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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 20212022

     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From              to             .

Commission file number 001-32336 (Digital Realty Trust, Inc.)

000-54023 (Digital Realty Trust, L.P.)

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

(Exact name of registrant as specified in its charter)

Maryland     (Digital Realty Trust, Inc.)

    

26-0081711

Maryland     (Digital Realty Trust, L.P.)

20-2402955

(State or other jurisdiction of

(IRS employer

incorporation or organization)

identification number)

5707 Southwest Parkway, Building 1, Suite 275

Austin, Texas 78735

(Address of principal executive offices)

(737) 281-0101

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbol(s)

    

Name of each exchange on which registered

Common Stock

DLR

New York Stock Exchange

Series J Cumulative Redeemable Preferred Stock

DLR Pr J

New York Stock Exchange

Series K Cumulative Redeemable Preferred Stock

DLR Pr K

New York Stock Exchange

Series L Cumulative Redeemable Preferred Stock

DLR Pr L

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Digital Realty Trust, Inc.

    

Yes        No    

Digital Realty Trust, L.P.

Yes        No    

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Digital Realty Trust, Inc.

    

Yes        No    

Digital Realty Trust, L.P.

Yes        No    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Digital Realty Trust, Inc.:

Large accelerated filer     

    

Accelerated filer                      

Non-accelerated filer       

Smaller reporting company     

Emerging growth company     

Digital Realty Trust, L.P.:

Large accelerated filer     

    

Accelerated filer                      

Non-accelerated filer       

Smaller reporting company     

Emerging growth company     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Digital Realty Trust, Inc.

    

Digital Realty Trust, L.P.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Digital Realty Trust, Inc.

    

Yes        No    

Digital Realty Trust, L.P.

Yes        No    

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Digital Realty Trust, Inc.:

Class

    

Outstanding at August 4, 20213, 2022

Common Stock, $.01 par value per share

282,593,428287,407,842

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 20212022 of Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, of which Digital Realty Trust, Inc. is the sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “our Company”, or “the Company” refer to Digital Realty Trust, Inc. together with its consolidated subsidiaries, including Digital Realty Trust, L.P. Unless otherwise, indicated or unless the context requires otherwise, all references to the “Parent” refer to Digital Realty Trust, Inc., and all references to “our Operating Partnership” orPartnership,” “the Operating Partnership” or “the OP” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.

The Parent is a real estate investment trust, or REIT, and the sole general partner of the OP. In statements regarding qualification as a REIT, such terms refer solely to Digital Realty Trust, Inc. As of June 30, 2021,2022, the Parent owned an approximate 97.6%97.8% common general partnership interest in the OP.Digital Realty Trust, L.P. The remaining approximate 2.4%2.2% of the common limited partnership interests of the OPDigital Realty Trust, L.P. are owned by non-affiliated third parties and certain directors and officers of the Parent. As of  June 30, 2021,2022, the Parent owned all of the preferred limited partnership interests of the OP.Digital Realty Trust, L.P. As the sole general partner of the OP,Digital Realty Trust, L.P., the Parent has the full, exclusive and complete responsibility for the OP’s day-to-day management and control.

We believe combining the quarterly reports on Form 10-Q of the Parent and the OP into this single report results in the following benefits:

enhancing investors’ understanding of the Parent and the OP by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Parent and the OP; and
creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

It is important to understand the few differences between the Parent and the OP in the context of how we operate the Company. The Parent does not conduct business itself, other than acting as the sole general partner of the OP and issuing public equity from time to time and guaranteeing certain unsecured debt of the OP and certain of its subsidiaries and affiliates. The OP holds substantially all the assets of the business, directly or indirectly. The OP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent, which are generally contributed to the OP in exchange for partnership units, the OP generates capital required by the business through the OP’s operations, incurrence of indebtedness and issuance of partnership units to third parties.

The presentation of noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Parent and those of the OP. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity and capital issuances in the Parent and in the OP.

The preferred stock, common stock, additional paid-in capital, accumulated other comprehensive income (loss) and distributions in excess of net earnings of the Parent are presented as stockholders’ equity in the Parent’s consolidated financial statements. These items represent the common and preferred general partnership interests held by the Parent in the OP and are presented as general partner’s capital within partners’ capital in the OP’s consolidated financial statements. The common limited partnership interests held by the limited partners in the OP are presented as noncontrolling interest within equity in the Parent’s consolidated financial statements and as limited partners’ capital within partners’ capital in the OP’s consolidated financial statements.

To highlight the differences between the Parent and the OP, separate sections in this report, as applicable, individually discuss the Parent and the OP, including separate financial statements and separate Exhibit 31 and 32

2

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certifications. In the sections that combine disclosure of the Parent and the OP, this report refers to actions or holdings as being actions or holdings of the Company.

As general partner with control of the OP, the Parent consolidates the OP for financial reporting purposes, and it does not have significant assets other than its investment in the OP. Therefore, the assets and liabilities of the Parent and the OP are the same on their respective condensed consolidated financial statements. The separate discussions of the Parent and the OP in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

In this report, “properties” and “buildings” refer to all or any of the buildings in our portfolio, including data centers and non-data centers, and “data centers” refers only to the properties or buildings in our portfolio that contain data center space. In this report, “global revolving credit facility” refers to our Operating Partnership’s $2.35 billion senior unsecured revolving credit facility and global senior credit agreement, as amended; “Yen revolving credit facility” refers to our Operating Partnership’s ¥33,285,000,000 (approximately $300 million based on exchange rates at June 30, 2021) senior unsecured revolving credit facility and Yen credit agreement, as amended; and “revolving credit facilities” or “global revolving credit facilities” refer to our global revolving credit facility and our Yen revolving credit facility, collectively.

32

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DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, L.P.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 20212022

TABLE OF CONTENTS

Page
Number

PART I.

FINANCIAL INFORMATION

ITEM 1.

Condensed Consolidated Financial Statements of Digital Realty Trust, Inc.:

Condensed Consolidated Balance Sheets as of June 30, 20212022 (unaudited) and December 31, 20202021 (unaudited)

54

Condensed Consolidated Income Statements for the three and six months ended June 30, 20212022 and 20202021 (unaudited)

65

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 20212022 and 20202021 (unaudited)

76

Condensed Consolidated Statement of Equity for the three and six months ended June 30, 20212022 and 20202021 (unaudited)

87

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 20212022 and 20202021 (unaudited)

1211

Condensed Consolidated Financial Statements of Digital Realty Trust, L.P.:

Condensed Consolidated Balance Sheets as of June 30, 20212022 (unaudited) and December 31, 20202021 (unaudited)

1312

Condensed Consolidated Income Statements for the three and six months ended June 30, 20212022 and 20202021 (unaudited)

1413

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 20212022 and 20202021 (unaudited)

1514

Condensed Consolidated Statement of Capital for the three and six months ended June 30, 20212022 and 20202021 (unaudited)

1615

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 20212022 and 20202021 (unaudited)

2019

Notes to Condensed Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (unaudited)

2120

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

5558

ITEM 4.

Controls and Procedures (Digital Realty Trust, Inc.)

5659

Controls and Procedures (Digital Realty Trust, L.P.)

5660

PART II.

OTHER INFORMATION

5861

ITEM 1.

Legal Proceedings

5861

ITEM 1A.

Risk Factors

5861

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

5862

ITEM 3.

Defaults Upon Senior Securities

5962

ITEM 4.

Mine Safety Disclosures

5962

ITEM 5.

Other Information

5962

ITEM 6.

Exhibits

6063

Signatures

6165

43

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share data)

    

June 30, 

    

December 31, 

2021

2020

ASSETS

Investments in real estate:

Investments in properties, net

$

20,782,348

$

20,582,954

Investments in unconsolidated entities

 

1,119,026

 

1,148,158

Net investments in real estate

 

21,901,374

 

21,731,112

Operating lease right-of-use assets, net

1,452,633

1,386,959

Cash and cash equivalents

 

120,482

 

108,501

Accounts and other receivables, net

 

630,086

 

603,111

Deferred rent

 

539,379

 

528,180

Goodwill

 

8,185,931

 

8,330,996

Customer relationship value, deferred leasing costs and intangibles, net

 

2,956,027

3,122,904

Other assets

 

365,308

 

264,528

Total assets

$

36,151,220

$

36,076,291

LIABILITIES AND EQUITY

Global revolving credit facilities, net

$

1,026,368

$

531,905

Unsecured term loans, net

 

 

536,580

Unsecured senior notes, net of discount

 

12,659,043

 

11,997,010

Secured and other debt, including premiums

 

242,410

 

239,222

Operating lease liabilities

1,545,689

1,468,712

Accounts payable and other accrued liabilities

 

1,367,240

 

1,420,162

Deferred tax liabilities, net

742,127

698,308

Accrued dividends and distributions

 

 

324,386

Security deposits and prepaid rents

 

362,606

 

371,659

Total liabilities

 

17,945,483

 

17,587,944

Redeemable noncontrolling interests

 

41,490

 

42,011

Commitments and contingencies

Equity:

Stockholders’ Equity:

Preferred Stock: $0.01 par value per share, 110,000,000 shares authorized; $755,000 and $956,250 liquidation preference ($25.00 per share), and 30,200,000 and 38,250,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

731,690

 

950,940

Common Stock: $0.01 par value per share, 392,000,000 shares authorized; 282,603,152 and 280,289,726 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

2,806

 

2,788

Additional paid-in capital

 

20,844,834

 

20,626,897

Accumulated dividends in excess of earnings

 

(4,153,407)

 

(3,997,938)

Accumulated other comprehensive income, net

 

31,733

 

135,010

Total stockholders’ equity

 

17,457,656

 

17,717,697

Noncontrolling interests

 

706,591

 

728,639

Total equity

 

18,164,247

 

18,446,336

Total liabilities and equity

$

36,151,220

$

36,076,291

    

June 30, 

    

December 31, 

2022

2021

ASSETS

Investments in real estate:

Investments in properties, net

$

20,800,389

$

20,762,241

Investments in unconsolidated entities

 

1,942,549

 

1,807,689

Net investments in real estate

 

22,742,938

 

22,569,930

Operating lease right-of-use assets, net

1,310,970

1,405,441

Cash and cash equivalents

 

99,226

 

142,698

Accounts and other receivables, net

 

797,208

 

671,721

Deferred rent, net

 

554,016

 

547,385

Goodwill

 

7,545,107

 

7,937,440

Customer relationship value, deferred leasing costs and intangibles, net

 

2,521,390

2,735,486

Other assets

 

385,202

 

359,459

Total assets

$

35,956,057

$

36,369,560

LIABILITIES AND EQUITY

Global revolving credit facilities, net

$

1,440,040

$

398,172

Unsecured senior notes, net of discount

 

12,695,568

 

12,903,370

Secured and other debt, including premiums

 

158,699

 

146,668

Operating lease liabilities

1,418,540

1,512,187

Accounts payable and other accrued liabilities

 

1,619,222

 

1,543,623

Deferred tax liabilities, net

611,582

666,451

Accrued dividends and distributions

 

 

338,729

Security deposits and prepaid rents

 

341,140

 

336,578

Total liabilities

 

18,284,791

 

17,845,778

Redeemable noncontrolling interests

 

41,047

 

46,995

Commitments and contingencies

Equity:

Stockholders’ Equity:

Preferred Stock: $0.01 par value per share, 110,000 shares authorized; $755,000 liquidation preference ($25.00 per share), 30,200 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

731,690

 

731,690

Common Stock: $0.01 par value per share, 392,000 shares authorized; 284,734 and 284,415 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

2,824

 

2,824

Additional paid-in capital

 

21,091,364

 

21,075,863

Accumulated dividends in excess of earnings

 

(4,211,685)

 

(3,631,929)

Accumulated other comprehensive loss, net

 

(475,561)

 

(173,880)

Total stockholders’ equity

 

17,138,632

 

18,004,568

Noncontrolling interests

 

491,587

 

472,219

Total equity

 

17,630,219

 

18,476,787

Total liabilities and equity

$

35,956,057

$

36,369,560

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except share and per share data)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

    

2021

    

2020

Operating Revenues:

Rental and other services

$

1,089,395

$

987,675

$

2,177,301

$

1,807,747

Fee income and other

 

3,793

 

5,320

 

 

6,278

 

8,585

Total operating revenues

 

1,093,188

 

992,995

 

2,183,579

 

1,816,332

Operating Expenses:

Rental property operating and maintenance

 

383,216

 

332,647

 

 

744,995

 

598,355

Property taxes and insurance

 

48,498

 

48,441

 

 

101,001

 

94,111

Depreciation and amortization

 

368,981

 

349,165

 

 

738,714

 

640,622

General and administrative

 

97,492

 

94,291

 

 

197,486

 

157,829

Transactions and integration

 

7,075

 

15,618

 

 

21,195

 

72,419

Other

 

2,298

 

22

 

 

2,041

 

136

Total operating expenses

 

907,560

 

840,184

 

 

1,805,432

 

1,563,472

Operating income

 

185,628

 

152,811

 

 

378,147

 

252,860

Other Income (Expenses):

Equity in earnings (loss) of unconsolidated entities

 

52,143

 

(7,632)

 

 

29,112

 

(86,628)

Gain on disposition of properties, net

499

0

334,420

304,801

Other expense, net

 

10,124

 

22,163

 

 

2,938

 

18,621

Interest expense

 

(75,014)

 

(79,874)

 

 

(150,667)

 

(165,674)

Loss from early extinguishment of debt

 

0

 

0

 

 

(18,347)

 

(632)

Income tax expense

 

(47,582)

 

(11,490)

 

 

(55,129)

 

(18,672)

Net income

 

125,798

 

75,978

 

 

520,474

 

304,676

Net income attributable to noncontrolling interests

 

(4,544)

 

(1,147)

 

 

(13,300)

 

(5,831)

Net income attributable to Digital Realty Trust, Inc.

 

121,254

 

74,831

 

 

507,174

 

298,845

Preferred stock dividends, including undeclared dividends

 

(11,885)

 

(21,155)

 

 

(25,399)

 

(42,310)

Gain on redemption of preferred stock

 

18,000

 

0

 

 

18,000

 

Net income available to common stockholders

$

127,369

$

53,676

$

499,775

$

256,535

Net income per share available to common stockholders:

Basic

$

0.45

$

0.20

$

1.78

$

1.05

Diluted

$

0.45

$

0.20

$

1.77

$

1.04

Weighted average common shares outstanding:

Basic

 

281,791,855

 

267,569,823

 

 

281,445,252

 

244,866,574

Diluted

 

282,433,857

 

270,744,408

 

 

282,075,611

 

247,576,014

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Operating Revenues:

Rental and other services

$

1,131,537

$

1,089,395

$

2,253,087

$

2,177,301

Fee income and other

 

7,785

 

3,793

 

13,557

 

6,278

Total operating revenues

 

1,139,322

 

1,093,188

 

2,266,644

 

2,183,579

Operating Expenses:

Rental property operating and maintenance

 

421,502

 

383,216

857,095

 

744,995

Property taxes and insurance

 

51,049

 

48,498

 

101,273

 

101,001

Depreciation and amortization

 

376,967

 

368,981

 

759,099

 

738,714

General and administrative

 

105,776

 

97,492

 

204,289

 

197,486

Transactions and integration

 

13,586

 

7,075

 

25,554

 

21,195

Other

 

70

 

2,298

 

7,727

 

2,041

Total operating expenses

 

968,950

 

907,560

 

1,955,037

 

1,805,432

Operating income

 

170,372

 

185,628

 

311,607

 

378,147

Other Income (Expenses):

Equity in (loss) earnings of unconsolidated entities

 

(34,088)

 

52,143

 

26,870

 

29,112

Gain on disposition of properties, net

499

2,770

334,420

Other income, net

 

13,008

 

10,124

 

16,059

 

2,938

Interest expense

 

(69,023)

 

(75,014)

 

(135,748)

 

(150,667)

Loss from early extinguishment of debt

 

 

 

(51,135)

 

(18,347)

Income tax expense

 

(16,406)

 

(47,582)

 

(29,650)

 

(55,129)

Net income

 

63,863

 

125,798

 

140,773

 

520,474

Net income attributable to noncontrolling interests

 

(436)

 

(4,544)

 

(4,065)

 

(13,300)

Net income attributable to Digital Realty Trust, Inc.

 

63,427

 

121,254

 

136,708

 

507,174

Preferred stock dividends

 

(10,181)

 

(11,885)

 

(20,362)

 

(25,399)

Gain on redemption of preferred stock

 

 

18,000

 

 

18,000

Net income available to common stockholders

$

53,246

$

127,369

$

116,346

$

499,775

Net income per share available to common stockholders:

Basic

$

0.19

$

0.45

$

0.41

$

1.78

Diluted

$

0.19

$

0.45

$

0.41

$

1.77

Weighted average common shares outstanding:

Basic

 

284,694

 

281,792

 

284,610

 

281,445

Diluted

 

285,110

 

282,434

 

284,980

 

282,076

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

2022

    

2021

    

2022

    

2021

Net income

$

125,798

$

75,978

$

520,474

$

304,676

$

63,863

$

125,798

$

140,773

$

520,474

Other comprehensive income (loss):

Foreign currency translation adjustments

 

111,678

 

88,659

 

(107,324)

 

(268,544)

 

(293,913)

 

111,678

 

(307,790)

 

(107,324)

Increase (decrease) in fair value of interest rate swaps

 

226

 

(1,011)

 

563

 

(12,849)

Increase in fair value of interest rate swaps

 

356

 

226

 

(988)

 

563

Reclassification to interest expense from interest rate swaps

 

353

 

784

 

712

 

226

 

41

 

353

 

(62)

 

712

Other comprehensive income (loss)

112,257

88,432

(106,049)

(281,167)

Comprehensive income

 

238,055

 

164,410

 

414,425

 

23,509

Comprehensive (income) loss attributable to noncontrolling interests

 

(7,285)

 

(3,706)

 

(10,528)

 

4,907

Comprehensive income attributable to Digital Realty Trust, Inc.

$

230,770

$

160,704

$

403,897

$

28,416

Other comprehensive (loss) income

(293,516)

112,257

(308,840)

(106,049)

Comprehensive (loss) income

 

(229,653)

 

238,055

 

(168,067)

 

414,425

Comprehensive loss (income) attributable to noncontrolling interests

 

6,362

 

(7,285)

 

3,093

 

(10,528)

Comprehensive (loss) income attributable to Digital Realty Trust, Inc.

$

(223,291)

$

230,770

$

(164,974)

$

403,897

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)

Accumulated

Accumulated

Redeemable

Number of

Additional

Dividends in

Other

Noncontrolling

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Three Months Ended June 30, 2022

    

Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Loss, Net

    

Interests

    

Total Equity

Balance as of March 31, 2022

 

$

42,734

$

731,690

284,666,082

2,824

$

21,069,391

$

(3,916,854)

$

(188,844)

$

510,499

$

18,208,706

Conversion of common units to common stock

2,436

201

(201)

Vesting of restricted stock, net

65,404

Issuance of common stock, net of costs

 

211

211

Net share settlement to satisfy tax withholding upon vesting

 

(981)

(981)

Amortization of unearned compensation regarding share based awards

22,420

22,420

Reclassification of vested share based awards

(1,746)

1,746

Adjustment to redeemable noncontrolling interests

 

(1,868)

1,868

1,868

Dividends declared on preferred stock

(10,181)

(10,181)

Dividends and distributions on common stock and common and incentive units

(190)

(348,077)

(8,027)

(356,104)

Contributions from (distributions to) noncontrolling interests

 

336

(6,032)

(6,032)

Net income

 

35

63,427

401

63,828

Other comprehensive loss—foreign currency translation adjustments

 

(287,105)

(6,808)

(293,913)

Other comprehensive income—fair value of interest rate swaps

 

347

9

356

Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense

41

41

Balance as of June 30, 2022

 

$

41,047

$

731,690

284,733,922

$

2,824

$

21,091,364

$

(4,211,685)

$

(475,561)

$

491,587

$

17,630,219

See accompanying notes to the condensed consolidated financial statements.

7

Table of Contents

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)

Accumulated

Accumulated

Redeemable

Number of

Additional

Dividends in

Other

Noncontrolling

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Six Months Ended June 30, 2022

    

Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Loss, Net

    

Interests

    

Total Equity

Balance as of December 31, 2021

 

$

46,995

$

731,690

 

284,415,013

$

2,824

$

21,075,863

$

(3,631,929)

$

(173,880)

$

472,219

$

18,476,787

Conversion of common units to common stock

17,297

1,459

(1,459)

Vesting of restricted stock, net

 

259,424

Issuance of common stock, net of costs

 

(3,813)

(3,813)

Shares issued under employee stock purchase plan

 

42,188

4,969

4,969

Net share settlement to satisfy tax withholding upon vesting

 

(7,143)

(7,143)

Amortization of unearned compensation regarding share based awards

 

40,965

40,965

Reclassification of vested share based awards

 

(28,277)

28,277

Adjustment to redeemable noncontrolling interests

 

(7,341)

7,341

7,341

Dividends declared on preferred stock

(20,362)

(20,362)

Dividends and distributions on common stock and common and incentive units

(380)

(696,102)

(15,813)

(711,915)

Contributions from noncontrolling interests

 

1,703

11,527

11,527

Net income

 

70

136,708

3,995

140,703

Other comprehensive loss—foreign currency translation adjustments

 

(300,656)

(7,134)

(307,790)

Other comprehensive loss—fair value of interest rate swaps

 

(965)

(23)

(988)

Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense

 

(60)

(2)

(62)

Balance as of June 30, 2022

 

$

41,047

$

731,690

 

284,733,922

$

2,824

$

21,091,364

$

(4,211,685)

$

(475,561)

$

491,587

$

17,630,219

See accompanying notes to the condensed consolidated financial statements.

8

Table of Contents

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)

Accumulated

Accumulated

Accumulated

Accumulated

Redeemable

Number of

Additional

Dividends in

Other

Redeemable

Number of

Additional

Dividends in

Other

Noncontrolling

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Noncontrolling

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Three Months Ended June 30, 2021

    

Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Income (Loss), Net

    

Interests

    

Total Equity

    

Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Income (Loss), Net

    

Interests

    

Total Equity

Balance as of March 31, 2021

 

$

40,097

$

950,940

281,372,310

$

2,795

$

20,700,282

$

(3,952,497)

$

(77,783)

$

721,587

$

18,345,324

 

$

40,097

$

950,940

281,372,310

$

2,795

$

20,700,282

$

(3,952,497)

$

(77,783)

$

721,587

$

18,345,324

Conversion of common units to common stock

 

 

698,485

 

7

 

57,777

 

 

 

(57,784)

 

 

 

698,485

 

7

 

57,777

 

 

(57,784)

 

Issuance of common stock, net of costs

 

 

477,762

 

5

 

75,665

 

 

 

 

75,670

477,762

5

75,665

75,670

Amortization of share-based compensation

 

 

 

 

21,063

 

 

 

 

21,063

 

 

 

 

21,063

 

 

 

 

21,063

Vesting of restricted stock, net

54,595

 

 

 

54,595

 

 

 

 

 

 

Shares repurchased and retired to satisfy tax withholding upon vesting

(1)

(6,130)

(6,131)

 

(1)

(6,130)

 

 

(6,131)

Reclassification of vested share-based awards

 

 

 

 

(2,322)

 

 

 

2,322

 

 

 

 

(2,322)

 

 

2,322

 

Redemption of series C preferred stock

(219,250)

18,000

(201,250)

(219,250)

18,000

(201,250)

Adjustment to redeemable noncontrolling interests

 

1,501

 

 

 

(1,501)

 

 

 

 

(1,501)

 

1,501

 

 

 

(1,501)

 

 

 

 

(1,501)

Dividends declared on preferred stock

 

 

 

 

 

(11,885)

 

 

 

(11,885)

(11,885)

(11,885)

Dividends and distributions on common stock and common and incentive units

 

(181)

 

 

 

 

(328,279)

 

 

(7,801)

 

(336,080)

(181)

(328,279)

(7,801)

(336,080)

Contributions from noncontrolling interests

 

 

 

 

 

 

 

41,055

 

41,055

 

 

 

 

 

 

 

41,055

 

41,055

Net income

 

73

 

 

 

 

121,254

 

 

4,471

 

125,725

 

73

 

 

 

 

121,254

 

 

4,471

 

125,725

Other comprehensive income—foreign currency translation adjustments

 

 

 

 

 

 

108,951

 

2,727

 

111,678

 

 

 

 

 

 

108,951

 

2,727

 

111,678

Other comprehensive income—fair value of interest rate swaps

 

 

 

 

 

 

221

 

5

 

226

 

 

 

 

 

 

221

 

5

 

226

Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

 

344

 

9

 

353

 

 

 

 

 

344

9

353

Balance as of June 30, 2021

 

$

41,490

$

731,690

282,603,152

$

2,806

$

20,844,834

$

(4,153,407)

$

31,733

$

706,591

$

18,164,247

 

$

41,490

$

731,690

282,603,152

$

2,806

$

20,844,834

$

(4,153,407)

$

31,733

$

706,591

$

18,164,247

See accompanying notes to the condensed consolidated financial statements.

89

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)

Accumulated

Accumulated

Number of

Additional

Dividends in

Other

Total

Redeemable

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Six Months Ended June 30, 2021

    

Noncontrolling Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Loss, Net

    

Interests

    

Total Equity

Balance as of December 31, 2020

 

$

42,011

$

950,940

 

280,289,726

$

2,788

$

20,626,897

$

(3,997,938)

$

135,010

$

728,639

$

18,446,336

Conversion of common units to common stock

 

 

 

1,340,675

 

13

 

111,384

 

 

 

(111,397)

 

Common stock issued in connection with acquisition

 

 

 

125,395

 

1

 

18,269

 

 

 

 

18,270

Issuance of common stock, net of costs

 

 

 

477,762

 

5

 

75,433

 

 

 

 

75,438

Shares issued under employee stock purchase plan

 

 

 

29,475

 

 

3,427

 

 

 

 

3,427

Amortization of share-based compensation

 

 

 

 

 

49,851

 

 

 

 

49,851

Vesting of restricted stock, net

 

 

 

340,119

 

 

 

 

 

 

Shares repurchased and retired to satisfy tax withholding upon vesting

 

 

 

 

(1)

 

(15,848)

 

 

 

 

(15,849)

Reclassification of vested share-based awards

 

 

 

 

 

(22,870)

 

 

 

22,870

 

Redemption of series C preferred stock

(219,250)

18,000

(201,250)

Adjustment to redeemable noncontrolling interests

 

1,709

 

 

 

 

(1,709)

 

 

 

 

(1,709)

Dividends declared on preferred stock

 

 

 

 

 

 

(25,399)

 

 

 

(25,399)

Dividends and distributions on common stock and common and incentive units

 

(362)

 

 

 

 

 

(655,244)

 

 

(16,502)

 

(671,746)

Contributions from noncontrolling interests

 

(2,150)

 

 

 

 

 

 

 

72,735

 

72,735

Net income

 

282

 

 

 

 

 

507,174

 

 

13,018

 

520,192

Other comprehensive loss—foreign currency translation adjustments

 

 

 

 

 

 

 

(104,520)

 

(2,804)

 

(107,324)

Other comprehensive income—fair value of interest rate swaps

 

 

 

 

 

 

 

549

 

14

 

563

Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

 

 

694

 

18

 

712

Balance as of June 30, 2021

 

$

41,490

$

731,690

 

282,603,152

$

2,806

$

20,844,834

$

(4,153,407)

$

31,733

$

706,591

$

18,164,247

See accompanying notes to the condensed consolidated financial statements.

9

Table of Contents

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)

Accumulated

Accumulated

Redeemable

Number of

Additional

Dividends in

Other

Noncontrolling

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Three Months Ended June 30, 2020

    

Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Loss, Net

    

Interests

    

Total Equity

Balance as of March 31, 2020

 

$

40,027

$

1,434,420

263,595,562

$

2,622

$

18,606,766

$

(3,139,350)

$

(444,222)

$

716,304

$

17,176,540

Conversion of common units to common stock

 

 

212,859

 

2

 

18,043

 

 

 

(18,045)

 

Common stock and share-based awards issued in connection with Interxion Combination

9,800

9,800

Issuance of common stock, net of costs

 

 

4,535,951

 

46

 

638,080

 

 

 

 

638,126

Shares issued under employee stock purchase plan

 

 

 

 

 

 

 

 

Amortization of share-based compensation

 

 

 

 

22,050

 

 

 

 

22,050

Vesting of restricted stock, net

54,701

 

Shares repurchased and retired to satisfy tax withholding upon vesting

(432)

(432)

Reclassification of vested share-based awards

 

 

 

 

(1,497)

 

 

 

1,497

 

Adjustment to redeemable noncontrolling interests

 

499

 

 

 

(499)

 

 

 

 

(499)

Dividends declared on preferred stock

 

 

 

 

 

(21,155)

 

 

 

(21,155)

Dividends and distributions on common stock and common and incentive units

 

(175)

 

 

 

 

(300,851)

 

 

(10,128)

 

(310,979)

Contributions from noncontrolling interests

 

515

 

 

 

 

 

 

4,506

 

4,506

Net income (loss)

 

(282)

 

 

 

 

74,831

 

 

1,429

 

76,260

Other comprehensive income—foreign currency translation adjustments

 

 

 

 

 

 

86,093

 

2,566

 

88,659

Other comprehensive loss—fair value of interest rate swaps

 

 

 

 

 

 

(981)

 

(30)

 

(1,011)

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

 

761

 

23

 

784

Balance as of June 30, 2020

 

$

40,584

$

1,434,420

268,399,073

$

2,670

$

19,292,311

$

(3,386,525)

$

(358,349)

$

698,122

$

17,682,649

See accompanying notes to the condensed consolidated financial statements.

10

Table of Contents

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)

Accumulated

Accumulated

Accumulated

Accumulated

Number of

Additional

Dividends in

Other

Total

Redeemable

Number of

Additional

Dividends in

Other

Redeemable

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Noncontrolling

Preferred

Common

Common

Paid-in

Excess of

Comprehensive

Noncontrolling

Six Months Ended June 30, 2020

    

Noncontrolling Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Loss, Net

    

Interests

    

Total Equity

Six Months Ended June 30, 2021

    

Interests

    

Stock

    

Shares

    

Stock

    

Capital

    

Earnings

    

Income, Net

    

Interests

    

Total Equity

Balance as of December 31, 2019

 

$

41,465

$

1,434,420

 

208,900,758

$

2,073

$

11,577,320

$

(3,046,579)

$

(87,922)

$

728,788

$

10,608,100

Balance as of December 31, 2020

 

$

42,011

$

950,940

 

280,289,726

$

2,788

$

20,626,897

$

(3,997,938)

$

135,010

$

728,639

$

18,446,336

Conversion of common units to common stock

 

 

 

805,812

 

8

 

70,274

 

 

 

(70,282)

 

 

 

 

1,340,675

 

13

111,384

 

 

 

(111,397)

 

Common stock and share-based awards issued in connection with Interxion Combination

 

 

 

54,298,595

 

543

 

6,984,509

 

 

 

 

6,985,052

Common stock issued in connection with acquisition

 

 

 

125,395

 

1

18,269

 

 

 

 

18,270

Issuance of common stock, net of costs

 

 

 

4,585,951

 

46

 

644,585

 

 

 

 

644,631

 

 

 

477,762

 

5

75,433

 

 

 

 

75,438

Shares issued under employee stock purchase plan

 

 

 

25,234

 

 

2,638

 

 

 

 

2,638

 

 

 

29,475

 

3,427

 

 

 

 

3,427

Amortization of share-based compensation

 

 

 

 

37,730

 

 

 

 

37,730

 

 

 

 

49,851

 

 

 

 

49,851

Vesting of restricted stock, net

 

 

(217,277)

 

 

 

 

 

 

 

 

340,119

 

 

 

 

 

Shares repurchased and retired to satisfy tax withholding upon vesting

 

 

 

 

 

(4,750)

 

 

 

 

(4,750)

 

 

 

(1)

(15,848)

 

 

 

 

(15,849)

Reclassification of vested share-based awards

 

 

 

 

 

(16,504)

 

 

 

16,504

 

 

 

 

 

(22,870)

 

 

 

22,870

 

Redemption of series C preferred stock

(219,250)

18,000

(201,250)

Adjustment to redeemable noncontrolling interests

 

3,491

 

 

 

 

(3,491)

 

 

 

 

(3,491)

1,709

(1,709)

(1,709)

Dividends declared on preferred stock

 

 

 

 

 

 

(42,310)

 

 

 

(42,310)

 

 

 

 

 

(25,399)

 

 

 

(25,399)

Dividends and distributions on common stock and common and incentive units

 

(350)

 

 

 

 

 

(596,481)

 

 

(19,150)

 

(615,631)

 

(362)

 

 

 

 

(655,244)

 

 

(16,502)

 

(671,746)

Contributions from noncontrolling interests

 

1,567

 

 

 

 

 

 

 

43,982

 

43,982

Net income (loss)

 

(3,188)

 

 

 

 

 

298,845

 

 

9,019

 

307,864

Contributions from (distributions to) noncontrolling interests

 

(2,150)

 

 

 

 

 

 

72,735

 

72,735

Net income

��

282

 

 

 

 

507,174

 

 

13,018

 

520,192

Other comprehensive loss—foreign currency translation adjustments

 

(2,401)

 

 

 

 

 

 

(258,257)

 

(10,286)

 

(268,513)

 

 

 

 

 

 

(104,520)

 

(2,804)

 

(107,324)

Other comprehensive loss—fair value of interest rate swaps

 

 

 

 

 

 

 

(12,393)

 

(456)

 

(12,849)

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

 

 

223

 

3

 

226

Balance as of June 30, 2020

 

$

40,584

$

1,434,420

 

268,399,073

$

2,670

$

19,292,311

$

(3,386,525)

$

(358,349)

$

698,122

$

17,682,649

Other comprehensive income—fair value of interest rate swaps

 

 

 

 

 

 

549

 

14

 

563

Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense

694

18

712

Balance as of June 30, 2021

 

$

41,490

$

731,690

 

282,603,152

$

2,806

$

20,844,834

$

(4,153,407)

$

31,733

$

706,591

$

18,164,247

See accompanying notes to the condensed consolidated financial statements.

1110

Table of Contents

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Six Months Ended June 30, 

    

2021

    

2020

Cash flows from operating activities:

  

 

  

Net income

$

520,474

$

304,676

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on disposition of properties, net

 

(334,420)

 

(304,801)

Equity in (earnings) loss of unconsolidated entities

 

(29,112)

 

86,628

Distributions from unconsolidated entities

 

57,037

 

9,231

Depreciation and amortization

738,714

640,622

Amortization of share-based compensation

 

47,668

 

35,580

Loss from early extinguishment of debt

 

18,347

 

632

Amortization of acquired above-market leases and acquired below-market leases, net

 

4,157

 

7,087

Amortization of deferred financing costs and debt discount / premium

9,571

9,820

Other items, net

(2,066)

(10,944)

Changes in assets and liabilities:

Increase in accounts receivable and other assets

(146,503)

(48,345)

Decrease in accounts payable and other liabilities

(33,945)

(17,816)

Net cash provided by operating activities

 

849,922

 

712,370

Cash flows from investing activities:

Improvements to investments in real estate

 

(1,081,446)

 

(854,885)

Cash paid for business combinations and asset acquisitions, net of cash and restricted cash acquired

(168,439)

(234,448)

Proceeds from (investment in) unconsolidated entities

6,131

(94,169)

Proceeds from sale of real estate

703,936

526,362

Other investing activities, net

(18,827)

(21,675)

Net cash used in investing activities

 

(558,645)

 

(678,815)

Cash flows from financing activities:

Net proceeds (payments on) from credit facilities

$

508,169

$

(287,271)

Borrowings on secured / unsecured debt

1,218,650

2,357,417

Repayments on secured / unsecured debt

(886,963)

(1,436,362)

Premium paid for early extinguishment of debt

(16,482)

Capital contributions from noncontrolling interests

 

70,585

 

36,876

Proceeds from issuance of common stock, net

75,438

639,881

Redemption of preferred stock

 

(201,250)

 

Payments of dividends and distributions

(1,021,893)

(892,911)

Other financing activities, net

(21,602)

(12,802)

Net cash (used in) provided by financing activities

 

(275,348)

 

404,828

Net increase in cash, cash equivalents and restricted cash

 

15,929

 

438,383

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(11,068)

 

(16,603)

Cash, cash equivalents and restricted cash at beginning of period

 

123,652

 

97,253

Cash, cash equivalents and restricted cash at end of period

$

128,513

$

519,033

Six Months Ended June 30, 

    

2022

    

2021

Cash flows from operating activities:

  

 

Net income

$

140,773

$

520,474

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on disposition of properties, net

 

(2,770)

 

(334,420)

Equity in (earnings) of unconsolidated entities

 

(26,870)

 

(29,112)

Distributions from unconsolidated entities

 

22,972

 

57,631

Depreciation and amortization

759,099

738,714

Amortization of share-based compensation

 

40,965

 

47,668

Loss from early extinguishment of debt

 

51,135

 

18,347

Straight-lined rents and amortization of above and below market leases

 

(16,885)

 

(14,908)

Amortization of deferred financing costs and debt discount / premium

9,359

9,571

Other items, net

17,024

30,586

Changes in assets and liabilities:

Increase in accounts receivable and other assets

(248,310)

(126,688)

Increase (decrease) in accounts payable and other liabilities

37,086

(67,372)

Net cash provided by operating activities

 

783,578

850,491

Cash flows from investing activities:

Improvements to investments in real estate

 

(1,067,027)

 

(1,081,446)

Cash paid for assets acquired

(97,205)

(168,439)

(Investment in) proceeds from unconsolidated entities, net

(199,945)

6,131

Proceeds from sale of real estate

703,936

Other investing activities, net

(63,655)

(18,827)

Net cash (used in) investing activities

 

(1,427,832)

 

(558,645)

Cash flows from financing activities:

Net proceeds from credit facilities

$

1,077,719

$

508,169

Borrowings on secured / unsecured debt

1,125,451

1,218,650

Repayments on secured / unsecured debt

(450,737)

(886,963)

Premium paid for early extinguishment of debt

(49,662)

(16,482)

Capital contributions from noncontrolling interests, net

 

17,977

 

70,585

Proceeds from issuance of common stock, net

75,438

Redemption of preferred stock

 

 

(201,250)

Payments of dividends and distributions

(1,071,386)

(1,021,893)

Other financing activities, net

(16,271)

(21,602)

Net cash provided by (used in) financing activities

 

633,091

 

(275,348)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(11,163)

 

16,498

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(31,101)

 

(11,637)

Cash, cash equivalents and restricted cash at beginning of period

 

151,485

 

123,652

Cash, cash equivalents and restricted cash at end of period

$

109,221

$

128,513

See accompanying notes to the condensed consolidated financial statements.

1211

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per unit data)

    

June 30, 

    

December 31, 

2021

2020

ASSETS

  

  

Investments in real estate:

 

  

 

  

Investments in properties, net

$

20,782,348

$

20,582,954

Investments in unconsolidated entities

 

1,119,026

 

1,148,158

Net investments in real estate

 

21,901,374

 

21,731,112

Operating lease right-of-use assets, net

1,452,633

1,386,959

Cash and cash equivalents

 

120,482

 

108,501

Accounts and other receivables, net

 

630,086

 

603,111

Deferred rent

 

539,379

 

528,180

Goodwill

 

8,185,931

 

8,330,996

Customer relationship value, deferred leasing costs and intangibles, net

 

2,956,027

 

3,122,904

Other assets

 

365,308

 

264,528

Total assets

$

36,151,220

$

36,076,291

LIABILITIES AND CAPITAL

 

  

 

  

Global revolving credit facilities, net

$

1,026,368

$

531,905

Unsecured term loans, net

 

 

536,580

Unsecured senior notes, net

 

12,659,043

 

11,997,010

Secured and other debt, including premiums

242,410

239,222

Operating lease liabilities

1,545,689

1,468,712

Accounts payable and other accrued liabilities

 

1,367,240

 

1,420,162

Deferred tax liabilities, net

742,127

698,308

Accrued dividends and distributions

 

 

324,386

Security deposits and prepaid rents

 

362,606

 

371,659

Total liabilities

 

17,945,483

 

17,587,944

Redeemable noncontrolling interests

41,490

42,011

Commitments and contingencies

 

 

Capital:

 

  

 

  

Partners’ capital:

 

  

 

  

General Partner:

 

  

 

  

Preferred units, $755,000 and $956,250 liquidation preference ($25.00 per unit), and 30,200,000 and 38,250,000 units issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

731,690

 

950,940

Common units, 282,603,152 and 280,289,726 units issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

16,694,233

 

16,631,747

Limited Partners, 7,055,409 and 8,046,267 units issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

516,879

 

609,190

Accumulated other comprehensive income

 

28,751

 

134,800

Total partners’ capital

 

17,971,553

 

18,326,677

Noncontrolling interests

 

192,694

 

119,659

Total capital

 

18,164,247

 

18,446,336

Total liabilities and capital

$

36,151,220

$

36,076,291

    

June 30, 

    

December 31, 

2022

2021

ASSETS

  

  

Investments in real estate:

 

  

 

  

Investments in properties, net

$

20,800,389

$

20,762,241

Investments in unconsolidated entities

 

1,942,549

 

1,807,689

Net investments in real estate

 

22,742,938

 

22,569,930

Operating lease right-of-use assets, net

1,310,970

1,405,441

Cash and cash equivalents

 

99,226

 

142,698

Accounts and other receivables, net

 

797,208

 

671,721

Deferred rent, net

 

554,016

 

547,385

Goodwill

 

7,545,107

 

7,937,440

Customer relationship value, deferred leasing costs and intangibles, net

 

2,521,390

 

2,735,486

Other assets

 

385,202

 

359,459

Total assets

$

35,956,057

$

36,369,560

LIABILITIES AND CAPITAL

 

  

 

  

Global revolving credit facilities, net

$

1,440,040

$

398,172

Unsecured senior notes, net

 

12,695,568

 

12,903,370

Secured and other debt, including premiums

158,699

146,668

Operating lease liabilities

1,418,540

1,512,187

Accounts payable and other accrued liabilities

 

1,619,222

 

1,543,623

Deferred tax liabilities, net

611,582

666,451

Accrued dividends and distributions

 

 

338,729

Security deposits and prepaid rents

 

341,140

 

336,578

Total liabilities

 

18,284,791

 

17,845,778

Redeemable noncontrolling interests

41,047

46,995

Commitments and contingencies

 

 

Capital:

 

  

 

  

Partners’ capital:

 

  

 

  

General Partner:

 

  

 

  

Preferred units, $755,000 liquidation preference ($25.00 per unit), and 30,200 units issued and outstanding as of June 30, 2022 and December 31, 2021

 

731,690

 

731,690

Common units, 284,734 and 284,415 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

16,882,503

 

17,446,758

Limited Partners, 6,299 and 5,932 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

446,937

 

432,902

Accumulated other comprehensive loss

 

(490,285)

 

(181,445)

Total partners’ capital

 

17,570,845

 

18,429,905

Noncontrolling interests in consolidated entities

 

59,374

 

46,882

Total capital

 

17,630,219

 

18,476,787

Total liabilities and capital

$

35,956,057

$

36,369,560

See accompanying notes to the condensed consolidated financial statements.

1312

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except unit and per unit data)

Three Months Ended June 30, 

Six Months Ended June 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

2022

    

2021

    

2022

    

2021

Operating Revenues:

 

  

 

  

  

 

  

 

  

 

  

  

 

  

Rental and other services

$

1,089,395

$

987,675

$

2,177,301

$

1,807,747

$

1,131,537

$

1,089,395

$

2,253,087

$

2,177,301

Fee income and other

 

3,793

 

5,320

 

6,278

 

8,585

 

7,785

 

3,793

 

13,557

 

6,278

Total operating revenues

 

1,093,188

 

992,995

 

2,183,579

 

1,816,332

 

1,139,322

 

1,093,188

 

2,266,644

 

2,183,579

Operating Expenses:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Rental property operating and maintenance

 

383,216

 

332,647

 

744,995

 

598,355

 

421,502

 

383,216

 

857,095

 

744,995

Property taxes and insurance

 

48,498

 

48,441

 

101,001

 

94,111

 

51,049

 

48,498

 

101,273

 

101,001

Depreciation and amortization

 

368,981

 

349,165

 

738,714

 

640,622

 

376,967

 

368,981

 

759,099

 

738,714

General and administrative

 

97,492

 

94,291

 

197,486

 

157,829

 

105,776

 

97,492

 

204,289

 

197,486

Transactions and integration

 

7,075

 

15,618

 

21,195

 

72,419

 

13,586

 

7,075

 

25,554

 

21,195

Other

 

2,298

 

22

 

2,041

 

136

 

70

 

2,298

 

7,727

 

2,041

Total operating expenses

 

907,560

 

840,184

 

1,805,432

 

1,563,472

 

968,950

 

907,560

 

1,955,037

 

1,805,432

Operating income

 

185,628

 

152,811

378,147

252,860

 

170,372

 

185,628

311,607

378,147

Other Income (Expenses):

 

 

Equity in earnings (loss) of unconsolidated entities

 

52,143

 

(7,632)

 

29,112

 

(86,628)

 

(34,088)

 

52,143

 

26,870

 

29,112

Gain on disposition of properties, net

499

334,420

304,801

499

2,770

334,420

Other expense, net

 

10,124

 

22,163

 

2,938

 

18,621

Other income (expense), net

 

13,008

 

10,124

 

16,059

 

2,938

Interest expense

 

(75,014)

 

(79,874)

 

(150,667)

 

(165,674)

 

(69,023)

 

(75,014)

 

(135,748)

 

(150,667)

Loss from early extinguishment of debt

(18,347)

(632)

(51,135)

(18,347)

Income tax expense

 

(47,582)

 

(11,490)

 

(55,129)

 

(18,672)

 

(16,406)

 

(47,582)

 

(29,650)

 

(55,129)

Net income

 

125,798

 

75,978

520,474

304,676

 

63,863

 

125,798

140,773

520,474

Net (income) loss attributable to noncontrolling interests

 

(1,344)

 

253

 

(300)

 

3,369

 

1,064

 

(1,344)

 

(965)

 

(300)

Net income attributable to Digital Realty Trust, L.P.

 

124,454

 

76,231

520,174

308,045

 

64,927

 

124,454

139,808

520,174

Preferred units distributions, including undeclared distributions

 

(11,885)

 

(21,155)

 

(25,399)

 

(42,310)

Preferred units distributions

 

(10,181)

 

(11,885)

 

(20,362)

 

(25,399)

Gain on redemption of preferred units

 

18,000

 

 

18,000

 

 

 

18,000

 

 

18,000

Net income available to common unitholders

$

130,569

$

55,076

$

512,775

$

265,735

$

54,746

$

130,569

$

119,446

$

512,775

Net income per unit available to common unitholders:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Basic

$

0.45

$

0.20

$

1.78

$

1.05

$

0.19

$

0.45

$

0.41

$

1.78

Diluted

$

0.45

$

0.20

$

1.77

$

1.04

$

0.19

$

0.45

$

0.41

$

1.77

Weighted average common units outstanding:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Basic

 

288,842,803

 

275,544,524

 

288,588,250

 

252,995,033

 

290,528

 

288,843

 

290,346

 

288,588

Diluted

 

289,484,805

 

278,719,109

 

289,218,609

 

255,704,473

 

290,944

 

289,485

 

290,716

 

289,219

See accompanying notes to the condensed consolidated financial statements.

1413

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

2022

    

2021

    

2022

    

2021

Net income

$

125,798

$

75,978

$

520,474

$

304,676

$

63,863

$

125,798

$

140,773

$

520,474

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

111,678

 

88,659

 

(107,324)

 

(268,544)

 

(293,913)

 

111,678

 

(307,790)

 

(107,324)

Increase (decrease) in fair value of interest rate swaps

 

226

 

(1,011)

 

563

 

(12,849)

Increase in fair value of interest rate swaps

 

356

 

226

 

(988)

 

563

Reclassification to interest expense from interest rate swaps

 

353

 

784

 

712

 

226

 

41

 

353

 

(62)

 

712

Other comprehensive income (loss)

112,257

88,432

(106,049)

(281,167)

Comprehensive income (loss) attributable to Digital Realty Trust, L.P.

$

238,055

$

164,410

$

414,425

$

23,509

Comprehensive (income) loss attributable to noncontrolling interests

 

(1,344)

 

253

 

(300)

 

3,369

Comprehensive income attributable to Digital Realty Trust, L.P.

$

236,711

$

164,663

$

414,125

$

26,878

Other comprehensive (loss) income

(293,516)

112,257

(308,840)

(106,049)

Comprehensive (loss) income attributable to Digital Realty Trust, L.P.

$

(229,653)

$

238,055

$

(168,067)

$

414,425

Comprehensive loss (income) attributable to noncontrolling interests

 

1,064

 

(1,344)

 

(965)

 

(300)

Comprehensive (loss) income attributable to Digital Realty Trust, L.P.

$

(228,589)

$

236,711

$

(169,032)

$

414,125

See accompanying notes to the condensed consolidated financial statements.

1514

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)

Accumulated

Redeemable

General Partner

Limited Partners

Other

Limited Partner

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Three Months Ended June 30, 2022

    

Common Units

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Loss, Net

    

Interests

    

Total Capital

Balance as of March 31, 2022

 

$

42,734

30,200,000

$

731,690

284,666,082

$

17,155,361

6,290,465

$

451,954

$

(196,769)

$

66,470

$

18,208,706

Conversion of limited partner common units to general partner common units

 

 

2,436

 

201

(2,436)

 

(201)

 

 

 

Vesting of restricted common units, net

65,404

Payment of common unit offering costs and other, net

211

211

Issuance of limited partner common units, net

 

 

 

11,449

 

 

 

 

Net unit settlement to satisfy tax withholding upon vesting

 

 

 

(981)

 

 

 

 

(981)

Amortization of share-based compensation

 

 

 

22,420

 

 

 

 

22,420

Reclassification of vested share-based awards

 

 

(1,746)

 

1,746

 

 

 

Adjustment to redeemable partnership units

 

(1,868)

 

 

1,868

 

 

 

 

1,868

Distributions

(190)

(358,258)

(8,027)

(366,285)

Contributions from (distributions to) noncontrolling interests in consolidated entities

336

(6,032)

(6,032)

Net income

35

63,427

1,465

(1,064)

63,828

Other comprehensive loss—foreign currency translation adjustments

 

 

 

 

 

(293,913)

 

 

(293,913)

Other comprehensive income—fair value of interest rate swaps

 

 

 

 

 

356

 

 

356

Other comprehensive loss—reclassification of accumulated other comprehensive income to interest expense

 

 

 

 

 

41

 

 

41

Balance as of June 30, 2022

 

$

41,047

30,200,000

$

731,690

284,733,922

$

16,882,503

6,299,478

$

446,937

$

(490,285)

$

59,374

$

17,630,219

See accompanying notes to the condensed consolidated financial statements.

15

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)

Accumulated

Redeemable

General Partner

Limited Partners

Other

Limited Partner

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Three Months Ended June 30, 2021

    

Common Units

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Income (Loss)

    

Interests

    

Total Capital

Balance as of March 31, 2021

 

$

40,097

38,250,000

$

950,940

281,372,310

$

16,750,580

7,741,271

$

577,015

$

(83,506)

$

150,295

$

18,345,324

Conversion of limited partner common units to general partner common units

 

 

698,485

 

57,784

(698,485)

 

(57,784)

 

 

 

Issuance of common units, net of offering costs

 

 

477,762

 

75,670

 

 

 

 

75,670

Issuance of common units, net of forfeitures

 

 

 

12,623

 

 

 

 

Amortization of share-based compensation

 

 

 

21,063

 

 

 

 

21,063

Vesting of restricted common units, net

 

54,595

 

 

 

 

 

Reclassification of vested share-based awards

 

 

 

(2,322)

 

2,322

 

 

 

Redemption of series C preferred units

(8,050,000)

(219,250)

18,000

(201,250)

Units repurchased and retired to satisfy tax withholding upon vesting

(6,131)

(6,131)

Adjustment to redeemable partnership units

 

1,501

 

 

(1,501)

 

 

 

 

(1,501)

Distributions

 

(181)

 

(11,885)

 

(328,279)

 

(7,801)

 

 

 

(347,965)

Contributions from noncontrolling interests in consolidated entities

 

 

 

 

 

 

41,055

 

41,055

Net income

 

73

 

11,885

 

109,369

 

3,127

 

 

1,344

 

125,725

Other comprehensive income—foreign currency translation adjustments

 

 

 

 

 

111,678

 

0

 

111,678

Other comprehensive income—fair value of interest rate swaps

 

 

 

 

 

226

 

 

226

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

353

 

 

353

Balance as of June 30, 2021

 

$

41,490

30,200,000

$

731,690

282,603,152

$

16,694,233

7,055,409

$

516,879

$

28,751

$

192,694

$

18,164,247

Accumulated

Redeemable

General Partner

Limited Partners

Other

Noncontrolling

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Six Months Ended June 30, 2022

    

Interests

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Loss, Net

    

Interests

    

Total Capital

Balance as of December 31, 2021

 

$

46,995

30,200,000

$

731,690

284,415,013

$

17,446,758

 

5,931,771

$

432,902

$

(181,445)

$

46,882

$

18,476,787

Conversion of limited partner common units to general partner common units

 

 

17,297

 

1,459

 

(17,297)

 

(1,459)

 

 

 

Vesting of restricted common units, net

 

 

259,424

 

 

 

 

 

 

Payment of common unit offering costs and other, net

 

 

(3,813)

 

 

 

 

 

(3,813)

Issuance of limited partner common units, net

 

 

 

 

385,004

 

 

 

 

Units issued in connection with employee stock purchase plan

 

 

42,188

 

4,969

 

 

 

 

 

4,969

Net unit settlement to satisfy tax withholding upon vesting

 

 

 

(7,143)

 

 

 

 

 

(7,143)

Amortization of share-based compensation

 

 

 

40,965

 

 

 

 

 

40,965

Reclassification of vested share-based awards

 

 

 

(28,277)

 

 

28,277

 

 

 

Adjustment to redeemable partnership units

 

(7,341)

 

 

7,341

 

 

 

 

 

7,341

Distributions

 

(380)

 

 

(716,464)

 

 

(15,813)

 

 

 

(732,277)

Contributions from noncontrolling interests in consolidated entities

1,703

11,527

11,527

Net income

 

70

 

 

136,708

 

 

3,030

 

 

965

 

140,703

Other comprehensive loss—foreign currency translation adjustments

 

 

 

 

 

 

(307,790)

 

 

(307,790)

Other comprehensive loss—fair value of interest rate swaps

 

 

 

 

 

 

(988)

 

 

(988)

Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense

(62)

(62)

Balance as of June 30, 2022

 

$

41,047

30,200,000

$

731,690

284,733,922

$

16,882,503

 

6,299,478

$

446,937

$

(490,285)

$

59,374

$

17,630,219

See accompanying notes to the condensed consolidated financial statements.

16

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)

Accumulated

Accumulated

Redeemable

General Partner

Limited Partners

Other

Redeemable

General Partner

Limited Partners

Other

Limited Partner

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Limited Partner

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Six Months Ended June 30, 2021

    

Common Units

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Income

    

Interests

    

Total Capital

Three Months Ended June 30, 2021

    

Common Units

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Income (Loss), Net

    

Interests

    

Total Capital

Balance as of December 31, 2020

 

$

42,011

38,250,000

$

950,940

280,289,726

$

16,631,747

 

8,046,267

$

609,190

$

134,800

$

119,659

$

18,446,336

Balance as of March 31, 2021

 

$

40,097

38,250,000

$

950,940

281,372,310

$

16,750,580

 

7,741,271

$

577,015

$

(83,506)

$

150,295

$

18,345,324

Conversion of limited partner common units to general partner common units

 

 

1,340,675

 

111,397

 

(1,340,675)

 

(111,397)

 

 

 

 

 

698,485

 

57,784

(698,485)

 

(57,784)

 

 

 

Common units issued in connection with acquisition

 

 

125,395

 

18,270

 

 

 

 

 

18,270

Issuance of common units, net of offering costs

 

 

477,762

 

75,438

 

 

 

 

 

75,438

Issuance of common units, net of forfeitures

 

 

 

 

349,817

 

 

 

 

Units issued in connection with employee stock purchase plan

 

 

29,475

 

3,427

 

 

 

 

 

3,427

Units repurchased and retired to satisfy tax withholding upon vesting

 

 

 

(15,849)

 

 

 

 

 

(15,849)

Payment of common unit offering costs and other, net

 

477,762

75,670

 

 

75,670

Issuance of limited partner common units, net

 

 

 

12,623

 

 

 

 

Amortization of share-based compensation

 

 

 

49,851

 

 

 

 

 

49,851

 

 

 

21,063

 

 

 

 

21,063

Vesting of restricted common units, net

 

 

340,119

 

 

 

 

 

 

 

 

54,595

 

 

 

 

 

Reclassification of vested share-based awards

 

 

 

(22,870)

 

 

22,870

 

 

 

(2,322)

2,322

 

 

Redemption of series C preferred units

(8,050,000)

(219,250)

18,000

(201,250)

 

(8,050,000)

 

(219,250)

 

18,000

 

 

 

 

(201,250)

Units repurchased and retired to satisfy tax withholding upon vesting

 

 

(6,131)

 

 

 

 

(6,131)

Adjustment to redeemable partnership units

 

1,709

 

 

(1,709)

 

 

 

 

 

(1,709)

 

1,501

 

 

(1,501)

 

 

 

 

(1,501)

Distributions

 

(362)

 

(25,399)

 

(655,244)

 

 

(16,502)

 

 

 

(697,145)

(181)

(11,885)

(328,279)

(7,801)

(347,965)

Contributions from noncontrolling interests in consolidated entities

 

(2,150)

 

 

 

 

 

 

72,735

 

72,735

41,055

41,055

Net income

 

282

 

25,399

 

481,775

 

 

12,718

 

 

300

 

520,192

 

73

 

11,885

 

109,369

 

3,127

 

 

1,344

 

125,725

Other comprehensive loss—foreign currency translation adjustments

 

 

 

 

 

 

(107,324)

 

 

(107,324)

Other comprehensive income—foreign currency translation adjustments

 

 

 

 

 

111,678

 

 

111,678

Other comprehensive income—fair value of interest rate swaps

 

 

 

 

 

 

563

 

 

563

 

 

 

 

 

226

 

 

226

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

 

712

 

 

712

 

 

 

 

 

353

353

Balance as of June 30, 2021

 

$

41,490

30,200,000

$

731,690

282,603,152

$

16,694,233

 

7,055,409

$

516,879

$

28,751

$

192,694

$

18,164,247

 

$

41,490

30,200,000

$

731,690

282,603,152

$

16,694,233

 

7,055,409

$

516,879

$

28,751

$

192,694

$

18,164,247

See accompanying notes to the condensed consolidated financial statements.

17

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)

Accumulated

Redeemable

General Partner

Limited Partners

Other

Limited Partner

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Three Months Ended June 30, 2020

    

Common Units

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Loss

    

Interests

    

Total Capital

Balance as of March 31, 2020

 

$

40,027

58,250,000

$

1,434,420

263,595,562

$

15,470,038

 

8,473,386

$

673,051

$

(461,007)

$

60,038

$

17,176,540

Conversion of limited partner common units to general partner common units

 

 

212,859

 

18,045

 

(212,859)

 

(18,045)

 

 

 

Common units and share-based awards issued in connection with Interxion Combination

9,800

9,800

Issuance of common units, net of offering costs

 

 

4,535,951

 

638,126

 

 

 

 

 

638,126

Issuance of common units, net of forfeitures

 

 

 

 

27,292

 

 

 

 

Amortization of share-based compensation

 

 

 

22,050

 

 

 

 

 

22,050

Vesting of restricted common units, net

 

54,701

 

 

 

 

 

 

Units repurchased and retired to satisfy tax withholding upon vesting

 

 

 

(432)

 

 

 

 

 

(432)

Reclassification of vested share-based awards

 

 

 

(1,497)

 

 

1,497

 

 

 

Adjustment to redeemable partnership units

 

499

 

 

(499)

 

 

 

 

 

(499)

Distributions

 

(175)

 

(21,155)

 

(300,851)

 

 

(10,128)

 

 

 

(332,134)

Contributions from noncontrolling interests in consolidated entities

 

515

 

 

 

 

 

 

4,506

 

4,506

Net income (loss)

 

(282)

 

21,155

 

53,676

 

 

1,682

 

 

(253)

 

76,260

Other comprehensive income—foreign currency translation adjustments

 

 

 

 

 

 

88,659

 

 

88,659

Other comprehensive loss—fair value of interest rate swaps

 

 

 

 

 

 

(1,011)

 

 

(1,011)

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

 

784

 

 

784

Balance as of June 30, 2020

 

$

40,584

58,250,000

$

1,434,420

268,399,073

$

15,908,456

 

8,287,819

$

648,057

$

(372,575)

$

64,291

$

17,682,649

See accompanying notes to the condensed consolidated financial statements.

18

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)

Accumulated

Redeemable

General Partner

Limited Partners

Other

Limited Partner

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Six Months Ended June 30, 2020

    

Common Units

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Loss

    

Interests

    

Total Capital

Balance as of December 31, 2019

 

$

41,465

58,250,000

$

1,434,420

208,900,758

$

8,532,814

8,843,155

$

711,650

$

(91,409)

$

20,625

$

10,608,100

Conversion of limited partner common units to general partner common units

 

 

805,812

 

70,282

(805,812)

 

(70,282)

 

 

 

Common units and share-based awards issued in connection with Interxion Combination

 

 

54,298,595

 

6,985,052

 

 

 

 

6,985,052

Issuance of common units, net of offering costs

 

 

4,585,951

 

644,631

 

 

 

 

644,631

Issuance of common units, net of forfeitures

 

 

 

250,476

 

 

 

 

Units issued in connection with employee stock purchase plan

 

 

25,234

 

2,638

 

 

 

 

2,638

Amortization of share-based compensation

36,480

36,480

Vesting of restricted common units, net

(217,277)

Units repurchased and retired to satisfy tax withholding upon vesting

 

 

 

(3,500)

 

 

 

 

(3,500)

Reclassification of vested share-based awards

 

 

 

(16,504)

 

16,504

 

 

 

Adjustment to redeemable partnership units

 

3,491

 

 

(3,491)

 

 

 

 

(3,491)

Distributions

 

(350)

 

(42,310)

 

(596,481)

 

(19,150)

 

 

 

(657,941)

Contributions from noncontrolling interests in consolidated entities

 

1,567

 

 

 

 

 

43,982

 

43,982

Net income (loss)

 

(3,188)

 

42,310

 

256,535

 

9,335

 

 

(316)

 

307,864

Other comprehensive loss—foreign currency translation adjustments

(2,401)

(268,543)

(268,543)

Other comprehensive loss—fair value of interest rate swaps

 

 

 

 

 

(12,849)

 

 

(12,849)

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

226

 

 

226

Balance as of June 30, 2020

 

$

40,584

58,250,000

$

1,434,420

268,399,073

$

15,908,456

8,287,819

$

648,057

$

(372,575)

$

64,291

$

17,682,649

Accumulated

Redeemable

General Partner

Limited Partners

Other

Noncontrolling

Preferred Units

Common Units

Common Units

Comprehensive

Noncontrolling

Six Months Ended June 30, 2021

    

Interests

    

Units

    

Amount

    

Units

    

Amount

    

Units

    

Amount

    

Income, Net

    

Interests

    

Total Capital

Balance as of December 31, 2020

 

$

42,011

38,250,000

$

950,940

280,289,726

$

16,631,747

8,046,267

$

609,190

$

134,800

$

119,659

$

18,446,336

Conversion of limited partner common units to general partner common units

 

 

1,340,675

 

111,397

(1,340,675)

 

(111,397)

 

 

 

Common units issued in connection with acquisition

 

125,395

18,270

18,270

Issuance of common units, net of offering costs

 

 

477,762

 

75,438

 

 

 

 

75,438

Issuance of limited partner common units, net

 

 

 

349,817

 

 

 

 

Units issued in connection with employee stock purchase plan

 

 

29,475

 

3,427

 

 

 

 

3,427

Units repurchased and retired to satisfy tax withholding upon vesting

 

 

 

(15,849)

 

 

 

 

(15,849)

Amortization of share-based compensation

 

 

 

49,851

 

 

 

 

49,851

Vesting of restricted common units, net

 

 

340,119

 

 

 

 

 

Reclassification of vested share-based awards

(22,870)

22,870

Redemption of series C preferred units

 

(8,050,000)

 

(219,250)

 

18,000

 

 

 

 

(201,250)

Adjustment to redeemable partnership units

 

1,709

 

 

(1,709)

 

 

 

 

(1,709)

Distributions

 

(362)

 

(25,399)

 

(655,244)

 

(16,502)

 

 

 

(697,145)

Contributions from (distributions to) noncontrolling interests in consolidated entities

 

(2,150)

 

 

 

 

 

72,735

 

72,735

Net income

 

282

 

25,399

 

481,775

 

12,718

 

 

300

 

520,192

Other comprehensive loss—foreign currency translation adjustments

 

 

 

 

 

(107,324)

 

 

(107,324)

Other comprehensive income—fair value of interest rate swaps

563

563

Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense

 

 

 

 

 

712

 

 

712

Balance as of June 30, 2021

 

$

41,490

30,200,000

$

731,690

282,603,152

$

16,694,233

7,055,409

$

516,879

$

28,751

$

192,694

$

18,164,247

See accompanying notes to the condensed consolidated financial statements.

1918

Table of Contents

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Six Months Ended June 30, 

2021

    

2020

Cash flows from operating activities:

  

 

  

Net income

$

520,474

$

304,676

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on disposition of properties, net

 

(334,420)

 

(304,801)

Equity in (earnings) loss of unconsolidated entities

 

(29,112)

 

86,628

Distributions from unconsolidated entities

 

57,037

 

9,231

Depreciation and amortization

738,714

640,622

Amortization of share-based compensation

 

47,668

 

35,580

Loss from early extinguishment of debt

 

18,347

 

632

Amortization of acquired above-market leases and acquired below-market leases, net

 

4,157

 

7,087

Amortization of deferred financing costs and debt discount / premium

9,571

9,820

Other items

(2,066)

(10,944)

Changes in assets and liabilities:

Increase in accounts receivable and other assets

(146,503)

(48,345)

Decrease in accounts payable and other liabilities

(33,945)

(17,816)

Net cash provided by operating activities

 

849,922

 

712,370

Cash flows from investing activities:

Improvements to investments in real estate

 

(1,081,446)

 

(854,885)

Cash paid for business combinations and asset acquisitions, net of cash and restricted cash acquired

(168,439)

(234,448)

Proceeds from (investment in) unconsolidated entities

6,131

(94,169)

Proceeds from sale of real estate

703,936

526,362

Other investing activities, net

(18,827)

(21,675)

Net cash used in investing activities

 

(558,645)

 

(678,815)

Cash flows from financing activities:

Net proceeds (payments on) from credit facilities

$

508,169

$

(287,271)

Borrowings on secured / unsecured debt

1,218,650

2,357,417

Repayments on secured / unsecured debt

(886,963)

(1,436,362)

Premium paid for early extinguishment of debt

(16,482)

Capital contributions from noncontrolling interests

 

70,585

 

36,876

General partner contributions

75,438

639,881

Redemption of preferred units

 

(201,250)

 

Payment of distributions

(1,021,893)

(892,911)

Other financing activities, net

(21,602)

(12,802)

Net cash (used in) provided by financing activities

 

(275,348)

 

404,828

Net increase in cash, cash equivalents and restricted cash

 

15,929

 

438,383

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(11,068)

 

(16,603)

Cash, cash equivalents and restricted cash at beginning of period

 

123,652

 

97,253

Cash, cash equivalents and restricted cash at end of period

$

128,513

$

519,033

Six Months Ended June 30, 

2022

    

2021

Cash flows from operating activities:

  

 

  

Net income

$

140,773

$

520,474

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on disposition of properties, net

 

(2,770)

 

(334,420)

Equity in (earnings) of unconsolidated entities

 

(26,870)

 

(29,112)

Distributions from unconsolidated entities

 

22,972

 

57,631

Depreciation and amortization

759,099

738,714

Amortization of share-based compensation

 

40,965

 

47,668

Loss from early extinguishment of debt

 

51,135

 

18,347

Straight-lined rents and amortization of above and below market leases

 

(16,885)

 

(14,908)

Amortization of deferred financing costs and debt discount / premium

9,359

9,571

Other items, net

17,024

30,586

Changes in assets and liabilities:

Increase in accounts receivable and other assets

(248,310)

(126,688)

Increase (decrease) in accounts payable and other liabilities

 

37,086

 

(67,372)

Net cash provided by operating activities

783,578

850,491

Cash flows from investing activities:

 

Improvements to investments in real estate

 

(1,067,027)

 

(1,081,446)

Cash paid for assets acquired

(97,205)

(168,439)

(Investment in) proceeds from unconsolidated entities, net

 

(199,945)

 

6,131

Proceeds from sale of real estate

703,936

Other investing activities, net

(63,655)

(18,827)

Net cash (used in) investing activities

(1,427,832)

(558,645)

Cash flows from financing activities:

Net proceeds from credit facilities

$

1,077,719

$

508,169

Borrowings on secured / unsecured debt

1,125,451

1,218,650

Repayments on secured / unsecured debt

 

(450,737)

 

(886,963)

Premium paid for early extinguishment of debt

(49,662)

(16,482)

Capital contributions from noncontrolling interests, net

 

17,977

70,585

General partner contributions

75,438

General partner distributions

(201,250)

Payments of dividends and distributions

 

(1,071,386)

 

(1,021,893)

Other financing activities, net

 

(16,271)

 

(21,602)

Net cash provided by (used in) financing activities

 

633,091

 

(275,348)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(11,163)

 

16,498

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(31,101)

(11,637)

Cash, cash equivalents and restricted cash at beginning of period

151,485

123,652

Cash, cash equivalents and restricted cash at end of period

$

109,221

$

128,513

See accompanying notes to the condensed consolidated financial statements.

2019

Table of Contents

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. General

Business

Organization and Description of Business. Digital Realty Trust, Inc. (the Parent), through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership or the OP) and the subsidiaries of the OP (collectively, we, our, us or the Company), is a leading global provider of data center (including colocation and interconnection) solutions for customers across a variety of industry verticals ranging from cloud and information technology services, social networking and communications to financial services, manufacturing, energy, healthcare, and consumer products. The OP, a Maryland limited partnership, is the entity through which the Parent, a Maryland corporation, conducts its business of owning, acquiring, developing and operating data centers. The Parent operates as a REIT for federal income tax purposes.

Accounting Principles

Our unaudited interim condensed consolidated financial statements and accompanying notes are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). All material intercompany transactions with consolidated entities have been eliminated. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not always indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”), as filed with the U.S. Securities and Exchange Commission (“SEC”), our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC, and other filings with the SEC.

Basis of Presentation

The accompanying interim condensed consolidated financial statements include all accounts of the Parent, the OP and the subsidiaries of the OP. The notes to the condensed consolidated financial statements have been combined.

The Parent’s only material asset is its ownership of partnership interests of the OP. As a result, theThe Parent generally does not conduct business itself, other than acting as the sole general partner of the OP, issuing public securities from time to time and guaranteeing certain unsecured debt of the OP and certain of its subsidiaries and affiliates. The Parent has not issued any debt but guarantees the unsecured debt of the OP and certain of its subsidiaries and affiliates.

The OP holds substantially all the assets of the Company. The OP conducts the operations of the business and has no publicly traded equity. Except for net proceeds from public equity issuances by the Parent, which are generally contributed to the OP in exchange for partnership units, the OP generally generates the capital required by the Company’s business primarily through the OP’s operations, by the OP’s or its affiliates’ direct or indirect incurrence of indebtedness or through the issuance of partnership units.

Management EstimatesAccounting Principles and AssumptionsBasis of Presentation. The accompanying unaudited interim condensed consolidated financial statements and accompanying notes (the “Financial Statements”) are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and are presented in our reporting currency, the U.S. dollar. All of the accounts of the Parent, the OP, and the subsidiaries of the OP are included in the accompanying Financial Statements. All material intercompany transactions with consolidated entities have been eliminated. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not always indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”), as filed with the U.S. Securities and Exchange Commission (“SEC”), our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, as filed with the SEC, and other filings with the SEC.

The preparation of financial statements in conformity withManagement Estimates and Assumptions. U.S. GAAP requires management tothat we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience, current market conditions,expenses during the reporting period, reported amounts for assets and various other assumptions thatliabilities as of the date of the financial statements, and disclosures of contingent assets and liabilities as of the date of the financial statements. Although we believe to be reasonable under the circumstances. Examples of estimates and assumptions include:we made are reasonable and appropriate, as discussed in the probability of collection of lease paymentsapplicable sections throughout the consolidated financial statements, different assumptions and estimates could materially impact our reported results. Actual results and outcomes may differ from customers,our assumptions.

New Accounting Pronouncements. Recently issued accounting pronouncements that have yet to be adopted by the recoverability ofCompany are not expected to have a material impact to the carrying values of investments in real estate, the fair value of share-based compensation awards, loss contingencies, the fair value of and/or potential impairment of goodwill and intangible assets, useful lives of tangible and intangible assets, and the fair value of customer relationships, buildings & improvements, and other tangible and intangible assets acquired in businesscondensed consolidated financial statements.

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(Unaudited)

combinations and asset acquisitions. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how the pandemic is impacting the Company’s customers and business partners. While the Company has not incurred significant disruptions during the six months ended June 30, 2021 from the COVID-19 pandemic, we are unable to predict the impact the COVID-19 pandemic will have on the Company’s financial condition, results of operations and cash flows due to numerous uncertainties.

New Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued updated guidance for the accounting for income taxes. The updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other income tax accounting matters. The Company adopted the updated guidance for the quarter ended March 31, 2021. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

We determined that all other recently issued accounting pronouncements that have yet to be adopted by the Company will not have a material impact on our consolidated financial statements or do not apply to our operations.

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(Unaudited)

2. Business Combinations

We obtained control of InterXion Holding N.V. (“Interxion”) on March 9, 2020 and completed the Company’s combination with Interxion (“Interxion Combination”) on March 12, 2020 for total equity consideration of approximately $7.0 billion, including approximately $108.5 million of assumed cash and cash equivalents. Revenues attributable to Interxion amounted to $244.6 million and $194.5 million for the three months ended June 30, 2021 and 2020, respectively, and $480.8 million and $241.9 million for the six months ended June 30, 2021 and 2020, respectively. Net income attributable to Interxion amounted to $23.2 million and $9.4 million for the three months ended June 30, 2021 and 2020, respectively, and $41.2 million and $12.1 million for the six months ended June 30, 2021 and 2020, respectively.

3.2. Investments in Properties

A summary of our investments in properties as of June 30, 2021 and December 31, 2020 is below (in thousands):

Property Type

As of June 30, 2021

As of December 31, 2020

As of June 30, 2022

As of December 31, 2021

Land

$

1,115,383

$

1,106,392

$

1,033,770

$

1,019,723

Acquired ground lease

6,872

10,308

6,051

6,721

Buildings and improvements

21,476,874

21,335,396

22,319,146

21,914,091

Tenant improvements

688,724

690,892

706,966

684,915

23,287,853

23,142,988

24,065,933

23,625,450

Accumulated depreciation and amortization

(5,919,650)

(5,555,221)

(6,665,118)

(6,210,281)

Investments in operating properties, net

17,368,203

17,587,767

17,400,815

17,415,169

Construction in progress and space held for development

3,270,570

2,768,325

3,362,114

3,213,389

Land held for future development

143,575

226,862

37,460

133,683

Investments in properties, net

$

20,782,348

$

20,582,954

$

20,800,389

$

20,762,241

Disposition3. Leases

On March 16, 2021 we sold a portfolio of 11 data centers in Europe (4 in the United Kingdom, 3 in the Netherlands, 3 in France and 1 in Switzerland) to Ascendas Reit, a CapitaLand sponsored REIT, for total purchase consideration of approximately $680.0 million (subject to customary final adjustments for working capital and other items). The total gain recorded during the three months ended March 31, 2021 as a result of this sale was approximately $333.3 million. Lessor Accounting

We will provide transitional property management services for one year from the closing date at a customary market rate. The assets and liabilities sold were not representative of a significant componentgenerate most of our portfolio, nor did the sale represent a significant shift in our strategy.

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(Unaudited)

4. Leases

Lessor Accounting

We lease ourrevenue by leasing operating properties to customers under agreements that are classified as operating leases. The majority of our revenue is derived from lease arrangements.agreements. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term if we determine that it is probable that substantially all of the lease payments will be collected over the lease term. Otherwise, rental revenue is recognized based on the amount contractually due. Generally, under the terms of our leases, the majoritymost of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers. We record amounts reimbursed by customers in the period that the applicable expenses are incurred, which is generally ratably throughout the term of the lease. The reimbursementsReimbursements are recognized in rental and other services revenue in the condensed consolidated income statements as we are the primary obligor with respect to purchasing and selecting goods and services from third-party vendors and bearing the associated credit risk.

Lessee Accounting

We lease space at certain of our data centers from third parties and certain equipment under noncancelable lease agreements. Leases for our data centers expire at various dates through 2069. As of June 30, 2021,2022, certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of June 30, 2021,2022, the termination dates of these ground leases generally range from 20412049 to 2125.2108. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 20212022 to 2028. The leases generally require us to make fixed rental payments that increase at defined intervals during the term of the lease plus pay our share of common area, real estate and utility expenses as incurred. The leases neither contain residual value guarantees nor impose material restrictions or covenants on us. Further, the leases have been classified and accounted for as either operating or finance leases. Rent expense related to operating leases included in rental property operating and maintenance expense in the condensed consolidated income statements amounted to approximately $37.2$35.6 million and $33.3$37.4 million for the three months ended June 30, 20212022 and 2020,2021, respectively, and approximately $72.4$73.0 million and $57.9 million for each of the six months ended June 30, 20212022 and 2020, respectively.2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Receivables

Accounts and Other Receivables, Net

Accounts and other receivables, net is primarily comprised of contractual rents and other lease-related obligations currently due from customers. These amounts are shown in the subsequent table as Accounts receivable – trade. Other receivables shown separately from Accounts receivable – trade, consist primarily of amounts that have not yet been billed to customers, such as for utility reimbursements and installation fees.

Balance as of

Balance as of

(Amounts in thousands):

June 30, 2022

December 31, 2021

Accounts receivable – trade, net

$

493,754

$

399,029

Allowance for doubtful accounts

(37,799)

(28,574)

Accounts receivable, net

455,955

370,455

Accounts receivable – customer recoveries

160,577

131,538

Value-added tax receivables

81,849

104,036

Accounts receivable – installation fees

50,482

43,626

Other receivables

48,345

22,066

Accounts and other receivables, net

$

797,208

$

671,721

Deferred Rent

Deferred rent receivables represent rental income that has been recognized as revenue under ASC 842, but which is not yet due from customers under their existing rental agreements. The Company recognizes an allowance against deferred rent receivables to the extent it becomes no longer probable that a customer or group of customers will be able to make substantially all of their required cash rental payments over the entirety of their respective lease terms.

Balance as of

Balance as of

(Amounts in thousands):

June 30, 2022

December 31, 2021

Deferred rent receivables

$

577,723

$

556,251

Allowance for deferred rent receivables

(23,707)

(8,866)

Deferred rent receivables, net

$

554,016

$

547,385

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Investments in Unconsolidated Entities

See below for a summary of our investments in unconsolidated entities accounted for under the equity method of accounting as presented in our condensed consolidated balance sheets (in thousands):

Year

    

Metropolitan

    

    

Balance as of

    

Balance as of

Entity

Entity Formed

Area

% Ownership

June 30, 2021

December 31, 2020

Ascenty (1)

2019

 

Brazil / Chile / Mexico

 

51

(2) 

$

613,086

$

567,192

Mapletree

2019

Northern Virginia

20

%  

178,429

184,890

Mitsubishi

Various

 

Osaka / Tokyo

 

50

%  

 

181,056

 

278,947

Lumen

2012

 

Hong Kong

 

50

%  

 

78,923

 

86,600

Other

Various

 

U.S.

 

Various

 

67,532

 

30,529

Total

 

  

 

  

$

1,119,026

$

1,148,158

(1)Our maximum exposure to loss related to this unconsolidated variable interest entity (VIE) is limited to our equity investment in this VIE.
(2)Includes an approximate 2% ownership interest held by a non-controlling interest in our entity that holds the investment in the Ascenty entity, which has a carrying value as of June 30, 2021 and December 31, 2020 of

Year

Metropolitan

Balance as of

Balance as of

Entity

Entity Formed

Area of Properties

% Ownership

June 30, 2022

December 31, 2021

Digital Core REIT (DCRU)

2021

U.S. / Canada

35

%

$

342,464

$

343,317

Ownership interest in DCRU operating properties

2021

U.S. / Canada

10

%

140,499

144,050

Ascenty

2019

Brazil / Chile / Mexico

51

%

645,184

553,031

Mapletree

2019

Northern Virginia

20

%  

166,507

172,465

Mitsubishi

Various

Osaka / Tokyo

50

%  

 

399,786

 

401,509

Lumen

2012

Hong Kong

50

%  

 

69,144

 

68,854

Other

Various

U.S. / India / Nigeria

Various

 

178,965

 

124,463

Total

  

  

$

1,942,549

$

1,807,689

DCREIT – Digital Core REIT is a standalone real estate investment trust publicly-traded on the Singapore Exchange under the ticker symbol “DCRU”. Digital Core REIT owns 10 operating data center properties. The Company’s ownership interest in the units of DCRU, as well as its ownership interest in the operating properties of DCRU are collectively referred to as the Company’s investment in DCREIT. As of June 30, 2022, the Company held 35% of the outstanding DCRU units and separately owned a 10% retained interest in the underlying operating properties. The Company’s 35% interest in DCRU consisted of 392 million units and 390 million units as of June 30, 2022 and December 31, 2021, respectively. Based on the closing price per unit of $0.77 as of June 30, 2022, the fair value of the units the Company owns in DCRU was approximately $302 million. Based on the closing price per unit of $1.16 as of December 31, 2021, the fair value of the units the Company owns in DCRU was approximately $453 million. This value does not include the value of the Company’s 10% interest in the operating properties of DCRU, because the associated ownership interests are not publicly traded. The Company accounts for its investment in DCREIT as an equity method investment (and not at fair value) based on the significant influence it is able to exert on DCREIT. The Company determined that the decline in fair value of the investment in DCRU as compared to the Company’s book basis as of June 30, 2022 was temporary in nature.

Pursuant to contractual agreements with the DCRU and its operating properties, the Company will earn fees for asset and property management services as well as fees for aiding in future acquisition, disposition and development activities. Certain of these fees are payable to the Company in the form of additional units in DCRU or in cash. During the three and six months ended June 30, 2022, the Company earned fees pursuant to these contractual agreements of approximately $2.8 million and $5.1 million, respectively, which is recorded as fee income and other on the condensed consolidated income statement.

Ascenty – The Company’s ownership interest in Ascenty includes an approximate 2% interest held by one of the Company’s non-controlling interest holders. This 2% interest had a carrying value of approximately $22.6 million and $20.9 million as of June 30, 2022 and December 31, 2021, respectively. Ascenty is a variable interest entity (“VIE”) and the Company’s maximum exposure to loss related to this VIE is limited to our equity investment in the entity.

The debt of our unconsolidated entities generally is non-recourse to us, except for customary exceptions pertaining to matters such as intentional misuse of funds, environmental conditions, and material misrepresentations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

approximately $19.7 million and $21.9 million, respectively, and is classified within redeemable noncontrolling interests in our condensed consolidated balance sheet.

The debt of our unconsolidated entities generally is non-recourse to us, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions, and material misrepresentations.

6. Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Changes in the value of goodwill at June 30, 20212022 as compared to December 31, 20202021 were immaterial and driven primarily by changes in exchange rates associated with goodwill balances denominated in foreign currencies.currencies – primarily the devaluation of the Euro as compared to the U.S. dollar.

7. Acquired Intangible Assets and Liabilities

The following table summarizes our acquired intangible assets and liabilities.liabilities:

(Amounts in thousands)

Balance as of

June 30, 2021

December 31, 2020

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Balance as of

June 30, 2022

December 31, 2021

(Amounts in thousands)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Customer relationship value

$

2,960,866

$

(657,293)

$

2,303,573

$

2,993,093

$

(570,886)

$

2,422,207

$

2,735,560

$

(789,285)

$

1,946,275

$

2,838,842

$

(721,983)

$

2,116,859

Acquired in-place lease value

1,341,381

(1,008,732)

332,649

1,382,563

(1,004,421)

378,142

1,267,777

(1,016,192)

251,585

1,278,012

(995,883)

282,129

Other

56,321

(11,109)

45,212

57,370

(7,107)

50,263

94,121

(20,059)

74,062

101,869

(14,688)

87,181

Acquired above-market leases

275,251

(243,700)

31,551

280,216

(236,923)

43,293

265,367

(250,626)

14,741

268,724

(247,135)

21,589

Acquired below-market leases

(383,127)

265,746

(117,381)

(401,539)

270,648

(130,891)

(347,781)

252,627

(95,154)

(351,052)

247,877

(103,175)

Amortization of customer relationship value, acquired in-place lease value and other intangibles (a component of depreciation and amortization expense) was approximately $66.4$57.3 million and $79.5$66.4 million for the three months ended June 30, 20212022 and 2020,2021 respectively, and approximately $134.1$118.9 million and $135.8$134.1 million for the six months ended June 30, 2022 and 2021, and 2020, respectively.

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in a decreasean increase in rental and other services revenue of $(1.1)$0.3 million and $(3.1)a decrease of $(1.1) million for the three months ended June 30, 20212022 and 2020,2021, respectively and $(2.6)$0.6 million and $(6.4)$(2.6) million for the six months ended June 30, 2022 and 2021, and 2020, respectively. Estimated annual amortization for each of the five succeeding years and thereafter, commencing July 1, 2021 is as follows:

(Amounts in thousands)

    

Customer relationship value

Acquired in-place lease value

Other (1)

Acquired above-market leases

Acquired below-market leases

Remainder of 2021

$

88,088

$

37,471

$

4,210

$

9,962

$

(9,055)

2022

 

175,004

 

58,817

 

8,419

 

11,209

 

(15,974)

2023

 

174,335

 

47,776

 

1,520

 

4,759

 

(14,289)

2024

 

173,755

 

41,010

 

 

2,584

 

(12,676)

2025

 

173,253

 

35,767

 

 

1,452

 

(10,779)

Thereafter

 

1,519,138

 

111,808

 

 

1,585

 

(54,608)

Total

$

2,303,573

$

332,649

$

14,149

$

31,551

$

(117,381)

(1)Excludes power grid rights in the amount of approximately $31.1 million that are currently not being amortized.  Amortization will begin once a data center associated with the power grid right is placed into service

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Estimated annual amortization for each of the five succeeding years and thereafter, commencing July 1, 2022 is as follows:

    

(Amounts in thousands)

Customer relationship value

Acquired in-place lease value

Other (1)

Acquired above-market leases

Acquired below-market leases

Remainder of 2022

$

81,641

$

24,499

$

4,560

$

4,363

$

(6,683)

2023

 

162,614

 

43,327

 

3,021

 

4,758

 

(12,507)

2024

 

162,034

 

37,709

 

1,677

 

2,584

 

(11,214)

2025

 

161,532

 

34,679

 

1,638

 

1,452

 

(10,225)

2026

 

161,097

 

30,619

 

1,442

 

684

 

(8,663)

Thereafter

 

1,217,357

 

80,752

 

19,941

 

900

 

(45,862)

Total

$

1,946,275

$

251,585

$

32,279

$

14,741

$

(95,154)

(1)Excludes power grid rights in the amount of approximately $41.8 million that are currently not being amortized. Amortization of these assets will begin once the data centers associated with the power grid rights are placed into service.

8. Debt of the Operating Partnership

On a standalone basis (e.g., excluding

All debt is currently held by the OP or its subsidiaries), Digital Realty Trust, Inc. does not have any indebtedness. Theconsolidated subsidiaries, and the Parent is the guarantor or co-guarantor on all debt held byof the OP or its subsidiaries. All debt is currently held directly or indirectly by the OP.global revolving credit facilities and unsecured senior notes. A summary of outstanding indebtedness of the OP, together with its subsidiaries, as of June 30, 2021 and December 31, 2020 is as follows (in thousands):

    

June 30, 2021

    

December 31, 2020

    

June 30, 2022

    

December 31, 2021

Weighted-

Weighted-

Weighted-

Weighted-

average

Amount

average

Amount

average

Amount

average

Amount

interest rate

Outstanding

interest rate

Outstanding

interest rate

Outstanding

interest rate

Outstanding

Global revolving credit facilities

0.98

%

$

1,032,946

0.91

%

$

540,184

1.95

%

$

1,458,730

0.96

%

$

415,116

Unsecured term loans

%  

 

1.20

%  

 

537,470

Unsecured senior notes

2.33

%  

12,762,570

2.49

%  

12,096,029

2.12

%  

12,792,422

2.26

%  

13,000,042

Secured and other debt

3.06

%  

 

242,870

2.92

%  

 

239,330

3.64

%  

 

159,024

3.47

%  

 

147,082

Total

2.24

%  

$

14,038,386

  

2.38

%  

$

13,413,013

2.12

%  

$

14,410,176

  

2.23

%  

$

13,562,240

The weighted-average interest rates presented in the table aboveshown represent the interest rates at the end of the periods for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest raterates on certain variable rate debt.

We primarily borrow in the functional currencies of the countries where we invest. Included in the outstanding balances were borrowings denominated in the following currencies (in thousands)thousands, U.S. dollars):

June 30, 2021

December 31, 2020

Amount

Amount

Denomination of Draw

    

Outstanding

    

% of Total

    

Outstanding

    

% of Total

    

U.S. dollar ($)

$

3,822,870

  

27.2

%

$

3,629,000

  

27.1

%

British pound sterling (£)

 

2,143,805

  

15.3

%

2,166,695

16.2

%

Euro ()

7,757,504

55.3

%

6,912,142

51.5

%

Other

314,207

2.2

%

705,176

5.2

%

Total

$

14,038,386

  

$

13,413,013

  

June 30, 2022

December 31, 2021

Amount

Amount

Denomination of Draw

    

Outstanding

    

% of Total

Outstanding

    

% of Total

U.S. dollar ($)

$

3,590,903

  

24.9

%

$

3,141,951

  

23.2

%

British pound sterling (£)

 

1,887,590

  

13.1

%

2,117,758

15.6

%

Euro ()

7,789,612

54.1

%

7,532,057

55.5

%

Other

1,142,071

7.9

%

770,474

5.7

%

Total

$

14,410,176

  

$

13,562,240

  

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(Unaudited)

The table below summarizes our debt maturities and principal payments as of June 30, 2022 (in thousands):

Global Revolving

Unsecured

Secured and

    

Credit Facilities (1)

    

Senior Notes

    

Other Debt

    

Total Debt

2022

$

$

629,040

$

$

629,040

2023

104,725

3,081

107,806

2024

933,490

933,490

2025

 

 

1,168,580

 

 

1,168,580

2026

 

 

1,415,023

 

 

1,415,023

Thereafter

 

1,458,730

 

8,541,564

 

155,943

 

10,156,237

Subtotal

$

1,458,730

$

12,792,422

$

159,024

$

14,410,176

Unamortized net discounts

 

 

(36,026)

 

 

(36,026)

Unamortized deferred financing costs

(18,690)

(60,828)

(325)

(79,843)

Total

$

1,440,040

$

12,695,568

$

158,699

$

14,294,307

(1)Includes amounts outstanding for the Global Revolving Credit Facility and the Yen Revolving Credit Facility (together, referred to as the “Global Revolving Credit Facilities”).

Unsecured Senior Notes

The following table provides details of our unsecured senior notes (balances in thousands):

Aggregate Principal at Issuance

Balance as of

Aggregate Principal Amount at Issuance

Balance as of

Borrowing Currency

USD

Maturity Date

June 30, 2021

December 31, 2020

Borrowing Currency

USD

Maturity Date

June 30, 2022

December 31, 2021

Floating rate notes due 2022

300,000

$

349,800

Sep 23, 2022

$

355,740

$

366,480

300,000

$

349,800

Sep 23, 2022

$

314,520

$

341,100

0.125% notes due 2022

300,000

$

332,760

Oct 15, 2022

355,740

366,480

300,000

332,760

Oct 15, 2022

314,520

341,100

2.750% notes due 2023

$

350,000

$

350,000

Feb 1, 2023

-

350,000

0.600% notes due 2023

CHF

100,000

108,310

Oct 02, 2023

104,725

-

2.625% notes due 2024

600,000

$

677,040

Apr 15, 2024

711,480

732,960

600,000

677,040

Apr 15, 2024

629,040

682,200

2.750% notes due 2024

£

250,000

$

324,925

Jul 19, 2024

345,775

341,750

£

250,000

324,925

Jul 19, 2024

304,450

338,300

4.250% notes due 2025

£

400,000

$

634,480

Jan 17, 2025

553,240

546,800

£

400,000

634,480

Jan 17, 2025

487,120

541,280

0.625% notes due 2025

650,000

$

720,980

Jul 15, 2025

770,770

794,040

650,000

720,980

Jul 15, 2025

681,460

739,050

4.750% notes due 2025

$

450,000

$

450,000

Oct 1, 2025

450,000

450,000

$

450,000

450,000

Oct 01, 2025

-

450,000

2.500% notes due 2026

1,075,000

$

1,224,640

Jan 16, 2026

1,274,735

1,313,219

1,075,000

1,224,640

Jan 16, 2026

1,127,030

1,222,275

0.200% notes due 2026

CHF

275,000

298,404

Dec 15, 2026

287,993

301,419

1.700% notes due 2027

CHF

150,000

162,465

Mar 30, 2027

157,087

-

3.700% notes due 2027

$

1,000,000

$

1,000,000

Aug 15, 2027

1,000,000

1,000,000

$

1,000,000

1,000,000

Aug 15, 2027

1,000,000

1,000,000

1.125% notes due 2028

500,000

$

548,550

Apr 09, 2028

592,900

610,800

500,000

548,550

Apr 09, 2028

524,200

568,500

4.450% notes due 2028

$

650,000

$

650,000

Jul 15, 2028

650,000

650,000

$

650,000

650,000

Jul 15, 2028

650,000

650,000

0.550% notes due 2029

CHF

270,000

292,478

Apr 16, 2029

282,757

295,938

3.600% notes due 2029

$

900,000

900,000

Jul 01, 2029

900,000

900,000

3.300% notes due 2029

£

350,000

$

454,895

Jul 19, 2029

484,085

478,450

£

350,000

454,895

Jul 19, 2029

426,230

473,620

3.600% notes due 2029

$

900,000

$

900,000

Jul 01, 2029

900,000

900,000

1.500% notes due 2030

750,000

$

831,900

Mar 15, 2030

889,350

916,200

750,000

831,900

Mar 15, 2030

786,300

852,750

3.750% notes due 2030

£

550,000

$

719,825

Oct 17, 2030

760,705

751,850

£

550,000

719,825

Oct 17, 2030

669,790

744,260

1.250% notes due 2031

500,000

$

560,950

Feb 1, 2031

592,900

610,800

500,000

560,950

Feb 01, 2031

524,200

568,500

0.625% notes due 2031

1,000,000

$

1,220,700

Jul 15, 2031

1,185,800

-

1,000,000

1,220,700

Jul 15, 2031

1,048,400

1,137,000

1.000% notes due 2032

750,000

$

874,500

Jan 15, 2032

889,350

916,200

750,000

874,500

Jan 15, 2032

786,300

852,750

1.375% notes due 2032

750,000

849,375

Jul 18, 2032

786,300

-

$

12,762,570

$

12,096,029

$

12,792,422

$

13,000,042

Unamortized discounts, net of premiums

(37,743)

(34,988)

Unamortized discounts, net of premiums

(36,026)

(33,612)

Deferred financing costs, net

(65,784)

(64,031)

Deferred financing costs, net

(60,828)

(63,060)

Total unsecured senior notes, net of discount and deferred financing costs

$

12,659,043

$

11,997,010

Total unsecured senior notes, net of discount and deferred financing costs

$

12,695,568

$

12,903,370

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restrictive Covenants in Unsecured Senior Notes

The indentures governing our senior notes contain certain covenants, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40% and (3) an interest coverage ratio of greater than 1.50, and1.50. The covenants also requiresrequire us to maintain total unencumbered assets of not less than 150% of the aggregate principal amount of unsecured debt. At June 30, 2021,2022, we were in compliance with each of these financial covenants.

The table below summarizes our debt maturities and principal payments asEarly Extinguishment of June 30, 2021 (in thousands):Unsecured Senior Notes

We recognized the following losses on early extinguishment of unsecured notes:

Global Revolving

Unsecured

Secured and

    

Credit Facilities(1)

    

Senior Notes

    

Other Debt

    

Total Debt

Remainder of 2021

$

0

$

0

$

0

$

0

2022

0

711,480

0

711,480

2023

996,766

0

104,000

1,100,766

2024

 

36,180

 

1,057,255

 

0

 

1,093,435

2025

 

0

 

1,774,010

 

0

 

1,774,010

Thereafter

 

0

 

9,219,825

 

138,870

 

9,358,695

Subtotal

$

1,032,946

$

12,762,570

$

242,870

$

14,038,386

Unamortized net discounts

 

0

 

(37,743)

 

0

 

(37,743)

Unamortized deferred financing costs

(6,578)

(65,784)

(460)

(72,822)

Total

$

1,026,368

$

12,659,043

$

242,410

$

13,927,821

(1)The global revolving credit facility is subjectDuring the six months ended June 30, 2022: $51.1 million primarily due to 2 six-month extension options exercisable by us. The bank group is obligatedredemption of the 4.750% Notes due 2025 in February 2022.
During the six months ended June 30, 2021: $18.3 million primarily due to grantredemption of the extension options provided we give proper notice, we make certain representations and warranties and no default exists under the global revolving credit facility.2.750% Notes due 2023 in February 2021.

DuringGlobal Revolving Credit Facility Amendment

On April 5, 2022, the six months ended June 30, 2021, we recognized a loss on early extinguishment of debt of approximately $18.3 million, mostly dueOperating Partnership entered into an amendment (the “Amendment”) to the redemptionSecond Amended and Restated Global Senior Credit Agreement (the “Credit Agreement”) The Amendment provides for, among other things: (1) an increase in the size of the 2.750% Notes due 2023global revolving credit facility from $3.0 billion to $3.75 billion and (2) the transition from U.S. dollar London Interbank Offered Rate (LIBOR) to Term Secured Overnight Financing Rate (SOFR) for floating rate borrowings denominated in February. DuringU.S. dollars for all purposes under the six months ended June 30, 2020, losses on early extinguishmentCredit Agreement.

9. Earnings per Common Share or Unit

The following is a summary of debt were not significant.basic and diluted income per share/unit (in thousands, except per share/unit amounts):

Digital Realty Trust, Inc. Earnings per Common Share

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net income available to common stockholders

$

53,246

$

127,369

$

116,346

$

499,775

Weighted average shares outstanding—basic

 

284,694

 

281,792

 

284,610

 

281,445

Potentially dilutive common shares:

 

  

 

 

  

 

Unvested incentive units

 

178

 

177

 

183

 

168

Unvested restricted stock

49

165

62

143

Market performance-based awards

 

189

 

300

 

125

 

320

Weighted average shares outstanding—diluted

 

285,110

 

282,434

 

284,980

 

282,076

Income per share:

 

  

 

  

 

  

 

  

Basic

$

0.19

$

0.45

$

0.41

$

1.78

Diluted

$

0.19

$

0.45

$

0.41

$

1.77

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Earnings per Common Share or Unit

The computation of basic and diluted earnings per share and unit is shown below (in thousands, except share/unit and per share / unit amounts):

Digital Realty Trust, Inc. Earnings per Common Share

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

Net income available to common stockholders

$

127,369

$

53,676

$

499,775

$

256,535

Weighted average shares outstanding—basic

 

281,791,855

 

267,569,823

 

281,445,252

 

244,866,574

Potentially dilutive common shares:

 

  

 

  

 

  

 

  

Unvested incentive units

 

176,777

 

110,178

 

167,352

 

81,319

Unvested restricted stock

164,787

312,634

142,677

261,758

Forward equity offering

 

 

2,246,171

 

 

1,845,832

Market performance-based awards

 

300,438

 

505,602

 

320,330

 

520,531

Weighted average shares outstanding—diluted

 

282,433,857

 

270,744,408

 

282,075,611

 

247,576,014

Income per share:

 

  

 

  

 

  

 

  

Basic

$

0.45

$

0.20

$

1.78

$

1.05

Diluted

$

0.45

$

0.20

$

1.77

$

1.04

Digital Realty Trust, L.P. Earnings per Unit

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

Net income available to common unitholders

$

130,569

$

55,076

$

512,775

$

265,735

Weighted average units outstanding—basic

 

288,842,803

 

275,544,524

 

288,588,250

 

252,995,033

Potentially dilutive common units:

 

  

 

  

 

  

 

  

Unvested incentive units

 

176,777

 

110,178

 

167,352

 

81,319

Unvested restricted units

164,787

312,634

142,677

261,758

Forward equity offering

 

 

2,246,171

 

 

1,845,832

Market performance-based awards

 

300,438

 

505,602

 

320,330

 

520,531

Weighted average units outstanding—diluted

 

289,484,805

 

278,719,109

 

289,218,609

 

255,704,473

Income per unit:

 

  

 

  

 

  

 

  

Basic

$

0.45

$

0.20

$

1.78

$

1.05

Diluted

$

0.45

$

0.20

$

1.77

$

1.04

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net income available to common unitholders

$

54,746

$

130,569

$

119,446

$

512,775

Weighted average units outstanding—basic

 

290,528

 

288,843

 

290,346

 

288,588

Potentially dilutive common units:

 

  

 

  

 

  

 

  

Unvested incentive units

 

178

 

177

 

183

 

168

Unvested restricted units

49

165

62

143

Market performance-based awards

 

189

 

300

 

125

 

320

Weighted average units outstanding—diluted

 

290,944

 

289,485

 

290,716

 

289,219

Income per unit:

 

  

 

  

 

  

 

  

Basic

$

0.19

$

0.45

$

0.41

$

1.78

Diluted

$

0.19

$

0.45

$

0.41

$

1.77

The below table shows the securities that would be antidilutive or not dilutive to the calculation of earnings per share and unit. Common units of the Operating Partnership not owned by Digital Realty Trust, Inc. were excluded only from the calculation of earnings per share as they are not applicable to the calculation of earnings per unit. All other securities shown below were excluded from the calculation of both earnings per share and earnings per unit.unit (in thousands).

Three Months Ended June 30, 

Six Months Ended June 30, 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

    

2022

    

2021

    

2022

    

2021

Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc. (excluded only from calculation of earnings per share)

 

7,050,948

 

7,974,701

 

7,142,998

 

8,128,459

 

Shares subject to Forward Equity Offering

6,250

6,250

Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.

 

5,834

 

7,051

 

5,735

 

7,143

Potentially dilutive Series C Cumulative Redeemable Perpetual Preferred Stock

 

688,978

 

1,441,895

 

1,082,497

 

1,518,997

 

 

 

689

 

 

1,082

Potentially dilutive Series G Cumulative Redeemable Preferred Stock

 

 

1,787,870

 

 

1,883,473

 

Potentially dilutive Series I Cumulative Redeemable Preferred Stock

 

 

1,789,962

 

1,269,035

 

1,885,677

 

Potentially dilutive Series J Cumulative Redeemable Preferred Stock

 

1,317,184

 

1,428,093

 

1,389,536

 

1,504,458

 

 

1,536

 

1,317

 

1,494

 

1,390

Potentially dilutive Series K Cumulative Redeemable Preferred Stock

1,385,091

1,501,718

1,461,173

1,582,019

1,615

1,385

1,571

1,461

Potentially dilutive Series L Cumulative Redeemable Preferred Stock

2,271,862

2,463,157

2,396,654

2,593,120

2,649

2,272

2,577

2,397

Total

 

12,714,063

 

18,387,396

 

14,741,893

 

19,096,203

 

 

17,884

 

12,714

 

17,627

 

13,473

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Equity and Capital

Equity Distribution Agreement

Digital Realty Trust, Inc. and Digital Realty Trust, L.P. were parties to an at-the-market (ATM) equity offering sales agreement dated January 4, 2019, as amended in 2020 (the “2020 Sales Agreement”). Pursuant to the 2020 Sales Agreement, Digital Realty Trust, Inc. was able to issue and sell common stock having an aggregate offering price of up to $1.0 billion through various named agents from time to time. The 2020 Sales Agreement was terminated on April 1, 2022 when Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into a new ATM equity offering sales agreement dated April 1, 2022 (the “2022 Sales Agreement”). At the time of the termination, $577.6 million remained unsold under the 2020 Sales Agreement. Pursuant to the 2022 Sales Agreement , Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $1.5 billion through various named agents from time to time. For the six months ended June 30, 2022, we had 0 sales under the 2022 Sales Agreement and $1.5 billion is still available.

Forward Equity Sale

On September 13, 2021, Digital Realty Trust, Inc. completed an underwritten public offering of 6,250,000 shares of its common stock, all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. The forward purchasers borrowed and sold an aggregate of 6,250,000 shares of Digital Realty Trust, Inc.’s common stock in the public offering. Digital Realty Trust, Inc. did not receive any proceeds from the sale of our common stock by the forward purchasers in the public offering. The Company may receive gross proceeds of approximately $1.0 billion (based on the offering price of $155.69 per share) upon full physical settlement of the forward sale agreements, which is to be no later than March 13, 2023.

Upon physical settlement of the forward sale agreements, the Operating Partnership is expected to issue general partner common partnership units to Digital Realty Trust, Inc. in exchange for contribution of the net proceeds.

We account for our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives. As of June 30, 2022, NaN of our forward equity sales agreements were deemed to be liabilities as they did not embody obligations to repurchase our shares, nor did they embody obligations to issue a variable number of shares for which the monetary value was predominantly fixed, varied with something other than the fair value of our shares, or varied inversely in relation to our shares. We also evaluated whether the agreements met the derivatives and hedging guidance scope exception to be accounted for as equity instruments and concluded that the agreements could be classified as equity contracts based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Equity and Capital

Equity Distribution Agreement

Digital Realty Trust, Inc. and Digital Realty Trust, L.P., are parties to an at-the-market (ATM) equity offering sales agreement dated January 4, 2019, as amended in 2020 (the “Sales Agreement”). Pursuant to the Sales Agreement, Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $1.0 billion through various named agents from time to time. For the six months ended June 30, 2021, Digital Realty Trust, Inc. issued approximately 0.5 million common shares under the Sales Agreement at an average price of $161.57 per share. For the six months ended June 30, 2020, Digital Realty Trust, Inc. issued approximately 4.6 million common shares under the Sales Agreement at an average price of $142.39 per share. As of June 30, 2021, approximately $672.2 million remains available for future sales under the program.

Preferred Stock Redemption

On May 17, 2021, Digital Realty Trust, Inc. redeemed all outstanding shares of its Series C cumulative redeemable perpetual preferred stock for $25.211632 per share, or a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date (the “Series C Preferred Share Redemption”). The transaction resulted in a gain on redemption of $18.0 million, measured as the difference between the cash consideration paid upon redemption, which was $201.3 million and the carrying value of the preferred stock at the time of the redemption, which was $219.3 million. This amount is reflected as gain on redemption of preferred stock which increased net income available to common stockholders.

Noncontrolling Interests

The following table details the components of noncontrolling interests as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

December 31, 2020

Noncontrolling interests in Operating Partnership

$

513,897

$

608,980

Noncontrolling interests in consolidated entities

192,694

119,659

Total noncontrolling interests

$

706,591

$

728,639

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Noncontrolling Interests in Operating Partnership

Noncontrolling interests are interests in the Operating Partnership relate to the proportion of entities consolidated subsidiariesby the Company that are not owned by Digital Realty Trust, Inc.third parties. The following table shows the ownership interest in the Operating Partnership as of June 30, 20212022 and December 31, 2020:2021 (in thousands):

June 30, 2021

December 31, 2020

 

June 30, 2022

December 31, 2021

Number of

Percentage of

Number of

Percentage of

Number of

Percentage of

Number of

Percentage of

    

units

    

total

    

units

    

total

 

    

units

    

total

units

    

total

Digital Realty Trust, Inc.

282,603,152

97.6

%  

280,289,726

97.2

%

284,734

97.8

%  

284,415

98.0

%

Noncontrolling interests consist of:

 

 

  

 

 

  

 

 

  

 

 

  

Common units held by third parties

 

5,352,766

 

1.8

%  

6,212,369

 

2.2

%

 

4,387

 

1.5

%  

4,389

 

1.5

%

Incentive units held by employees and directors (see Note 15 below)

 

1,702,643

 

0.6

%  

1,833,898

 

0.6

%

Incentive units held by employees and directors (see Note 12. "Incentive Plan")

 

1,912

 

0.7

%  

1,543

 

0.5

%

 

289,658,561

 

100.0

%  

288,335,993

 

100.0

%

 

291,033

 

100.0

%  

290,347

 

100.0

%

Limited partners have the right to require the Operating Partnership to redeem partall or alla portion of their common units for cash based on the fair market value of an equivalent number of shares of Digital Realty Trust, Inc. common stock at the time of redemption. Alternatively, Digital Realty Trust, Inc. may elect to acquire those common units in exchange for shares of Digital Realty Trust, Inc.its common stock on a 1-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. The common units and incentive units of the Operating Partnership are classified within equity, except for certain common units issued to certain former DuPont Fabros Technology, L.P. unitholders in the Company’s acquisition of DuPont Fabros Technology, Inc., which are subject to certain restrictions and, accordingly, are not presented as permanent equity in the condensed consolidated balance sheet.

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $1,009.8$765.8 million and $1,078.9$1,074.7 million based on the closing market price of Digital Realty Trust, Inc. common stock on June 30, 20212022 and December 31, 2020,2021, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the six months ended June 30, 2021:2022 (in thousands):

    

Common Units

    

Incentive Units

    

Total

    

Common Units

    

Incentive Units

    

Total

As of December 31, 2020

 

6,212,369

 

1,833,898

 

8,046,267

As of December 31, 2021

 

4,389

 

1,542

 

5,931

Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)

 

(859,603)

 

0

 

(859,603)

 

(2)

 

0

 

(2)

Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)

 

0

 

(481,072)

 

(481,072)

 

0

 

(15)

 

(15)

Incentive units issued upon achievement of market performance condition

 

0

 

219,652

 

219,652

 

0

 

221

 

221

Grant of incentive units to employees and directors

 

0

 

132,041

 

132,041

 

0

 

167

 

167

Cancellation / forfeitures of incentive units held by employees and directors

 

0

 

(1,876)

 

(1,876)

 

0

 

(3)

 

(3)

As of June 30, 2021

 

5,352,766

 

1,702,643

 

7,055,409

As of June 30, 2022

 

4,387

 

1,912

 

6,299

(1)These redemptions and conversions were recorded as a reduction to noncontrolling interests in the Operating Partnership and an increase to common stock and additional paid inpaid-in capital based on the book value per unit in the accompanying consolidated balance sheet of Digital Realty Trust, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Dividends and Distributions

Digital Realty Trust, Inc. Dividends

Digital Realty Trust, Inc.We have declared and paid the following dividends on itsour common and preferred stock for the six months ended June 30, 20212022 (in thousands, except per share data):

Series C

Series J

Series K

Series L

    

Preferred

Preferred

Preferred

Preferred

Common

Date dividend declared

    

Dividend payment date

    

Stock

    

Stock

    

Stock

    

Stock

Stock

February 25, 2021

March 31, 2021

$

3,333

$

2,625

$

3,071

$

4,485

$

326,965

May 10, 2021

June 30, 2021

(1)

2,625

3,071

4,485

328,279

$

3,333

$

5,250

$

6,142

$

8,970

$

655,244

Annual rate of dividend per share

  

$

1.65625

  

$

1.31250

$

1.46250

$

1.30000

$

4.64000

  

(1)These shares were redeemed in the Series C Preferred Share Redemption on May 17, 2021 as discussed above.

Series J

Series K

Series L

Preferred

Preferred

Preferred

Common

Date dividend declared

    

Dividend payment date

    

Stock

    

Stock

    

Stock

Stock

March 3, 2022

March 31, 2022

$

2,625

$

3,071

$

4,485

$

348,025

May 24, 2022

June 30, 2022

2,625

3,071

4,485

348,077

$

5,250

$

6,142

$

8,970

$

696,102

Annual rate of dividend per share

$

1.31250

$

1.46250

$

1.30000

$

4.88000

Digital Realty Trust, L.P. Distributions

All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s Board of Directors. The Operating Partnership hastable below shows the distributions declared and paid by the following distributionsOperating Partnership on its common and preferred units for the six months ended June 30, 20212022 (in thousands, except for per unit data):

Series C

Series J

Series K

Series L

Series J

Series K

Series L

Preferred

Preferred

Preferred

Preferred

Common

Preferred

Preferred

Preferred

Common

Date distribution declared

    

Distribution payment date

    

Units

    

Units

    

Units

Units

Units

    

Distribution payment date

    

Units

    

Units

Units

Units

February 25, 2021

March 31, 2021

$

3,333

$

2,625

$

3,071

$

4,485

$

336,041

May 10, 2021

June 30, 2021

 

(1)

 

2,625

 

3,071

 

4,485

 

336,543

$

3,333

$

5,250

$

6,142

$

8,970

$

672,584

March 3, 2022

March 31, 2022

$

2,625

$

3,071

$

4,485

$

355,812

May 24, 2022

June 30, 2022

2,625

3,071

4,485

355,885

$

5,250

$

6,142

$

8,970

$

711,697

Annual rate of distribution per unit

$

1.65625

$

1.31250

$

1.46250

$

1.30000

$

4.64000

$

1.31250

$

1.46250

$

1.30000

$

4.88000

(1)These units were redeemed in connection with the Series C Preferred Share Redemption on May 17, 2021 as discussed above.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Accumulated Other Comprehensive Income (Loss), Net

The accumulated balances for each item within accumulated other comprehensive income (loss) are shown below (in thousands) for Digital Realty Trust, Inc. and separately for Digital Realty Trust, L.P:

Digital Realty Trust, Inc.

Foreign currency

Cash flow

Foreign currency net

Accumulated other

Foreign currency

Cash flow

Foreign currency net

Accumulated other

translation

hedge

investment hedge

comprehensive

translation

hedge

investment hedge

comprehensive

    

adjustments

    

adjustments

    

adjustments

    

income (loss), net

    

adjustments

    

adjustments

    

adjustments

    

income (loss), net

Balance as of December 31, 2020

$

98,760

$

(2,630)

$

38,880

$

135,010

Balance as of December 31, 2021

$

(212,653)

$

(107)

$

38,880

$

(173,880)

Net current period change

 

(104,520)

 

549

 

 

(103,971)

 

(300,656)

 

(965)

 

 

(301,621)

Reclassification to interest expense from interest
rate swaps

 

 

694

 

 

694

 

 

(60)

 

 

(60)

Balance as of June 30, 2021

$

(5,760)

$

(1,387)

$

38,880

$

31,733

Balance as of June 30, 2022

$

(513,309)

$

(1,132)

$

38,880

$

(475,561)

Digital Realty Trust, L.P.

Foreign currency

Cash flow

Foreign currency net

Accumulated other

Foreign currency

Foreign currency net

Accumulated other

translation

hedge

investment hedge

comprehensive

translation

Cash flow hedge

investment hedge

comprehensive

    

adjustments

    

adjustments

    

adjustments

    

income (loss)

    

adjustments

    

adjustments

    

adjustments

    

income (loss)

Balance as of December 31, 2020

$

98,946

$

(3,823)

$

39,677

$

134,800

Balance as of December 31, 2021

$

(219,882)

$

(1,240)

$

39,677

$

(181,445)

Net current period change

 

(107,324)

 

563

 

 

(106,761)

 

(307,790)

 

(988)

 

 

(308,778)

Reclassification to interest expense from interest
rate swaps

 

 

712

 

 

712

 

 

(62)

 

 

(62)

Balance as of June 30, 2021

$

(8,378)

$

(2,548)

$

39,677

$

28,751

Balance as of June 30, 2022

$

(527,672)

$

(2,290)

$

39,677

$

(490,285)

12. Incentive Plans

2014 Incentive Award Plan

The Company provides incentive awards in the form of common stock or awards convertible into common stock pursuant to the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan, as amended (the “Incentive Plan”). The Incentive Plan allows for the issuance of a variety of awards. The major categories of awards that can be issued under the Incentive Plan include:

Long-Term Incentive Units (“LTIP Units”): LTIP Units, in the form of profits interest units of the Operating Partnership, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. LTIP Units (other than Class D units), whether vested or not, receive the same quarterly per-unit distributions as Operating Partnership common units. Initially, LTIP Units do not have full parity with common units with respect to liquidating distributions. However, if such parity is reached, vested LTIP Units may be converted into an equal number of common units of the Operating Partnership at any time. The awards generally vest over periods between two and four years.

Service-Based Restricted Stock Units: Service-based Restricted Stock Units, which vest over periods between two and four years, convert to shares of Digital Realty Trust, Inc.’s common stock upon vesting.

Market Performance-Based Awards (“the Performance Awards”): Market performance-based Performance Awards in the form of Class D units of the Operating Partnership and market performance-based Restricted Stock Units covering shares of Digital Realty Trust, Inc’sInc.’s common stock canmay be issued to officers and employees of the Company. Depending on the award, the total number of units that qualify to fully

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

vest is determined based on either a market performance criterion (“Market-Based Performance Awards”) or financial performance criterion (“Financial-Based Performance Awards”).

Market-Based Performance Awards.

The percentage of the total number of units that performance vest for Market-Based Performance Awards utilizeis determined by comparing the Company’s total shareholder return (“TSR”) relative to the MSCI US REIT Index (“RMS”) over a three-year period. The awards then have a time-based vesting element that allows for 50% of the performance-vested units to fully vest in the immediately following year and 50% of the performance-vested units to fully vest in the next-subsequent year. The fair value of these awards is determined using a Monte Carlo simulation to estimate the probability of the market vesting condition being satisfied.

Achievement of the market performance condition is measured based on the difference between Digital Realty Trust, Inc.’s TSR percentage and the TSR percentage of the RMS as is shown in the subsequent table (the “RMS Relative Market Performance”).

Market

2021-2022

Performance

RMS Relative

Vesting

Level

Market Performance

Percentage

Below Threshold Level

≤ -500 basis points

0

%

Threshold Level

-500 basis points

25

%

Target Level

0 basis points

50

%

High Level

≥ 500 basis points

100

%

If the RMS Relative Market Performance falls between the levels specified in the above table, the percentage of the award that will vest with respect to the market condition will be determined using straight-line linear interpolation between such levels.

2019 Awards

Following the completion of the applicable Market Performance Period, in January 2022, the Compensation Committee made the following determinations regarding the vesting of these awards:

The RMS Relative Market Performance fell between the target and high levels for the 2019 awards and accordingly, 239,436 Class D units and 70,721 Restricted Stock Units performance vested and qualified for time-based vesting.
The number of performance-vested Class D units included 18,966 distribution equivalent units that immediately vested on December 31, 2021.
On February 27, 2022, 50% of the 2019 awards vested and the remaining 50% will vest on February 27, 2023, subject to continued employment through the applicable vesting date.

The grant date fair value of the Market-Based Performance Awards was approximately $12.3 million and $25.0 million for the six months ended June 30, 2022 and 2021, respectively. This amount will be recognized as compensation expense on a straight-line basis over the expected service period of approximately four years.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(“TSR”) over a 3-year measurement period as the market performance metric. Awards vest based on the Company’s TSR relative to the MSCI US REIT Index over a 3-year period, subject to continued services.

In January 2021, following the completion of the applicable Market Performance Period, the Compensation Committee determined that the high level had been achieved for the 2018 awards and, accordingly, 240,377 Class D units (including 20,725 distribution equivalent units that immediately vested on December 31, 2020) and 63,498 market performance-based Restricted Stock Units performance vested, subject to service-based vesting. On February 27, 2021, 50% of the 2018 awards vested and the remaining 50% will vest on February 27, 2022, subject to continued employment through the applicable vesting date. The targets and vesting thresholds for these awards remain unchanged from the targets and thresholds disclosed in the 2020 Form 10-K as filed with the SEC.

The fair values of the awards granted were measured using a Monte Carlo simulation to estimate the probability of the market vesting condition being satisfied. The Company’s achievement of the market vesting condition is contingent on its TSR over a three-year market performance period, relative to the TSR of the MSCI US REIT Index. The Monte Carlo simulation is a probabilistic technique based on the underlying theory of the Black-Scholes formula, which was run for 100,000 trials to determine the fair value of the awards. For each trial, the payoff to an award is calculated at the settlement date and is then discounted to the grant date at a risk-free interest rate. The total expected value of the awards on the grant date was determined by multiplying the average value per award over all trials by the number of awards granted. Assumptions used in the valuations are summarized as follows:

    

Expected Stock Price

    

Risk-Free Interest

Award Date

 

Volatility

 

Rate

February 19, 2020

22

%  

1.39

%

February 20, 2020

22

%  

1.35

%

January 1, 2021

27

%  

0.17

%

February 25, 2021

26

%  

0.31

%

Financial-Based Performance Awards.

On March 4, 2022, the Company granted Financial-Based Performance Awards, based on growth in core funds from operation (“Core FFO”) during the three-year period commencing on January 1, 2022. The awards have a time-based vesting element consistent with the Market-Based Performance Awards discussed above. For these awards, fair value is based on market value on the date of grant and compensation cost is recognized based on the probable achievement of the performance condition at each reporting period. The grant date fair value of these awards is $12.3 million, based on the Class D unit and market performance-based Restricted Stock Unit awards was approximately $25.0 million and $17.2 million forCompany’s closing stock price at the six months ended June 30, 2021 and 2020, respectively. We will recognize compensation expense on a straight-line basis over the expected service period of approximately four years.grant date.

Other Items:: In addition to the LTIP Units, service-based Restricted Stock Units and Performance Awards described above, one-time grants withof time and/or performance-based vestingClass D units and Restricted Stock Units were issued associatedin connection with the Interxion Combination. The vestingCompany’s combination with InterXion Holding N.V. These awards vest over a period of these awards is between two and three years.years based on the attainment of performance metrics related to the successful integration of the Interxion business and continued service.

As of June 30, 2021,2022, approximately 5.55.0 million shares of common stock, including awards convertible intothat can be converted to or exchangeableexchanged for shares of common stock, remained available for future issuance under the Incentive Plan.

Each LTIP unit and each Class D unit issued under the Incentive Plan counts as one share of common stock for purposes of calculating the limit on shares that may be issued under the Incentive Plan and the individual award limits set forth therein.

Below is a summary of our compensation expense and our unearned compensation (in millions):

Expected

 

 

 

period to

Deferred Compensation

 

Unearned Compensation

 

recognize

Expensed

Capitalized

As of

As of

 

unearned

    

Three Months Ended June 30, 

June 30, 

December 31, 

 

compensation

Type of incentive award

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

    

(in years)

Long-term incentive units

$

6.4

$

2.8

$

0.0

$

$

33.9

$

19.8

 

2.3

Performance-based awards

 

5.6

 

6.4

 

0.1

 

0.1

 

46.9

 

39.2

 

2.3

Service-based restricted stock units

 

6.8

 

5.3

 

1.4

 

0.9

 

68.8

 

44.5

 

2.8

Interxion awards

1.1

4.1

4.6

8.5

1.1

 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

    

Long-term incentive units

$

11.6

$

6.0

$

0.1

$

0.1

Performance-based awards

 

10.6

 

14.9

 

0.3

 

0.5

Service-based restricted stock units

12.1

9.2

2.4

1.6

Interxion awards

 

2.0

 

14.6

 

 

Activity for LTIP Units and service-based Restricted Stock Units for the six months ended June 30, 2022 is shown below.

    

    

Weighted-Average

 

Grant Date Fair

Unvested LTIP Units

Units

 

Value

Unvested, beginning of period

 

250,468

$

132.66

Granted

 

167,326

 

154.09

Vested

 

(127,117)

 

130.32

Cancelled or expired

 

 

Unvested, end of period

 

290,677

$

146.02

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Below is a summary of our compensation expense and unearned compensation (in millions):

Expected

 

 

period to

Deferred Compensation

Unearned Compensation

 

recognize

Expensed

Capitalized

As of

As of

 

unearned

    

Three Months Ended June 30, 

    

June 30, 

December 31, 

 

compensation

Type of incentive award

    

2021

    

2020

    

2021

    

2020

    

2021

    

2020

    

(in years)

Long-term incentive units

$

2.8

$

3.1

$

$

$

24.9

$

15.1

 

2.3

Performance-based awards

 

6.4

 

6.6

 

0.1

 

0.2

 

47.2

 

34.4

 

2.8

Service-based restricted stock units

 

5.3

 

3.6

 

0.9

 

0.8

 

57.6

 

41.5

 

2.8

Interxion awards

4.1

7.1

12.8

27.2

1.9

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Long-term incentive units

$

6.0

$

6.2

$

0.1

$

0.1

Performance-based awards

 

14.9

 

11.2

 

0.5

 

0.4

Service-based restricted stock units

9.2

6.8

1.6

1.6

Interxion awards

 

14.6

 

10.1

 

 

Weighted-Average

 

Grant Date Fair

Unvested Restricted Stock Units

    

Shares

    

Value

Unvested, beginning of period

 

509,369

$

129.52

Granted

 

312,244

 

138.35

Vested

 

(169,630)

 

124.32

Cancelled or expired

 

(44,828)

 

133.37

Unvested, end of period

 

607,155

$

135.23

The subsequent tables provide a summary13. Derivative Instruments

We had 0 material outstanding interest rate derivatives that were designated as cash flow hedges of activity for LTIP Units and service-based Restricted Stock Units for the six months endedinterest rate risk as of June 30, 2021.

    

    

Weighted-Average

 

Grant Date Fair

Unvested Long-term Incentive Units

Units

 

Value

Unvested, beginning of period

 

235,535

$

122.22

Granted

 

132,041

 

138.05

Vested

 

(124,984)

 

122.22

Cancelled or expired

 

(1,876)

 

128.38

Unvested, end of period

 

240,716

$

130.86

Weighted-Average

 

Grant Date Fair

Unvested Restricted Stock

    

Shares

    

Value

Unvested, beginning of period

 

783,219

$

123.04

Granted

 

243,107

 

135.44

Vested

 

(327,773)

 

120.04

Cancelled or expired

 

(30,366)

 

129.01

Unvested, end of period

 

668,187

$

128.75

2022.

Interxion Equity Plans

On March 9, 2020,Amounts reported in connection withaccumulated other comprehensive loss related to interest rate swaps are reclassified to interest expense as interest payments are made on our debt. As of June 30, 2022, we had 0 material interest rate swap agreements outstanding.

The derivative instruments the Interxion Combination, certain outstanding awards granted under various Interxion equity plans were assumed by Digital Realty Trust, Inc. and convertedCompany enters into adjusted equity-based awards of Digital Realty Trust, Inc. common stocktypically contain provisions that would declare the Company as being in accordance with the termsdefault on its derivative obligations if repayment of the Purchase Agreement for the Interxion Combination. All such awards will continue to be governedunderlying indebtedness is accelerated by the termslender due to any default on the indebtedness. As of the applicable Interxion equity plan and underlying award agreement evidencing the award. Approximately 0.6 million shares of Digital Realty Trust, Inc. common stock are registered and issuable pursuant to such awards. The impact of these plans is included in the tables above.June 30, 2022, we did not have any material derivatives outstanding.

14. Fair Value of Financial Instruments

There have been no significant changes in our policy for fair value measurements from what was disclosed in our 2021 Form 10-K.

As of June 30, 2022 and December 31, 2021, the carrying amounts for cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and other accrued liabilities, accrued dividends and distributions, security deposits and prepaid rents approximate fair value because of the short-term nature of these instruments. The carrying value of our global revolving credit facilities approximates estimated fair value, because these liabilities have variable interest rates and our credit ratings have remained stable. Differences between the carrying value and fair value of our unsecured senior notes and secured and other debt are caused by differences in interest rates or borrowing spreads that were available to us on June 30, 2022 and December 31, 2021 as compared to those in effect when the debt was issued or assumed.

We calculate the fair value of our secured and other debt and unsecured senior notes based on currently available market rates assuming the loans are outstanding through maturity and considering the collateral and other loan terms. In determining the current market rate for fixed rate debt, a market spread is added to the quoted yields on federal government treasury securities with similar maturity dates to our debt.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Derivative Instruments

As of June 30, 2021, there was no impact from netting arrangements as the Company did not have any derivatives in asset positions. There have been no significant changes to our policy or strategy from what was disclosed in our 2020 Form 10-K. A summary of our outstanding interest rate derivative instruments is shown in the subsequent table (in thousands).

Summary of Outstanding Interest Rate Derivatives

Fair Value at Significant Other

Notional Amount

Observable Inputs (Level 2)

As of

As of

As of

As of

June 30, 

December 31, 

Type of

Strike

Effective

Expiration

June 30, 

December 31, 

2021

    

2020

    

Derivative

    

Rate

    

Date

    

Date

    

2021

    

2020

Currently-paying contracts

  

 

  

 

  

 

  

 

  

 

  

104,000

 

104,000

Swap

 

1.435

Jan 15, 2016

Jan 15, 2023

 

(2,031)

 

(2,773)

 

77,352

Swap

 

0.779

Jan 15, 2016

Jan 15, 2021

 

 

(9)

$

104,000

$

181,352

$

(2,031)

$

(2,782)

As of June 30, 2021, we estimate that an additional $1.4 million will be reclassified as an increase to interest expense during the twelve months ended June 30, 2022, when the hedged forecasted transactions impact earnings.

14. Fair Value of Financial Instruments

There have been no significant changes in our policy forThe aggregate estimated fair value measurements from what was disclosed in our 2020 Form 10-K.

As of June 30, 2021 and December 31, 2020, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values. The carrying value of our global revolving credit facilities, and unsecured term loans approximates estimated fair value, because these liabilities have variable interest rates and our credit ratings have remained stable. Differences between the carrying value and fair value of our unsecured senior notes and secured and other debt are caused by differences in interest rates or borrowing spreads that were available to us on June 30, 2021 and December 31, 2020 as compared to those in effect whenof the debt was issued or assumed.

A comparison of estimated fair value and carrying value of our debtrespective periods is shown in the subsequent tablebelow (in thousands).:

Categorization

As of June 30, 2021

As of December 31, 2020

Categorization

As of June 30, 2022

As of December 31, 2021

under the fair value

Estimated Fair

Estimated Fair

under the fair value

Estimated Fair

Estimated Fair

    

hierarchy

    

Value

    

Carrying Value

    

Value

    

Carrying Value

    

hierarchy

    

Value

    

Carrying Value

    

Value

    

Carrying Value

Global revolving credit facilities

 

Level 2

$

1,032,946

$

1,032,946

$

540,184

$

540,184

 

Level 2

$

1,458,730

$

1,458,730

$

415,116

$

415,116

Unsecured term loans

 

Level 2

 

 

 

537,470

 

537,470

Unsecured senior notes (1)

 

Level 2

 

13,630,380

 

12,762,570

 

13,359,960

 

12,096,029

 

Level 2

 

11,262,417

 

12,792,422

 

13,580,262

 

13,000,042

Secured and other debt (1)

 

Level 2

 

250,836

 

242,870

 

242,051

 

239,326

 

Level 2

 

153,543

 

159,024

 

152,511

 

147,082

$

14,914,162

$

14,038,386

$

14,679,665

$

13,413,009

$

12,874,690

$

14,410,176

$

14,147,889

$

13,562,240

(1)Valuations for our unsecured senior notes and secured and other debt are determined based on the expected future payments discounted at risk-adjusted rates and quoted market prices.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Commitments and Contingencies

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements including ground up construction. From time to time in the normal course of our business, we enter into various construction contracts with third parties that may obligate us to make payments. At June 30, 2021,2022, we had open commitments, including amounts reimbursable by customers of approximately $35.2$55.1 million, related to construction contracts of approximately $1.5$1.9 billion.

In the ordinary course of our business, we may become subject to various legal proceedings. As of June 30, 2021,2022, we were not a party to any legal proceedings which we believe would have a material adverse effect on our operations or financial position.

16. Supplemental Cash Flow Information

Cash, cash equivalents, and restricted cash balances as of June 30, 2021,2022, and December 31, 2020:2021:

Balance as of

(Amounts in thousands)

    

June 30, 2021

    

December 31, 2020

Cash and cash equivalents

$

120,482

$

108,501

Restricted cash (included in other assets)

 

8,031

 

15,151

Total

$

128,513

$

123,652

Balance as of

(Amounts in thousands)

    

June 30, 2022

    

December 31, 2021

Cash and cash equivalents

$

99,226

$

142,698

Restricted cash (included in other assets)

 

9,995

 

8,787

Total

$

109,221

$

151,485

We paid $151.7$144.1 million and $151.5$151.7 million for interest, net of amounts capitalized, for the six months ended June 30, 20212022 and 2020,2021, respectively.

We paid $12.7$8.8 million and $8.6$12.7 million for income taxes, net of refunds, for the six months ended June 30, 2022 and 2021, respectively.

Accrued construction related costs totaled $469.6 million and 2020,$370.3 million as of June 30, 2022 and 2021, respectively.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

17. Subsequent EventsSegment and Geographic Information

On July 15, 2021, Digital Intrepid Holding B.V., an indirect wholly owned subsidiary

Most of the Operating Partnership, issued and sold CHF 275 million aggregate principal amount of 0.20% Guaranteed Notes due 2026 (the “2026 Notes”) and CHF 270 million aggregate principal amount of 0.55% Guaranteed Notes due 2029 (the “2029 Notes” and togetherCompany’s largest customers are global entities that transact with the 2026 Notes,Company across multiple geographies worldwide. The Company manages critical decisions around development, operations, and leasing globally based on customer demand considerations to best address the “Swiss Franc Notes”). The Swiss Franc Notes are senior unsecured obligationsneeds of Digital Intrepid Holding B.V.its global customers. In this regard, the Company manages customer relationships on a global basis in order to achieve consistent sales and are fullydelivery experience of our products for our customers. In order to best accommodate the needs of our current and unconditionally guaranteed by Digital Realty Trust, Inc.potential global customers, the Company manages its operations as a single global business – with 1 operating segment and, the Operating Partnership. Net proceeds from the offeringtherefore, 1 reporting segment. A breakout of the Swiss Franc Notes were approximately CHF 542.3 million after deducting the managers’ commissionsCompany’s Operating Revenues, Investments in Properties, net, and certain offering expenses.Operating lease right-of-use assets, net by geography is shown below.

Operating Revenues

Three Months Ended June 30, 

Six Months Ended June 30, 

(Amounts in millions)

2022

2021

2022

2021

Inside the United States

$

679.7

$

686.4

$

1,344.8

$

1,377.3

Outside the United States

459.7

406.8

921.8

806.3

Revenue Outside of U.S. %

40.3

%

37.2

%

40.7

%

36.9

%

Investments in Properties, net

Operating lease right-of-use assets, net

As of June 30, 

As of December 31, 

As of June 30, 

As of December 31, 

(Amounts in millions)

2022

2021

2022

2021

Inside the United States

$

11,197.9

$

11,167.9

$

692.6

$

719.1

Outside the United States

9,602.5

9,594.3

618.4

686.4

Net Assets in Foreign Operations

$

2,990.5

$

3,865.4

18. Subsequent Events

On August 1, 2022, we completed the acquisition of a 55% majority interest in Teraco, a leading carrier-neutral data center and interconnection services provider in South Africa. The total purchase price was $1.7 billion cash, funded by our global revolving credit facility and a partial settlement of the forward sale agreements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 20202021, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021,2022, each as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”). This report contains forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, expected use of borrowings under our credit facilities, expected use of proceeds from our ATM equity program, expected settlement and use of proceeds from our forward sale agreements, litigation matters, portfolio performance, leverage policy, acquisition and capital expenditure plans, capital recycling program, returns on invested capital, supply and demand for data center space, capitalization rates, rents to be received in future periods and expected rental rates on new or renewed data center space as well as our discussion of “Factors Which May Influence Future Results of Operations,” contain forward-looking statements. Likewise, all of our statements regarding anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and discussions which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and that we may not be able to realize. We do not guarantee that the transactions and events described will happen as described or that they will happen at all. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: reduced demand for data centers or decreases in information technology spending; increased competition or available supply of data center space; decreased rental rates, increased operating costs or increased vacancy rates; the impact of the COVID-19 pandemic on our, our customers’ and our suppliers’ operations;operations during a pandemic, such as COVID-19; changes in political conditions, geopolitical turmoil, political instability, civil disturbances, restrictive governmental actions or nationalization in the countries in which we operate; the suitability of our data centers and data center infrastructure, delays or disruptions in connectivity or availability of power, or failures or breaches of our physical and information security infrastructure or services; our dependence upon significant customers, bankruptcy or insolvency of a major customer or a significant number of smaller customers, or defaults on or non-renewal of leases by customers; breaches of our obligations or restrictions under our contracts with our customers; our inability to successfully develop and lease new properties and development space, and delays or unexpected costs in development of properties; the impact of current global and local economic, credit and market conditions;conditions, including impacts of inflation; global supply chain or procurement disruptions, or increased supply chain costs; our inability to retain data center space that we lease or sublease from third parties; information security and data privacy breaches; difficulties managing an international business and acquiring or operating properties in foreign jurisdictions and unfamiliar metropolitan areas; our failure to realize the intended benefits from, or disruptions to our plans and operations or unknown or contingent liabilities related to, our recent and future acquisitions; our inability to achieve expected revenue synergies or cost savings as a result of our combination with Interxion; our failure to successfully integrate and operate acquired or developed properties or businesses; difficulties in identifying properties to acquire and completing acquisitions; risks related to joint venture investments, including as a result of our lack of control of such investments; risks associated with using debt to fund our business activities, including re-financing and interest rate risks, our failure to repay debt when due, adverse changes in our credit ratings or our breach of covenants or other terms contained in our loan facilities and agreements; our failure to obtain necessary debt and equity financing, and our dependence on external sources of capital; financial market fluctuations and changes in foreign currency exchange rates; adverse economic or real estate developments in our industry or the industry sectors that we sell to, including risks relating to decreasing real estate valuations and impairment charges and goodwill and other intangible asset impairment charges; our inability to manage our growth effectively; losses in excess of our insurance coverage; our inability to attract and retain talent; environmental liabilities, risks related to natural disasters and our inability to achieve our sustainability goals; our inability to comply with rules and regulations applicable to our Company; Digital Realty Trust, Inc.’s failure to maintain its status as a REIT for federal income tax purposes; Digital Realty Trust, L.P.’s failure to qualify as a partnership for federal income tax purposes; restrictions on our ability to

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engage in certain business activities; and changes in local, state, federal and international laws and regulations, including related to taxation, real estate and zoning laws, and increases in real property tax rates.

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While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in our annual report on Form 10-K for the year ended December 31, 2020.2021. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to identify all such risk factors, nor can we assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.

Occupancy percentages included in the following discussion, for some of our properties, are calculated based on factors in addition to contractually leased square feet, including available power, required support space and common area.

As used in this report: “Ascenty Acquisition” refers to the acquisition of Ascenty by the Operating Partnership and Stellar Participações S.A. (formerly Stellar Participações Ltda.), a Brazilian subsidiary of the Operating Partnership; “Ascenty entity” refers to the entity, which owns and operates Ascenty, formed with Brookfield Infrastructure; “Brookfield” refers to Brookfield Infrastructure, an affiliate of Brookfield Asset Management; “Interxion” refers to InterXion Holding N.V.; and “Interxion Combination” refers to the Company’s combination with InterXion Holding N.V.Infrastructure.

Business Overview and Strategy

Digital Realty Trust, Inc., through its controlling interest in Digital Realty Trust, L.P. and its subsidiaries, delivers comprehensive space, power, and interconnection solutions that enable its customers and partners to connect with each other and service their own customers on a global technology and real estate platform. We are a leading global provider of data center, colocation and interconnection solutions for customers across a variety of industry verticals ranging from cloud and information technology services, social networking and communications to financial services, manufacturing, energy, healthcare, and consumer products.verticals. Digital Realty Trust, Inc. operates as a REIT for federal income tax purposes, and our Operating Partnership is the entity through which we conduct our business and own our assets.

Our primary business objectives are to maximize:

(i)sustainable long-term growth in earnings and funds from operations per share and unit;
(ii)cash flow and returns to our stockholders and our Operating Partnership’sDigital Realty Trust, L.P.’s unitholders through the payment of distributions; and
(iii)return on invested capital.

We expect to accomplish our objectives by achieving superior risk-adjusted returns, prudently allocating capital, diversifying our product offerings, accelerating our global reach and scale, and driving revenue growth and operating efficiencies. A significant component of our current and future internal growth is anticipated through the development of our existing space held for development, acquisition of land for future development, and acquisition of new properties.

We target high-quality, strategically located properties containing the physical and connectivity infrastructure that supports the applications and operations of data center and technology industry customers and properties that may be developed for such use. Most of our data center properties contain fully redundant electrical supply systems, multiple power feeds, above-standard cooling systems, raised floor areas, extensive in-building communications cabling and high-level security systems. Fundamentally, we bring together foundational real estate and innovative technology expertise around the world to deliver a comprehensive, dedicated product suite to meet customers’ data and connectivity needs. We focus exclusively on owning, acquiring, developing and operating data centers becauserepresent an important part of the digital economy that we believe that thewill benefit from powerful, long-term growth in data center demand and the technology-related real estate industry generally will continue to outpace the overall economy.drivers.

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We have developed detailed, standardized procedures for evaluating new real estate investments to ensure that they meet our financial, technical and other criteria. We expect to continue to acquire additional assets as part of our growth

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strategy. We intend to aggressively manage and lease our assets to increase their cash flow. We may continue to build out our development portfolio when justified by anticipated demand and returns.

We may acquire properties subject to existing mortgage financing and other indebtedness or we may incur new indebtedness in connection with acquiring or refinancing these properties. Debt service on such indebtedness will have a priority over any cash dividends with respect to Digital Realty Trust, Inc.’s common stock and preferred stock. We are committed to maintaining a conservative capital structure. We target a debt-to-Adjusted EBITDA ratio at or less than 5.5x, fixed charge coverage of greater than three times, and floating rate debt at less than 20% of total outstanding debt. In addition, we strive to maintain a well-laddered debt maturity schedule, and we seek to maximize the menu of our available sources of capital, while minimizing the cost.

Summary of 2022 Significant Activities

We completed the following significant activities during the six months ended June 30, 2022:

In December 2021 we entered into a definitive agreement to acquire a majority stake in Teraco, South Africa’s leading carrier-neutral colocation provider, in a transaction valuing Teraco at approximately $3.5 billion. The transaction closed on August 1, 2022.
In January, we issued and sold €750.0 million aggregate principal amount of 1.375% Guaranteed Notes due 2032 (the “2032 Notes”). The 2032 Notes are senior unsecured obligations of Digital Intrepid Holding B.V. and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and Digital Realty Trust, L.P. Net proceeds from the offering were approximately €737.5 million (approximately $835.3 million based on the exchange rate on January 18, 2022) after deducting managers’ discounts and estimated offering expenses.
In February, we redeemed $450.0 million of 4.750% Notes due 2025. As part of this redemption, we recorded a $51.1 million loss on extinguishment of debt.
In March, we issued and sold CHF 100 million aggregate principal amount of 0.600% Guaranteed Notes due 2023 (the “2023 Notes”) and CHF 150 million aggregate principal amount of 1.700% Guaranteed Notes due 2027 (the “2027 Notes” and, together with the 2023 Notes, the “Swiss Franc Notes”). The Swiss Franc Notes are senior unsecured obligations of Digital Intrepid Holding B.V. and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and Digital Realty Trust, L.P. Net proceeds from the offering of the Swiss Franc Notes were approximately CHF 248.6 million (approximately $269.2 million based on the exchange rate on March 30, 2022) after deducting the managers’ commissions and certain offering expenses.
In June, we announced the formation of a joint venture with Mivne Real Estate (K.D.). The joint venture will operate under the brand name Digital Realty Mivne and will develop a multi-tenant data center campus in Israel.

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Revenue Base

The majorityMost of our revenue consists of rental income generated by the data centers in our portfolio. Our ability to generate and grow revenue depends on several factors, including our ability to maintain or improve occupancy rates. As of June 30, 2021 and December 31, 2020, our portfolio (excluding space under development or held for development) was 84.7% and 86.3% leased, respectively. A summary of our data center portfolio and related square feet occupied as of June 30, 2021(excluding space under development or held for development) is shown below. Unconsolidated portfolios shown below consist of assets owned by unconsolidated entities in which we have invested. We often provide management services for these entities under management agreements and receive management fees. These are shown as Managed Unconsolidated Portfolio. Entities for which we do not provide such services are shown as Non-Managed Unconsolidated Portfolio.

As of June 30, 2021

Region

Data Center Buildings

Net Rentable Square Feet (1)

Space Under Active Development

(2)

Space Held for Development

(3)

Occupancy

North America

124

23,031,002

2,243,332

731,285

86.1

%

Europe

 

106

7,065,271

 

3,036,745

263,141

76.5

%

Asia Pacific

 

14

1,125,077

 

1,459,823

176,794

84.0

%

Africa

 

3

25,791

 

37,025

47.9

%

Consolidated Portfolio

 

247

31,247,142

 

6,776,925

1,171,220

83.9

%

Managed Unconsolidated Portfolio

16

2,191,236

92.2

%

Non-Managed Unconsolidated Portfolio

 

28

2,374,531

 

521,126

970,909

87.4

%

Total Portfolio

 

291

35,812,908

 

7,298,051

2,142,129

84.7

%

As of June 30, 2022

As of December 31, 2021

Region

Data Center Buildings

Net Rentable Square Feet (1)

Space Under Active Development (2)

Space Held for Development (3)

Occupancy

Data Center Buildings

Net Rentable Square Feet (1)

Space Under Active Development (2)

Space Held for Development (3)

Occupancy

North America

116

22,142,838

2,790,213

815,238

85.0

%

114

21,751,638

2,327,121

900,357

85.4

%

Europe

114

7,872,464

4,163,626

188,153

77.5

%

107

7,549,209

3,125,451

191,094

74.6

%

Asia Pacific

12

1,577,915

495,920

87,660

79.7

%

12

1,355,243

806,252

76.2

%

Africa

4

25,834

43,876

59.0

%

4

25,825

40,965

58.5

%

Consolidated Portfolio

246

31,619,051

7,493,635

1,091,051

82.8

%

237

30,681,914

6,299,789

1,091,451

82.5

%

Managed Unconsolidated Portfolio

16

2,383,729

95.2

%

16

2,383,729

95.2

%

Non-Managed Unconsolidated Portfolio

35

2,800,027

795,769

1,569,641

86.2

%

34

2,565,185

930,670

1,591,004

86.0

%

Total Portfolio

297

36,802,807

8,289,404

2,660,692

83.9

%

287

35,630,828

7,230,460

2,682,456

83.6

%

(1)Net rentable square feet represents the current square feet under lease as specified in the applicable lease agreement plus management’s estimate of space available for lease based on engineering drawings. The amount includes customers’ proportional share of common areas but excludes space held for the intent of or under active development.
(2)Space under active development includes current base building and data center projects in progress, and excludes space held for development. For additional information on the current and future investment for space under active development, see “—Liquidity“Liquidity and Capital Resources of the Operating Partnership—Construction”Resources—Development Projects”.
(3)Space held for development includes space held for future data center development and excludes space under active development. For additional information on the current investment for space held for development, see “—Liquidity“Liquidity and Capital Resources of the Operating Partnership—Construction”Resources—Development Projects”.

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Leasing Activities

Due to the capital-intensive and long-term nature of the operations we support, our lease terms with customers are generally longer than standard commercial leases. As of June 30, 2021,2022, our average remaining lease term was approximately five years.

Our ability to re-lease expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. The followingsubsequent table summarizes our leasing activity in the six months ended June 30, 2021:2022:

    

    

    

    

    

TI’s/Lease

    

Weighted

Commissions 

Average Lease 

Rentable

Expiring 

New

Rental Rate

Per Square 

Terms 

Square Feet (1)

Rates (2)

Rates (2)

Changes

Foot

(years)

Leasing Activity (3)(4)

 

  

 

  

 

  

 

  

 

  

 

  

Renewals Signed

 

  

 

  

 

  

 

  

 

  

 

  

0 1 MW

 

998,606

$

254.08

$

259.63

 

2.2

%  

$

0.85

 

1.8

> 1 MW

 

648,590

$

144.44

$

147.80

 

2.3

%  

$

0.74

 

3.2

Other (6)

 

733,091

$

19.74

$

22.44

 

13.7

%  

$

0.35

 

3.6

New Leases Signed (5)

 

  

 

  

 

  

 

 

  

 

  

0 1 MW

 

242,428

 

$

304.36

 

$

43.00

 

3.9

> 1 MW

 

885,417

 

$

145.07

 

$

17.77

 

8.6

Other (6)

 

68,447

 

$

32.98

 

$

7.60

 

8.1

Leasing Activity Summary

 

  

 

  

 

  

 

 

  

 

  

0 1 MW

 

1,241,034

 

$

268.37

 

 

 

  

> 1 MW

 

1,534,008

 

$

146.22

 

 

 

  

Other (6)

 

801,538

 

$

23.34

 

 

 

  

    

    

    

    

    

TI’s/Lease

    

Weighted

Commissions 

Average Lease 

Rentable

Expiring 

New

Rental Rate

Per Square 

Terms 

Square Feet (1)

Rates (2)

Rates (2)

Changes

Foot

(years)

Leasing Activity (3)(4)

 

  

 

  

 

  

 

  

 

  

 

  

Renewals Signed

 

  

 

  

 

  

 

  

 

  

 

  

0 1 MW

 

1,055,093

$

238.62

$

246.62

 

3.4

%  

$

0.29

 

1.5

> 1 MW

 

313,997

$

167.43

$

182.43

 

9.0

%  

$

47.69

 

3.0

Other (6)

 

678,425

$

39.06

$

47.37

 

21.3

%  

$

16.94

 

12.0

New Leases Signed (5)

 

 

  

 

  

 

 

 

0 1 MW

 

323,841

 

$

229.02

 

$

9.82

 

3.7

> 1 MW

 

1,330,732

 

$

136.60

 

$

3.16

 

8.5

Other (6)

 

71,020

 

$

24.50

 

$

2.39

 

2.9

Leasing Activity Summary

 

 

  

 

  

 

 

  

 

  

0 1 MW

 

1,378,934

 

$

242.49

 

 

 

  

> 1 MW

 

1,644,728

 

$

145.35

 

 

 

  

Other (6)

 

749,445

 

$

45.20

 

 

 

  

(1)For some of our properties, we calculate square footage based on factors in addition to contractually leased square feet, including power, required support space and common area.
(2)Rental rates represent average annual estimated base cash rent per rentable square foot – calculated for each contract based on total cash base rent divided by the total number of years in the contract (including any tenant concessions). All rates were calculated in the local currency of each contract and then converted to USD based on average exchange rates for the six months ended June 30, 2021.period presented.
(3)Excludes short-term leases.
(4)Commencement dates for the leases signed range from 20212022 to 2022.2023.
(5)Includes leases signed for new and re-leased space.
(6)Other includes Powered Base Building shell capacity as well as storage and office space within fully improved data center facilities.

We continue to see strong demand in most of our key metropolitan areas for data center space and, subject to the supply of available data center space in these metropolitan areas, we expect average aggregate rental rates on re-leased or renewed data center leases for 20212022 expirations to generally be consistentslightly positive as compared with the rates currently being paid for the same space on a GAAP basis and on a cash basis. Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our data centers will be re-leased at all or at rental rates equal to or above the current average rental rates. Further, re-leased/renewed rental rates in a particular metropolitan area may not be consistent with rental rates across our portfolio as a whole and may fluctuate from one period to another due to a number of factors, including local economic conditions, local supply and demand for data center space, competition from other data center developers or operators, the condition of the property and whether the property, or space within the property, has been developed.

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Geographic concentrationConcentration

We depend on the market for data centers in specific geographic regions and significant changes in these regional or metropolitan areas can impact our future results. The following table shows the geographic concentration of annualized rent from our portfolio, including data centers held as investments in unconsolidated entities.

    

Percentage of

June 30, 2021

total annualized

2022

Metropolitan Area

total annualized rent(1)

Northern Virginia

 

19.118.7

%

Chicago

 

8.99.1

%

New York

6.2

%

London England

 

7.45.8

%

Frankfurt

5.8

%

Silicon Valley

 

6.7

%

New York

6.4

%

Frankfurt, Germany

5.95.6

%

Dallas

5.85.4

%

Singapore

5.3

%

Sao Paulo

4.5

%

Amsterdam Netherlands

 

4.1

%

Sao Paulo, BrazilParis

 

3.8

%

Singapore

3.5

%

Phoenix

2.0

%

Paris, France

1.92.2

%

San Francisco

 

1.9

%

Portland

1.8

%

Phoenix

1.8

%

Atlanta

1.5

%

Osaka, Japan

1.5

%

Other

 

19.720.3

%

Total

 

100.0

%

(1)Annualized rent is monthly contractual rent (defined as cash base rent before abatements) under existing leases as of June 30, 2021the end of the period presented, multiplied by 12. Includes consolidated portfolio and unconsolidated entities at the entities’ 100% ownership level. The aggregate amount of abatements for the six months ended June 30, 20212022 was approximately $55.7$55.1 million.

Operating expensesExpenses

Our operatingOperating expenses primarily consist of utilities, property and ad valorem taxes, property management fees, insurance and site maintenance costs, and rental expenses on our ground and building leases. Our buildings require significant power to support data center operations and the cost of electric power and other utilities is a significant component of operating expenses.

Many of our leases contain provisions under which tenants reimburse us for all or a portion of property operating expenses and real estate taxes incurred by us. However, in some cases we are not entitled to reimbursement of property operating expenses, other than utility expense, and real estate taxes under our leases for Turn-Key Flex® facilities. We expect to incur additional operating expenses as we continue to expand.

Costs pertaining to our asset management function, legal, accounting, corporate governance, reporting and compliance are categorized as general and administrative costs within operating expenses.

Other key components of operating expenses include: depreciation of our fixed assets, amortization of intangible assets, and transaction and integration costs.

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Other Income / (Expenses)

Equity in earnings of unconsolidated entities, interest expense, and income tax expense make up the majority of other income/(expense). Equity in earnings of unconsolidated entities represents our share of the income/(loss) of entities

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in which we invest, but do not consolidate under U.S. GAAP. The largest of these investments is currently our investment in Ascenty, which is located primarily in Brazil. We also hold investments in multiple other unconsolidated entities acrossOur second-largest equity-method investment is Digital Core REIT, which is publicly traded on the globe. Given that manySingapore Exchange (“SGX”) and which owns a portfolio of these entities transact in currencies other than the U.S. Dollar, results of these entities can be significantly impacted by changes in foreign currency exchange rates.

Interest expense pertains primarily to unsecured senior notes, the majority of which are issued at fixed rates. The Company is subject to foreign, state and local taxes10 properties operating in the jurisdictions in which it operatesUnited States and income tax expense can be impacted by changes in tax rates in these various jurisdictions.

Factors Which May Influence Future ResultsCanada. Refer to additional discussion of Operations

COVID-19. We continue to closely monitor the impact of the COVID-19 pandemic on our global businessDigital Core REIT and operations, including the impact on our customers, suppliers and business partners. As of the date of this report, all of our facilities have been and continue to be fully operational and operating in accordance with our business continuity and pandemic response plans. Across our portfolio, our facilities have been deemed essential operations, allowing us to remain staffed with critical personnel in place to continue to provide services and support for our customers. While we did not experience significant disruptions from the COVID-19 pandemic during the six months ended June 30, 2021 nor as of the date of this report, we cannot predict the impact that the COVID-19 pandemic will have on our future financial condition, results of operations and cash flows due to numerous uncertainties.

Rental Income. As of June 30, 2021, most of our leases (on a rentable square footage basis) contained base rent escalations that were either fixed (generally ranging from 2% to 4%) or indexed based on a consumer price index or other similar inflation-related index. We cannot assure you that these escalations will cover all the increases in our costs or will otherwise keep rental rates at or above market rates.

Our ability to increase revenue depends in part on our ability to develop and lease capacity at favorable rates, which we may not be able to obtain. Significant capital investment is required in order to develop data center facilities that are ready for use and, in addition, we may require additional time or encounter delays in securing customers for development projects. We may purchase additional vacant properties and properties with vacant development capacityAscenty in the future. We will require additional capitalNotes to finance our development activities, which may not be available or may not be available on terms acceptable to us.

In addition to approximately 5.0 million square feet of available space in our portfolio, which excludes approximately 7.1 million square feet of space under active development and approximately 1.0 million square feet of space held for development as of June 30, 2021 and the 28 data centers held as investments in our non-managed unconsolidated entities, leases representing approximately 6.5% and 13.0% of the net rentable square footage of our portfolio are scheduled to expire during the six months ending December 31, 2021 and the year ending December 31, 2022, respectively.Condensed Consolidated Financial Statements.

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Results of Operations

As a result of the consistent and significant growth in our business since the first property acquisition in 2002, we evaluate period-to-period results for revenue and property level operating expenses on a stabilized rather thanversus non-stabilized portfolio basis.

Stabilized

Stabilized:: The stabilized portfolio includes properties owned as of the beginning of all periods presented with less than 5% of total rentable square feet under development.

Non-stabilized:Non-stabilized: The non-stabilized portfolio includes: 1)(1) properties that were undergoing, or were expected to undergo, development activities during any of the periods presented, 2)presented; (2) any properties contributed to joint ventures, sold, or held for sale during the periods presented,presented; and 3)(3) any properties that were acquired or delivered at any point during the periods presented.

Comparison of the Three and Six Months Ended June 30, 2021 to the Three and Six Months Ended June 30, 2020

Revenues

Total operating revenues increased by approximately $100.2 million and $367.2 millionA roll forward showing changes in the threestabilized and non-stabilized portfolios for the six months ended June 30, 2021, respectively,2022 as compared to the same periods in 2020, driven primarily by growth in non-stabilized rental and other services revenue. Non-stabilized rental and other services revenue increased primarily due to the Interxion Combination which contributed $50.1 million and $238.9 million to the increases for the three-month and six-month periods, respectively, along with new leasing activity related to our development assets. This increase was partially offset by properties sold in 2020 and 2021. Stabilized rental and other services revenue increased $7.6 million and $23.8 million in the three and six months ended June 30,December 31, 2021 respectively, compared to the same periods in 2020 due to new leasing and renewals, net of expirations as well as increased tenant reimbursements associated with higher utility costs in Texas due to winter storm Uri.is shown below.

Net Rentable Square Feet

    

Stabilized

    

Non-Stabilized

    

Total

As of December 31, 2021

17,095,366

13,586,548

30,681,914

New development and space reconfigurations

9,963

477,254

487,217

Transfers to stabilized from unstabilized

6,823,169

(6,822,308)

861

Addition to unstabilized

449,059

449,059

As of June 30, 2022

23,928,498

7,690,553

31,619,051

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

$ Change

% Change

    

2021

    

2020

    

$ Change

% Change

Stabilized

$

609,703

$

602,107

$

7,596

1.3

%

$

1,221,144

$

1,197,359

$

23,785

2.0

%

Non-Stabilized

479,692

385,568

94,124

24.4

%

956,157

610,388

345,769

56.6

%

Rental and other services

1,089,395

987,675

101,720

10.3

%

2,177,301

1,807,747

369,554

20.4

%

Fee income and other

3,793

5,320

(1,527)

(28.7)

%

 

6,278

 

8,585

(2,307)

(26.9)

%

Total operating revenues

$

1,093,188

$

992,995

$

100,193

10.1

%

$

2,183,579

$

1,816,332

$

367,247

20.2

%

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Comparison of the Results of Operations for the three and six months ended June 30, 2022 to the three and six months ended June 30, 2021

Revenues

Total operating revenues as shown on our condensed consolidated income statements was as follows (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

$ Change

% Change

    

2022

    

2021

    

$ Change

% Change

Stabilized

$

863,188

$

887,660

$

(24,472)

(2.8)

%

$

1,735,114

$

1,779,575

$

(44,461)

(2.5)

%

Non-Stabilized

268,349

201,735

66,614

33.0

%

517,973

397,726

120,247

30.2

%

Rental and other services

1,131,537

1,089,395

42,142

3.9

%

2,253,087

2,177,301

75,786

3.5

%

Fee income and other

7,785

3,793

3,992

105.2

%

 

13,557

 

6,278

7,279

115.9

%

Total operating revenues

$

1,139,322

$

1,093,188

$

46,134

4.2

%

$

2,266,644

$

2,183,579

$

83,065

3.8

%

Total operating revenues increased by approximately $46.1 million and $83.1 million in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, driven primarily by growth in non-stabilized rental and other services revenue.

Stabilized rental and other services revenue decreased $24.5 million in the three months ended June 30, 2022, compared to the same period in 2021 primarily due to a $35.2 million unfavorable foreign currency translation effect (primarily related to weaking of the Euro and British pound sterling versus the U.S. dollar) partially offset by a net increase in tenant reimbursements related to higher utility consumption of $13.4 million.

Stabilized rental and other services revenue decreased $44.5 million in the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a $54.7 million unfavorable foreign currency translation effect (primarily due to the Euro and British pound sterling versus the U.S. dollar), and a $15.1 million increase in bad debt and straight-line rent reserves, partially offset by a net increase in tenant reimbursements related to higher utility consumption of $20.4 million.

Non-stabilized rental and other services revenue increased $66.6 million in the three months ended June 30, 2022, compared to the same period in 2021 driven primarily by:

(i)an increase of $73.4 million due to the completion of global development pipeline and related lease up operating activities;
(ii)$26.2 million generated from an APAC property, which was not operational for the three months ended March 31, 2021;
(iii)offset by a $27.4 million decrease from the impact of properties sold in 2021 and the unfavorable foreign currency translation effect primarily due to the Euro versus the U.S. dollar of approximately $8.7 million.

Non-stabilized rental and other services revenue increased $120.2 million in the six months ended June 30, 2022, compared to the same period in 2021, driven primarily by:

(i)an increase of $148.4 million due to the completion of global development pipeline and related lease up operating activities;
(ii)$58.4 million generated from an APAC property, which was not operational for the three months ended March 31, 2021;

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(iii)offset by a $68.3 million decrease from the impact of properties sold in 2021 and the unfavorable foreign currency translation effect primarily due to the Euro versus the U.S. dollar of approximately $13.1 million.

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Operating Expenses — Property Level

Property level operating expenses as shown in our condensed consolidated income statements were as follows (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

$ Change

% Change

2022

    

2021

    

$ Change

% Change

Stabilized

$

317,625

$

312,250

$

5,375

1.7

%

$

643,989

$

633,048

$

10,941

1.7

%

Non-Stabilized

 

103,877

 

70,966

32,911

46.4

%

 

213,106

 

111,947

101,159

90.4

%

Rental property operating and maintenance

421,502

383,216

38,286

10.0

%

857,095

744,995

112,100

15.0

%

Stabilized

 

40,868

 

38,692

2,176

5.6

%

 

81,337

 

79,322

2,015

2.5

%

Non-Stabilized

 

10,181

 

9,806

375

3.8

%

 

19,936

 

21,679

(1,743)

(8.0)

%

Property taxes and insurance

 

51,049

 

48,498

2,551

5.3

%

 

101,273

 

101,001

272

0.3

%

Total Property Level Expenses

$

472,551

$

431,714

$

40,837

9.5

%

$

958,368

$

845,996

$

112,372

13.3

%

Property level operating expenses include costs to operate and maintain the locationsproperties in our portfolio as well as taxes and insurance.

Stabilized property operating and maintenance expenses increased by approximately $15.1$5.4 million in the three months ended June 30, 2022, compared to the same period in 2021 primarily due to:

(i)$17.6 million increase in utility consumption and higher rates at certain properties in the stabilized portfolio;
(ii)offset by a $12.2 million decrease in rental property operating expenses as a result of the expiration of enhanced COVID janitorial and security screening protocols and data center labor.

Stabilized property operating and maintenance expenses increased $10.9 million in the six months ended June 30, 2022, compared to the same period in 2021 primarily due to:

(i)$26.7 million increase in utility consumption and higher rates at certain properties in the stabilized portfolio;
(ii)offset by a $15.8 million decrease in rental property operating expenses as a result of the expiration of enhanced COVID janitorial and security screening protocols and data center labor.

Non-stabilized property operating and maintenance expenses increased $32.9 million and $42.1$101.2 million in the three and six months ended June 30, 2021,2022, respectively, compared to the same periods in 2020,2021, primarily relateddue to higher utility consumption at certain propertiesin a growing portfolio of recently completed development sites of approximately $20.8 million and $76.9 million, respectively.

The cost of electric power comprises a significant component of our operating expenses. Any additional taxation or regulation of energy use, including as a result of (i) new legislation that the U.S. Congress may pass, (ii) the regulations that the U.S. EPA has proposed or finalized, (iii) regulations under legislation that states have passed or may pass, or (iv) any further legislation or regulations in the stabilized portfolio. Non-stabilized property operatingEU, APAC or other regions where we operate could significantly increase our costs, and maintenance expenses increased largely duewe may not be able to the Interxion Combination, which contributed $22.4 million and $92.7 millioneffectively pass all of these costs on to the increases for the three-month and six-month periods, respectively, primarily due to increased utility costs associated with higherour customers. These matters could adversely impact our business, volume at Interxion properties. Leasing activity at non-stabilized properties during the twelve months ended June 30, 2021 offset by properties sold in 2020 and 2021 also contributed to the increase.results of operations, or financial condition.

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

$ Change

% Change

2021

    

2020

    

$ Change

% Change

    

Stabilized

$

201,446

$

186,366

$

15,080

8.1

%

$

413,266

$

371,128

$

42,138

11.4

%

Non-Stabilized

 

181,770

 

146,281

35,489

24.3

%

 

331,729

 

227,227

104,502

46.0

%

Rental property operating and maintenance

383,216

332,647

50,569

15.2

%

744,995

598,355

146,640

24.5

%

Stabilized

 

32,108

 

33,340

(1,232)

(3.7)

%

 

65,762

 

65,788

(26)

(0.0)

%

��

Non-Stabilized

 

16,390

 

15,101

1,289

8.5

%

 

35,239

 

28,323

6,916

24.4

%

Property taxes and insurance

 

48,498

 

48,441

57

0.1

%

 

101,001

 

94,111

6,890

7.3

%

Total Property Level Expenses

$

431,714

$

381,088

$

50,626

13.3

%

$

845,996

$

692,466

$

153,530

22.2

%

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Other Operating Expenses

Other operating expenses include costs which are either non-cash in nature (such as depreciation and amortization), or which do not directly pertain to operation of data center properties. A comparison of other operating expenses for the three and six months ended June 30, 20212022 and 20202021 is shown below. The increase

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

$ Change

% Change

    

2022

    

2021

$ Change

% Change

Depreciation and amortization

 

$

376,967

$

368,981

$

7,986

2.2

%

 

$

759,099

$

738,714

$

20,385

2.8

%

General and administrative

105,776

97,492

8,284

8.5

%

204,289

197,486

6,803

3.4

%

Transaction, integration and other expense

 

13,586

 

7,075

6,511

92.0

%

 

25,554

21,195

4,359

20.6

%

Other

 

70

 

2,298

(2,228)

97

%

 

7,727

2,041

5,686

278.6

%

Total Other Operating Expenses

496,399

475,846

20,553

4.3

%

996,669

959,436

37,233

3.9

%

Property level operating expenses

472,551

431,714

40,837

9.5

%

958,368

845,996

112,372

13.3

%

Total Operating Expenses

$

968,950

$

907,560

61,390

6.8

%

$

1,955,037

$

1,805,432

149,605

8.3

%

Equity in all categoriesearnings (loss) of other operating expenses forunconsolidated entities

Equity in earnings (loss) of unconsolidated entities decreased approximately $86.0 million and $2.2 million in the 2021 periods shown is primarily driven by the Interxion Combination, which closed in March 2020. The primary driver of increased other operating expenses for the three-month periodthree and six months ended June 30, 2021, as2022, respectively, compared to the same periodperiods in 2020, was a $19.8 million increase in depreciation and amortization expense2021. The foreign exchange remeasurement of debt associated with additional investmentsour Ascenty unconsolidated entity creates volatility in properties as part of normal growth of the business.

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

$ Change

% Change

    

2021

    

2020

$ Change

% Change

    

Depreciation and amortization

 

$

368,981

$

349,165

$

19,816

5.7

%

 

$

738,714

$

640,622

$

98,092

15.3

%

 

General and administrative

97,492

94,291

3,201

3.4

%

197,486

157,829

39,657

25.1

%

Transaction, integration and other expense

 

9,373

 

15,640

(6,267)

(40.1)

%

 

23,236

72,555

(49,319)

(68.0)

%

Total Other Operating Expenses

475,846

459,096

16,750

3.6

%

959,436

871,006

88,430

10.2

%

Property level operating expenses

431,714

381,088

50,626

13.3

%

845,996

692,466

153,530

22.2

%

Total Operating Expenses

$

907,560

$

840,184

67,376

8.0

%

$

1,805,432

$

1,563,472

241,960

15.5

%

our equity in earnings.

Gain on Disposition of Properties, Net

DuringGain on disposition of properties decreased approximately $0.5 million and $331.7 million in the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, because we recognized a gain of approximately $333.3 million in March 31, 2021 we soldassociated with sale of a portfolio of 11 data centers in Europe (four in the United Kingdom, three in the Netherlands, three in France and one in Switzerland) to Ascendas Reit, a CapitaLand sponsored REIT, for total purchase consideration of approximately $680.0 million resulting in a gain of approximately $333.3 million in March 2021. During the three months ended March 31, 2020, we sold 10 Powered Base Building® properties, which comprise 12 data centers, in North America to Mapletree at a purchase consideration of approximately $557.0 million, resulting in a gain of approximately $304.8 million in January 2020.million.

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Loss from Early Extinguishment of Debt

Loss from early extinguishment of debt increased approximately $17.7$32.8 million in the six months ended June 30, 20212022 compared to the same period in 2020,2021. The increase is primarily due to the redemption of the 2.750% 20234.750% Notes due 2025 in February 2021.2022, which resulted in a $51.1 million loss, offset by the redemption 2.750% Notes due 2023 in February 2021, which resulted in a $18.3 million loss.

Income Tax Expense

Income tax expense increaseddecreased by $36.1$31.2 million and $36.5$25.5 million during the three and six-month periodssix months ended June 30, 2021, respectively. This increase2022, respectively, compared to the same periods in 2021. The decrease was driven primarily by an increase in the corporate tax rate that increased deferred tax expense in the United Kingdom from 19% to 25%. during the quarter ended June 30, 2021.

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Liquidity and Capital Resources

The sections “Analysis of Liquidity and Capital Resources - Parent” and “Analysis of Liquidity and Capital Resources - Operating Partnership” should be read in conjunction with one another to understand our liquidity and capital resources on a consolidated basis. The term “Parent” refers to Digital Realty Trust, Inc. on an unconsolidated basis, excluding our Operating Partnership. The term “Operating Partnership” or “OP” refers to Digital Realty Trust, L.P. on a consolidated basis.

Analysis of Liquidity and Capital Resources — Parent

Our Parent does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time, incurring certain expenses in operating as a public company (which are fully reimbursed by the Operating Partnership) and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates. If our Operating Partnership or such subsidiaries fail to fulfill their debt requirements, which trigger Parent guarantee obligations, then our Parent will be required to fulfill its cash payment commitments under such guarantees. Our Parent’s only material asset is its investment in our Operating Partnership.

Our Parent’s principal funding requirement is the payment of dividends on its common and preferred stock. Our Parent’s principal source of funding is the distributions it receives from our Operating Partnership.

As the sole general partner of our Operating Partnership, our Parent has the full, exclusive and complete responsibility for our Operating Partnership’s day-to-day management and control. Our Parent causes our Operating Partnership to distribute such portion of its available cash as our Parent may in its discretion determine, in the manner provided in our Operating Partnership’s partnership agreement.

As circumstances warrant, our Parent may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. Any proceeds from such equity issuances would generally be contributed to our Operating Partnership in exchange for additional equity interests in our Operating Partnership. Our Operating Partnership may use the proceeds to acquire additional properties, to fund development opportunities and for general working capital purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities.

Our Parent and our Operating Partnership arewere parties to an at-the-market (ATM) equity offering sales agreement dated January 4, 2019, as amended in 2020 (the “Sales“2020 Sales Agreement”). In accordance with the 2020 Sales Agreement, following the date of the 2020 amendment, Digital Realty Trust, Inc. maycould offer and sell shares of its common stock having an aggregate offering price of up to $1.0 billion. Prior to theThe 2020 amendment,Sales Agreement was terminated when Digital Realty Trust, Inc. had offered and sold sharesDigital Realty Trust, L.P. entered into a new ATM equity offering sales agreement dated April 1, 2022 (the “2022 Sales Agreement”). At the time of itsthe termination, $577.6 million remained unsold under the 2020 Sales Agreement. Pursuant to the 2022 Sales Agreement, Digital Realty Trust, Inc. can issue and sell common stock having an aggregate gross salesoffering price of approximately $652.2 million.up to $1.5 billion through various named agents from time to time. The sales of common stock made under the 2022 Sales Agreement will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. For the six months ended June 30, 2021, Digital Realty Trust, Inc. issued approximately 0.5 million common shares under the Sales Agreement at an average price of $161.57 per share. For the six months ended June 30, 2020, Digital Realty Trust, Inc. issued approximately 4.6 million common shares under the Sales Agreement at an average price of $142.39 per share. As of June 30, 2021, approximately $672.2 million remains

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available for future sales under the program. Our Parent has used and intends to use the net proceeds from the program to temporarily repay borrowings under our Operating Partnership’s global revolving credit facilities, to acquire additional properties or businesses, to fund development opportunities and for working capital and other general corporate purposes, including potentially for the repayment of other debt or the repurchase, redemption or retirement of outstanding debt securities. For

On September 13, 2021, Digital Realty Trust, Inc. completed an underwritten public offering of 6,250,000 shares of its common stock, all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. The forward purchasers borrowed and sold an aggregate of 6,250,000 shares of Digital Realty Trust, Inc.’s common stock in the public offering. Digital Realty Trust, Inc. did not receive any proceeds from the sale of our common stock by the forward purchasers in the public offering. The Company may receive gross proceeds of approximately $1.0 billion (based on the offering price of $155.69 per share) upon full physical settlement of the forward sale agreements, which is to be no later than March 13, 2023. Upon physical settlement of the

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forward sale agreements, the Operating Partnership is expected to issue general partner common partnership units to Digital Realty Trust, Inc. in exchange for contribution of the net proceeds. The forward purchasers had also granted to the underwriters an option, exercisable until October 13, 2021, to purchase up to 937,500 additional information regardingshares at a price of $155.69, which represents the Sales Agreement, see our Annual Report on Form 10-K forinitial price to the year ended December 31, 2020.public less the underwriting discount. The underwriters opted not to exercise their option within the specified time period.

We believe our Operating Partnership’s sources of working capital, specifically its cash flow from operations, and funds available under its global revolving credit facility are adequate for it to make its distribution payments to our Parent and, in turn, for our Parent to make its dividend payments to its stockholders. However, we cannot assure you that our Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including making distribution payments to our Parent. The lack of availability of capital could adversely affect our Operating Partnership’s ability to pay its distributions to our Parent, which would in turn, adversely affect our Parent’s ability to pay cash dividends to its stockholders.

Future Uses of Cash — Parent

Our Parent may from time to time seek to retire, redeem or repurchase its equity or the debt securities of our Operating Partnership or its subsidiaries through cash purchases and/or exchanges for equity securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases, redemptions or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.

Dividends and Distributions — Parent

Our Parent is required to distribute 90% of its taxable income (excluding capital gains) on an annual basis to continue to qualify as a REIT for federal income tax purposes. Our Parent intends to make, but is not contractually bound to make, regular quarterly distributions to its common stockholders from cash flow from our Operating Partnership’s operating activities. While historically our Parent has satisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of cash or other property. All such distributions are at the discretion of our Parent’s Board of Directors. Our Parent considers market factors and our Operating Partnership’s performance in addition to REIT requirements in determining distribution levels. Our Parent has distributed at least 100% of its taxable income annually since inception to minimize corporate level federal and state income taxes. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, which are consistent with our intention to maintain our Parent’s status as a REIT.

As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. Our Parent may need to continue to raise capital in the debt and equity markets to fund our Operating Partnership’s working capital needs, as well as potential developments at new or existing properties, acquisitions or investments in existing or newly created joint ventures. In addition, our Parent may be required to use borrowings under the Operating Partnership’s global revolving credit facility (which is guaranteed by our Parent), if necessary, to meet REIT distribution requirements and maintain our Parent’s REIT status.

Distributions out of our Parent’s current or accumulated earnings and profits are generally classified as ordinary income whereas distributions in excess of our Parent’s current and accumulated earnings and profits, to the extent of a stockholder’s U.S. federal income tax basis in our Parent’s stock, are generally classified as a return of capital. Distributions in excess of a stockholder’s U.S. federal income tax basis in our Parent’s stock are generally characterized as capital gain. Cash provided by operating activities has been generally sufficient to fund distributions on an annual basis. However, we may also need to utilize borrowings under the global revolving credit facility to fund distributions.

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For additional information regarding dividends declared and paid by our Parent on its common and preferred stock for the six months ended June 30, 2021,2022, see Note 1010. “Equity and Capital” to our condensed consolidated financial statements contained herein.

Analysis of Liquidity and Capital Resources — Operating Partnership

As of June 30, 2021,2022, we had $120.5$99.2 million of cash and cash equivalents, excluding $8.0$10.0 million of restricted cash. Restricted cash primarily consists of contractual capital expenditures plus other deposits. Our liquidity requirements primarily consist of:

operating expenses,expenses;
development costs and other expenditures associated with our properties,properties;
distributions to our Parent to enable it to make dividend payments,payments;
distributions to unitholders of common limited partnership interests in Digital Realty Trust, L.P.,
capital expenditures,;
debt service,service; and
potentially, acquisitions.

Future Uses of Cash

Our properties require periodic investments of capital for customer-related capital expenditures and for general capital improvements. Depending upon customer demand, we expect to incur significant improvement costs to build out and develop additional capacity. At June 30, 2021,2022, we had open commitments, related to construction contracts of approximately $1.5$1.9 billion, including amounts reimbursable of approximately $35.2$55.1 million.

We currently expect to incur approximately $1.1$1.3 billion to $1.4$1.5 billion of capital expenditures for our development programs during the six months ending December 31, 2021.2022. This amount could go up or down, potentially materially, based on numerous factors, including changes in demand, leasing results and availability of debt or equity capital.

On August 1, 2022, we completed the acquisition of a 55% majority interest in Teraco, a leading carrier-neutral data center and interconnection services provider in South Africa. The total purchase price was $1.7 billion cash, funded by our global revolving credit facility and a partial settlement of the forward sale agreements

. The transaction is expected to position Digital Realty as the premier data center and connectivity provider on the African continent.

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Development Projects

The costs we incur to develop our properties is a key component of our liquidity requirements. The subsequentfollowing table summarizes our cumulative investments in current development projects as well as expected future investments in these projects as of the periods presented, excluding costs incurred or to be incurred by unconsolidated entities.

Development Lifecycle

As of June 30, 2021

As of December 31, 2020

Net Rentable 

Current 

Net Rentable 

Current 

Future 

Square Feet

Investment

Future Investment

 Square Feet 

Investment 

Investment

(dollars in thousands)

    

  (1)

    

(2)

    

(3)

    

Total Cost

    

(1)

    

 (4)

    

(3)

    

Total Cost

Land held for future development (5)

 

N/A

 

$

143,575

 

$

 

$

143,575

 

N/A

 

$

226,862

 

$

 

$

226,862

Construction in Progress and Space Held for Development

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Land - Current Development (5)

N/A

$

897,881

$

$

897,881

N/A

$

785,182

$

$

785,182

Space Held for Development (6)

 

987,397

 

217,548

 

 

217,548

 

1,501,310

236,545

 

236,545

Base Building Construction

 

3,814,437

 

609,191

621,211

 

1,230,402

 

2,331,472

 

458,357

485,613

 

943,970

Data Center Construction

 

3,282,275

 

1,496,319

 

2,305,557

 

3,801,876

 

2,573,759

 

1,232,762

 

1,596,821

 

2,829,583

Equipment Pool & Other Inventory

 

N/A

 

9,401

 

 

9,401

 

N/A

 

9,761

 

 

9,761

Campus, Tenant Improvements & Other

 

N/A

 

40,230

 

40,029

 

80,259

 

N/A

 

45,719

 

42,848

 

88,567

Total Construction in Progress and Land Held for Future Development

 

8,084,109

$

3,414,145

$

2,966,797

$

6,380,942

 

6,406,541

$

2,995,188

$

2,125,282

$

5,120,470

Development Lifecycle

As of June 30, 2022

As of December 31, 2021

Net Rentable 

Current 

Future 

Net Rentable 

Current 

Future 

(dollars in thousands)

    

Square Feet (1)

    

Investment (2)

    

Investment (3)

    

Total Cost

    

 Square Feet (1)

    

Investment (4)

    

Investment (3)

    

Total Cost

Land held for future development (5)

 

N/A

 

$

37,460

 

$

 

$

37,460

 

N/A

 

$

133,683

 

$

 

$

133,683

Construction in Progress and Space Held for Development

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Land - Current Development (5)

N/A

$

1,036,470

$

$

1,036,470

N/A

$

974,464

$

$

974,464

Space Held for Development (6)

 

1,091,051

 

232,514

 

 

232,514

 

1,091,451

210,903

 

210,903

Base Building Construction

 

3,384,304

 

510,711

633,859

 

1,144,570

 

3,319,999

 

545,529

460,595

 

1,006,124

Data Center Construction

 

4,109,331

 

1,493,446

 

2,834,864

 

4,328,310

 

2,979,791

 

1,409,403

 

1,825,369

 

3,234,772

Equipment Pool and Other Inventory

 

N/A

 

14,926

 

 

14,926

 

N/A

 

7,881

 

 

7,881

Campus, Tenant Improvements and Other

 

N/A

 

74,047

 

136,184

 

210,231

 

N/A

 

65,209

 

99,118

 

164,327

Total Construction in Progress and Land Held for Future Development

 

8,584,686

$

3,399,574

$

3,604,907

$

7,004,481

 

7,391,241

$

3,347,072

$

2,385,082

$

5,732,154

(1)We estimate the total net rentable square feet available for lease based on a number of factors in addition to contractually leased square feet, including available power, required support space and common areas. Excludes square footage of properties held in unconsolidated entities. Square footage is based on current estimates and project plans and may change upon completion of the project due to remeasurement.
(2)Represents balances incurred through June 30, 2021.2022.
(3)Represents estimated cost to complete specific scope of work pursuant to contract, budget or approved capital plan.
(4)Represents balances incurred through December 31, 2020.2021.
(5)Represents approximately 894803 acres as of June 30, 20212022 and approximately 927849 acres as of December 31, 2020.2021.
(6)Excludes space held for development through unconsolidated entities.

Land inventory and space held for development reflect cumulative cost spent pending future development. Base building construction consists of ongoing improvements to building infrastructure in preparation for future data center fit-out. Data center construction includes 7.17.5 million square feet of Turn Key Flex® and Powered Base Building®Building® product. Generally, weWe expect to deliver the space within 12 months; however, lease commencement dates may significantly impact final delivery schedules. Equipment pool and other inventory represent the value of long-lead equipment and materials required for timely deployment and delivery of data center construction fit-out. Campus, tenant improvements and other costs include the value of development work which benefits space recently converted to our operating portfolio and is composed primarily of shared infrastructure projects and first-generation tenant improvements.

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Capital Expenditures (Cash Basis)

The table below summarizes our capital expenditure activity for the six months ended June 30, 20212022 and 20202021 (in thousands):

Six Months Ended June 30, 

    

2021

    

2020

Development projects

$

945,735

$

733,536

Enhancement and improvements

 

160

 

122

Recurring capital expenditures

 

78,753

 

73,473

Total capital expenditures (excluding indirect costs)

$

1,024,648

$

807,131

Six Months Ended June 30, 

    

2022

    

2021

Development projects

$

897,251

$

945,735

Enhancement and improvements

 

8,697

 

160

Recurring capital expenditures

 

90,267

 

78,753

Total capital expenditures (excluding indirect costs)

$

996,215

$

1,024,648

For the six months ended June 30, 2021, total capital expenditures increased $217.5 million to approximately $1,024.6 million from $807.1 million for the same period in 2020. Capital expenditures on our development projects

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plus our enhancement and improvements projects for the six months ended June 30, 2021 were approximately $945.9 million, which reflects an increase of approximately 29% from the same period in 2020. This increase was primarily due to development activity at properties acquired in the Interxion Combination. Our development capital expenditures are generally funded by our available cash and equity and debt capital.

Indirect costs, including capitalized interest, capitalized in the six months ended June 30, 2022 and 2021 and 2020 were $56.8$70.8 million and $47.8$56.8 million, respectively. Capitalized interest comprised approximately $23.0$28.9 million and $23.1$23.0 million of the total indirect costs capitalized for the six months ended June 30, 20212022 and 2020,2021, respectively. Capitalized interest in the six months ended June 30, 2021 decreased,2022 increased, compared to the same period in 2020,2021, due to lower interest ratesan increase in 2021. qualifying activities.

Excluding capitalized interest, indirect costs in the six months ended June 30, 20212022 increased compared to the same period in 20202021 due primarily to capitalized amounts relating to compensation expense of employees directly engaged in construction activities. See “—Future“Future Uses of Cash” below for a discussion of the amount of capital expenditures we expect to incur during the year ending December 31, 2021.2022.

Consistent with our growth strategy, we actively pursue potential acquisition opportunities, with due diligence and negotiations often at different stages at different times. The dollar value of acquisitions for the year ending December 31, 20212022 will depend upon numerous factors, including customer demand, leasing results, availability of debt or equity capital and acquisition opportunities. Further, the growing acceptance by private institutional investors of the data center asset class has generally pushed capitalization rates lower, as such private investors may often have lower return expectations than us. As a result, we anticipate near-term single asset acquisitions activity to comprise a smaller percentage of our growth while this market dynamic persists.

We may from time to time seek to retire or repurchase our outstanding debt or the equity of our Parent through cash purchases and/or exchanges for equity securities of our Parent in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.

Sources of Cash

We expect to meet our short-term and long-term liquidity requirements, including payment of scheduled debt maturities and funding of acquisitions and non-recurring capital improvements, with net cash from operations, future long-term secured and unsecured indebtedness, non-core asset sales and/or contributions to capital partner vehicles and the issuance of equity and debt securities and the proceeds of equity issuances by our Parent. We also may fund future short-term and long-term liquidity requirements, including acquisitions and non-recurring capital improvements, using our global revolving credit facilities pending permanent financing. As of August 4, 2021,3, 2022, we had approximately $2.1$0.8 billion of borrowings available under our global revolving credit facilities.

Our global revolving credit facility providesfacilities provide for borrowings up to $2.35 billion.$4.05 billion (including approximately $0.3 billion available to be drawn on the Yen revolving credit facility). We have the ability from time to time to increase the size of the global revolving credit facility by up to $1.25 billion,$750 million, subject to the receipt of lender commitments and other conditions precedent. The global revolving credit facility maturesBoth facilities mature on January 24, 2023,2026, with two six-month extension options available. These facilities also feature a sustainability-linked pricing component, with pricing subject to adjustment based on annual performance targets, further demonstrating our continued leadership and commitment to sustainable business practices.

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We have used and intend to use available borrowings under the global revolving credit facilityfacilities to fund our liquidity requirements from time to time. For additional information regarding our global revolving credit facility, see Note 8 to our condensed consolidated financial statements contained herein.

Subsequent to June 30, 2021, Digital Intrepid Holding B.V., an indirect wholly owned subsidiary of the Operating Partnership, issued and sold the following notes:

On July 15, 2021, CHF 275 million aggregate principal amount of 0.20% Guaranteed Notes due 2026 (the “2026 Notes”) and CHF 270 million aggregate principal amount of 0.55% Guaranteed Notes due 2029 (the “2029 Notes” and together with the 2026 Notes, the “Swiss Franc Notes”). The Swiss Franc Notes are senior unsecured obligations of Digital Intrepid Holding B.V. and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and the Operating Partnership. Net proceeds from the offering of the Swiss Franc Notes were approximately CHF 542.3 million (approximately $590.9 million based on the exchange rate on July 15, 2021) after deducting the managers’ commissions and certain offering expenses.

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We intend to allocate an amount equal to the net proceeds from the offering of the Swiss Franc Notes to finance or refinance, in whole or in part, Eligible Green Projects, including the development and redevelopment of such projects. Pending the allocation of an amount equal to the net proceeds of the Swiss Franc Notes to Eligible Green Projects, all or a portion of an amount equal to the net proceeds from the Swiss Franc Notes were used to temporarily repay borrowings outstanding under the Operating Partnership’s global credit facility and for other general corporate purposes.

Distributions

All distributions on our units are at the discretion of our Parent’s Board of Directors. For additional information regarding distributions paid on our common and preferred units for the six months ended June 30, 2021,2022, see Note 1010. “Equity and Capital” to our condensed consolidated financial statements contained herein.

Outstanding Consolidated Indebtedness

The table below summarizes our outstanding debt as of June 30, 20212022 (in millions):

Debt Summary:

    

    

Fixed rate

$

12,545.7

Variable rate debt subject to interest rate swaps

 

104.0

Total fixed rate debt (including interest rate swaps)

 

12,649.7

Variable rate—unhedged

 

1,388.7

Total

$

14,038.4

Percent of Total Debt:

 

  

Fixed rate (including swapped debt)

 

90.1

%

Variable rate

 

9.9

%

Total

 

100.0

%

Effective Interest Rate as of June 30, 2021

 

  

Fixed rate (including hedged variable rate debt)

 

2.40

%

Variable rate

 

0.73

%

Effective interest rate

 

2.24

%

Debt Summary:

    

    

Fixed rate

$

12,620.8

Variable rate debt subject to interest rate swaps

 

8.0

Total fixed rate debt (including interest rate swaps)

 

12,628.8

Variable rate—unhedged

 

1,781.4

Total

$

14,410.2

Percent of Total Debt:

 

  

Fixed rate (including swapped debt)

 

87.6

%

Variable rate

 

12.4

%

Total

 

100.0

%

Effective Interest Rate as of June 30, 2022

 

  

Fixed rate (including hedged variable rate debt)

 

2.19

%

Variable rate

 

1.67

%

Effective interest rate

 

2.25

%

As of June 30, 2021, we had approximately $14.0 billion of outstanding consolidated long-term debt as set forth in the table above, which excludes deferred financing costs. Our ratio of debt to total enterprise value was approximately 24%27% (based on the closing price of Digital Realty Trust, Inc.’s common stock on June 30, 20212022 of $150.46)$129.83). For this purpose, our total enterprise value is defined as the sum of the market value of Digital Realty Trust, Inc.’s outstanding common stock (which may decrease, thereby increasing our debt to total enterprise value ratio), plus the liquidation value of Digital Realty Trust, Inc.’s preferred stock, plus the aggregate value of our Operating Partnership’sDigital Realty Trust, L.P.’s units not held by Digital Realty Trust, Inc. (with the per unit value equal to the market value of one share of Digital Realty Trust, Inc.’s common stock and excluding long-term incentive units, Class C units and Class D units), plus the book value of our total consolidated indebtedness.

The variable rate debt shown above bears interest at interest rates based on various one-month USD LIBOR, EURIBOR, SOR, JPY LIBOR,SONIA, SORA, BBR, HIBOR, BBRTIBOR, CDOR, and CDORfor Korean Won the base CD rates, depending on the respective agreement governing the debt, including our global revolving credit facilities. As of June 30, 2021,2022, our debt had a weighted average term to initial maturity of approximately 6.25.7 years (or approximately 6.35.8 years assuming exercise of extension options).

Off-Balance Sheet Arrangements

As of June 30, 2021, we were party to interest rate swap agreements related to $104.0 million of outstanding principal on our variable rate debt. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk.”

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As of June 30, 2021,2022, our pro-rata share of secured debt of unconsolidated entities was approximately $723.2$788.8 million.

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Cash Flows

The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Comparison of Six Months Ended June 30, 20212022 to Six Months Ended June 30, 20202021

The following table shows cash flows and ending cash, cash equivalents and restricted cash equivalent balances for the six months ended June 30, 2021 and 2020respective periods (in thousands).

Six Months Ended June 30, 

2022

    

2021

    

Change

Net cash provided by operating activities

$

783,578

$

850,491

$

(66,913)

Net cash (used in) investing activities

 

(1,427,832)

 

(558,645)

 

(869,187)

Net cash provided by (used in) financing activities

 

633,091

 

(275,348)

 

908,439

Net increase in cash, cash equivalents and restricted cash

$

(11,163)

$

16,498

$

(27,661)

Six Months Ended June 30, 

    

2021

    

2020

    

Change

Net cash provided by operating activities

$

849,922

$

712,370

$

137,552

Net cash used in investing activities

 

(558,645)

 

(678,815)

 

120,170

Net cash (used in) provided by financing activities

 

(275,348)

 

404,828

 

(680,176)

Net increase in cash, cash equivalents and restricted cash

$

15,929

$

438,383

$

(422,454)

The increase in net cash provided by operating activities was primarily due to the Interxion Combination offset by the operating activities of properties sold during the twelve months ended June 30, 2021.

The changes in the activities that comprise the decreaseincrease in net cash used in investing activities for the six months ended June 30, 20212022 as compared to the six months ended June 30, 20202021 consisted of the following amounts (in thousands).

Change

Increase in cash used for improvements to investments in real estate

$

(226,561)

Decrease in cash paid for business combinations and assets acquisition, net of cash and restricted cash acquired

66,009

Increase in cash from investment in joint ventures

 

100,300

Increase in cash provided by proceeds from sale of real estate

177,574

Other changes

 

2,848

Decrease in net cash used in investing activities

$

120,170

Change

Decrease in cash used for improvements to investments in real estate

$

14,419

Increase in cash contributed to investments in unconsolidated entities

(206,076)

Decrease in net cash provided by proceeds from sale of real estate

(703,936)

Other changes

 

26,406

Increase in net cash used in investing activities

$

(869,187)

The decreaseincrease in net cash used in investing activities was primarily due to an increase in cash provided by proceeds from(i) sale of investments related to the sale of 11 data centers in Europe in March 2021, partially(ii) investments in various unconsolidated entities, offset by the sale of 10 Powered Base Building® properties, which comprise 12 data centers, in North America to Mapletree in January 2020, an increase in cash used for improvements to investments in real estate and(iii) a decrease in cash paid for acquisitions related to the acquisition of an additional 49% ownership interest in the Westin Building Exchange in February 2020, partially offset by an increase in cash used for improvements to investments in real estate.

Change

Increase in cash used in/provided by short-term borrowings

$

569,550

Decrease in cash provided by proceeds from secured / unsecured debt

(93,199)

Decrease in cash used for repayment on secured / unsecured debt

436,226

Increase in cash used for dividend and distribution payments

 

(49,493)

Other changes

45,355

Increase in net cash provided by financing activities

$

908,439

The increase in net cash provided by financing activities was primarily due to (i) an increase in cash proceeds from short-term borrowings, (ii) a decrease in cash used for repayment of unsecured notes (in 2022, we redeemed the 4.750% Notes due 2025 ($450 million); in 2021 we redeemed 2.750% Notes due 2023 ($300 million) and paid down the remaining balance of our unsecured term loan ($537 million)), and (iii) an increase in dividend and distribution payments due to an increased dividend amount per share of common stock and common unit.

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The changes in the activities that comprise the increase in net cash used in financing activities for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 for the Company consisted of the following amounts (in thousands).

    

Change

Increase in proceeds from short-term borrowings, net of repayments

$

795,440

Decrease in cash provided by proceeds from secured / unsecured debt

 

(1,138,767)

Decrease in cash used for repayment on secured / unsecured debt

549,399

Decrease in cash provided by proceeds from issuance of common stock, net

(564,443)

Increase in cash used for redemption of preferred stock

(201,250)

Increase in cash used for dividend and distribution payments

 

(128,982)

Other changes

 

8,427

Increase in net cash used in financing activities

$

(680,176)

The increase in cash used in financing activities was primarily due to a decrease in cash provided by proceeds from secured / unsecured debt, a decrease in cash provided by proceeds from issuance of common stock and an increase in cash used to redeem preferred stock and an increase in dividend and distribution payments for the six months ended June 30, 2021 as compared to the same period in 2020 as a result of an increase in the number of shares outstanding due to the Interxion Combination and increased dividend amount per share of common stock in the six months ended June 30, 2021 as compared to the same period in 2020 partially offset by an increase in cash proceeds from short-term borrowings and a decrease in repayments of secured / unsecured debt.

Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the common units in our Operating PartnershipDigital Realty Trust, L.P. that are not owned by Digital Realty Trust, Inc., which, as of June 30, 2021,2022, amounted to 2.4%2.2% of our Operating PartnershipDigital Realty Trust, L.P. common units. Historically, our Operating PartnershipDigital Realty Trust, L.P. has issued common units to third party sellers in connection with our acquisition of real estate interests from such third parties.

Limited partners have the right to require our Operating PartnershipDigital Realty Trust, L.P. to redeem part or all of their common units for cash based upon the fair market value of an equivalent number of shares of Digital Realty Trust, Inc. common stock at the time of the redemption. Alternatively, we may elect to acquire those common units in exchange for shares of Digital Realty Trust, Inc. common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. As of June 30, 2021,2022, approximately 0.2 million common units of the Operating PartnershipDigital Realty Trust, L.P. that were issued to certain former unitholders of DuPont Fabros Technology, L.P. in connection with the Company’s acquisition of DuPont Fabros Technology, Inc. were outstanding, which are subject to certain restrictions and, accordingly, are not presented as permanent capital in the condensed consolidated balance sheet.

Inflation

Many of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above.

Funds from Operations

We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts (Nareit) in the Nareit Funds From Operations White Paper - 2018 Restatement. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, a gain from a pre-existing relationship, impairment charges and real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate

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related depreciation and amortization and gains and losses from property dispositions and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the Nareit definition and, accordingly, our FFO may not be comparable to other REITs’ FFO. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

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Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO)

(unaudited, in thousands, except per share and unit data)

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Net Income Available to Common Stockholders

$

127,369

$

53,676

$

499,775

$

256,535

Adjustments:

 

  

 

  

 

  

 

  

Non-controlling interests in operating partnership

 

3,200

 

1,400

 

13,000

 

9,200

Real estate related depreciation & amortization (1)

 

363,640

 

342,334

 

728,337

 

628,851

Unconsolidated entities real estate related depreciation & amortization

20,983

17,123

40,361

37,046

Gain on disposition of properties

 

(499)

 

 

(334,420)

 

(304,801)

FFO available to common stockholders and unitholders (2)

$

514,693

$

414,533

$

947,053

$

626,831

Basic FFO per share and unit

$

1.78

$

1.50

$

3.28

$

2.48

Diluted FFO per share and unit (2)

$

1.78

$

1.49

$

3.27

$

2.45

Weighted average common stock and units outstanding

 

  

 

  

 

  

 

  

Basic

 

288,843

 

275,545

 

288,588

 

252,995

Diluted (2)

 

289,485

 

278,719

 

289,219

 

255,704

(1) Real estate related depreciation and amortization was computed as follows:

Depreciation and amortization per income statement

    

$

368,981

    

$

349,165

    

738,714

    

640,622

Non-real estate depreciation

 

(5,341)

(6,831)

 

(10,377)

(11,771)

$

363,640

$

342,334

$

728,337

$

628,851

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net Income Available to Common Stockholders

$

53,246

$

127,369

$

116,346

$

499,775

Adjustments:

 

  

 

  

 

  

 

  

Non-controlling interests in operating partnership

 

1,500

 

3,200

 

3,100

 

13,000

Real estate related depreciation and amortization (1)

 

369,327

 

363,640

 

743,489

 

728,337

Unconsolidated JV real estate related depreciation and amortization

29,022

20,983

58,341

40,361

Gain on real estate transactions

(1,144)

(499)

(3,914)

(334,420)

FFO available to common stockholders and unitholders (2)

$

451,951

$

514,693

$

917,362

$

947,053

Basic FFO per share and unit

$

1.56

$

1.78

$

3.16

$

3.28

Diluted FFO per share and unit (2)

$

1.55

$

1.78

$

3.16

$

3.27

Weighted average common stock and units outstanding

 

  

 

  

 

  

 

  

Basic

 

290,528

 

288,843

 

290,346

 

288,588

Diluted (2)

 

290,944

 

289,485

 

290,716

 

289,219

(1) Real estate related depreciation and amortization was computed as follows:

Depreciation and amortization per income statement

    

$

376,967

    

$

368,981

    

759,099

    

738,714

Non-real estate depreciation

 

(7,640)

(5,341)

 

(15,610)

(10,377)

$

369,327

$

363,640

$

743,489

$

728,337

(2)For all periods presented, we have excluded the effect of the series C, series G, series I, series J, series K and series L preferred stock, as applicable, that may be converted into common stock upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series C, series G, series I, series J, series K and series L preferred stock, as applicable, as they would be anti-dilutive.

Three Months Ended June 30, 

 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Weighted average common stock and units outstanding

 

288,843

 

 

275,545

 

 

288,588

 

252,995

Add: Effect of dilutive securities

 

642

 

 

3,174

 

 

631

 

2,709

Weighted average common stock and units outstanding—diluted

289,485

 

278,719

 

289,219

 

255,704

Three Months Ended June 30, 

 

Six Months Ended June 30, 

2022

    

2021

    

2022

    

2021

Weighted average common stock and units outstanding

 

290,528

 

 

288,843

 

 

290,346

 

288,588

Add: Effect of dilutive securities

 

416

 

 

642

 

 

370

 

631

Weighted average common stock and units outstanding—diluted

290,944

 

289,485

 

290,716

 

289,219

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments depend upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit ratingratings and other factors.

Analysis of Debt between Fixed and Variable Rate

We use interest rate swap agreements and fixed rate debt to reduce our exposure to interest rate movements. As of June 30, 2021,2022, our consolidated debt was as follows (in millions):

    

    

Estimated Fair

    

    

Estimated Fair

Carrying Value

 

Value

Carrying Value

 

Value

Fixed rate debt

$

12,545.7

$

13,421.5

$

12,620.8

$

11,085.3

Variable rate debt subject to interest rate swaps

 

104.0

 

104.0

 

8.0

 

8.0

Total fixed rate debt (including interest rate swaps)

 

12,649.7

 

13,525.5

 

12,628.8

 

11,093.3

Variable rate debt

 

1,388.7

 

1,388.7

 

1,781.4

 

1,781.4

Total outstanding debt

$

14,038.4

$

14,914.2

$

14,410.2

$

12,874.7

Sensitivity to Changes in Interest Rates

The following table shows the effect if assumed changes in interest rates occurred, based on fair values and interest expense as of June 30, 2021:2022:

    

Change

Assumed event

($ millions)

Increase in fair value of interest rate swaps following an assumed 10% increase in interest rates

$

0.0

Decrease in fair value of interest rate swaps following an assumed 10% decrease in interest rates

 

(0.0)

Increase in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% increase in interest rates

 

0.3

Decrease in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% decrease in interest rates

 

(0.3)

Increase in fair value of fixed rate debt following a 10% decrease in interest rates

 

14.7

Decrease in fair value of fixed rate debt following a 10% increase in interest rates

 

(16.1)

Change

Assumed event

($ millions)

Increase in fair value of interest rate swaps following an assumed 10% increase in interest rates

$

(0.1)

Decrease in fair value of interest rate swaps following an assumed 10% decrease in interest rates

0.1

Increase in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% increase in interest rates

4.6

Decrease in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% decrease in interest rates

(4.6)

Increase in fair value of fixed rate debt following a 10% decrease in interest rates

159.8

Decrease in fair value of fixed rate debt following a 10% increase in interest rates

(143.9)

Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

Foreign Currency Exchange Risk

We are subject to risk from the effects of exchange rate movements of a variety of foreign currencies, which may affect future costs and cash flows. Our primary currency exposures are to the Euro, Japanese yen, British pound sterling Euro and the Singapore dollar. As a result of the Ascenty entity and deconsolidation of Ascenty, our exposure to foreign exchange risk related to the Brazilian real is limited to the impact that currency has on our share of the Ascenty entity’s operations and financial position. We attempt to mitigate a portion of the risk of currency fluctuationfluctuations by financing our investments in the local currency denominations andin order to reduce our exposure to any foreign currency transaction gains or losses resulting from transactions entered into in currencies other than the functional currencies of the associated entities. In addition, we may also hedge well-defined transactional exposures with foreign currency forwards or options, although there can be no assurances that these will be effective. As a result, changes in the relation of any such foreign currency to U.S. dollarsdollar may affect our revenues, operating margins and distributions and may also affect the book value of our assets and the amount of stockholders’ equity. For the three months ended June 30, 2021 and

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2020, operating revenues from properties outside the United States contributed $406.8 million and $342.0 million, respectively, which represented 37.2% and 34.4% of our total operating revenues, respectively. For the six months ended June 30, 2021 and 2020, operating revenues from properties outside the United States contributed $806.3 million and $537.5 million, respectively, which represented 36.9% and 29.6% of our total operating revenues, respectively. Net investment in properties outside the United States was $9.4 billion and $9.3 billion as of June 30, 2021 and December 31, 2020, respectively. Net assets in foreign operations were approximately $4.1 billion and $5.7 billion as of June 30, 2021 and December 31, 2020, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures (Digital Realty Trust, Inc.)

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and its management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As the Company does not control or manage these entities, its disclosure controls and procedures with respect to such entities may be substantially more limited than those it maintains with respect to its consolidated subsidiaries.

As required by Rule 13a-15(b) or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, management of the Company carried out an evaluation, under the supervision and with participation of its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures that were in effect as of the end of the quarter covered by this report. Based on the foregoing, the Company’s chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during its most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

As a result of COVID-19, our global workforce shifted to a primarily work from home environment beginning in March 2020. This change to remote working was rapid and included employees that are not considered critical to our daily data center operations. While pre-existing controls were not specifically designed to operate in our current work from home operating environment, we believe that our internal controls over financial reporting continue to be effective. We took precautionary actions to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely.

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Evaluation of Disclosure Controls and Procedures (Digital Realty Trust, L.P.)

The Operating Partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the chief executive officer and chief financial officer of its general partner, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Operating Partnership’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and its management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Operating Partnership has investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As the Operating Partnership does not control or manage these entities, its disclosure controls and procedures with respect to such entities may be substantially more limited than those it maintains with respect to its consolidated subsidiaries.

As required by Rule 13a-15(b) or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, management of the Operating Partnership carried out an evaluation, under the supervision and with participation of the chief executive officer and chief financial officer of its general partner, of the effectiveness of the design and operation of its disclosure controls and procedures that were in effect as of the end of the quarter covered by this report. Based on the foregoing, the chief executive officer and chief financial officer of the Operating Partnership’s general partner concluded that its disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in the Operating Partnership’s internal control over financial reporting during its most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

As a result of COVID-19, our global workforce shifted to a primarily work from home environment beginning in March 2020. This change to remote working was rapid and included employees that are not considered critical to our daily data center operations. While pre-existing controls were not specifically designed to operate in our current work from home operating environment, we believe that our internal controls over financial reporting continue to be effective. We took precautionary actions to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In the ordinary course of our business, we may become subject to various legal proceedings. As of June 30, 2021,2022, we were not a party to any legal proceedings which we believe would have a material adverse effect on our operations or financial position.

ITEM 1A. RISK FACTORS.

The risk factors discussed under the heading “Risk Factors” and elsewhere in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 20202021 continue to apply to our business.business and should be supplemented with the following risk factor:

Many of our costs, such as operating and general and administrative expenses, interest expense and real estate acquisition and construction costs, could be adversely impacted by periods of heightened inflation. 

In recent months, the consumer price index has increased substantially. Federal policies and recent global events, such as the rising price of oil and the conflict between Russia and Ukraine, may have exacerbated, and may continue to exacerbate, increases in the consumer price index.

A sustained or further increase in inflation could have an adverse impact on our operating expenses incurred in connection with, among others, the property-related contracted services such as repairs and maintenance, utilities, security and insurance. With regard to utilities expense, which is our largest expense category, the vast majority of the expense is passed directly through to our customers which significantly mitigates our exposure to increases in power costs.  For our other operating expenses, we expect to recover some increases from our customers through our existing lease structures, annual rent escalations or from the resetting of rents from our renewal and re-leasing activities. As a result, we do not believe that inflation would result in a significant adverse effect on our net operating income and operating cash flows at the property level. However, there can be no assurance that the impact of inflation will be adequately offset by some of our annual rent escalations contained in our leases, and it is possible that the resetting of rents from our renewal and re-leasing activities would not fully offset the impact of higher operating expenses resulting from inflationary pressure. As a result, during inflationary periods in which the inflation rate exceeds the annual rent escalation percentages within our customer contracts, we may not adequately mitigate the impact of inflation, which may adversely affect to our business, financial condition, results of operations, and cash flows.

Our general and administrative expenses consist primarily of compensation costs and professional service fees. Rising inflation rates may require us to provide compensation increases beyond historical annual increases, which may unexpectedly or significantly increase our compensation costs. Similarly, professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services. Consequently, inflation may increase our general and administrative expenses over time and may adversely impact our results of operations and cash flows.

Additionally, inflationary pricing may have a negative effect on the construction costs necessary to complete our development projects, including, but not limited to, costs of construction equipment and materials, labor and services from third-party contractors and suppliers. We rely on a number of third-party suppliers and contractors to supply raw materials, skilled labor and services for our construction projects. Certain increases in the costs of construction equipment and materials can often be managed in our development projects through either general budget contingencies built into our overall construction cost estimates for each of our projects or guaranteed maximum price construction contracts, which stipulate a maximum price for certain construction costs and shift inflation risk to our construction general contractors. However, no assurance can be given that our budget contingencies would accurately account for potential construction cost increases given the current severity of inflation and variety of contributing factors or that our general contractors would be able to absorb such increases in costs and complete our construction projects timely, within budget, or at all. Higher construction costs could adversely impact our investments in real estate assets and expected

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yields on our development projects, which may adversely impact our returns on our investments. As a result, our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders could be adversely affected over time.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Digital Realty Trust, Inc.

Period

(a) Total Number of Shares (or Units) Purchased

(b) Average Price Paid per Share (or Unit)

(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)

(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)

April 1-30, 2021

$

May 1-31, 2021

8,050,000 shares of Series C Preferred Stock

25.00

8,050,000 shares of Series C Preferred Stock

June 1-30, 2021

Total

8,050,000

$

25.00

8,050,000

(1)On April 15, 2021, the Company distributed a Notice of Redemption to all holders of record of its outstanding 6.625% series C cumulative redeemable perpetual preferred stock, or the series C preferred stock, announcing its redemption of all 8,050,000 outstanding shares of the series C preferred stock at a redemption price of $25.211632 per share. The redemption price was equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date. The redemption was made at the Company's option pursuant to Section 5(b) of the Articles Supplementary establishing and fixing the rights and preferences of the series C preferred stock. The redemption date was May 17, 2021.
(2)The Company redeemed all outstanding shares of its series C preferred stock on May 17, 2021. The Operating Partnership also redeemed the corresponding 8,050,000 series C preferred units.

58None.

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Digital Realty Trust, L.P.

During the three months ended June 30, 2021, our Operating Partnership2022, Digital Realty Trust, L.P. issued partnership units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:

During the three months ended June 30, 2021,2022, Digital Realty Trust, Inc. issued an aggregate of 15,11828,392 shares of its common stock in connection with restricted stock awards for no cash consideration. For each share of common stock issued by Digital Realty Trust, Inc. in connection with such an award, our Operating PartnershipDigital Realty Trust, L.P. issued a restricted common unit to Digital Realty Trust, Inc. During the three months ended June 30, 2021, our Operating Partnership2022, Digital Realty Trust, L.P. issued an aggregate of 15,11828,392 common units to Digital Realty Trust, Inc., as required by our Operating Partnership’sDigital Realty Trust, L.P.’s partnership agreement. During the three months ended June 30, 2021,2022, an aggregate of 21,03751,998 shares of its common stock were forfeited to Digital Realty Trust, Inc. in connection with restricted stock awards for a net forfeiture of 5,91923,606 shares of common stock.

For these issuances of common units to Digital Realty Trust, Inc., our Operating PartnershipDigital Realty Trust, L.P. relied on Digital Realty Trust, Inc.’s status as a publicly traded NYSE-listed company with approximately $36.2$36.0 billion in total consolidated assets and as our Operating Partnership’sDigital Realty Trust, L.P.’s majority owner and general partner as the basis for the exemption under Section 4(a)(2) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

Incorporated by

Reference

Exhibit
Number

    

Description

    

Form

File Number

Date

Number

Filed Herewith

2.1

Amendment No. 1 to Purchase Agreement dated as of January 23, 2020, by and among Digital Realty Trust, Inc., Digital Intrepid Holding B.V. and InterXion Holding N.V.

8-K

001-32336

01/27/2020

2.1

3.1

Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended

10-Q

001-32336 and 000-54023

05/11/2020

3.1

3.2

Eighth Amended and Restated Bylaws of Digital Realty Trust, Inc.

10-K

001-32336 and 000-54023

02/25/2019

3.02

3.3

Certificate of Limited Partnership of Digital Realty Trust, L.P.

10

000-54023

06/25/2010

3.1

3.4

Nineteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.

8-K

001-32336 and 000-54023

10/10/2019

3.1

10.1*

Amendment No. 2, dated as of April 5, 2022, to the Second Amended and Restated Global Senior Credit Agreement, dated as of November 18, 2021, among Digital Realty Trust, L.P. and the other initial borrowers named therein and additional borrowers party thereto, as borrowers, Digital Realty Trust, Inc., as parent guarantor, the additional guarantors party thereto, as additional guarantors, the banks, financial institutions and other institutional lenders listed therein, as the initial lenders, each issuing bank and swing line bank as listed therein, Citibank, N.A., as administrative agent, BofA Securities, Inc. and Citibank, as co-sustainability structuring agents, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as syndication agents, and BofA Securities, Inc., Citibank, N.A., and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, and the other agents and lenders named therein.

10-Q

001-32336 and 000-54023

05/06/2022

10.1

10.2†

Transition and Consulting Agreement, dated as of July 26, 2022, by and among Digital Realty Trust, Inc., DLR LLC and David Ruberg.

X

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer for Digital Realty Trust, Inc.

X

31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer for Digital Realty Trust, Inc.

X

31.3

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer for Digital Realty Trust, L.P.

X

31.4

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer for Digital Realty Trust, L.P.

X

32.1

18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, Inc.

X

63

Exhibit
Number

Description

32.2

2.1

Amendment No. 1 to Purchase Agreement dated as of January 23, 2020, by and among Digital Realty Trust, Inc., Digital Intrepid Holding B.V. and InterXion Holding N.V. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Digital Realty Trust, Inc. (File No. 001-32336) filed on January 27, 2020).

3.1

Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on May 11, 2020.

3.2

Eighth Amended and Restated Bylaws of Digital Realty Trust, Inc. (incorporated by reference to exhibit 3.02 to the Combined Annual Report on Form 10-K of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on February 25, 2019).

3.3

Certificate of Limited Partnership of Digital Realty Trust, L.P. (incorporated by reference to Exhibit 3.1 to Digital Realty Trust, L.P.’s General Form for Registration of Securities on Form 10 (File No. 000-54023) filed on June 25, 2010).

3.4

Nineteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P. (incorporated by reference to Exhibit 3.1 to the Combined Current Report on Form 8-K of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on October 10, 2019).

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer for Digital Realty Trust, Inc.

31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer for Digital Realty Trust, Inc.

31.3

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer for Digital Realty Trust, L.P.

31.4

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer for Digital Realty Trust, L.P.

32.1

18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, Inc.

32.2

18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, Inc.

X

32.3

18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, L.P.

X

32.4

18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, L.P.

X

101

The following financial statements from Digital Realty Trust, Inc.’s and Digital Realty Trust, L.P.’s Form 10-Q for the quarter ended June 30, 2021,2022, formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of June 30, 20212022 and December 31, 2020;2021; (ii) Condensed Consolidated Income Statements for the three and six months ended June 30, 20212022 and 2020;2021; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20212022 and 2020;2021; (iv) Condensed Consolidated Statements of Equity/Capital for the three and six months ended June 30, 20212022 and 2020;2021; (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 20212022 and 2020;2021; and (vi) Notes to Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

†  

*

Portions of this exhibit have been omitted because such portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

Management contract or compensatory plan or arrangement.

6064

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DIGITAL REALTY TRUST, INC.

August 6, 20215, 2022

/S/  A. WILLIAM STEIN

A. William Stein
Chief Executive Officer
(principal executive officer)

August 6, 20215, 2022

/S/  ANDREW P. POWER

Andrew P. Power
President & Chief Financial Officer
(principal financial officer)

August 6, 20215, 2022

/S/  CAMILLA A. HARRIS

Camilla A. Harris
Chief Accounting Officer
(principal accounting officer)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DIGITAL REALTY TRUST, L.P.

By:

Digital Realty Trust, Inc.

Its general partner

By:

August 6, 20215, 2022

/S/  A. WILLIAM STEIN

A. William Stein
Chief Executive Officer
(principal executive officer)

August 6, 20215, 2022

/S/  ANDREW P. POWER

Andrew P. Power
President & Chief Financial Officer
(principal financial officer)

August 6, 20215, 2022

/s/  CAMILLA A. HARRIS

Camilla A. Harris
Chief Accounting Officer
(principal accounting officer)

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