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Good afternoon, and welcome to the Digital Realty first quarter 2019 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. Today's call will end promptly after 60 minutes. Please note that this 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 and Chief Technology Officer Chris Sharp are also on the call and will be available for Q&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 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 our CEO, Bill Stein, I'd like to hit the tops of the waves on our first quarter results.
First and foremost, we continue to support our customers' global expansion requirements with an agreement to anchor development of a new campus in Santiago, Chile. Next, we demonstrated our commitment to delivering sustainable growth for all stakeholders with efficient and socially responsible capital raises, renewable energy procurement, and corporate governance enhancements. Third, we raised the dividend by 7%, our 14th consecutive annual dividend increase. Last but not least, we further strengthened the balance sheet, redeeming high coupon debt and preferred stock, lowering our weighted average coupon by 30 basis points, while simultaneously extending our weighted average duration by more than half a year with the opportunistic issuance of $1.6 billion of long-term capital. Now, I'd like to turn the call over to Bill.
Thanks, John. Good afternoon, and thank you all for joining us. During the first quarter of 2019, the Digital Realty team continued to effectively press our competitive advantages. We capitalized on the strength of our comprehensive multi-product offering by capturing healthy enterprise demand across multiple regions. We also advanced our private capital initiative by closing our joint venture with Brookfield. We further strengthened our balance sheet by locking in fixed rate long-term capital at attractive inputs. We continue to build upon our industry-leading commitment to sustainability and sound corporate governance, setting the stage for sustainable growth for all stakeholders. We further expanded our global platform with strategic land purchases in Tokyo and Singapore, as shown here on page three of our presentation.
Finally, we announced earlier this afternoon that we are entering Chile, Digital Realty's 14th country, with a six megawatt facility underway, slated for delivery in the third quarter of 2020. Our strategy for new market entry is to follow our customers. Chile is no exception. We are pleased to be supporting the growth of a leading global cloud provider who will be anchoring the first phase of our campus in Santiago. Chile is one of the most economically and politically stable countries in South America and is considered a high income economy by the World Bank, with a clearly codified business-friendly investment climate and the highest per capita GDP in Latin America. Our Chilean operations will be conducted by the Ascenty joint venture with Brookfield, our exclusive vehicle for data center investment in South America.
It's obviously still early days since we just closed on the acquisition of Ascenty in December and the joint venture with Brookfield at the tail end of the first quarter. We are encouraged by our partnership with Brookfield, the early execution by the Ascenty team, and the compelling growth opportunity within the region. We also continue to advance our ESG priorities over the past few months, highlighted here on page four. In January, we issued the first ever data center green Eurobond. Late January, we announced a long-term renewable power purchase agreement to secure 80 megawatts of solar power on behalf of Facebook to support their renewable energy goals. In late February, our board of directors amended our corporate governance guidelines to clarify that director candidate pools must include candidates with diversity of race, ethnicity, and gender.
Our board also approved a proxy access standard for stockholders in late February. We are committed to sustainability and sound corporate governance principles, and we are focused on delivering sustainable growth for our customers, shareholders, and employees. Let's turn to market fundamentals on page five. As most of you are aware, 2018 was a record year for data center net absorption, and the primary metros across North America are still in digestion and restocking mode. To provide some context, North America represents approximately 80% of our total revenue and was responsible for 75% of our 2018 leasing activity, but only half of our current availability is located in North America. The same dynamic is true in space for Northern Virginia, our largest market at over 20% of total revenue. It accounted for 40% of our 2018 bookings, but less than 15% of our current availability.
We expect to see a pickup in North American data center absorption in the second half of the year as data center providers restocking their shelves with inventory coincides with the next phase of hyperscale users' incremental growth requirements, seeking adjacency next to existing applications and continuous runway for growth on our campuses. In Europe, recent leasing activity has been dominated by global cloud service providers who continue to sign expansions throughout the major metros. Data privacy and sovereignty rules are driving a distributed architecture, forcing cloud providers to establish a presence in all the major metros. These expansions generally come in smaller increments than the hyperscale deployments in North America. Last year was likewise a record year for absorption in Europe, with leading cloud providers deploying multiple megawatts across major metros.
These cloud providers also exhibit a clear preference for expanding adjacent to existing deployments, landing the initial deployment is key. Our global Connected Campus strategy is uniquely positioned to capitalize on this consumption pattern. Across the Asia Pacific region, supply remains largely in check. The complexity of local regulatory frameworks, the difficulty of procuring power, and the limited availability of sites with adequate connectivity all serve to limit new competition. Demand is outpacing supply in several of our key APAC markets, notably Singapore, Tokyo, and Osaka. This has translated into solid execution and pipeline targeting our near and medium-term available inventory in these markets, setting us up for an attractive backdrop as we bring adjacent capacity online at our Singapore and Osaka campuses, in addition to our recently announced Tokyo campus development project.
At the macro level, the Asia Pacific region is still likely in the very early stages of its communications infrastructure build-out, and we see a significant runway for growth for years to come. Our pipeline of existing customer expansion and new customer opportunities is growing in both Brazil and now Chile, where we are the market-leading data center provider. 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 the macro environment on page six. Global economic expansion remains intact. In the U.S., unemployment claims recently dipped below 200,000. Central banks the world over have adopted a dovish stance, and the risk of a full-blown trade war appears to be receding.
As you've heard me say many times before, 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. The hyperscale data center customers who drove outsized demand in 2018 marched to the beat of their own drum. Although they have largely remained in digestion mode in the early days of 2019, we remain highly confident in the longer-term trajectory of this demand. In addition, the resiliency of our business model enables us to capture robust and diverse demand from a broad swath of customer verticals across geographic regions around the world, as evidenced by our first quarter results. To put a finer point on the secular demand drivers underpinning our business, I'd like to highlight a couple of the data points on page seven.
According to Synergy Research, the total cloud market ecosystem passed the $250 billion revenue milestone in 2018, up 32% from the prior year. Separately, according to an IDC global study of 800 enterprise cloud users, 58% of respondents are now employing a hybrid cloud model, defined as using private and public resources for the same workload. Finally, an IDC study of 400 users of public cloud compute and storage services found that over 50% have recently moved their workload back on premise. To effectively address the hybrid multi-cloud market, data center providers must offer a global interconnected solution from colocation to hyperscale. These trends obviously play directly to our strengths, help explain the durability of our recent results, and bode very well for future demand cycles.
Given the resiliency of our industry, our business, and our balance sheet, we believe we are well positioned to continue to deliver steady per share growth in earnings, cash flow, and dividends, 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 nine. As Bill indicated, our first quarter results highlighted the durability of the Digital Realty global platform, with balanced performance across regions, product types, and customer segments. We signed total bookings of $50 million, including $9 million from colocation and a $7 million contribution from interconnection. We signed new leases for space and power totaling $42 million, with a weighted average lease term of 10 years, including a $7 million colocation contribution. Five of our top 10 deals in the first quarter were outside the U.S., including several top customers who were able to leverage our global platform to enable their growth across regions.
For example, this quarter, we enabled the expansion of a cloud infrastructure provider that specializes in helping developers launch applications into the cloud, helping them better serve their customers on the West Coast as well as APAC. Within our global account segment, we landed two sizable deployments north and south of the border with a leading global cloud service provider. Separately, we also landed a network edge node from another leading global cloud service provider, which we expect will enhance the interconnection profile of our campus in Dallas, Texas. We continue to track healthy demand within our global account segment, where the cloud accounted for just one-third of our first quarter bookings, as shown on page 11. While the majority of our new business during the quarter was with existing customers, we added 43 new logos with a particularly strong contribution from our enterprise segment.
For example, a well-funded software startup leveraging artificial intelligence to develop safe and reliable technology for autonomous vehicles, selected a Digital Realty data center to house their production application and deliver their technology on a global scale. Afterpay is a global fintech provider based in Australia, providing a buy now, pay later payment platform. Their proprietary decision-making engine determines creditworthiness of their retail customers in near real time on a global scale, and they are leveraging Service Exchange from our internet gateways in the U.S. and in Europe to simplify, scale, and improve the user experience. We continue to see traction from European-based organizations keen to partner with a data center provider able to facilitate their global growth well into the future.
A multinational semiconductor and software design company headquartered in Europe selected Digital Realty to provide a global data center strategy to support the transition of their business services as they decommission data centers and extend their business reach. In particular, the partnership will facilitate their ability to expand their presence into Singapore in support of their APAC initiatives. They will now be able to deliver a full global services capability supported by Digital Realty in each region around the world. In addition, a British satellite telecommunications company is expanding with us in Europe to provide further colocation solutions for their London and Amsterdam operations. The solution underpins the infrastructure required to support the launch of their new satellite later this year and will provide high-speed broadband services to their customers.
Channel partners continue to contribute to our business and comprise 15% of our first quarter colocation and interconnection bookings and accounted for 25% of our new logos. One of our top channel partners brought us an opportunity to support a digital healthcare company that is redefining the way cardiac arrhythmias are clinically diagnosed by combining their wearable biosensing technology with cloud-based data analytics and machine learning capabilities. Their primary business model requires extensive data mining to help doctors predict and respond to cardiovascular events. The customer's proprietary cloud solution within Digital Realty required access to Azure, AWS, and Salesforce cloud services. Digital Realty won the business by providing a secure, low latency, and HIPAA compliant solution with the ability to connect to multiple cloud providers through our interconnection services, including Service Exchange. We're also seeing traction with the strategic relationships we have forged with leading cloud and managed service providers.
For example, we are engaged with one of our mobile cloud hyperscale customers to provide best-in-class, ultra-low latency hybrid services to end customers with specific performance requirements. We are also teaming up with a major storage solution provider to offer services to end customers who want to deploy private infrastructure in close proximity to the public cloud. Alliances like these greatly expand Digital Realty's addressable market and demonstrate our unique capabilities in terms of ubiquitous cloud interconnection and near-field proximity to underlying cloud infrastructure around the globe. Turning to our backlog on page 12. The current backlog of leases signed but not yet commenced stood at $144 million at the end of the first quarter. I would like to point out here that the current backlog shown on page 12 reflects a full contribution from Ascenty, whereas the Ascenty contribution will be shown in our 49% pro rata share going forward.
The weighted average lag between the first quarter signings and commencements remained tighter than our long-term average at a little over two months. Moving on to renewal leasing activity on page 13. We signed $116 million of renewals during the first quarter, in addition to new leases signed. This is the second highest quarterly renewal leasing volume in our history, right on the heels of the all-time high of $138 million in 4Q 2018. Weighted average lease term on renewals was nearly 13 years, while cash rents on renewals were down 6.9%, driven primarily by a strategic portfolio transaction with a single customer deployed in multiple power-based building cells, as well as fully built out turnkey capacity in 15 sites across our global platform.
We renewed their footprint for 15 years on triple net lease terms, locking in these cash flows for years to come and maximizing the value from these facilities. We also effectively tied this strategic renewal to a multi-region expansion opportunity with the same customer. Excluding global relationships that have signed an incremental $15 million of annualized GAAP revenue over the past six months, mark to market on first quarter renewals would have been essentially flat on a cash basis, as you can see from the data points on the bottom of page 13. This incremental leasing activity is a prime example of what we mean when we talk about our holistic long-term approach to customer relationship management. 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.
Wherever 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 first quarter operating performance, overall portfolio occupancy slipped 40 basis points to 88.6%, half due to development deliveries placed in service in Ashburn and Chicago, and half due to customer move-outs in Silicon Valley and Dallas. The U.S. dollar continued to strengthen over the past 90 days. 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 14. Turning to our economic risk mitigation strategies on page 15. We manage currency risk by issuing locally denominated debt to act as a natural hedge. 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 and longer-term fixed rate financing. Given our strategy of matching the duration of our long-lived assets with long-term fixed rate debt, a 100 basis points move in LIBOR would have a less than 1% 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 up 6% year-over-year, or 7% on a constant currency basis, and came in $0.10 above consensus. Delta relative to prior expectations was primarily due to interest income on the Brookfield joint venture funding, as well as tax benefit due to a reduction in the corporate tax rate in the U.K., which came into effect during the first quarter.
In terms of the quarterly run rate, we expect to dip back down in the second quarter due to the deconsolidation of the Ascenty joint venture going forward, the absence of the tax benefit in future periods, and the forward equity drawdown, as you can see from the bridge on page 16. We're rebounding in the second half of the year as several large leases commence. As you may have seen from the press release, we are reiterating 2019 core FFO per share guidance. Most of the drivers are unchanged with the exception of updating financing activity and a reduction to our same-store growth outlook. In addition to continued FX headwinds, the primary change from our prior forecast includes the blend and extend component of the strategic portfolio transaction executed during the first quarter, and bad debt expense related to a subscale private colo reseller.
We also face a particularly tough comparison in the second quarter due to a sizable property tax refund we collected in the second quarter of last year, which also weighs on the full-year same-store growth comparison. Last, but certainly not least, let's turn to the balance sheet on page 17. Net debt to EBITDA remains in line at 5.5 times as of the end of the first quarter, and fixed charge coverage remains healthy at 3.6 times. Pro forma for the ins and outs of Brookfield's funding of the Ascenty joint venture and the forward equity drawdown, net debt to EBITDA is just over five times, and fixed charge coverage is just over four times. Over the past several months, the Digital team capitalized on favorable market conditions to advance our financing strategy of maximizing the menu of available capital options while minimizing the related cost.
In early January, we redeemed all $500 million of our 5 7/8% senior notes due 2020. We also executed against our strategy of locking in long-term fixed rate financing and attractive coupons across the currencies that support our assets with a green Eurobond offering in early January. This was our second Eurobond offering and also our second green bond, following the $500 million U.S. dollar green bond we raised in 2015, and this was the first ever data center Euro green bond. The offering was well-received, successfully raising gross proceeds of approximately EUR 1 billion of seven-year paper at 2.5%, while underscoring Digital Realty's industry-leading sustainability commitment. Market conditions continued to improve over the quarter, and in late February, on the basis of reverse inquiries from investors, we reopened both the 2.5% Euro green bond offering due 2026, as well as our recently issued 3.75% sterling bonds due 2030.
We raised another $450 million of long-term debt at attractive coupons. We followed the same playbook with the professional preferred equity portion of our capital stack during the first quarter. We announced the redemption of all $365 million of our 7 3/8 Series H preferred stock, and we raised $210 million of permanent capital under our new Series K professional preferred at 5.85%. Finally, we advanced our private capital initiative, closing on the $700 million Ascenty joint venture with Brookfield, a leading global asset manager.
The 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, enables us to prudently fund our growth. As you can see from the debt maturity schedule on page 18, the recent finances have extended our weighted average debt maturity by more than half a year and lowered our weighted average coupon by 30 basis points. A little over half our debt is non-U.S. dollar denominated, acting as a natural FX hedge for our investments outside the U.S. Nearly 90% 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 page 18, we have a clear runway with nominal 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 field growth opportunities for our customers around the globe, consistent with our long-term financing strategy. This concludes my prepared remarks. Now we'll be pleased to take your questions. Andrea, would you please begin the Q&A session?
We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, pick up your handset before pressing the key. To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jonathan Atkin of RBC Capital Markets. Please go ahead.
Good afternoon. Two questions. One, on the sales pipeline, I was wondering if it looks amazingly different than earlier this year and late last year, or do you see a greater mix potentially of double-digit megawatt opportunities as the company brings on more inventory? Are there any notable changes by region, Asia Pac, Brazil, Europe, and North America, as you sort of think about the pipeline relative to the year versus earlier? I have a kind of a margin question more conceptually. Do you see an opportunity to get sustainably past 50%, even a margin level as opportunities appropriate in your anticipated development pipeline and other investments you're making in the business? Thank you.
Thanks, Jon. This is Andy. I guess there was a handful of questions in there, let me try to unpack them. Overall pipeline, obviously, we don't really speak to a specific pipeline number. I think if you look at the composition of our signings in the first quarter, it was quite healthy across regions in terms of composition, size of deals across industries. A great 43 new logos. Fairly healthy, and I think I'd characterize the pipeline going forward consistent with that strength. Your question on the, I guess, seeing more double-digit megawatt opportunities. I'd say on the whole, we've seen an increase in double-digit megawatt opportunities, really with additional inventory coming online.
While that's been the case for Ashburn, Dallas, Chicago, where we've been building out campuses for quite some time, it's been a little bit of a newer phenomenon in Frankfurt, Amsterdam, and London, or even a Toronto, and now certainly in Osaka, excuse me, were examples where now these larger customers could see immediate inventory that meets their needs and can see that runway to growth. I do think you're going to continue to see that mix of more double-digit megawatt deals continue. I think the next question was a little bit of kind of compare and contrast on the markets. I'll try to do that efficiently. Maybe starting in Asia, I think we've seen some great strength.
Bill mentioned firstly in Singapore and Tokyo markets where we're literally trying to find extra capacity in the broom closet for some of our customers as it relates to the next leg of our campuses in Camp 12 or our new 15 sites that come online. Osaka is another highlight there where we are bringing on capacity in a series of decent campus-like facilities, where our customers are going with us in a nice smooth runway. Hopping over to Europe, Frankfurt's been a highlight. We had a great three-megawatt signing to an IT service customer that had an end enterprise customer that they exported from the U.S. into that market, and we've seen some robustness there at a time that I'd say supply's been quite limited. Back in the Americas, as I think I mentioned in my prepared remarks, the competition was really Toronto.
We've been building upon our success there, I think we've seen some incremental inbounds most recently there, and some obviously other wins in Dallas and Santa Clara. A little lighter in Ashburn, but that was very much subject to our inventory. Bill kind of gave you a little preview of our entry to Chile and the success of 17. I think the second question, just so I have it right, John, was about EBITDA margins and where do we get to see that going from here? I guess the midpoint of our guidance is about a 58% adjusted EBITDA margin. As a reminder, that's down over 100 basis points year-over-year from ASC 842 accounting change for the expensing of non-success-based leasing compensation.
Right now, I can tell you we're much more focused on expanding, we're less focused on expanding our industry-leading EBITDA margin and more focused on growth. Over the longer term, I think it's pretty intuitive as we continue to scale across and globally, particularly in new markets that I mentioned with more volume campuses and with economies of scale. I do see a longer-term trajectory to further EBITDA expansion, pushing up closer to the 60% area that you mentioned. Right now, again, the focus is more on prioritizing growth, given we feel like we have a quite healthy EBITDA margin.
Thank you very much.
Our next question comes from Jordan Sadler of KeyBanc Capital Markets. Please go ahead.
Thank you. Good afternoon. First question is on guidance versus sort of the beat in the quarter. Andy, you touched on it and went through slide 16, which is always helpful. I guess just running the numbers as opposed to looking at the bars. If I back the $1.73 in the quarter out of the $6.65, it implies that you're going to do $1.64 per quarter in order to get to the full year, or that's what you need to do, at least. Which seems like a pretty sizable step down. I know you touched on some of the puts and takes. Brookfield JV funding obviously is a little bit of a drag. The tax benefit, I guess I could use a little bit of a better explanation for.
Separately, can you maybe elucidate what we should expect to happen on the forward equity a little bit better? Because at least in this illustration, it shows you taking down all the forward equity prior to 2Q or before the 2Q bar. I'll have a follow-up.
Sure. Thanks, Jordan. I guess the components again. Brookfield closed on its 49% of the joint venture the very last day of the quarter. We had not anticipated that to take so long in terms of regulatory approvals and tax and legal structuring. We did prepare for it just in case, and they compensated us for carrying their share in the investment with a current return. That's obviously going to go away. It's a bit of a one-time benefit we have to build on the quarter. To a lesser extent the U.K. corporate tax rates revised from 21% down to something slightly lower than that, I think 17%. Obviously we have non-U.S. dollar investments in London that we have to adjust our tax rate for any deferred tax assets or liabilities in this case.
Having a benefit to our core FFO that appears in the quarter as well. Those are the things I'd say that contributed to the several penny of outperformance in the first quarter relative to our original guidance. In terms of headwinds that counteracted us in the quarter and also will counteract us in the full year. I think I spelled out, we had some bad debt expense. We have a more troubled private colo reseller customer that's a relatively small percentage of our total portfolio but does provide some headwinds during the quarter. It's certainly been our same store annual life pool year-over-year growth. Also will provide a headwind to core FFO per share growth on a full year basis.
I'd say right now consistent with prior practice which is really a philosophy of not sending the starters in the locker room after one of four quarters. We did keep our guidance constant. Going to your question on the follow on the equity forward. There's about $1.1 billion gross equity. We've not drawn down on any of it. As you can see from the balance sheet at 3/31, we have just over $800 million of revolver balance on a 2.8-point revolver. We had about $130 million almost cash on hand. Brookfield literally came in the last day, so we couldn't even pay down the revolver with a portion of that till a day later. I would say we're going to be drawing down a portion of it before the end of the second quarter.
We took a little bit of poetic license on the chart with putting that bar just to the left of the second quarter bar. I'd say the bulk of it will be done. Well, bulk if not all of it will certainly be done by the end of the third quarter.
Just to clarify, the Brookfield cash didn't show up on the balance sheet at all. Is it because
I'm just saying we have $127 or so million of cash on the balance sheet at 3/31 because that money literally came in that single day and we couldn't send a wire to pay down more revolver balance for that piece.
Okay. My follow-up was more on sort of funding longer term. You've recently, and maybe this is a good question for Mr. Wright. You've recently talked about a self-funding model potentially and I'm just curious if we could get an update maybe a few months into the year. What it looks like as you've sort of gone out to the market or taken an assessment of the portfolio and how we should be thinking about Digital's funding and sort of harvesting of assets this year.
Yeah. Hey, Jordan. Thanks for the question. Look, I think consistent with what we've said previously, although our 2019 guidance does not include any of the disposition assumptions we continue to remain focused on recycling and portfolio optimization. The company has a heritage of that. Paul was doing that six, seven years ago. We continue to focus on those opportunities when they make sense. We certainly continue to evaluate the private market as a source of capital and clearly we'll let everyone know when we have anything to report. With that said, you can reasonably expect us to periodically sell assets particularly non-data center properties or assets in markets that no longer fit our strategy
Specifically, we discussed selling certain triple net lease assets potentially, as well as potentially joint venturing stabilized assets, where we can pull out some of that capital. We would joint venture it and redeploy that capital into higher yielding development assets, which we think is a prudent capital allocation strategy. Look, I think, again, we haven't committed to any specific amounts and timing, since as Andy will touch on, we're fully funded through 2020. Other than to say that, it could be as high as a couple billion over multiple years. Again, no specific timing or amounts.
Thank you.
Our next question comes from Michael Funk of Bank of America Merrill Lynch. Please go ahead.
Thank you very much. Just a couple, guys. First of all, during the call you made some comments on expectation for, you may give pick-up or an absorption in the second half of 2019 for the larger hyperscale guys. We kind of connect that back to some of the comments we've heard in the last week or so from Intel, for example, a little unit weakness there. MTSI talking about inventory or oversupply. You contrast it with Microsoft talking about building out their global data center regions. Maybe help us pull that together and talk about your own view on the second half pick-up and absorption.
Keep in mind, the first half, we really didn't have any inventory in Northern Virginia, which is our strongest and biggest market, and that's going to be coming on in the second half. That at least will give us some product to sell. I can tell you that just based on conversations that we're having. Well, backing up. The purchasing cycle of these CSPs tends to be spiky. It has been volatile and not all CSPs buy on the same schedule. Some buy in far greater quantity than others. Some regions receive greater orders than others. In general, Virginia is the highest, and historically we've seen smaller orders in Europe versus North America. There certainly was a lull in the first quarter. I think despite that, we did $15 million in bookings, so we're happy with that.
In some ways, we feel that the quality of bookings is better in the first quarter because we're less dependent on large spiky CSP orders. I have no doubt that those orders will resume in the back half of the year.
Okay. You also announced the, we talked about it earlier, the Chile deal in the first phase. I think you announced the size of the deal. Any additional commentary on future phases, what that could look like, the timing, any kind of underwriting commentary you can give us as well as kind of rate you're underwriting that?
Sure, Michael. I'd like fill in some of the details here. This is very consistent with our Digital Realty New Market entry expansion. Purely customer led, and this one in particular, de-risked by simultaneous customer signing and our control of land, and ultimately start of construction. This is initially going to be about a little over 6.3 megawatts data center haul in Santiago, but has a runway for growth to could be another 20 plus megawatts with adjacency. On the heels of this, I think we'll likely see additional other customers looking to expand in this market as well.
And then-
Michael-
Oh, sorry. Go ahead.
Michael, you probably know, it was initially structured as a leasehold.
Right.
That was really a function of time to market. Our expectation is that we will purchase that asset.
Okay. One point of clarification, Andy, if I could. The adjusted EBITDA guidance, is that apples to apples, what you gave us at 4Q? I did notice some adjustments for Ascenty. Just to clarify, is that the same guidance or was there a change there?
Sure. I think if you get adjusted, EBITDA margin guidance-
Margin, yeah
not necessarily EBITDA, but I would say, as you look across our guidance table for each of the assumptions and ultimately the output row at the very bottom, we've kept that on an apples to apples basis throughout, no change. I think if you go back to our initial guidance back in the first weeks of January, we did try to give you what 2018 would've looked like under the change in accounting for ASC 842.
No change, even though if you calculate the adjusted EBITDA, look at the back of your supplemental, there is the difference with the unconsolidated JV and then the non-controlling interest now contributing to that.
No. Same accounting for the table and from left to right on there. The only difference is Ascenty. We owned 100% of Ascenty from December 21st on through all but the very last day of the first quarter.
We recognized, consolidated our almost 99%, I should say, of that venture, since management does own 1% interest through our P&L. On the last day when Brookfield closed on its 49%, it moved to an unconsolidated joint venture. Ultimately, given that it was literally one day, it really wasn't a material amount for disclosure in the back of our future, but there will be next quarter when we own 49% for a full 90 days. We did provide a reconciliation on our leverage stats for both net debt to EBITDA and fixed charge coverage to make sure your apples to apples in the numerator and denominator for our pro-rata share of ownership on those counts.
Okay, great. Thank you so much, guys.
Sure.
Our next question comes from Colby Synesael of Cowen and Company. Please go ahead.
Great. I guess just two high-level questions. Bill, I think in that last comment or question you mentioned you have no doubt that you'll see a resumption to the larger deals in the second half of 2019. I'm just curious, is that based on recent trends in the last few weeks, the last month, or would you have felt just as confident called on January 1st? Then secondly, M&A. Obviously, it's been a key aspect of your strategy the last several years. I know there's been some pushback on valuations, perhaps more recently over the last few quarters, if not year. Are you seeing those change, and are you seeing potentially more opportunities for you guys to do something than maybe you would've thought of just a few months ago? Thanks.
Sure. Colby, I'll handle the first one, then Greg can pick up on the second one. I wouldn't say that there's been any change since January that causes that. It's just a function of looking back over history and seeing what the buying pattern has been. Obviously, some of these CSPs have taken down very large blocks of space in the relatively recent past, which has taken some time for them to absorb. For example, if you listen to the Microsoft earnings report today, their cloud business is clearly very robust. I would assume that the other firms will report in a similar vein. At the end of the day, they need to procure space to house these operations. That's why we feel as we do.
Yeah. Just providing a little bit more color on that, Bill. A couple elements that we've been looking at in the market is particularly around some of the services that we all see all of these cloud providers launching. These services are becoming more complex and require a different type of infrastructure to meet their requirements. It's all about these huge data lakes and about the ability to do caging or multi-megawatt deployments across our entire Connected Campus , which is where we still see every major provider out there launching a handful of new services every quarter. All of that requires infrastructure to continue to meet the market demands of all the consumers globally.
Hi, this is Greg, responding to the M&A question. Look, I think when we take a look at the landscape right now, we've mentioned before, we constantly monitor all opportunities, whether they're in the public market, the private markets, whatever it may be. At this time, I think your point's right. We're seeing a lot of potential M&A opportunities in the private market especially. As you can imagine, given our position, we see everything. I think you also alluded to the fact that pricing remains fairly robust. That's true. With that said, I think we've shown our discipline and commitment in the past to only do deals that make strategic sense and meet what we believe is the appropriate risk-adjusted return. That's the way we're going to continue to pursue our M&A strategies.
With that said, also another leg of that stool, it's not necessarily M&A, but we're looking at land purchases as well, to continue to fund the company's growth. The reality is we look at three different prongs, really. M&A, whether it's public or private. We look at both private portfolio and one-off acquisitions, as well as land acquisitions. Again, this may change by market. We go back and we monitor each market, determine what we think appropriate returns are and what our strategy is and where our customers are driving us in that market, and weigh all those factors before we embark upon any M&A activity.
Okay, thank you.
Our next question comes from Erik Rasmussen of Stifel. Please go ahead.
Okay, thank you. Two quick questions. Maybe just circling back, in Northern Virginia. Obviously, there's a slowdown. We're seeing a slower absorption in this market, hearing a lot of inventory in the market, and putting pressure on pricing. Can you just talk to some of those sort of dynamics in that market? I know, from what we're hearing and some of the things that we've seen so far reported, it kind of all jives with maybe a second half pickup. Can you just give a little bit more color on what you're hearing from customers there and just some clarity?
Hey, Erik, this is Andy. Maybe I'll try to tackle it. We've obviously been monitoring this market quite closely. It's certainly the most competitive market in the arena. I would also say it's historically been the largest and had the largest amount of demand and most robust and diverse demand across all cloud service providers and enterprise customers.
We've, as Bill mentioned, have had a pretty great phenomenal success over the last 12 plus months, close to 99 MW, to the point where pretty much all of our existing inventory that had been leased. Came up a little short. We did not anticipate that was going to happen a year prior when we would've gone incremental inventory. I think the way we think about tackling that market, we are closely monitoring relative competitiveness. We are very pleased with the fact that we are selling to a very large and growing installed customer base. Many customers want to grow with that adjacency, adjacent suites, adjacent buildings, or literally a short walk across the road or condos for the fiber to be pulled.
Many of these customers who have already landed with us have that game plan already routed out of incremental capacity they're going to take once they're fully utilizing their existing suites. Having that installed base is certainly a competitive advantage to date, and I think that'll bear fruit as our newer inventory or latest inventory comes online in the back half of 2019. The other thing I would say, which is a tool we utilize in pretty much defending rate returns and profitability in any more competitive market, is really flexing the muscle of the global multi-cloud portfolio, and bringing together opportunities for our customer growth in very supply-constrained, more rare and unique opportunities in Tokyo or Singapore or Osaka or Frankfurt or South America.
Kind of packaging opportunities for these customers, and not being beholden necessarily to that private one-off competitor that only has anything to sell is great. Obviously more to come. I will be even more close to the front lines as we have inventory to sell again in that market. I think we've got a tremendous value proposition, and some pretty good tools in our toolkit to make sure we maximize value for that market and for the company.
Great. What I'm hearing is that even though you may have lost out or you could be losing out on deals, it's not like because of your competitive advantage in this installed base, if you lost out on this side the first go-around, that business will come back. Maybe even customers are kind of waiting for that incremental capacity to come online. Again, it's not just a pricing game, or because there is a lot of capacity that's in that market and a lot of inventory. Is that a fair way to capture that?
I would say that the timing of inventory tightness and demand taking a bit of a pause kind of coincided for us in that market. I'm not sure we really lost out based on our look at the market in the first quarter. There weren't a tremendous amount of deals we lost out on, even if they were at more competitive rates, due to our lack of inventory. I think that goes back to some of Bill's commentary of we've landed large consumers of our product in the past 12, 15 months, that often take several months of digestion and restocking mode and then come back and want to grow with that capacity, with adjacency.
Today, I don't think there's really any regrettable losses in that market of any substance, even with the competitive pricing opportunities out there from certainly many of the competitors that do not have other value add for their customers beyond just offering them price.
Great. That's all I have. Thank you.
Next question comes from Michael Rollins with Citi. Please go ahead.
Hi, thanks for taking the question. Was curious if you could unpack a bit more of the same-store NOI guidance update for 2019. As you look into 2020, how should we think about the change in same-store NOI based on the mix of business that you'll have and renewals for next year?
Hey, Michael, why don't I maybe I'll start with actuals and kind of bridge to guidance for people just to kind of make it more clear. Our same-store NOI came in at negative 2.5%. That's cash NOI year-over-year for the quarter. I would splice it into there were normal course business that would have had that number come in closer to 1% positive or at least 70 basis points positive for sure. We had two or three more episodic headwinds that hit us during the quarter. I mentioned there's bad debt expense that is a net against the revenue and obviously cash NOI from the colo reseller that is a customer within our same-store pool. We also had that global relationship multi-market 15-year renewal, which had a quoted blended expand component.
The customer had like two and a half years left, we pushed them out 15 years. While we lowered the rate, which you see in our PVP renewals and some of our QPF renewals, those leases will now clip on in two and a half plus for now 15 years, which was the value maximization path there. We also had some FX headwinds from the strengthening of the dollar because it didn't have any hedge on an unlevered basis through the same-store NOI pool. Negative 2.5% as reported cash NOI.
If you were to back out the bad debt, the FX, and our strategic renewal, that would have been about 0.7% positive. I would say if you translate actuals from one quarter into a guidance table for a full year, I would say about half of the decrease in the NOI is due to that bad debt expense, and the blended extend renewal. Again, that's not something we do every quarter or every year. We don't have that many customers with that much capacity, with that short a duration available to renew all at once, and you do renew it once in resets. I would say the other half, just overall CapEx would say the other half and just where I'd say we're seeing outcomes on potential expirations, potential downtime for re-leasing. Nothing tremendously new, just maybe a little more cautious on our outlook at the same-store pool.
Before I let you get to your second question, I would remind you and others on the call, the same-store pool is one piece of the puzzle, just like our cash mark-to-markets. We do a tremendous amount of business that have new leasing tied to existing renewals. We called out that on one of the slides in the deck that our mark-to-markets would actually been flat on a cash basis and positive on a GAAP basis, about 3%. The subset of those customers did $15 million of CapEx with us. On a relationship return versus same-store versus unique capacity splicing, it's actually accretive to our cash flows and to our revenue.
How do you think about that for next year?
Next year, we're really fighting our way through the major renewals this year. We talked about the big 15 sites strategic portfolio customer that was not a CSP. We are just at the very beginning of the second quarter, executed with a top CSP, a long-term legacy digital customer for about 250,000 square feet, 20-plus megawatts at a pretty attractive renewal called five years in term. I'd say that one's kind of through now. I'd say other than one legacy renewal from a company we acquired two years ago, we're really through getting into, I think, quieter waters here in terms of these renewal headwinds. I think we talk a lot less about them in 2020 and certainly 2021.
Thank you.
Our next question comes from Jonathan Petersen of Jefferies. Please go ahead.
Great. Thank you. Just very quickly, I just wanted to get your take on the guidance. I know people keep asking about it, but I just wanted to clarify. The one-time payment you got from Brookfield and the U.K. tax benefit, was that contemplated in the initial guidance, or was that not expected?
John, we did not expect Brookfield to close 90 days into the first quarter. We thought that transaction would have been closed very early in the year, if not prior to the end of the year, quite honestly. Now we didn't expect it in the guidance, but we planned for that in structuring our deal with Brookfield. Part of our transaction with Brookfield, in exchange for us to assure them a 49% share of the Ascenty business as they navigated their regulatory and legal approvals, they were to compensate us for fronting their capital, for what ended up being called just over 90 days. That was not contemplated, and we did not contemplate the change in U.K. corporate tax rates in our guidance.
Our next question comes from Richard Choe of J.P. Morgan. Please go ahead.
Hi. In terms of the commentary you made about focusing on growth, especially with the development coming on at the end of the year, does it make sense that to look at the dividend growth kind of slowing to help fund the growth aspect? Or is that just kind of overall large numbers? If we can get a follow-up on how you think about the dividend growth rate, that would be great. Thank you.
Thanks, Richard. I don't think this is a zero-sum game between dividend growth and investing in the platform for future top-line growth. Really, the dividend growth is predicated on really the growth in taxable income as a REIT and ultimately our cash flows. We're now calling a 70% AFFO payout ratio. That's on the heels of our dividend increase of just under 7% last quarter. As I think we continue to see the cash flows grow on to 2019 and beyond, I think you'll see the dividend kind of move lockstep. Always looking to today and leaning towards not over-distributing and retaining a good portion of our capital in order to prevent reliance on external markets for funding our development and our growth opportunities. At the same time, we are certainly investing and focusing on accelerating our growth. I think that's a few points across the board.
It's obviously, I think top of mind for our new Global Head of Sales and Marketing, Corey Dyer. We've made some changes to kind of accelerate the growth. And kind of further emphasize our focus on the enterprise customer seeking co-location, interconnection on a global platform. Again, I don't think this is one thing or another. These are both missions that I think we can deliver simultaneously.
This concludes our question and answer session. I'd like to turn the conference back over to Mr. Bill Stein for any closing remarks.
Thank you, Andrea. I'd like to wrap up our call today by recapping our highlights for the first quarter, as outlined here on the last page of our presentation. First, we further expanded our global platform, closing the Ascenty joint venture with Brookfield, securing strategic land holdings in key global metros, and announcing our entry into Chile in support of a strategic customer's global growth aspirations. Second, we also underscored our commitment to delivering sustainable growth for all stakeholders with efficient and socially responsible capital raises, renewable energy contracts, and corporate governance enhancements. Third, we raised the dividend by 7%, the 14th consecutive year we've raised the dividend, dating all the way back to our inception in 2004. Last but not least, we further strengthened our balance sheet with redemption of high coupon debt and preferred equity and the opportunistic issuance of over $1.6 billion 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, and we look forward to seeing many of you at Nareit in June.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.