Digital Realty Trust (DLR)

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Michael F. Foust has served as Chief Executive Officer and a Director at Digital Realty Trust since its IPO in October 2004. He co-founded the predecessor private equity fund, GI Partners, in 2001 and served as its Managing Director. While his tenure at GI Partners, Mr. Foust directed the acquisition of research-related properties and portfolio management. He was as well a Senior Vice President at CB Richard Ellis, where he managed regional asset services operations, and he was a Senior Director at CB Richard Ellis Investors. Prior to CBRE, Mr. Foust held senior portfolio management and investment positions at UBS Asset Management, Karsten Realty Advisors and Trammell Crow Company. Mr. Foust received an A.B. degree magna cum laude from Harvard University and an MBA from Harvard Business School.

Mr. Foust: We started out as a private equity partnership with CalPERS, and that was almost specifically 10 years ago, in February of 2001. We developed and implemented a strategy around innovation and real estate for CalPERS, and that led us directly to data centers and at first, data centers that we referred to as Internet gateways. Some people referred to them as telecom hotels, and those data centers are characterized by a very high concentration of the telecom and broadband networks. These are physical locations, often in central cities, that are actually the hubs of distribution locally and intercity for Internet traffic, voice traffic, data traffic.

It was a very contrarian strategy at that time, nevertheless we were convinced that the Internet was only going to grow in importance and that these facilities that house data centers and house the networks were going to be very long-term valuable locations. And that has turned out to be the case. From there, we branched out more broadly to suburban areas, and typically with corporate-enterprise-type tenants and IT services companies that are providing services to corporates. So our program today has three broad categories of clients. About 25% of our customer base by square footage are telecom and Internet networks, about 35% or so are IT services companies serving corporate IT, and at once corporations' IT directly for their data center use.

Mr. Foust: Internet is not going away by any stretch of the imagination. We were able to acquire assets, not necessarily distressed assets because we were only buying leased properties, now we were taking some credit risk then, which turned out to be good underwritings. However fast-forward 10 years, the growth in data center applications - whether it's Facebook and Zynga, or securities trading and corporate CRM systems and corporate cloud computing platforms, content distribution with video and mobile applications - all of this is driving tremendous growth in requirements for secure facilities to house the servers and to house the data storage.

Mr. Foust: Very much so. The power infrastructure from the utility company and access to the major fiber-optic networks for the Internet are actually important. We find it's often very challenging in a particular location that might be attractive for the corporate clients to have the necessary amount of power available from the power company. So we have folks dedicated to the power acquisition and purchasing process and consultants we team with, depending on a particular region. We spend a tremendous amount of time with the utility companies in every region. So we understand the deployment of their grid, as then as them understanding who we are and the fact that they can be comfortable allocating the megawatts of power that are required, knowing that our clients will use that power. The last thing they want is to allocate power to a particular site and at that time have that power not be drawn. That's inventory that goes away minute by minute if they are not selling that power.

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