking to land on our market leading campus. I think you touched on London and Europe, maybe I'll hit that and then hand off Korea to Bill or maybe Greg can chime in on Frankfurt portion. So maybe on the front end, the Frankfurt market, as we mentioned, has been one of our hottest markets.
We initially entered that market just a few years ago. I think our first anchor customer was a top 3 CSP. We subsequently grew with an enterprise customer. And if you can see the absorption on our leasing table and developments, that was certainly our star for the quarter and we're rapidly running out of capacity in that market. Maybe, Greg, you want to talk about some of the activity in our other release there in terms of expanding?
Yes. Look, I think, well, first of all, I think one of the questions was in terms of Frankfurt.
Sorry, I didn't have my mic on.
I think one of the first questions was in terms of Frankfurt in terms of potential timing. Look, the contract is subject to conditions including power zoning and planning and that will probably take roughly 24 to 30 months. But again, in terms of the layout of the site and the potential for the site, as we said, it's only 3 miles from the Frankfurt airport. We're very excited about that. And lastly, over in Europe, London, we're pretty excited about opening up our Cloud House in Docklands campus strategy, a highly interconnected series of buildings in the Docklands of London and we have been working on some strategic colocation oriented wins in that market.
We also have had some increase on our Crawley campus and some other pockets within the London portfolio. So, seeing some good opportunities in
that market as well. Bill, maybe you want to kick back to John's questions on Korea? Yes, John, I think Korea could be we think Korea is going to be pretty similar to Japan in terms of how it plays out. We're not we haven't decided yet whether we're going to pursue that on our own or with a partner. But clearly, we went into Osaka several years ago, created a connected campus, and that's worked out extremely well for us.
And likewise, we've been building up in Tokyo. So, Seoul is really the next leg of that strategy.
Thank you.
Our next question comes from Michael Funk of Bank of America Merrill Lynch. Please go ahead.
Hey, good evening. Thank you for taking the questions. I guess the first was kind of follow-up. Bill, earlier this year, I think you made some comments that looking into the second half of the trajectory for bookings or the funnel looked relatively strong. And I think there has been some mixed commentary out there across the industry.
So maybe just an update on your earlier comments from this year about the second half of twenty 19?
Sure, Michael. Well, I mean, I think that our performance hopefully in the second quarter is consistent with what we said in March when we said we weren't going to write off the balance of the year. And I think clearly that's not the case. I think if you look at the 2nd quarter versus 1st, there's clear positive momentum and acceleration. It's our 3rd highest bookings quarter, as Andy said, with a record number of new logos standing at 57.
And frankly, we expect continued improvement during the balance of the year. It's great to be able to leverage our global footprint and that's how that's working out. So we expect that international is going to play a major role in the back half of the year. But we still would see a fair share of bookings coming out of North America. To sum up, we remain highly confident in the long term demand drivers for our business, those being big data, mobile and Internet of Things.
And we really like our position given the strength of our global diversified platform.
And then just a related question as well, thinking about the new market entry and the expansion that you announced today, maybe just kind of walk through, I guess, the intelligence, the thought process and even the mind of the customer relationships and what you know about their expansion and how that maybe directs some of that new market entry and the I guess the visibility that gives you into entering the new markets like South Korea and expanding in Frankfurt?
Well, this new market entry and the expansion into expansion in Frankfurt, the reentry into Paris, it's all based on conversations that we have with our customers. So it's we're not going into these markets on a purely speculative basis. It's more than one customer, too.
Our next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.
Thank you. So just wanted to you touched on Northern Virginia a little bit in your prepared remarks as being oversupplied and you also alluded to that potentially creating some opportunities. I'd be curious about those opportunities if you could sort of talk about anything that you're seeing there. And then separately, Andy, in contrast, as you were talking about some of the market strengths in the back half, you mentioned Northern Virginia, which kind of surprised me a little bit as it sounds like that's got the potential to pick up a little bit. Are you a good line of sight there in the second half?
Or is that just you see customers kicking around some requirements and you expect them to land somewhere and potentially with you guys?
Thanks, Jordan. So, in regards to my commentary, I was speaking to our dialogues with our customers and so not on a speculatively basis really what we're seeing in terms of opportunities. Listen, Northern Virginia Ashford is obviously the largest market in the world. It's been the most robust and diverse. At the same time, it's become one of our most competitive markets and we're certainly seeing some pricing pressure on new opportunities, while at the same time some of our larger customers have been in digestion mode for the first half of this year.
We think that this market is going to work through this current supply demand challenge and we're optimistic on the market. We think these hyperscalers are going to resume their growth. And we are seeing some green shoots around some of these private outfits, not just in that market, but broadly speaking, some of the private outfits who have entered the market in the last 12 months to 18 months, who have either not moved forward with speculative capacity or we've even seen signs where some are selling land that they previously bought to build data center capacity. In the meantime, we're just being picking our spots. So, we're trying to find places where we compete beyond price, where our unique global platform can add substantial value.
That is customers who need a global partner in the full product suite. It's our installed and growing customer base on our Northern Virginia campuses that wants to grow with adjacency. And then lastly, it's customers to place value on the longest runway for growth for their deployments in that market, which they find in our campuses.
So, on the opportunity side, it sounds like there may be some land parcels, for example, that maybe you guys might be able to pick up. And then separately on the leasing front, it sounds like you've got capacity coming online and you know that you have tenants who've been waiting for some of that capacity to deliver, which could line up well for you guys in
the second half. Is
that fair?
Well, I would just put some finer details on it. I don't think we're I think we feel pretty good about our supply chain in Ashford and other markets and it's these much more tighter markets be it Paris or Frankfurt, South Korea, new market entry where we're focused on the land. So, I don't see it other than the small parcels that really physically connected the campuses and added incremental ingress, egress to an existing campus parcel we owned, I don't see us picking up those land parcels. I do see as a good sign as potential competitor the tide of potential competitors subsiding a little bit here, which helps the overall backdrop. But going back to the demand that I was referencing, it hits all those highlights I was talking about.
It was international customers looking for global partners across the full product spectrum. It's a customer that landed in a certain building already on our campus and wants to grow a megawatt or 2 megawatts right next door. It's the larger customers who we've already built an entire shelf for and they're building out their capacity in call it 3, 6 megawatt chunks and have kind of anchored all their infrastructure on our campus. And lastly, it's specific customers that say, this is not going to be my first time to lay my workload, I need to find a partner that's going to give me a really long runway for growth and they find that with Digital Realty. So, all those are kind of examples I can think of mine of either opportunities we landed in recent quarters or opportunities we're working on right now in a still fairly competitive Ashburn market.
Our next question comes from Erik Rasmussen of Stifel. Please go ahead.
Yes, thanks. I'm just going circle back with Nova once again. You talked about the supply demand imbalance and then more supply coming online and then still sort of the market in digestion mode. But just trying to balance that and understand your thoughts on maybe in the confident level of you've seen some pickup, obviously, you're going to have some supply your own supplier capacity coming online. But what does that then do in terms of pricing?
I mean, are we really looking at a challenge to get to that low end of your pricing range in that market and development yield?
That's a market where there are certain private smaller location operators that are solely competing on price that will likely ink deals just to fill capacity and my guess is, it will be a short lived run in our business quite honestly given the competition. We're picking our spots. We're trying to find customers that really value our product offering and not just go into the lowest common denominator on price and we've been winning on that on those merits for some time. So obviously, that's a market where the pricing has been under pressure given the relative supply demand backdrop. What I would Eric, what my comment really goes to is, I don't think demand is as barren as some might suspect and that's based on conversations we're having live with our customers.
And we're going to pick our spots and be competitive and work through a potential temporary dislocation in this market. And in fact, when you look at this in the broader Digital Realty platform backdrop, I think it's just a small piece of our puzzle. As you saw from a quarter where we sequentially increased the signings 24 plus percent, put up a bronze medal or number 3 in our records and Ashburn really didn't play a demonstrative amount to those signings at all. So, I think we're going to work through this and come out the other side of this just fine.
No, that's helpful. Thanks. And maybe just on the same cash NOI forecast, you reduced that to the mid single digits versus high single digits. How should we think about this and beyond this year? And then will the headwinds from the legacy DFT business be completed this year?
Sure. So, the what I would say on that front, so we are got a couple of things going against us in terms of the same store pool. You obviously had the FX, which we highlighted in the script. We also had the customer bankruptcy that we reserved for last quarter and it's going to flow through this quarter. But also we also had a tough comp in terms of real estate property taxes quarter a year ago, had some benefits.
This quarter, we started accruing for 1 of our central regions. If you net that out, it's not quite as bad on a kind of same store basis. I think negative 5% is like closer to negative 2.5% when you kind of do the normalizations on both periods. And the negative is really due to we're in our largest exploration year and despite quite strong retention, we've had some downtime on releasing capacity. As we also highlighted in our script, quite pleased with the trajectory of the new signings, the 57 new logos, great interconnection signings, multi market, multi geo, co location APAC, but there was one point, if the sign commences close to 8 months.
So, the in year 2019 contribution that might flow through that same store pool is not as great as we'd like it to be. And the flip side of that, that leaves inventory for our sales reps to be selling move in ready space in some hot markets. And you could see in our sub, we have capacity now sitting available in a market like Amsterdam, which is obviously tightening on the backdrop of some of the municipality moratoriums, Osaka, which has been a hot harbor market and even 3 megs sitting in Frankfurt, where quite honestly, there will probably be a food fight over that last capacity on that campus. And then lastly, I would just say, while the same store pool is very valid and very instrumental in working our financials, Our dialogues with our customers is a total commercial package. So we're often tying in multiple product lines, new signings and renewals and a complex commercial solutions for our customers.
So, some often like a little bit in this quarter and certainly in the prior quarter, we may give our customers some relief on existing contract, but we're winning incremental share of their business at good returns and it's a win win for the customer benefiting from Platform Digital and a commercial win for the company.
Our next question comes from Michael Rollins of Citi. Please go ahead.
Hi, thanks for taking the questions. I think first, if you could talk a little bit about just broadly the cloud impact that you're seeing on your business in terms of just the direction of bookings as well as what you're seeing on churn and the pace of migrations to the cloud from your customers? And then secondly, if you could talk a little bit about what happened in terms of I think it was the renewal rate in the PBB business and just maybe what caused the dip there? Thanks.
Michael, I'll take your first question, Andy will take your second. Relative to the cloud, it's been, as you might expect, a significant source of demand for us. And we haven't seen the pickup in churn that some of the others have mentioned, some of our peers have mentioned on the calls. I mean, look, this as we've mentioned, this is the 3rd highest booking quarter we've had, huge number of international wins, 57 new logos, which was a record, 2nd highest volume in cross connect bookings. And we really do see the world moving to a hybrid multi cloud architecture and digital is focused on the enterprise.
And we think our offerings such as the service exchange really enable the shift to a hybrid multi cloud. Cloud ultimately resides in a data center and they lead they sit in an awful lot of our data centers. They're signing many long term deals with us. So we think we're really, really well positioned to benefit from the growth in cloud demand, but we're also very focused on attracting enterprise customers to sit both in our data center and connect to the clouds on our campuses. Andy, you want to handle the second question?
And Michael, just to make sure I address your second question, do you mind repeating that? You said the renewal rate on the PBB?
Yes. So if I look at the Page 22 sorry, 21 this quarter. I think the PBV retention ratio dropped to 62.6% from the LTM of 93.5 percent and was curious if there's anything specific that caused the drop there?
Yes. I think what you have is a little bit of a small sample set as you can see especially on the square footage 39,000 versus almost 2,000,000 of square feet in the prior quarter. So, I obviously, it's literally only 4 renewal contracts that happened this quarter. So, 1, 1.5 depending on the square footage rating renewed. I believe that was a customer in our Houston footprint, not a large market for Digital Realty or a major focus.
And I think we only have a site or 2 in that market. But I would say it's pretty much an anomaly. And as recall from last quarter, those power based buildings are typically very high retention rates and usually the longest duration renewals given the fact that the customer is often putting even more substantial capital commitment into that capacity. So I don't think there is a trend or anything in that renewal stat.
Our next question comes from Colby Synesael of Cowen and Company. Please go ahead.
Great. Thank you for taking my questions. First off, on the price renewal change, the mid single digits versus previously the high single digits, is that specifically because the legacy DuPont customer has not yet been renewed and is there now an expectation that they will not renew in 2019? And then secondly, there is something that seem like they would drive your core FFO guidance up. So there was the one time UK tax benefiting in the Q1, it seems like the equity forward didn't come in as linearly as maybe what was anticipated.
I mean obviously as we just mentioned the reduction in the renewal spread, are the offsets to why that might not have happened, if I have them correctly, the FX, the bankruptcy, the tough real estate property taxes and then the longer book to bill? And then just lastly, a higher level question, what does the capacity look like for the back half of this year in terms of available megawatts if you will in the markets where you're seeing the most demand, do you have enough capacity effectively available you think in the markets where you're seeing the most demand sustain the level of momentum you saw in the Q2? Thank you.
Thanks, Colby. Think there's a bunch of numbers questions in here. So, let me try to tackle all 3 in no specific order. So actually, maybe I'll work in reverse order because it might be easier. So available capacity, I think it was set up pretty nicely in terms of available capacity in the back half of the year.
And you can see that either in what's on our development cycle in terms of unleased capacity or you can see in the pre stabilized just delivered and highlights in that in those markets are, as I mentioned, Frankfurt, Osaka, Amsterdam, London, there's markets in our Latin America platform as well. So, I think we're set up pretty nicely in terms of available capacity that are coming on back half of this year. But as you know, as we move into the back half of this year, we're also working on capacity that's even coming online in early 2020. So and many of these tighter markets be it Tokyo and others, the customer is really stretching out the timelines of coming to us even earlier given there is such limited capacity. What I like more in some of those markets, of course, Frankfurt is a market where we've just seen a rapid acceleration.
So and it's a tightening market. Hence, it's been tough to get land parcels and quite pleased with the global investment team. It's great work and tying that down on the heels of our success. But net net, I think we're in a pretty good space for back half of 'nineteen going into 2020 markets coming online and with capacity in the backdrop of attractive demand. Going to, I think, your guidance question, if you net out the outcome on the guidance, we obviously beat our internal numbers in the Q1, largely due to some timings on the Ascenty close and our funding or bridging of our partners' equity and being compensated for that.
And as you move into 2nd quarter, we kind of came in line with our numbers. And if you look at kind of the math, you pretty much need to kind of flat line ish with the 2nd quarter numbers into both Q3 and Q4 to kind of get roughly to the midpoint of our guidance. I would say you got a couple of things going on there. 1, you got obviously NOI coming online for capacity that are signed but not commenced to so that's the positive the headwinds, which makes us reaffirm our guidance at this current range are the AvaFX continuing to be a headwind on a year over year basis. 2, you have our equity forward, which we delayed to match our sources and uses to later in the year.
So the share count from that equity forward getting drawdown is going to come into the share count. And then 3, I mentioned the headwind with the property tax accrual. Again, we do look to try to modify those and appeal, but we are not going to win on any type of appeal on that in call it 3 months' time. So those are the offsetting headwinds. And as I mentioned, the signings, while great quality on many metrics across the board, it does have a longer signed to commenced time period of 8 months.
So it's probably doing a little bit more the 2nd quarter signings are probably paying
a little more work to building us
up for our 2020 numbers than actual in year 2019 contribution. But the positive, as I mentioned, will leave us with move in ready capacity in several great markets for our sales reps to be selling into right now. Last but not least, on the guidance table, we did improve the our expectations for our cash mark to market for the full year. We don't want to specify any specific confidential customer dealings. What I can tell you is among our large both legacy Digital and legacy DFT customers, We're moving closer and closer to final resolution of a path forward on some of their capacity renewals.
We've worked with this customer who we've been helping in growing their capacity over the 12 past 18 months across now I think I believe all three of our connected Ashburn campuses, the triangle that surrounds Loudoun County. We've been helping them with connectivity across these campuses. Their needs and requests over time have changed. And I think the shape and form of that renewal will be constructive for both the customer and for digital and likely result in a little bit better outcome in terms of rate as we push out some of those contracts that do expire over several years to begin with out a couple of years from there into the future. So that was really the driver for the guidance table change.
So we do expect to complete that renewal in short order.
This concludes our question and answer session. Would like to turn the conference back over to CEO, Bill Stein, for any closing remarks.
Thank you, Andrea. I'd like to wrap up our call today by recapping our highlights for the Q2 as outlined here on the last page of our presentation. We advanced our top priority of deepening connections with our customers, delivering all time high new logos, our 2nd best renewal leasing and interconnection bookings and our 3rd highest total bookings in our history.
We extended our global footprint
and took steps to secure our supply chain with several strategic land acquisitions. We reentered Paris. We secured our 2nd campus in Frankfurt and announced our entry into South Korea. We also underscored our commitment delivering sustainable growth for all stakeholders with the publication of our inaugural ESG report and our official recognition as an Energy Star partner. Last but not least, we further strengthened our balance sheet with redemption of high coupon debt and preferred equity and the opportunistic issuance of another $900,000,000 of long term capital.
As I do every quarter, I'd like to conclude today by saying thank you to the entire Digital Realty family, whose hard work and dedication is directly responsible for this consistent execution. Thank you all for joining us. I hope you enjoy the dog days of summer and hope to see many of you at Marketplace Live in New York in November.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.