Operator: The next question comes from Eric Luebchow of Wells Fargo. Please go ahead.
Eric Luebchow: Great. Thanks for the questions. So I wanted to touch on kind of your outlook for renewal spreads, which have been pretty strong the last couple of quarters. So, if I look at your expiration schedule, it looks like your in-place rents really start to look even more attractive the further out you look. So maybe you can talk about kind of the near-term outlook. Is it going to be a little more subdued as you work through some of these higher in-place rents? And then maybe are there any of your larger footprint contracts that have any contractual terms that may limit your ability to push rents as high as you would like? Thank you.
Matthew Mercier: Sure. Thanks. So I think, first off, I think as a note, we feel pretty confident about the pricing environment right now and – that I think we demonstrated that with the continued increase in releasing spreads that we put into our guidance, where we said greater than 5%. And we’ve had – we called out some items this year that have been, we’ll call it, slight outliers, but we’ll – we still see a strong pricing environment that were. And we expect that to continue into the fourth quarter where, we expect positive renewal spreads across all of our product types. I think going into next year, again, not giving guidance, what I would say is come back to the environment that we’re in. I mean, there’s nothing that suggests that pricing won’t continue to be robust and strong across all of our major markets, where things might be different.
Again, that you were alluding to is the basis against which those strong pricings are compared against. We are not seeing the same, I still expect that we’ll have positive renewal spreads next year, but we’ll be able to provide more granularity in terms of the level that, that is once we give guidance next quarter.
Operator: The next question comes from Frank Louthan of Raymond James. Please go ahead.
Frank Louthan: Great. Thank you. So when you guys are having conversations with a customer that’s primarily looking at an AI deal when you win an AI deal, what is it that they’re coming to you for versus maybe some of the less expensive campuses kind of the middle of nowhere that we’ve heard about and that sort of thing. So how are you winning in AI? And what is it they’re looking to get from digital versus some of your peers or some of the private players?
Andrew Power: Hi, thanks Frank. I’m going to toss just a column in a second. But I just – there’s many shapes and forms of AI, and I reiterate, this is still early innings of what’s going to be a vast build-out of required infrastructure. So our intersection of supporting AI is called in the single megawatt or two for enterprise adjacent to the existing workloads expansion into multiple – many, many megawatts of contiguous capacity and everything in between. And we’re in a world right now where it’s about large language model training, obviously, the inference – the dawn of inference and the implications will hopefully point to incremental location latency-sensitive needs. The private consumption of AI or the public consumption – consumer consumption as well outweighing the enterprise, that’s going to change.
So I think this is – this demand case, I think, is going to grow and change and it feels like come in our favor. But Colin, why don’t you speak to some of your experience front line with the customers?
Colin McLean: Sure. Thanks, Andy. Frank. I appreciate the question. I would just amplify what Andy is saying is the demand principles are not monolithic. I mean you’re talking about a wide gamut of requirements across the customer platform, which really plays well to our broad-based portfolio. So I think we do as good a job as any to support broad-based requirements and Catechist’s capacity. But also having mixed dynamic requirements in terms of densities. And so what we try to do is to map that right customer to right market to right workload. And again, across 300-plus data centers, I think we can serve that pretty well. We also feel pretty strongly that core market orientation, i.e., proximity to eyeballs and GDP is still going to remain a core requirement for much of this AI workload. So, we feel like that maps really well to our course of assets across the globe.
Operator: The next question comes from Irvin Liu of Evercore ISI. Please go ahead.
Irvin Liu: Hi. Thank you for the question. So Greg mentioned the strength in demand for both stabilized and development JVs, but in light of a more volatile rate environment, especially in recent weeks, have you sensed any meaningful shifts in the appetite for JVs when you’re discussing with potential partners?
Jordan Sadler: Greg, has your phone been ringing any louder?
Gregory Wright: I mean no. Look, it’s a good question, but the answer is no. Remember, when investors are out there making investments in different sectors, right? Everything is on a relative basis. And I think when investors look at data centers today, and they look at the quality of the facility, the quality of the customer base, the term of the lease, the strong organic growth in the business today. It’s the best place for them to invest. In fact, I would argue that over time, you’re going to continue to see data centers becoming more mainstream investing rather than a niche play investing when you look at the level of demand out there, whether it’s through pension funds, endowments, sovereign wealth funds and the like. So no, I mean, it’s also an interesting as there’s pockets of capital that are driven – we’ll do this unlevered.
So they’re willing to be patient and wait for leverage and wait for rates to come back down. And I think that also, to your point, Ivan, and I think that’s what I mentioned earlier, there’s even an outsized demand on the development side. I think the fact that we’re in a higher rate environment is driving more demand, if you will, towards development. So – but no, we have not. In fact, I would go the other way. I would say that we’ve seen an acceleration in the demand for development JVs.
Operator: The next question comes from Michael Rollins of Citi. Please go ahead.
Michael Rollins: Thanks and good afternoon. When you take the demand that you’re seeing, the backlog and the target for the development joint ventures, can you give us a bit of a preview on the range of development capital that digital will place on balance sheet in 2024?
Andrew Power: Thanks Michael. So I mean – this isn’t new news. And I think I framed this at some of the investor meetings we’ve had through the fall or even on back to NAREIT. Listen, we are a large – the largest global player in the space here and we are taking a strategic change to how we’re funding the business was one of my three top priorities. And what we’re not going to do is tie ourselves to a partner for all time and reduce our flexibility. But we’re going to be looking at targeted large-scale projects. These are projects that are supporting will support customers, we believe in their growth campuses multiple megawatts. So not non-core at all like things that we would invest 100% if we weren’t looking to change our funding strategy to drive more bottom line growth.
And I think you can think the concentration of those type of projects to-date are mostly in North America and Europe. Given our business is already in a shared in a venture in Latin America and was a little bit smaller in APAC. And I think it’s going to be very targeted trying to find the right capital source that is like-minded in terms of their vision for the asset class and looking for a partner that wants to really invest alongside we think is the best-in-class in this industry.
Operator: The next question comes from Matt Niknam of Deutsche Bank. Please go ahead.
Matt Niknam: Hi, guys. Thanks for taking the question. Just one on cash flow. So the accounts receivable looks like it increased another $167 million sequentially, and it’s been a drag of over $400 million year-to-date. Just wondering if there’s any color you can share on what’s driving this? And then maybe how to think about the prospects for any sort of reversal in upcoming quarters? Thanks.
Matthew Mercier: Yes. Thanks, Matt. This is Matt as well. So yes, we’ve had what – I think the important points that I’d call out here are two things. One, the majority of the increase that we’ve seen over the last couple of quarters in our accounts receivable has been tied to actually VAT receivables as a result of the increased construction that we’ve had, particularly over internationally in EMEA. When you look at our trade payables, which are really only actually roughly half or a little over half of that balance, we have increased trade payables over the period, but it’s also been fairly much in line with our increase in revenue as well. And we’ve actually been able to bring down our amount of trade payables in the last couple of quarters as well.
