Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS


		Page No.
Management’s Reports on Internal Control over Financial Reporting		100
Reports of Independent Registered Public Accounting Firm		101
Consolidated Financial Statements of Digital Realty Trust, Inc.
Consolidated Balance Sheets as of December 31, 2019 and 2018		105
Consolidated Income Statements for each of the years in the three-year period ended December 31, 2019		107
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2019		108
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2019		109
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2019		112
Consolidated Financial Statements of Digital Realty Trust, L.P.
Consolidated Balance Sheets as of December 31, 2019 and 2018		116
Consolidated Income Statements for each of the years in the three-year period ended December 31, 2019		118
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2019		119
Consolidated Statements of Capital for each of the years in the three-year period ended December 31, 2019		120
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2019		123
Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P.
Notes to Consolidated Financial Statements		127
Supplemental Schedule—Schedule III—Properties and Accumulated Depreciation		189
Notes to Schedule III—Properties and Accumulated Depreciation		195

Index to Financial Statements

Management’s Report on Internal Control over Financial Reporting

The management of Digital Realty Trust, Inc. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). Our internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on our assessment, management concluded that as of December 31, 2019, the Company’s internal control over financial reporting was effective based on those criteria.

Our independent registered public accounting firm has issued an audit report on the Company’s internal control over financial reporting. This report appears on page 102.

Management’s Report on Internal Control over Financial Reporting

The management of Digital Realty Trust, L.P. (the Operating Partnership) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). Our internal control system was designed to provide reasonable assurance to the Operating Partnership’s management regarding the preparation and fair presentation of published financial statements.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of our general partner, we assessed the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2019. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on our assessment, management concluded that as of December 31, 2019, the Operating Partnership’s internal control over financial reporting was effective based on those criteria.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Digital Realty Trust, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Digital Realty Trust, Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated income statements and consolidated statements of comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule III, properties and accumulated depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 2, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASU No. 2016-02 Leases and related accounting standards updates (collectively Topic 842).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Index to Financial Statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of lease revenue

As discussed in Note 2 to the consolidated financial statements, the Company records rental revenue on a straight-line basis if the Company determines it is probable substantially all lease payments over the term of the lease on a lease-by-lease basis will be collected. Whenever the results of that assessment, events, or changes in circumstances indicate that it is not probable that the Company will be able to collect substantially all lease payments over the remaining term of the lease, the Company records a reduction to rental and other services revenue equal to the then-current combined balance of the deferred rent and amounts contractually due but unpaid for the lease (rent receivable), and ceases recognizing rental revenue on a straight-line basis and commences recognizing rental revenue on a cash basis. Rental and other services revenue was $3.2 billion for the year ended December 31, 2019 and deferred rent and rent receivable, net was $478.7 million and $171.9 million, respectively, as of December 31, 2019.

We identified the evaluation of the probability of collection of lease payments as a critical audit matter. Evaluating the Company’s probability assessment of collection of substantially all the lease payments for its leases required significant auditor judgment because of the subjective nature of the evidence obtained. The key assumption used in the assessment includes the creditworthiness of the customer and any guarantors.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s probability assessment of lease payment collection process, including the assessment of the key assumption above. For a selection of the Company’s leases, we evaluated the Company’s determination of the collectability of substantially all of the lease payments. To do this, we: (i) compared legal name of customer and any guarantor, to the underlying lease agreements and third-party credit rating report, (ii) evaluated the creditworthiness of the customer by assessing their credit rating, (iii) read publicly available information, including the customer’s financial statements, analyst reports, recent public filings and news articles to evaluate the Company’s collection probability assessment, and (iv) inquired of Company employees to obtain evidence regarding creditworthiness of the customers.

.
		/s/ KPMG LLP

We have served as the Company’s auditor since 2004.

San Francisco, California
March 2, 2020

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Digital Realty Trust, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Digital Realty Trust, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated income statements and consolidated statements of comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule III, properties and accumulated depreciation (collectively, the consolidated financial statements), and our report dated March 2, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


		/s/ KPMG LLP
San Francisco, California
March 2, 2020

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of the General Partner and Partners

Digital Realty Trust, L.P.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Digital Realty Trust, L.P. and subsidiaries (the Operating Partnership) as of December 31, 2019 and 2018, the related consolidated income statements and consolidated statements of comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedules III, properties and accumulated depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Operating Partnership as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Operating Partnership has changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASU No. 2016-02 Leases and related accounting standards updates (collectively Topic 842).

Basis for Opinion

These consolidated financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Operating Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Operating Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.


		/s/ KPMG LLP

We have served as the Operating Partnership’s auditor since 2004.

San Francisco, California
March 2, 2020

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	December 31,		December 31,
	2019		2018
ASSETS
Investments in real estate:
Properties:
Land	$	804,830	$	859,113
Acquired ground leases		10,725		10,575
Buildings and improvements		15,449,884		15,610,992
Tenant improvements		621,153		574,336
Total investments in operating properties		16,886,592		17,055,016
Accumulated depreciation and amortization		(4,536,169)		(3,935,267)
Net investments in operating properties		12,350,423		13,119,749
Construction in progress and space held for development		1,732,555		1,621,928
Land held for future development		147,597		162,941
Net investments in properties		14,230,575		14,904,618
Investments in unconsolidated joint ventures		1,287,109		175,108
Net investments in real estate		15,517,684		15,079,726
Operating lease right-of-use assets, net		628,681		—
Cash and cash equivalents		89,817		126,700
Accounts and other receivables, net of allowance for doubtful accounts of $13,753 and $11,554 as of December 31, 2019 and December 31, 2018, respectively		305,501		299,621
Deferred rent		478,744		463,248
Acquired above-market leases, net of accumulated amortization of $204,233 and $158,037 as of December 31, 2019 and December 31, 2018, respectively		74,815		119,759
Goodwill		3,363,070		4,348,007
Acquired in-place lease value, deferred leasing costs and intangibles, net of accumulated amortization of $1,629,117 and $1,355,013 as of December 31, 2019 and December 31, 2018, respectively		2,195,324		3,144,395
Assets held for sale		229,934		—
Other assets		184,561		185,239
Total assets	$	23,068,131	$	23,766,695
LIABILITIES AND EQUITY
Global revolving credit facilities, net	$	234,105	$	1,647,735
Unsecured term loans, net		810,219		1,178,904
Unsecured senior notes, net of discount		8,973,190		7,589,126
Secured debt, including premiums		104,934		685,714
Operating lease liabilities		693,539		—
Accounts payable and other accrued liabilities		1,007,761		1,164,509
Accrued dividends and distributions		234,620		217,241
Acquired below-market leases, net of accumulated amortization of $247,735 and $242,422 as of December 31, 2019 and December 31, 2018, respectively		148,774		200,113
Security deposits and prepaid rents		208,724		209,311
Obligations associated with assets held for sale		2,700		—
Total liabilities		12,418,566		12,892,653

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(in thousands, except share and per share data)


	December 31,		December 31,
	2019		2018
Redeemable noncontrolling interests		41,465		15,832
Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 110,000,000 shares authorized; 58,250,000 and 50,650,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively		1,434,420		1,249,560
Common Stock: $0.01 par value per share, 315,000,000 shares authorized, 208,900,758 and 206,425,656 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively		2,073		2,051
Additional paid-in capital		11,577,320		11,355,751
Accumulated dividends in excess of earnings		(3,046,579)		(2,633,071)
Accumulated other comprehensive loss, net		(87,922)		(115,647)
Total stockholders’ equity		9,879,312		9,858,644
Noncontrolling Interests:
Noncontrolling interests in operating partnership		708,163		906,510
Noncontrolling interests in consolidated joint ventures		20,625		93,056
Total noncontrolling interests		728,788		999,566
Total equity		10,608,100		10,858,210
Total liabilities and equity	$	23,068,131	$	23,766,695

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in thousands, except share and per share data)


	Year Ended December 31,
	2019		2018		2017
Operating Revenues:
Rental and other services	$	3,196,356	$	2,412,076	$	2,010,301
Tenant reimbursements		—		624,637		440,224
Fee income and other		12,885		9,765		7,403
Total operating revenues		3,209,241		3,046,478		2,457,928
Operating Expenses:
Rental property operating and maintenance		1,020,578		957,065		759,616
Property taxes and insurance		172,183		140,918		134,995
Depreciation and amortization		1,163,774		1,186,896		842,464
General and administrative		211,097		163,667		161,441
Transactions and integration		27,925		45,327		76,048
Impairment of investments in real estate		5,351		—		28,992
Other		14,118		2,818		3,077
Total operating expenses		2,615,026		2,496,691		2,006,633
Operating income		594,215		549,787		451,295
Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures		8,067		32,979		25,516
Gain on deconsolidation, net		67,497		—		—
Gain on disposition of properties, net		267,651		80,049		40,354
Interest and other income, net		66,000		3,481		3,655
Interest expense		(353,057)		(321,529)		(258,642)
Tax expense		(11,995)		(2,084)		(7,901)
(Loss) gain from early extinguishment of debt		(39,157)		(1,568)		1,990
Net income		599,221		341,115		256,267
Net income attributable to noncontrolling interests		(19,460)		(9,869)		(8,008)
Net income attributable to Digital Realty Trust, Inc.		579,761		331,246		248,259
Preferred stock dividends, including undeclared dividends		(74,990)		(81,316)		(68,802)
Issuance costs associated with redeemed preferred stock		(11,760)		—		(6,309)
Net income available to common stockholders	$	493,011	$	249,930	$	173,148
Net income per share available to common stockholders:
Basic	$	2.37	$	1.21	$	0.99
Diluted	$	2.35	$	1.21	$	0.99
Weighted average common shares outstanding:
Basic		208,325,823		206,035,408		174,059,386
Diluted		209,462,247		206,673,471		174,895,098

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Net income	$	599,221	$	341,115	$	256,267
Other comprehensive income (loss):
Foreign currency translation adjustments		23,975		(11,736)		28,709
Reclassification of foreign currency translation adjustment due to deconsolidation of Ascenty		21,687		—		—
(Decrease) increase in fair value of interest rate swaps and foreign currency hedges		(9,232)		8,197		(3,434)
Reclassification to interest expense from interest rate swaps		(7,446)		(3,969)		2,459
Comprehensive income		628,205		333,607		284,001
Comprehensive income attributable to noncontrolling interests		(20,719)		(9,576)		(8,569)
Comprehensive income attributable to Digital Realty Trust, Inc.	$	607,486	$	324,031	$	275,432

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share data)


												Accumulated
										Accumulated		Other				Noncontrolling		Noncontrolling
	Redeemable				Number of			Additional		Dividends in		Comprehensive		Total		Interests in		Interests in		Total
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Income (Loss),		Stockholders’		Operating		Consolidated		Noncontrolling		Total
	Interests		Stock		Shares	Stock		Capital		Earnings		net		Equity		Partnership		Joint Ventures		Interests		Equity
Balance as of December 31, 2016	$	—	$	1,012,961	159,019,118	$	1,582	$	5,764,497	$	(1,547,420)	$	(135,605)	$	5,096,015	$	29,684	$	6,598	$	36,282	$	5,132,297
Conversion of common units to common stock		—		—	562,582		6		10,003		—		—		10,009		(10,009)		—		(10,009)		—
Issuance of unvested restricted stock, net of forfeitures		—		—	249,050		—		—		—		—		—		—		—		—		—
Common stock and units issued in connection with DFT merger		66,259		—	43,175,629		432		5,247,126		—		—		5,247,558		676,566		—		676,566		5,924,124
Issuance of common stock, net of offering costs		—		—	2,375,000		24		211,873		—		—		211,897		—		—		—		211,897
Exercise of stock options		—		—	17,668		—		729		—		—		729		—		—		—		729
Shares issued under employee stock purchase plan		—		—	71,253		—		5,143		—		—		5,143		—		—		—		5,143
Issuance of series C preferred stock in connection with DFT merger		—		219,250	—		—		—		—		—		219,250		—		—		—		219,250
Issuance of series J preferred stock, net of offering costs		—		193,540	—		—		—		—		—		193,540		—		—		—		193,540
Redemption of series F preferred stock		—		(176,191)	—		—		—		(6,309)		—		(182,500)		—		—		—		(182,500)
Amortization of unearned compensation on share-based awards		—		—	—		—		27,981		—		—		27,981		—		—		—		27,981
Reclassification of vested share-based awards		—		—	—		—		(10,057)		—		—		(10,057)		10,057		—		10,057		—
Adjustment to redeemable noncontrolling interests		(12,357)		—	—		—		4,166		—		—		4,166		8,191		—		8,191		12,357
Dividends declared on preferred stock		—		—	—		—		—		(68,802)		—		(68,802)		—		—		—		(68,802)
Dividends and distributions on common stock and common and incentive units		—		—	—		—		—		(681,280)		—		(681,280)		(20,694)		—		(20,694)		(701,974)
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions		—		—	—		—		—		—		—		—		—		(8,593)		(8,593)		(8,593)
Net income		—		—	—		—		—		248,259		—		248,259		3,770		4,238		8,008		256,267
Other comprehensive income— foreign currency translation adjustments		—		—	—		—		—		—		28,272		28,272		437		—		437		28,709
Other comprehensive income— fair value of interest rate swaps and foreign currency hedges		—		—	—		—		—		—		(3,513)		(3,513)		79		—		79		(3,434)
Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense		—		—	—		—		—		—		2,414		2,414		45		—		45		2,459
Balance as of December 31, 2017	$	53,902	$	1,249,560	205,470,300	$	2,044	$	11,261,461	$	(2,055,552)	$	(108,432)	$	10,349,081	$	698,126	$	2,243	$	700,369	$	11,049,450

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (continued)

(in thousands, except share data)


												Accumulated
										Accumulated		Other				Noncontrolling		Noncontrolling
	Redeemable				Number of			Additional		Dividends in		Comprehensive		Total		Interests in		Interests in		Total
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Income (Loss),		Stockholders’		Operating		Consolidated		Noncontrolling		Total
	Interests		Stock		Shares	Stock		Capital		Earnings		net		Equity		Partnership		Joint Ventures		Interests		Equity
Balance as of December 31, 2017	$	53,902	$	1,249,560	205,470,300	$	2,044	$	11,261,461	$	(2,055,552)	$	(108,432)	$	10,349,081	$	698,126	$	2,243	$	700,369	$	11,049,450
Conversion of common units to common stock		—		—	711,892		7		61,997		—		—		62,004		(62,004)		—		(62,004)		—
Issuance of unvested restricted stock, net of forfeitures		—		—	220,765		—		—		—		—		—		—		—		—		—
Common stock offering costs		—		—	—		—		1,194		—		—		1,194		—		—		—		1,194
Shares issued under employee stock purchase plan		—		—	69,532		1		5,873		—		—		5,874		—		—		—		5,874
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	(46,833)		(1)		(5,054)		—		—		(5,055)		—		—		—		(5,055)
Units issued in connection with Ascenty Acquisition		—		—	—		—		—		—		—		—		253,837		25,000		278,837		278,837
Amortization of unearned compensation on share-based awards		—		—	—		—		32,456		—		—		32,456		—		—		—		32,456
Reclassification of vested share-based awards		—		—	—		—		(3,772)		—		—		(3,772)		3,772		—		3,772		—
Adjustment to redeemable noncontrolling interests		(37,274)		—	—		—		1,596		—		—		1,596		35,678		—		35,678		37,274
Dividends declared on preferred stock		—		—	—		—		—		(81,316)		—		(81,316)		—		—		—		(81,316)
Dividends and distributions on common stock and common and incentive units		(1,271)		—	—		—		—		(833,364)		—		(833,364)		(32,311)		—		(32,311)		(865,675)
Contributions from noncontrolling interests in consolidated joint ventures, net of distributions		—		—	—		—		—		—		—		—		—		66,124		66,124		66,124
Cumulative effect adjustment from adoption of new accounting standard		—		—	—		—		—		5,915				5,915		—		—		—		5,915
Net income		475		—	—		—		—		331,246		—		331,246		9,705		(311)		9,394		340,640
Other comprehensive income—foreign currency translation adjustments		—		—	—		—		—		—		(11,279)		(11,279)		(457)		—		(457)		(11,736)
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		7,890		7,890		307		—		307		8,197
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		(3,826)		(3,826)		(143)		—		(143)		(3,969)
Balance as of December 31, 2018	$	15,832	$	1,249,560	206,425,656	$	2,051	$	11,355,751	$	(2,633,071)	$	(115,647)	$	9,858,644	$	906,510	$	93,056	$	999,566	$	10,858,210

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (continued)

(in thousands, except share data)


												Accumulated
										Accumulated		Other				Noncontrolling		Noncontrolling
	Redeemable				Number of			Additional		Dividends in		Comprehensive		Total		Interests in		Interests in		Total
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Income (Loss),		Stockholders’		Operating		Consolidated		Noncontrolling		Total
	Interests		Stock		Shares	Stock		Capital		Earnings		net		Equity		Partnership		Joint Ventures		Interests		Equity
Balance as of December 31, 2018	$	15,832	$	1,249,560	206,425,656	$	2,051	$	11,355,751	$	(2,633,071)	$	(115,647)	$	9,858,644	$	906,510	$	93,056	$	999,566	$	10,858,210
Conversion of common units to common stock		—		—	2,154,460		22		190,492		—		—		190,514		(190,514)		—		(190,514)		—
Issuance of unvested restricted stock, net of forfeitures		—		—	256,868		—		—		—		—		—		—		—		—		—
Common stock offering costs		—		—	—		—		(2,530)		—		—		(2,530)		—		—		—		(2,530)
Shares issued under employee stock purchase plan		—		—	63,774		—		5,462		—		—		5,462		—		—		—		5,462
Issuance of series K preferred stock, net of offering costs		—		203,264	—		—		—		—		—		203,264		—		—		—		203,264
Issuance of series L preferred stock, net of offering costs		—		334,886	—		—		—		—		—		334,886		—		—		—		334,886
Redemption of series H preferred stock		—		(353,290)	—		—		—		(11,760)		—		(365,050)		—		—		—		(365,050)
Amortization of unearned compensation on share-based awards		—		—	—		—		38,662		—		—		38,662		—		—		—		38,662
Reclassification of vested share-based awards		—		—	—		—		(8,458)		—		—		(8,458)		8,458		—		8,458		—
Adjustment to redeemable noncontrolling interests		25,937		—	—		—		(2,059)		—		—		(2,059)		—		(23,878)		(23,878)		(25,937)
Dividends declared on preferred stock		—		—	—		—		—		(74,990)		—		(74,990)		—		—		—		(74,990)
Dividends and distributions on common stock and common and incentive units		(676)		—	—		—		—		(900,201)		—		(900,201)		(38,278)		—		(38,278)		(938,479)
Contributions from noncontrolling interests in consolidated joint ventures, net of distributions		—		—	—		—		—		—		—		—		—		63,173		63,173		63,173
Deconsolidation of consolidated joint venture		—		—	—		—		—		—		—		—		—		(110,086)		(110,086)		(110,086)
Cumulative effect adjustment from adoption of new accounting standard		—		—	—		—		—		(6,318)		—		(6,318)		—		—		—		(6,318)
Net income		372		—	—		—		—		579,761		—		579,761		20,728		(1,640)		19,088		598,849
Other comprehensive income—foreign currency translation adjustments		—		—	—		—		—		—		43,702		43,702		1,960		—		1,960		45,662
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		(8,839)		(8,839)		(393)		—		(393)		(9,232)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		(7,138)		(7,138)		(308)		—		(308)		(7,446)
Balance as of December 31, 2019	$	41,465	$	1,434,420	208,900,758	$	2,073	$	11,577,320	$	(3,046,579)	$	(87,922)	$	9,879,312	$	708,163	$	20,625	$	728,788	$	10,608,100

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Cash flows from operating activities:
Net income	$	599,221	$	341,115	$	256,267
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(335,148)		(80,049)		(40,354)
Unrealized gain on equity investment		(46,492)		(1,631)		—
Impairment of investments in real estate		5,351		—		28,992
Equity in earnings of unconsolidated joint ventures		(8,067)		(32,979)		(25,516)
Distributions from unconsolidated joint ventures		44,293		21,905		31,747
Write-off due to early lease terminations		11,400		2,818		3,076
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases		809,472		770,275		594,996
Amortization of acquired in-place lease value and deferred leasing costs		354,302		416,621		247,468
Amortization of share-based compensation		34,905		27,159		20,521
Non-cash amortization of terminated swaps		1,047		1,120		1,204
Allowance for (recovery of) doubtful accounts		2,159		6,304		(776)
Amortization of deferred financing costs		13,362		11,537		10,634
Loss (gain) from early extinguishment of debt		39,157		1,568		(1,990)
Amortization of debt discount/premium		2,260		3,538		2,992
Amortization of acquired above-market leases and acquired below-market leases, net		17,097		26,530		1,770
Changes in assets and liabilities:
Accounts and other receivables		(8,435)		(21,318)		(73,717)
Deferred rent		(47,858)		(39,905)		(16,564)
Deferred leasing costs		(31,270)		(72,104)		(15,363)
Other assets		(15,599)		(9,145)		(1,800)
Accounts payable, operating lease liabilities and other accrued liabilities		68,155		39,192		(16,384)
Security deposits and prepaid rents		4,505		(27,227)		16,102
Net cash provided by operating activities		1,513,817		1,385,324		1,023,305
Cash flows from investing activities:
Improvements to investments in real estate		(1,436,902)		(1,325,162)		(1,150,619)
Ascenty acquisition		—		(1,679,830)		—
Deconsolidation of Ascenty cash		(97,081)		—		—
Proceeds from joint ventures transactions		1,494,881		—		—
Deposits paid for acquisitions of real estate		(18,075)		—		—
Cash assumed in business combinations		—		116,000		20,650
Acquisitions of real estate		(75,704)		(410,712)		(415,764)
Proceeds from sale of assets, net of sales costs		—		286,204		89,333
Distribution of debt proceeds from closing of joint venture		—		—		135,793
Investments in unconsolidated joint ventures		(101,101)		(673)		(93,405)
Excess proceeds from forward contract settlement		—		—		63,956
Prepaid construction costs and other investments		(2,597)		(13,254)		—

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Improvement advances to tenants		(66,078)		(48,502)		(50,857)
Collection of improvement advances to tenants		27,665		39,936		43,760
Net cash used in investing activities		(274,992)		(3,035,993)		(1,357,153)
Cash flows from financing activities:
Borrowings on global revolving credit facilities	$	3,099,685	$	3,046,245	$	2,180,556
Repayments on global revolving credit facilities		(4,512,073)		(1,945,594)		(2,304,686)
Borrowings on unsecured term loans		—		467,922		—
Repayments on unsecured term loans		(375,000)		(674,332)		(371,520)
Borrowings on unsecured senior notes		2,869,240		1,169,006		2,265,060
Repayments on unsecured senior notes		(1,539,613)		—		—
Principal payments on unsecured senior notes		—		—		(884,841)
Borrowings on secured debt		—		600,000		104,000
Principal payments on secured debt		(688)		(594)		(105,546)
Repayments on other secured loans		—		—		(50,000)
Payment of loan fees and costs		(20,944)		(44,299)		(16,830)
Premium paid for early extinguishment of debt		(35,067)		—		—
Capital contributions from (distributions to) noncontrolling interests in consolidated joint ventures, net		63,173		66,124		(8,593)
Taxes paid related to net settlement of stock-based compensation awards		—		(5,055)		—
Proceeds from common and preferred stock offerings, net		535,620		1,194		405,437
Redemption of preferred stock		(365,050)		—		(182,500)
Proceeds from equity plans		5,462		5,874		5,872
Proceeds from forward swap contract		—		1,560		—
Payment of dividends to preferred stockholders		(74,990)		(81,316)		(68,802)
Payment of dividends to common stockholders and distributions to noncontrolling interests in operating partnership		(921,776)		(849,466)		(646,407)
Net cash (used in) provided by financing activities		(1,272,021)		1,757,269		321,200
Net (decrease) increase in cash, cash equivalents and restricted cash		(33,196)		106,600		(12,648)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(4,773)		15,441		3,793
Cash, cash equivalents and restricted cash at beginning of year		135,222		13,181		22,036
Cash, cash equivalents and restricted cash at end of year	$	97,253	$	135,222	$	13,181

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	312,848	$	288,643	$	211,549
Cash paid for income taxes		14,607		11,224		9,456
Operating cash paid used in the measurement of operating lease liabilities		89,980		—		—
Supplementary disclosure of noncash investing and financing activities:
Noncontrolling interests in operating partnership converted to shares of common stock		190,514		62,004		10,009
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		197,665		189,508		149,548
Assumption of capital lease obligations upon acquisition		—		75,030		—
Non-cash derecognition of capital lease obligation		—		17,294		—
Decrease to goodwill and deferred tax liability (classified with accounts payable and other accrued liabilities)		(9,436)		—		—
Allocation of purchase price of real estate/investment in partnership to:
Investment in real estate	$	74,903	$	410,712	$	366,105
Account receivables		76		—		—
Acquired above-market leases		—		—		21,043
Acquired in-place lease value and deferred leasing costs		725		—		30,111
Acquired below-market leases		—		—		(1,495)
Cash paid for acquisition of real estate	$	75,704	$	410,712	$	415,764

Allocation of purchase price to business combinations:
Cash and cash equivalents	$	—	$	116,000	$	20,650
Land		—		—		312,579
Buildings and improvements		—		425,000		3,677,497
Accounts receivables and other assets		—		30,000		10,978
Acquired above-market leases		—		—		162,333
Tenant relationship and acquired in-place lease value		—		495,000		1,582,385
Goodwill		—		982,667		2,592,181
Revolving credit facility		—		—		(450,697)
Unsecured term loans		—		—		(250,000)
Unsecured notes		—		—		(886,831)
Mortgage notes payable and unsecured debt		—		—		(105,000)
Accounts payable and other accrued liabilities		—		(90,000)		(248,259)
Acquired below-market leases		—		—		(185,543)
Other working capital, net		—		—		(22,640)
Redeemable noncontrolling interests -- operating partnership		—		—		(66,259)
Common stock issued in connection with DFT merger		—		—		(5,247,558)
Noncontrolling interests in operating partnership		—		(253,837)		(676,566)
Noncontrolling interests in consolidated joint venture		—		(25,000)		—
Issuance of preferred stock in connection with DFT merger		—		—		(219,250)
Cash consideration	$	—	$	1,679,830	$	—

Contribution of assets and liabilities to unconsolidated joint venture:
Investment in real estate	$	571,648	$	—	$	119,106
Other assets		171,798		—		16,700
Other liabilities		(21,004)		—		(31,634)
Net carrying value of assets and liabilities contributed to joint ventures	$	722,442	$	—	$	104,172

Recognition of retained investment in unconsolidated joint ventures	$	196,547	$	—	$	55,746

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)


Deconsolidation of Ascenty:
Investment in real estate	$	(362,951)	$	—	$	—
Account receivables		(24,977)		—		—
Acquired in-place lease value, deferred leasing costs and intangibles		(480,128)		—		—
Goodwill		(967,189)		—		—
Other assets		(31,099)		—		—
Secured debt		571,873		—		—
Accounts payable and other accrued liabilities		72,449		—		—
Accumulated other comprehensive loss		(21,687)		—		—
Deconsolidation of Ascenty cash		(97,081)		—		—
Net carrying value of Ascenty assets and liabilities deconsolidated	$	(1,340,790)	$	—	$	—

Recognition of retained investment in unconsolidated Ascenty joint venture	$	727,439	$	—	$	—

Deconsolidation of consolidated joint venture:
Investment in real estate	$	(199,063)		—		—
Account receivables		(14,545)		—		—
Acquired in-place lease value, deferred leasing costs and intangibles		(23)		—		—
Other assets		(13)		—		—
Accounts payable and other accrued liabilities		1,316		—		—
Deconsolidation of cash and cash equivalents		(7,844)		—		—
Net carrying value of assets and liabilities contributed to unconsolidated joint venture	$	(220,172)	$	—		—

Recognition of retained investment in unconsolidated joint venture	$	110,086	$	—		—
Derecognition of noncontrolling interest in joint venture	$	110,086	$	—		—

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)


	December 31,		December 31,
	2019		2018
ASSETS
Investments in real estate:
Properties:
Land	$	804,830	$	859,113
Acquired ground leases		10,725		10,575
Buildings and improvements		15,449,884		15,610,992
Tenant improvements		621,153		574,336
Total investments in operating properties		16,886,592		17,055,016
Accumulated depreciation and amortization		(4,536,169)		(3,935,267)
Net investments in operating properties		12,350,423		13,119,749
Construction in progress and space held for development		1,732,555		1,621,928
Land held for future development		147,597		162,941
Net investments in properties		14,230,575		14,904,618
Investments in unconsolidated joint ventures		1,287,109		175,108
Net investments in real estate		15,517,684		15,079,726
Operating lease right-of-use assets, net		628,681		—
Cash and cash equivalents		89,817		126,700
Accounts and other receivables, net of allowance for doubtful accounts of $13,753 and $11,554 as of December 31, 2019 and December 31, 2018, respectively		305,501		299,621
Deferred rent		478,744		463,248
Acquired above-market leases, net of accumulated amortization of $204,233 and $158,037 as of December 31, 2019 and December 31, 2018, respectively		74,815		119,759
Goodwill		3,363,070		4,348,007
Acquired in-place lease value, deferred leasing costs and intangibles, net of accumulated amortization of $1,629,117 and $1,355,013 as of December 31, 2019 and December 31, 2018, respectively		2,195,324		3,144,395
Assets held for sale		229,934		—
Other assets		184,561		185,239
Total assets	$	23,068,131	$	23,766,695
LIABILITIES AND CAPITAL
Global revolving credit facilities, net	$	234,105	$	1,647,735
Unsecured term loans, net		810,219		1,178,904
Unsecured senior notes, net		8,973,190		7,589,126
Secured debt, including premiums		104,934		685,714
Operating lease liabilities		693,539		—
Accounts payable and other accrued liabilities		1,007,761		1,164,509
Accrued dividends and distributions		234,620		217,241
Acquired below-market leases, net of accumulated amortization of $247,735 and $242,422 as of December 31, 2019 and December 31, 2018, respectively		148,774		200,113
Security deposits and prepaid rents		208,724		209,311
Obligations associated with assets held for sale		2,700		—
Total liabilities		12,418,566		12,892,653

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(in thousands, except unit data)


	December 31,		December 31,
	2019		2018
Redeemable noncontrolling interests		41,465		15,832
Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Preferred units, 58,250,000 and 50,650,000 units issued and outstanding as of December 31, 2019 and December 31, 2018, respectively		1,434,420		1,249,560
Common units, 208,900,758 and 206,425,656 units issued and outstanding as of December 31, 2019 and December 31, 2018, respectively		8,532,814		8,724,731
Limited Partners, 8,843,155 and 10,580,884 units issued and outstanding as of December 31, 2019 and December 31, 2018, respectively		711,650		911,256
Accumulated other comprehensive loss		(91,409)		(120,393)
Total partners’ capital		10,587,475		10,765,154
Noncontrolling interests in consolidated joint ventures		20,625		93,056
Total capital		10,608,100		10,858,210
Total liabilities and capital	$	23,068,131	$	23,766,695

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in thousands, except unit and per unit data)


	Year Ended December 31,
	2019		2018		2017
Operating Revenues:
Rental and other services	$	3,196,356	$	2,412,076	$	2,010,301
Tenant reimbursements		—		624,637		440,224
Fee income and other		12,885		9,765		7,403
Total operating revenues		3,209,241		3,046,478		2,457,928
Operating Expenses:
Rental property operating and maintenance		1,020,578		957,065		759,616
Property taxes and insurance		172,183		140,918		134,995
Depreciation and amortization		1,163,774		1,186,896		842,464
General and administrative		211,097		163,667		161,441
Transactions and integration		27,925		45,327		76,048
Impairment of investments in real estate		5,351		—		28,992
Other		14,118		2,818		3,077
Total operating expenses		2,615,026		2,496,691		2,006,633
Operating income		594,215		549,787		451,295
Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures		8,067		32,979		25,516
Gain on deconsolidation, net		67,497		—		—
Gain on disposition of properties, net		267,651		80,049		40,354
Interest and other income, net		66,000		3,481		3,655
Interest expense		(353,057)		(321,529)		(258,642)
Tax expense		(11,995)		(2,084)		(7,901)
(Loss) gain from early extinguishment of debt		(39,157)		(1,568)		1,990
Net income		599,221		341,115		256,267
Net loss (income) attributable to noncontrolling interests		1,640		311		(4,238)
Net income attributable to Digital Realty Trust, L.P.		600,861		341,426		252,029
Preferred units distributions, including undeclared distributions		(74,990)		(81,316)		(68,802)
Issuance costs associated with redeemed preferred units		(11,760)		—		(6,309)
Net income available to common unitholders	$	514,111	$	260,110	$	176,918
Net income per unit available to common unitholders:
Basic	$	2.37	$	1.21	$	0.99
Diluted	$	2.35	$	1.21	$	0.99
Weighted average common units outstanding:
Basic		217,284,755		214,312,871		178,055,936
Diluted		218,421,179		214,950,934		178,891,648

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Net income	$	599,221	$	341,115	$	256,267
Other comprehensive income (loss):
Foreign currency translation adjustments		23,975		(11,736)		28,709
Reclassification of foreign currency translation adjustment due to deconsolidation of Ascenty		21,687		—		—
(Decrease) increase in fair value of interest rate swaps and foreign currency hedges		(9,232)		8,197		(3,434)
Reclassification to interest expense from interest rate swaps		(7,446)		(3,969)		2,459
Comprehensive income	$	628,205	$	333,607	$	284,001
Comprehensive loss (income) attributable to noncontrolling interests		1,640		311		(4,238)
Comprehensive income attributable to Digital Realty Trust, L.P.	$	629,845	$	333,918	$	279,763

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITAL

(in thousands, except unit data)


												Accumulated		Noncontrolling
	Redeemable		General Partner						Limited Partners			Other		Interests in
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Consolidated
	Interests		Units	Amount		Units	Amount		Units	Amount		Income (Loss)		Joint Ventures		Total Capital
Balance as of December 31, 2016	$	—	41,900,000	$	1,012,961	159,019,118	$	4,218,659	2,475,663	$	34,698	$	(140,619)	$	6,598	$	5,132,297
Conversion of limited partner common units to general partner common units		—	—		—	562,582		10,009	(562,582)		(10,009)		—		—		—
Issuance of unvested restricted common units, net of forfeitures		—	—		—	249,050		—	—		—		—		—		—
Issuance of common units in connection with DFT merger		66,259	—		—	43,175,629		5,247,558	6,111,770		676,566		—		—		5,924,124
Issuance of common units, net of offering costs		—	—		—	2,375,000		211,897	—		—		—		—		211,897
Issuance of common units in connection with the exercise of stock options		—	—		—	17,668		729	—		—		—		—		729
Issuance of common units, net of forfeitures		—	—		—	—		—	464,244		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	71,253		5,143	—		—		—		—		5,143
Issuance of series C preferred units in connection with DFT merger		—	8,050,000		219,250	—		—	—		—		—		—		219,250
Issuance of series J preferred units, net of offering costs		—	8,000,000		193,540	—		—	—		—		—		—		193,540
Redemption of series F preferred units		—	(7,300,000)		(176,191)	—		(6,309)	—		—		—		—		(182,500)
Amortization of unearned compensation on share-based awards		—	—		—	—		27,981	—		—		—		—		27,981
Reclassification of vested share-based awards		—	—		—	—		(10,057)	—		10,057		—		—		—
Adjustment to redeemable noncontrolling interests		(12,357)	—		—	—		4,166	—		8,191		—		—		12,357
Distributions		—	—		(68,802)	—		(681,280)	—		(20,694)		—		—		(770,776)
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions		—	—		—	—		—	—		—		—		(8,593)		(8,593)
Net income		—	—		68,802	—		179,457	—		3,770		—		4,238		256,267
Other comprehensive income - foreign currency translation adjustments		—	—		—	—		—	—		—		28,709		—		28,709
Other comprehensive loss - fair value of interest rate swaps and foreign currency hedges		—	—		—	—		—	—		—		(3,434)		—		(3,434)
Other comprehensive income – reclassification of accumulated other comprehensive loss to interest expense		—	—		—	—		—	—		—		2,459		—		2,459
Balance as of December 31, 2017	$	53,902	50,650,000	$	1,249,560	205,470,300	$	9,207,953	8,489,095	$	702,579	$	(112,885)	$	2,243	$	11,049,450

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITAL (continued)

(in thousands, except unit data)


												Accumulated		Noncontrolling
	Redeemable		General Partner						Limited Partners			Other		Interests in
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Consolidated
	Interests		Units	Amount		Units	Amount		Units	Amount		Income (Loss)		Joint Ventures		Total Capital
Balance as of December 31, 2017	$	53,902	50,650,000	$	1,249,560	205,470,300	$	9,207,953	8,489,095	$	702,579	$	(112,885)	$	2,243	$	11,049,450
Conversion of limited partner common units to general partner common units		—	—		—	711,892		62,004	(711,892)		(62,004)		—		—		—
Issuance of unvested restricted common units, net of forfeitures		—	—		—	220,765		—	—		—		—		—		—
Common unit offering costs		—	—		—	—		1,194	—		—		—		—		1,194
Issuance of units in connection with Ascenty Acquisition		—	—		—	—		—	2,338,874		253,837		—		25,000		278,837
Issuance of common units, net of forfeitures		—	—		—	—		—	464,807		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	69,532		5,874	—		—		—		—		5,874
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	(46,833)		(5,055)	—		—		—		—		(5,055)
Amortization of unearned compensation on share-based awards		—	—		—	—		32,456	—		—		—		—		32,456
Reclassification of vested share-based awards		—	—		—	—		(3,772)	—		3,772		—		—		—
Adjustment to redeemable noncontrolling interests		(37,274)	—		—	—		1,596	—		35,678		—		—		37,274
Distributions		(1,271)	—		(81,316)	—		(833,364)	—		(32,311)		—		—		(946,991)
Contributions from noncontrolling interests in consolidated joint ventures, net of distributions		—	—		—	—		—	—		—		—		66,124		66,124
Cumulative effect adjustment from adoption of new accounting standard		—	—		—	—		5,915	—		—		—		—		5,915
Net income		475	—		81,316	—		249,930	—		9,705		—		(311)		340,640
Other comprehensive income - foreign currency translation adjustments		—	—		—	—		—	—		—		(11,736)		—		(11,736)
Other comprehensive loss - fair value of interest rate swaps		—	—		—	—		—	—		—		8,197		—		8,197
Other comprehensive income – reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		(3,969)		—		(3,969)
Balance as of December 31, 2018	$	15,832	50,650,000	$	1,249,560	206,425,656	$	8,724,731	10,580,884	$	911,256	$	(120,393)	$	93,056	$	10,858,210

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITAL (continued)

(in thousands, except unit data)


												Accumulated		Noncontrolling
	Redeemable		General Partner						Limited Partners			Other		Interests in
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Consolidated
	Interests		Units	Amount		Units	Amount		Units	Amount		Income (Loss)		Joint Ventures		Total Capital
Balance as of December 31, 2018	$	15,832	50,650,000	$	1,249,560	206,425,656	$	8,724,731	10,580,884	$	911,256	$	(120,393)	$	93,056	$	10,858,210
Conversion of limited partner common units to general partner common units		—	—		—	2,154,460		190,514	(2,154,460)		(190,514)		—		—		—
Issuance of unvested restricted common units, net of forfeitures		—	—		—	256,868		—	—		—		—		—		—
Common unit offering costs		—	—		—	—		(2,530)	—		—		—		—		(2,530)
Issuance of common units, net of forfeitures		—	—		—	—		—	416,731		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	63,774		5,462	—		—		—		—		5,462
Issuance of series K preferred units, net of offering costs		—	8,400,000		203,264	—		—	—		—		—		—		203,264
Issuance of series L preferred units, net of offering costs		—	13,800,000		334,886	—		—	—		—		—		—		334,886
Redemption of series H preferred units		—	(14,600,000)		(353,290)	—		(11,760)	—		—		—		—		(365,050)
Amortization of unearned compensation on share-based awards		—	—		—	—		38,662	—		—		—		—		38,662
Reclassification of vested share-based awards		—	—		—	—		(8,458)	—		8,458		—		—		—
Adjustment to redeemable noncontrolling interests		25,937	—		—	—		(2,059)	—		—		—		(23,878)		(25,937)
Distributions		(676)	—		(74,990)	—		(900,201)	—		(38,278)		—		—		(1,013,469)
Contributions from noncontrolling interests in consolidated joint ventures, net of distributions		—	—		—	—		—	—		—		—		63,173		63,173
Deconsolidation of consolidated joint venture		—	—		—	—		—	—		—		—		(110,086)		(110,086)
Cumulative effect adjustment from adoption of new accounting standard		—	—		—	—		(6,318)	—		—		—		—		(6,318)
Net income		372	—		74,990	—		504,771	—		20,728		—		(1,640)		598,849
Other comprehensive income - foreign currency translation adjustments		—	—		—	—		—	—		—		45,662		—		45,662
Other comprehensive loss - fair value of interest rate swaps		—	—		—	—		—	—		—		(9,232)		—		(9,232)
Other comprehensive income – reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		(7,446)		—		(7,446)
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

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Cash flows from operating activities:
Net income	$	599,221	$	341,115	$	256,267
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(335,148)		(80,049)		(40,354)
Unrealized gain on equity investment		(46,492)		(1,631)		—
Impairment of investments in real estate		5,351		—		28,992
Equity in earnings of unconsolidated joint ventures		(8,067)		(32,979)		(25,516)
Distributions from unconsolidated joint ventures		44,293		21,905		31,747
Write-off due to early lease terminations		11,400		2,818		3,076
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases		809,472		770,275		594,996
Amortization of acquired in-place lease value and deferred leasing costs		354,302		416,621		247,468
Amortization of share-based compensation		34,905		27,159		20,521
Non-cash amortization of terminated swaps		1,047		1,120		1,204
(Recovery of) allowance for doubtful accounts		2,159		6,304		(776)
Amortization of deferred financing costs		13,362		11,537		10,634
Loss (gain) from early extinguishment of debt		39,157		1,568		(1,990)
Amortization of debt discount/premium		2,260		3,538		2,992
Amortization of acquired above-market leases and acquired below-market leases, net		17,097		26,530		1,770
Changes in assets and liabilities:
Accounts and other receivables		(8,435)		(21,318)		(73,717)
Deferred rent		(47,858)		(39,905)		(16,564)
Deferred leasing costs		(31,270)		(72,104)		(15,363)
Other assets		(15,599)		(9,145)		(1,800)
Accounts payable, operating lease liabilities and other accrued liabilities		68,155		39,192		(16,384)
Security deposits and prepaid rents		4,505		(27,227)		16,102
Net cash provided by operating activities		1,513,817		1,385,324		1,023,305
Cash flows from investing activities:
Improvements to investments in real estate		(1,436,902)		(1,325,162)		(1,150,619)
Ascenty acquisition		—		(1,679,830)		—
Cash assumed in business combinations		—		116,000		20,650
Acquisitions of real estate		(75,704)		(410,712)		(415,764)
Proceeds from sale of properties, net of sales costs		—		286,204		89,333
Proceeds from the joint ventures transactions		1,494,881		—		—
Deconsolidation of Ascenty cash		(97,081)		—		—
Distribution of debt proceeds from closing of joint venture		—		—		135,793
Excess proceeds from forward contract settlement		—		—		63,956
Prepaid construction costs and other investments		(2,597)		(13,254)		—
Contributions to unconsolidated joint ventures		(101,101)		(673)		(93,405)
Deposits paid for acquisitions of real estate		(18,075)		—		—
Improvement advances to tenants		(66,078)		(48,502)		(50,857)
Collection of improvement advances to tenants		27,665		39,936		43,760
Net cash used in investing activities		(274,992)		(3,035,993)		(1,357,153)

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Cash flows from financing activities:
Borrowings on global revolving credit facilities	$	3,099,685	$	3,046,245	$	2,180,556
Repayments on global revolving credit facilities		(4,512,073)		(1,945,594)		(2,304,686)
Repayments on unsecured term loans		(375,000)		(674,332)		(371,520)
Borrowings on unsecured term loans		—		467,922		—
Borrowings on unsecured senior notes		2,869,240		1,169,006		2,265,060
Principal payments on unsecured senior notes		(1,539,613)		—		(884,841)
Borrowings on secured debt		—		600,000		104,000
Principal payments on secured debt		(688)		(594)		(105,546)
Repayments on other secured loans		—		—		(50,000)
Payment of loan fees and costs		(20,944)		(44,299)		(16,830)
Premium paid for early extinguishment of debt		(35,067)		—		—
Capital contributions from (distributions to) noncontrolling interests in consolidated joint ventures, net		63,173		66,124		(8,593)
Taxes paid related to net settlement of stock-based compensation awards		—		(5,055)		—
General partner contributions		541,082		7,068		411,309
General partner distributions		(365,050)		—		(182,500)
Proceeds from forward swap contract		—		1,560		—
Payment of distributions to preferred unitholders		(74,990)		(81,316)		(68,802)
Payment of distributions to common unitholders		(921,776)		(849,466)		(646,407)
Net cash (used in) provided by financing activities		(1,272,021)		1,757,269		321,200
Net (decrease) increase in cash, cash equivalents and restricted cash		(33,196)		106,600		(12,648)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(4,773)		15,441		3,793
Cash, cash equivalents and restricted cash at beginning of year		135,222		13,181		22,036
Cash, cash equivalents and restricted cash at end of year	$	97,253	$	135,222	$	13,181

Index to Financial Statements

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)


	Year Ended December 31,
	2019		2018		2017
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	312,848	$	288,643	$	211,549
Cash paid for income taxes		14,607		11,224		9,456
Operating cash paid used in the measurement of operating lease liabilities		89,980		—		—
Supplementary disclosure of noncash investing and financing activities:
Decrease to goodwill and deferred tax liability (classified within accounts payable and other accrued liabilities)		(9,436)		—		—
Limited Partner common units converted to General Partner common units		190,514		62,004		10,009
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		197,665		189,508		149,548
Assumption of capital lease obligations upon acquisition		—		75,030		—
Non-cash derecognition of capital lease obligation		—		17,294		—

Allocation of purchase price of real estate/investment in partnership to:
Investment in real estate	$	74,903	$	410,712	$	366,105
Account receivables		76		—		—
Acquired above-market leases		—		—		21,043
Acquired in-place lease value, deferred leasing costs and intangibles		725		—		30,111
Acquired below-market leases		—		—		(1,495)
Cash paid for acquisition of real estate	$	75,704	$	410,712	$	415,764

Allocation of purchase price to business combinations:
Cash and cash equivalents	$	—	$	116,000	$	20,650
Land		—		—		312,579
Buildings and improvements		—		425,000		3,677,497
Accounts receivables and other assets		—		30,000		10,978
Acquired above-market leases		—		—		162,333
Tenant relationship and acquired in-place lease value		—		495,000		1,582,385
Goodwill		—		982,667		2,592,181
Revolving credit facility		—		—		(450,697)
Unsecured term loans		—		—		(250,000)
Unsecured notes		—		—		(886,831)
Secured debt		—		—		(105,000)
Accounts payable and other accrued liabilities		—		(90,000)		(248,259)
Acquired below-market leases		—		—		(185,543)
Other working capital, net		—		—		(22,640)
Redeemable noncontrolling interests -- operating partnership		—		—		(66,259)
Common units issued to general partner in connection with DFT merger		—		—		(5,247,558)
Common units issued to limited partners in connection with DFT merger		—		(253,837)		(676,566)
Noncontrolling interests in consolidated joint venture		—		(25,000)		—
Issuance of preferred units in connection with merger		—		—		(219,250)
Cash consideration	$	—	$	1,679,830	$	—

Contribution of assets and liabilities to unconsolidated joint venture:
Investment in real estate	$	571,648	$	—	$	119,106
Other assets		171,798		—		16,700
Other liabilities		(21,004)		—		(31,634)
Net carrying value of assets and liabilities contributed to joint ventures	$	722,442	$	—	$	104,172

Recognition of retained investment in unconsolidated joint ventures	$	196,547	$	—	$	55,746

Index to Financial Statements

Deconsolidation of Ascenty:
Investment in real estate	$	(362,951)	$	—	$	—
Account receivables		(24,977)		—		—
Acquired in-place lease value, deferred leasing costs and intangibles		(480,128)		—		—
Goodwill		(967,189)		—		—
Other assets		(31,099)		—		—
Secured debt		571,873		—		—
Accounts payable and other accrued liabilities		72,449		—		—
Accumulated other comprehensive loss		(21,687)		—		—
Deconsolidation of Ascenty cash		(97,081)		—		—
Net carrying value of Ascenty assets and liabilities deconsolidated	$	(1,340,790)	$	—	$	—

Recognition of retained investment in unconsolidated Ascenty joint venture	$	727,439	$	—	$	—

Deconsolidation of consolidated joint venture:
Investment in real estate	$	(199,063)	$	—	$	—
Account receivables		(14,545)		—		—
Acquired in-place lease value, deferred leasing costs and intangibles		(23)		—		—
Other assets		(13)		—		—
Accounts payable and other accrued liabilities		1,316		—		—
Deconsolidation of cash and cash equivalents		(7,844)		—		—
Net carrying value of assets and liabilities contributed to unconsolidated joint venture	$	(220,172)	$	—	$	—

Recognition of retained investment in unconsolidated joint venture	$	110,086	$	—		—
Derecognition of noncontrolling interest in joint venture	$	110,086	$	—		—

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-

December 31, 2019 and 2018

Organization and Description of Business

Digital Realty Trust, Inc. through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership) and the subsidiaries of the Operating Partnership (collectively, we, our, us or the Company) is 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, communications and social networking to financial services, manufacturing, energy, healthcare, and consumer products. The Operating Partnership, a Maryland limited partnership, is the entity through which Digital Realty Trust, Inc., a Maryland corporation, conducts its business of owning, acquiring, developing and operating data centers. Digital Realty Trust, Inc. operates as a REIT for federal income tax purposes. A summary of our data center portfolio as of December 31, 2019 and 2018 is as follows:


	Data Centers
	As of December 31, 2019				As of December 31, 2018
			Unconsolidated				Unconsolidated
Region	Operating	Held for Sale (1)	Joint Ventures	Total	Operating	Held for Sale	Joint Ventures	Total
United States	119	11	17	147	131	—	14	145
Europe	41	—	—	41	38	—	—	38
Latin America	—	—	19	19	16	—	—	16
Asia	5	—	5	10	3	—	4	7
Australia	5	—	—	5	5	—	—	5
Canada	2	1	—	3	3	—	—	3
Total	172	12	41	225	196	—	18	214

(1)	Includes 10 Powered Base Building® properties, which comprise 12 data centers, that are held for sale to a third party as of December 31, 2019 (see note 5).

On December 20, 2018, the Operating Partnership and Stellar Participações S.A. (formerly Stellar Participações Ltda.), a Brazilian subsidiary of the Operating Partnership, completed the acquisition of Ascenty, a leading data center provider in Brazil, for cash and equity consideration of approximately $2.0 billion, including cash purchased. We refer to this transaction as the Ascenty Acquisition. In March 2019, we formed a joint venture with Brookfield Infrastructure, an affiliate of Brookfield Asset Management, one of the largest owners and operators of infrastructure assets globally. Brookfield invested approximately $702 million in exchange for 49% of the total equity interests in the joint venture which owns and operates Ascenty. A subsidiary of the Operating Partnership retained the remaining equity interest in the Ascenty joint venture. The power to control the Ascenty joint venture is shared equally between the Operating Partnership and Brookfield and as a result of losing control, the Operating Partnership deconsolidated Ascenty on March 29, 2019. See note 6 for additional information.

We are diversified in major metropolitan areas where data center and technology customers are concentrated, including the Atlanta, Boston, Chicago, Dallas, Los Angeles, New York, Northern Virginia, Phoenix, San Francisco, Seattle, Silicon Valley and Toronto metropolitan areas in North America, the Amsterdam, Dublin, Frankfurt, London and Paris metropolitan areas in Europe, the Fortaleza, Rio de Janeiro, Santiago and São Paulo metropolitan areas in Latin America, and the Hong Kong, Melbourne, Osaka, Seoul, Singapore, Sydney, and Tokyo metropolitan areas in the Asia Pacific region. The portfolio consists of data centers, Internet gateway facilities and office and other non-data center space.

The Operating Partnership was formed on July 21, 2004 in anticipation of Digital Realty Trust, Inc.’s initial public offering (IPO) on November 3, 2004 and commenced operations on that date. As of December 31, 2019, Digital Realty

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Trust, Inc. owns a 95.9% common interest and a 100.0% preferred interest in the Operating Partnership. As of December 31, 2018, Digital Realty Trust, Inc. owned a 95.1% common interest and a 100.0% preferred interest in the Operating Partnership. As sole general partner of the Operating Partnership, Digital Realty Trust, Inc. has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control. The limited partners of the Operating Partnership do not have rights to replace Digital Realty Trust, Inc. as the general partner nor do they have participating rights, although they do have certain protective rights.

As used in these Notes: “DFT” refers to DuPont Fabros Technology, Inc.; “DFT Merger” refers to the Company’s acquisition of DuPont Fabros Technology, Inc.; “DFT Operating Partnership” refers to DuPont Fabros Technology, L.P.; “European Portfolio Acquisition” refers to the Company’s acquisition of a portfolio of eight data centers in Europe; and “Telx Acquisition” refers to the Company’s acquisition of Telx Holdings, Inc.

Summary of Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include all of the accounts of Digital Realty Trust, Inc., the Operating Partnership and the subsidiaries of the Operating Partnership. Intercompany balances and transactions have been eliminated.

The notes to the consolidated financial statements of Digital Realty Trust, Inc. and the Operating Partnership have been combined to provide the following benefits:

	●	enhancing investors’ understanding of the Company and the Operating Partnership 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 Company and the Operating Partnership; and

	●	creating time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.

There are few differences between the Company and the Operating Partnership, which are reflected in these consolidated financial statements. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how we operate as an interrelated consolidated company. Digital Realty Trust, Inc.’s only material asset is its ownership of partnership interests of the Operating Partnership. As a result, Digital Realty Trust, Inc. generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public securities from time to time and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates. Digital Realty Trust, Inc. itself has not issued any indebtedness but guarantees the unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates, as disclosed in these notes.

The Operating Partnership holds substantially all the assets of the Company and holds the ownership interests in the Company’s joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by Digital Realty Trust, Inc., which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generally generates the capital required by the Company’s business primarily through the Operating

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Partnership’s operations, by the Operating Partnership’s or its affiliates’ direct or indirect incurrence of indebtedness or through the issuance of partnership units.

The presentation of noncontrolling interests in operating partnership, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of Digital Realty Trust, Inc. and those of the Operating Partnership. The common limited partnership interests held by the limited partners in the Operating Partnership are presented as limited partners’ capital within partners’ capital in the Operating Partnership’s consolidated financial statements and as noncontrolling interests in operating partnership within equity in Digital Realty Trust, Inc.’s consolidated financial statements. The common and preferred partnership interests held by Digital Realty Trust, Inc. in the Operating Partnership are presented as general partner’s capital within partners’ capital in the Operating Partnership’s consolidated financial statements and as preferred stock, common stock, additional paid-in capital and accumulated dividends in excess of earnings within stockholders’ equity in Digital Realty Trust, Inc.’s consolidated financial statements. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity issued at the Digital Realty Trust, Inc. and the Operating Partnership levels.

To help investors understand the significant differences between the Company and the Operating Partnership, these consolidated financial statements present the following separate sections for each of the Company and the Operating Partnership:

	●	consolidated face financial statements; and

	●	the following notes to the consolidated financial statements:

	●	"Debt of the Company" and "Debt of the Operating Partnership";

	●	"Income per Share" and "Income per Unit";

	●	"Equity and Accumulated Other Comprehensive Loss, Net of the Company" and Capital and Accumulated Other Comprehensive Loss of the Operating Partnership"; and

	●	"Quarterly Financial Information".

In the sections that combine disclosure of Digital Realty Trust, Inc. and the Operating Partnership, these notes refer to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company generally operates the business through the Operating Partnership.

(b) Cash Equivalents

For the purpose of the consolidated statements of cash flows, we consider short-term investments with original maturities of 90 days or less to be cash equivalents. As of December 31, 2019 and 2018, cash equivalents consist of investments in money market instruments.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Investments in real estate are stated at cost, less accumulated depreciation and amortization. Land is not depreciated. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives as follows:


Acquired ground leases		Terms of the related lease
Buildings and improvements		5-39 years
Machinery and equipment		7-15 years
Furniture and fixtures		3-5 years
Leasehold improvements		Shorter of the estimated useful lives or the terms of the related leases
Tenant improvements		Shorter of the estimated useful lives or the terms of the related leases

Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

Assets that are classified as held for sale are recorded at the lower of their carrying value or fair value less costs to dispose. We classify an asset as held for sale once management has the authority to approve and commits to a plan to sell, the asset is available for immediate sale, an active program to locate a buyer has commenced and the sale of the asset is probable and transfer of the asset is expected to occur within one year. Upon the classification of assets as held for sale or sold, the depreciation and amortization of the assets will cease.

(d) Investments in Unconsolidated Joint Ventures

The Company’s investments in unconsolidated joint ventures are accounted for using the equity method. We use the equity method when we have the ability to exercise significant influence over operating and financial policies of the venture but do not have control of the entity. Under the equity method, we initially recognize these investments in the balance sheet at our cost or proportionate share of fair value. We subsequently adjust the accounts to reflect our proportionate share of net earnings or losses recognized and other comprehensive income or loss, distributions received, contributions made and certain other adjustments, as appropriate. We do not record losses of the joint ventures in excess of our investment balances unless we are liable for the obligations of the joint venture or are otherwise committed to provide financial support to the joint venture. Likewise, and as long as we have no explicit or implicit obligations to the joint venture, we will suspend equity method accounting to the extent that cash distributions exceed our investment balances until those unrecorded earnings exceed the excess distributions previously recognized in income. In this case, we will apply cost accounting concepts which tie income recognition to the receipt of cash. Cost basis accounting concepts will apply until earnings exceed the excess distributions previously recognized in income.

We amortize the difference between the cost of our investment in the joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. In the event the underlying asset is goodwill, the difference is not amortized. The amortization of this difference was immaterial for each of the years ended December 31, 2019, 2018 and 2017.

(e) Impairment of Long-Lived and Finite-Lived Intangible Assets

We review each of our properties for indicators that its carrying amount may not be recoverable. Examples of such indicators may include a significant decrease in the market price of the property, a change in the expected holding period for the property, a significant adverse change in how the property is being used or expected to be used based on the underwriting at the time of acquisition, an accumulation of costs significantly in excess of the amount originally

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

expected for the acquisition or development of the property, or a history of operating or cash flow losses of the property. When such impairment indicators exist, we review an estimate of the future undiscounted net cash flows (excluding interest charges) expected to result from the property’s or asset group’s use and eventual disposition and compare that estimate to the carrying value of the property or the asset group. We consider factors such as future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If our future undiscounted net cash flow evaluation indicates that we are unable to recover the carrying value of a property or asset group, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property or fair value of the properties within the asset group. These losses have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be long-lived assets to be held and used are considered on an undiscounted basis to determine whether the carrying value of a property or asset group is recoverable, our strategy of holding properties over the long-term directly decreases the likelihood of their carrying values not being recoverable and therefore requiring the recording of an impairment loss. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized, and such loss could be material. If we determine that the asset fails the recoverability test, the affected assets must be reduced to their fair value.

We generally estimate the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs that a market participant would use based on the highest and best use of the asset, which is similar to the income approach that is commonly utilized by appraisers. In certain cases, we may supplement this analysis by obtaining outside broker opinions of value.

In considering whether to classify a property as held for sale or contribution, the Company considers whether: (i) management has committed to a plan to sell or contribute the property; (ii) the property is available for immediate sale or contribution in its present condition; (iii) the Company has initiated a program to locate a buyer or joint venture partner; (iv) the Company believes that the sale or contribution of the property is probable; (v) the Company is actively marketing the property for sale or contribution at a price that is reasonable in relation to its current value; and (vi) actions required for the Company to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.

If all the above criteria are met, the Company classifies the property as held for sale or contribution. Assets classified as held for sale are expected to be sold to a third party and assets classified as held for contribution are expected to be contributed to an unconsolidated joint venture or to a third party within twelve months. At such time, the respective assets and liabilities are presented separately in the consolidated balance sheets and depreciation is no longer recognized. Assets held for sale or contribution are reported at the lower of their carrying amount or their estimated fair value less the costs to sell or contribute. Only those assets held for sale or contribution that constitute a strategic shift that has or will have a major effect on our operations are classified as discontinued operations. To date we have had no property dispositions or assets classified as held for sale or contribution that would meet the definition of discontinued operations.

If impairment indicators arise with respect to intangible assets with finite useful lives, we evaluate impairment by comparing the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying amount of the asset, then we estimate the fair value of the asset and compare the estimated fair value to the intangible asset’s carrying value. We recognize any shortfall from carrying value as an impairment loss in the current period.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(f) Purchase Accounting

Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired from third parties. The Company evaluates the nature of the purchase to determine whether the purchase is a business combination or an asset acquisition. Transaction costs associated with business combinations are expensed as incurred while transaction costs associated with an asset acquisition are included in the total costs of the acquisition and are allocated on a pro-rata basis to the carrying value of the assets and liabilities recognized in connection with the acquisition. The following accounting policies related to valuing the acquired tangible and intangible assets and liabilities are applicable to both business combinations and asset acquisitions. However, in the event the purchase is an asset acquisition, no goodwill or gain is permitted to be recognized. In an asset acquisition, the difference between the sum of the identified tangible and intangible assets and liabilities and the total purchase price (including transactions costs) is allocated to the identified tangible and intangible assets and liabilities on a relative fair value basis. In accordance with current accounting guidance_,_ the fair value of the real estate acquired is allocated to the acquired tangible assets, consisting primarily of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, value of in-place leases and acquired ground leases and in the case of a business combination, tenant relationship value, based in each case on their fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate.

The fair values of the tangible assets of an acquired property are determined based on comparable land sales for land and replacement costs adjusted for physical and market obsolescence for the improvements. The fair values of the tangible assets of an acquired property are also determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and tenant improvements based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property based on assumptions that a market participant would use, which is similar to methods used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related costs.

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) estimated fair market lease rates from the perspective of a market participant for the corresponding in-place leases, measured, for above-market leases, over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below-market fixed rate renewal periods. The leases we have acquired do not currently include any below-market fixed rate renewal periods. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values, also referred to as acquired lease obligations, are amortized as an increase to rental income over the initial terms of the respective leases and any below-market fixed rate renewal periods.

In addition to the intangible value for above-market leases and the intangible negative value for below-market leases, there is intangible value related to having tenants leasing space in the purchased property, which is referred to as in-place lease value. Such value results primarily from the buyer of a leased property avoiding the costs associated with leasing the property and also avoiding rent losses and unreimbursed operating expenses during the lease-up period.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases.

The Company uses the excess earnings method to value tenant relationship value, if any. Such value exists in transactions that involve the acquisition of tenants and customers that are expected to generate recurring revenues beyond existing in place lease terms. The primary factors to be considered by management in its analysis of tenant relationship value include historical tenant lease renewals and attrition rates, rental renewal probabilities and related market terms, estimated operating costs, and discount rate. Tenant relationship value is amortized to expense ratably over the anticipated life of the tenant relationships generating excess earnings, which is the period management uses to value this intangible asset.

(g) Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired and tangible and intangible liabilities assumed in a business combination. Goodwill is not amortized. We perform an annual impairment test for goodwill and between annual tests, we evaluate goodwill for impairment whenever events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. In our impairment tests of goodwill, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If based on this assessment, we determine that the fair value of the reporting unit is not less than its carrying value, then performing the additional two-step impairment test is unnecessary. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets including goodwill to the fair value of the reporting unit. We estimate the fair value of the reporting unit using a technique based on a performance measure or measures consistent with the objective of measuring fair value, which may include quoted market prices, multiples of earnings or discounted cash flows. If the fair value is determined to be less than the book value of the net assets, including goodwill, a second step is performed to compute the amount of impairment as the difference between the implied fair value of goodwill and its carrying value. If the carrying value of goodwill exceeds its implied fair value, an impairment charge is recognized. We have not recognized any goodwill impairments since our inception. Since some of the goodwill is denominated in foreign currencies, changes to the goodwill balance occur over time due to changes in foreign currency exchange rates.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

The following is a summary of goodwill activity for the years ended December 31, 2019 and 2018 (in thousands):


	Balance as of								Impact of Change		Balance as of
	December 31,		Merger /				Goodwill		in Foreign		December 31,
Merger / Portfolio Acquisition	2018		Acquisition		Deconsolidation		Adjustments (1)		Exchange Rates		2019

Telx Acquisition	$	330,845	$	—	$	—	$	—	$	—	$	330,845
European Portfolio Acquisition		442,349		—		—		(9,436)		7,166		440,079
DFT Merger		2,592,146		—		—		—		—		2,592,146
Ascenty Acquisition		982,667		—		(967,189)		—		(15,478)		—
Total	$	4,348,007	$	—	$	(967,189)	$	(9,436)	$	(8,312)	$	3,363,070

	Balance as of								Impact of Change		Balance as of
	December 31,		Merger /				Goodwill		in Foreign		December 31,
	2017		Acquisition		Deconsolidation		Adjustments		Exchange Rates		2018

Telx Acquisition	$	330,845	$	—	$	—	$	—	$	—	$	330,845
European Portfolio Acquisition		466,604		—		—		—		(24,255)		442,349
DFT Merger		2,592,146		—		—		—		—		2,592,146
Ascenty Acquisition		—		982,667		—		—		—		982,667
Total	$	3,389,595	$	982,667	$	—	$	—	$	(24,255)	$	4,348,007

(1)	As a result of a subsequent reduction to an acquired deferred tax liability that would not have impacted consideration paid, goodwill was adjusted.

(h) Capitalization of Costs

Direct and indirect project costs that are clearly associated with the development of properties are capitalized as incurred. Project costs include all costs directly associated with the development of a property, including construction costs, interest, property taxes, insurance, legal fees and costs of personnel working on the project. Indirect costs that do not clearly relate to the projects under development are not capitalized and are charged to expense as incurred.

Capitalization of costs begins when the activities necessary to get the development project ready for its intended use begins, which include costs incurred before the beginning of construction. Capitalization of costs ceases when the development project is substantially complete and ready for its intended use. Determining when a development project commences and when it is substantially complete and ready for its intended use involves a degree of judgment. We generally consider a development project to be substantially complete and ready for its intended use upon receipt of a certificate of occupancy. If and when development of a property is suspended pursuant to a formal change in the planned use of the property, we will evaluate whether the accumulated costs exceed the estimated value of the project and write off the amount of any such excess accumulated costs. For a development project that is suspended for reasons other than a formal change in the planned use of such property, the accumulated project costs are evaluated for impairment consistent with our impairment policies for long-lived assets. During the development period, all costs including the associated land are classified to construction in progress and space held for development. Upon completion of the development period for a project, accumulated construction in progress costs including the land related to a project are allocated to the specific components of a project that are benefited.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Construction in progress and space held for development includes the cost of land, the cost of construction of buildings, improvements and fixed equipment, and costs for design and engineering. Other costs, such as interest, legal, property taxes and corporate project supervision, which can be directly associated with the project during construction, are also included in construction in progress and space held for development. Land held for development includes parcels of land owned by the Company, upon which the Company intends to develop and own data centers, but has yet to commence development.

During the years ended December 31, 2019, 2018 and 2017, we capitalized interest of approximately $40.2 million, $34.7 million and $21.7 million, respectively. During the years ended December 31, 2019, 2018 and 2017, we capitalized amounts relating to compensation expense and other overhead expense of employees direct and incremental to construction activities of approximately $50.3 million, $42.0 million and $38.0 million, respectively.

(i) Deferred Leasing Costs

Leasing commissions and other direct and indirect costs associated with the acquisition of tenants are capitalized and amortized on a straight-line basis over the terms of the related leases. During the years ended December 31, 2019, 2018 and 2017, we capitalized amounts relating to fixed compensation expense and other overhead expense of employees direct and incremental to successful leasing activities of approximately $0.0 million, $37.0 million and $43.4 million, respectively. During the years ended December 31, 2019, 2018 and 2017, we capitalized amounts relating to variable compensation of employees direct and incremental to successful leasing activities of approximately $30.8 million, $27.2 million and $10.6 million, respectively. Deferred leasing costs is included in acquired in-place lease value, deferred leasing costs and intangibles on the consolidated balance sheet and amounted to approximately $291.8 million and $322.2 million, net of accumulated amortization, as of December 31, 2019 and 2018, respectively. Amortization expense on leasing costs was approximately $75.3 million, $72.9 million, and $50.1 million for the years ended December 31, 2019, 2018 and 2017, respectively.

(j) Foreign Currency Translation

Assets and liabilities of our subsidiaries outside the United States with non-U.S. dollar functional currencies are translated into U.S. dollars using exchange rates as of the balance sheet dates. Income and expenses are translated using the average exchange rates for the reporting period. Foreign currency translation adjustments are recorded as a component of other comprehensive income. In the statement of cash flows, cash flows denominated in foreign currencies are translated using the exchange rates in effect at the time of the cash flows or an average exchange rate for the period, depending on the nature of the cash flow item.

(k) Deferred Financing Costs

Loan fees and costs are recorded as an adjustment to the carrying amount of the related debt and amortized over the life of the related loans on a straight-line basis, which approximates the effective interest method. Such amortization is included as a component of interest expense.

(l) Restricted Cash

Restricted cash consists of deposits for real estate taxes and insurance and other amounts as required by our loan agreements including funds for leasing costs and improvements related to unoccupied space.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(m) Offering Costs

Underwriting commissions and other offering costs are reflected as a reduction in additional paid-in capital, or in the case of preferred stock, as a reduction of the carrying value of preferred stock.

(n) Share-Based Compensation

The Company measures all share-based compensation awards at fair value on the date they are granted to employees and directors, and recognizes compensation cost, net of forfeitures, over the requisite service period for awards with only a service condition. The estimated fair value of the long-term incentive units and Class D units (discussed in Note 15) granted by us is being amortized on a straight-line basis over the expected service period.

The fair value of share-based compensation awards that contain a market condition is measured using a Monte Carlo simulation method and is not adjusted based on actual achievement of the market condition.

(o) Derivative Instruments

Derivative financial instruments are employed to manage risks, including foreign currency and interest rate exposures and are not used for trading or speculative purposes. As part of the Company’s risk management program, a variety of financial instruments, such as interest rate swaps and foreign exchange contracts, may be used to mitigate interest rate exposure and foreign currency exposure. The Company recognizes all derivative instruments in the balance sheet at fair value.

Changes in the fair value of derivatives are recognized periodically either in earnings or in stockholders’ equity as a component of accumulated other comprehensive income (loss), depending on whether the derivative financial instrument is undesignated or qualifies for hedge accounting, and if so, whether it represents a fair value, cash flow, or net investment hedge. Gains and losses on derivatives designated as cash flow hedges, to the extent they are included in the assessment of effectiveness, are recorded in other comprehensive income (loss) and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. In the event it becomes probable the forecasted transaction to which a cash flow hedge relates will not occur, the derivative would be terminated and the amount in other comprehensive income (loss) would be recognized in earnings. Changes in the fair value of derivatives that are designated and qualify as a hedge of the net investment in foreign operations, to the extent they are included in the assessment of effectiveness, are reported in other comprehensive income (loss) and are deferred until disposal of the underlying assets. Gains and losses representing components excluded from the assessment of effectiveness for cash flow and fair value hedges are recognized in earnings on a straight-line basis in the same caption as the hedged item over the term of the hedge. Gains and losses representing components excluded from the assessment of effectiveness for net investment hedges are recognized in earnings on a straight-line basis over the term of the hedge.

The net interest paid or received on interest rate swaps is recognized as interest expense. Gains and losses resulting from the early termination of interest rate swap agreements are deferred and amortized as adjustments to interest expense over the remaining period of the debt originally covered by the terminated swap.

See Note 16 for further discussion on derivative instruments.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(p) Income Taxes

Digital Realty Trust, Inc. has elected to be treated as a real estate investment trust (a “REIT”) for federal income tax purposes. As a REIT, Digital Realty Trust, Inc. generally is not required to pay U.S. federal corporate income tax to the extent taxable income is currently distributed to its stockholders. If Digital Realty Trust, Inc. fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income tax (including any applicable alternative minimum tax for taxable years prior to 2018) on its taxable income.

The Company is subject to foreign, state and local income taxes in the jurisdictions in which it conducts business. The Company’s taxable REIT subsidiaries are subject to federal, state, local and foreign income taxes to the extent there is taxable income. Accordingly, the Company recognizes current and deferred income taxes for U.S. federal (for its taxable REIT subsidiaries), state, local and foreign jurisdictions, as appropriate.

We assess our significant tax positions in accordance with U.S. GAAP for all open tax years and determine whether we have any material unrecognized liabilities from uncertain tax benefits. If a tax position is not considered “more-likely-than-not” to be sustained solely on its technical merits, no benefits of the tax position are to be recognized (for financial statement purposes). As of December 31, 2019 and 2018, we have no assets or liabilities for uncertain tax positions. We classify interest and penalties from significant uncertain tax positions as interest expense and operating expense, respectively, in our consolidated income statements. For the years ended December 31, 2019, 2018 and 2017, we had no such interest or penalties. The tax year 2016 and thereafter remain open to examination by the major taxing jurisdictions with which the Company files tax returns.

See Note 12 for further discussion on income taxes.

(q) Presentation of Transactional-based Taxes

We account for transactional-based taxes, such as value added tax, or VAT, for our international properties on a net basis.

(r) Redeemable Noncontrolling Interests

Redeemable noncontrolling interests include amounts related to partnership units issued by consolidated subsidiaries of the Company in which redemption for equity is outside the control of the Company. Partnership units which are determined to be contingently redeemable for cash under the Financial Accounting Standards Board’s "Distinguishing Liabilities from Equity" guidance are classified as redeemable noncontrolling interests and presented in the mezzanine section between total liabilities and stockholder’s equity on the Company’s consolidated balance sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented on the Company’s consolidated income statements.

(s) Lease Accounting

Transition

On January 1, 2019, we adopted ASU No. 2016-02 “Leases” and the several additional ASU’s intended to clarify certain aspects of ASU 2016-02 and to provide certain practical expedients entities can elect upon adoption (collectively “Topic 842”). Topic 842 sets out the principles for the recognition, measurement, presentation, and disclosure of leases

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for both parties to a lease agreement (i.e., lessees and lessors). Upon adoption of the new lease accounting standard, we elected the following practical expedients and accounting policies provided by this lease standard:

	●	Package (“all or nothing” expedients) - requires us not to reevaluate our existing or expired leases as of January 1, 2019, under Topic 842;

	●	Optional transition method - requires us to apply Topic 842 prospectively from the effective date of adoption (i.e., January 1, 2019);

	●	Land easements - requires us to account for land easements existing as of January 1, 2019, under the accounting standards applied to them prior to January 1, 2019;

	●	Lease and non-lease components (lessee) - requires us to account for lease and non-lease components associated with that lease under Topic 842 as a single lease component, for all classes of underlying assets;

	●	Lease and non-lease components (lessor) - requires us to account for lease and non-lease components associated with that lease under Topic 842 as a single lease component, if certain criteria are met, for all classes of underlying assets; and

	●	Short-term leases practical expedient (lessee) - for leases with a term of 12 months or less in which we are the lessee, this expedient requires us not to record on our balance sheets the related lease liabilities and right-of-use assets.

Our election of the package of practical expedients and the optional transition method allowed us not to reassess:

	●	Whether any expired or existing contracts as of January 1, 2019 are or contain leases as defined in Topic 842;

	●	The lease classification for any expired or existing leases as of January 1, 2019; and

	●	Treatment of initial direct costs relating to any existing leases as of January 1, 2019.

We applied the package of practical expedients consistently to all leases (i.e., in which we are the lessee or the lessor) that commenced before January 1, 2019. The election of this package permits us to “run off” our leases that commenced before January 1, 2019, for the remainder of their lease terms and to apply the new lease accounting standard to leases commencing or modified after January 1, 2019.

For our leases that commenced prior to January 1, 2019, under the package of practical expedients and optional transition method, we are not required to reassess whether initial direct leasing costs capitalized prior to the adoption of the new lease accounting standard in connection with such leases qualify for capitalization under the new lease accounting standard. Therefore, we continue to amortize these initial direct leasing costs over their respective lease terms.

In addition, we applied the modified retrospective transition method to build-to-suit leases for which assets and liabilities have been recognized solely as a result of the transactions’ build-to-suit designation in accordance with Topic 840. Therefore, we derecognized those assets and liabilities at the effective date of adoption for build-to-suit leases where construction had completed, with the difference of approximately $6.3 million recorded as an increase to accumulated dividends in excess of earnings at the adoption date. We accounted for the leases therefrom, following lessee transition guidance. The remainder of our capital leases were classified as finance leases and there was no change in their carrying value or classification at the adoption date.

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Under the package of practical expedients that we elected upon adoption of the new lease accounting standard, all of our operating leases existing as of January 1, 2019, in which we are the lessee, continue to be classified as operating leases subsequent to the adoption of the new lease accounting standard. In accordance with the new lease accounting standard, we were required to record an operating lease liability in our consolidated balance sheet equal to the present value of remaining future rental payments in which we are the lessee existing as of January 1, 2019 and the related operating lease right-of-use asset. Consequently, on January 1, 2019, we recorded an operating lease liability aggregating $757.2 million , which included approximately $73.3 million reclassified out of the deferred rent liabilities balance in accordance with the new lease standard. We have also recorded a corresponding operating lease right-of-use asset of $683.9 million. The present value of the remaining lease payments was calculated for each operating lease existing as of January 1, 2019, in which we were the lessee by using each respective remaining lease term and a corresponding estimated incremental borrowing rate. The incremental borrowing rate is the interest rate that we estimated we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments.

Subsequent application of the new lease accounting guidance

Definition of a lease

Effective January 1, 2019, when we enter into a contract or amend an existing contract, we evaluate whether the contract meets the definition of a lease. To meet the definition of a lease, the contract must meet all three criteria:

	(i)	One party (lessor) must hold an identified asset;

	(ii)	The counterparty (lessee) must have the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of the contract; and

	(iii)	The counterparty (lessee) must have the right to direct the use of the identified asset throughout the period of the contract.

Lease classification

The new lease accounting standard also sets new criteria for determining the classification of finance leases for lessees and sales-type leases for lessors. The criteria to determine whether a lease should be accounted for as a finance/sales-type lease include any of the following:

	(i)	Ownership is transferred from lessor to lessee by the end of the lease term;

	(ii)	An option to purchase is reasonably certain to be exercised;

	(iii)	The lease term is for the major part of the underlying asset’s remaining economic life;

	(iv)	The present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset; or

	(v)	The underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

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If any of these criteria is met, a lease is classified as a finance lease by the lessee and as a sales-type lease by the lessor. If none of the criteria are met, a lease is classified as an operating lease by the lessee but may still qualify as a direct financing lease or an operating lease for the lessor. The existence of a residual value guarantee from an unrelated third party other than the lessee may qualify the lease as a direct financing lease by the lessor. Otherwise, the lease is classified as an operating lease by the lessor. Therefore, under the new lease accounting standard, lessees apply a dual approach by classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, which corresponds to a similar evaluation performed by lessors.

Lessor accounting

Costs to execute leases

The new lease accounting standard requires that lessors (and, if applicable, lessees) capitalize, as initial direct costs, only incremental costs of a lease that would not have been incurred if the lease had not been obtained. Costs that we incur to negotiate or arrange a lease, regardless of its outcome, such as for fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.

Operating leases

We account for the revenue from our lease contracts by utilizing the single component accounting policy. This policy requires us to account for, by class of underlying asset, the lease component and non-lease component(s) associated with each lease as a single component if two criteria are met:

	(i)	The timing and pattern of transfer of the lease component and the non-lease component(s) are the same; and

	(ii)	The lease component would be classified as an operating lease if it were accounted for separately.

Lease components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases, and contingent rental payments. Non-lease components consist primarily of tenant recoveries representing reimbursements of rental operating expenses under our triple net lease structure, including recoveries for utilities, repairs and maintenance, and common area expenses. If a lessee makes payments for taxes and insurance directly to a third party on behalf of a lessor, lessors are required to exclude them from variable payments and from recognition in the lessors’ income statements. Otherwise, tenant recoveries for taxes and insurance are classified as additional lease revenue recognized by the lessor on a gross basis in their income statements.

On January 1, 2019, we adopted the practical expedient that allowed us to not separate expenses reimbursed by our customers (“rental recoveries”) from the associated rental revenue if certain criteria were met. We assessed these criteria and concluded that the timing and pattern of transfer for rental revenue and the associated rental recoveries are the same and as our leases qualify as operating leases, we accounted for and presented rental revenue and rental recoveries as a single component under rental and other services in our consolidated income statement for the year ended December 31, 2019. Rental recoveries are classified as tenant reimbursement revenue in the accompanying consolidated income statements for the years ended December 31, 2018 and 2017 pursuant to Topic 840. Tenant recoveries are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

If the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with the new lease accounting standard. Conversely, if the non-lease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. Our operating leases qualify for the single component accounting, and the lease component in each of our leases is predominant. Therefore, we account for all revenues from our operating leases under the new lease accounting standard and classify these revenues as rental and other services in our consolidated income statements.

We commence recognition of income from rentals related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes possession, or controls the physical use, of the leased asset. Our leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases, which may span multiple years. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in deferred rent in the accompanying consolidated balance sheets and contractually due but unpaid rents are included in accounts and other receivables. As of December 31, 2019 and 2018, the balance of rent receivable, net of allowance, was $171.9 million and $185.7 million, respectively, and is classified within accounts and other receivables, net of allowance for doubtful accounts in the accompanying consolidated balance sheets. Amounts received currently but recognized as revenue in future periods are classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets.

Lease termination fees are recognized over the remaining term of the lease, effective as of the date the lease modification is finalized, assuming collection is not considered doubtful. We recognize amortization of the value of acquired above or below-market tenant leases as a reduction of rental revenue in the case of above-market leases or an increase to rental revenue in the case of below-market leases.

We make subjective estimates as to the probability of collection of substantially all lease payments over the term of a lease. We specifically analyze customer creditworthiness, accounts receivable and historical bad debts and current economic trends when evaluating the probability of collection. If collection of substantially all lease payments over the term of a lease is deemed not probable, rental revenue would be recognized when payment is received and revenue would not be recognized on a straight-line basis. We monitor the probability of collection over the lease term and in the event the collection of substantially all lease payments is no longer probable, we cease recognizing revenue on a straight-line basis and write-off the balance of all deferred rent related to the lease and commence recording rental revenue on a cash-basis. In addition, we record a full valuation allowance on the balance of any rent receivable, less the balance of any security deposits or letters of account. In the event that we subsequently determine the collection is probable, we resume recognizing rental revenue on a straight-line basis and record the incremental revenue such that the cumulative rental revenue is equal to the amount of revenue that would have been recorded on a straight-line basis since the inception of the lease. We also would reverse the allowance for bad debt recorded on the balance of accounts receivable.

(t) Revenue Recognition

We adopted Topic 606 in the first quarter of 2018 using the modified retrospective transition method and applied Topic 606 to those contracts that were not completed as of January 1, 2018. The results for reporting periods beginning after January 1, 2018 were presented under Topic 606, while prior period amounts were not adjusted and continued to be presented under Topic 605. Our financial statements did not recognize a material effect from the cumulative impact of adopting Topic 606. The majority of our revenue is derived from lease arrangements, which we account for in accordance with “Leases (Topic 840)” prior to 2019 and pursuant to Topic 842 commencing on January 1, 2019. We accounted for the non-lease components within our lease arrangements (prior to the adoption of Topic 842), as well as other sources of revenue, in accordance with Topic 606. Upon the adoption of Topic 842, we elected the practical expedient that requires us to account for lease and non-lease components associated with that lease as a single lease

Index to Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

component and are recorded within rental revenue. Revenue recognized as a result of applying Topic 842 for 2019 and Topic 840 (prior to 2019) was 97% and Topic 606 was approximately 3% of total operating revenue for the years ended December 31, 2019 and 2018.

Interconnection services are included in rental and other services on the consolidated income statements and are generally provided on a month-to-month, one-year or multi-year term. Interconnection services include port and cross-connect services. Port services are typically sold on a one-year or multi-year term and revenue is recognized on a recurring monthly basis (straight-line). The Company bills customers on a monthly basis and recognizes the revenue over the period the service is provided. Revenue for cross-connect installations is generally recognized in the period the cross-connect is installed. Interconnection services that are not specific to a particular space are accounted for under Topic 606 and have terms that are generally one year or less.

Occasionally, customers engage the Company for certain services. The nature of these services historically involves property management and construction management. The proper revenue recognition of these services can be different, depending on whether the arrangements are service revenue or contractor type revenue.

Service revenues are typically recognized on an equal monthly basis based on the minimum fee to be earned. The monthly amounts could be adjusted depending on whether certain performance milestones are met.

Fee income arises primarily from contractual management agreements with entities in which we have a noncontrolling interest. The management fees are recognized as earned under the respective agreements. Management and other fee income related to partially owned noncontrolled entities are recognized to the extent attributable to the unaffiliated interest.

(u) Asset Retirement Obligations

We record accruals for estimated asset retirement obligations as required by current accounting guidance. The amount of asset retirement obligations relates primarily to estimated costs associated with asbestos removal at the end of the economic life of properties that were built before 1984 along with remediation of soil contamination issues. As of December 31, 2019 and 2018, the amount included in accounts payable and other accrued liabilities on our consolidated balance sheets was approximately $16.8 million and $17.5 million, respectively.

(v) Assets and Liabilities Measured at Fair Value

Fair value under U.S. GAAP is a market-based measurement, not an entity-specific measurement. Therefore, our fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, we use a fair-value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are

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unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the lowest level input that is significant would be used to determine the fair-value measurement in its entirety. Our assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

(w) Transaction and Integration Expense

Transaction and integration expense includes business combination expenses, other business development expenses and other expenses to integrate newly acquired investments, which are expensed as incurred. Transaction expenses include closing costs, broker commissions and other professional fees, including legal and accounting fees related to business combinations or acquisitions that were not consummated. Integration costs include transition costs associated with organizational restructuring (such as severance and retention payments and recruiting expenses), third-party consulting expenses directly related to the integration of acquired companies (in areas such as cost savings and synergy realization, technology and systems work), and internal costs such as training, travel and labor, reflecting time spent by Company personnel on integration activities and projects. Recurring costs are recorded in general and administrative expense.

(x) Gains on Disposition of Properties

As of January 1, 2018, we began accounting for the sale or contribution of real estate properties under Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which provides for revenue recognition based on transfer of ownership. All properties were non-financial real estate assets and thus not businesses which were sold to noncustomers with no performance obligations subsequent to transfer of ownership. Prior to the adoption of Subtopic 610-20, we accounted for gains on sales of properties under 360-20, Property, Plant and Equipment — Real Estate Sales. Gains on sale of properties are recognized using the full accrual or partial sale methods, as applicable, provided various criteria relating to the terms of sale and any subsequent involvement with the real estate sold are satisfied.

(y) Gain on Deconsolidation

We deconsolidate our subsidiaries in accordance with ASC 810, Consolidation, as of the date we cease to have a controlling financial interest in our subsidiaries. We account for the deconsolidation of our subsidiaries by recognizing a gain or loss in accordance with ASC 810. This gain or loss is measured at the date our subsidiaries are deconsolidated as the difference between (a) the aggregate of the fair value of any consideration received, the fair value of any retained non-controlling interest in our subsidiaries being deconsolidated, and the carrying amount of any non-controlling interest in our subsidiaries being deconsolidated, including any accumulated other comprehensive income/loss attributable to the non-controlling interest, and (b) the carrying amount of the assets and liabilities of our subsidiaries being deconsolidated.

(z) Management’s Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates made. On an on-going basis, we evaluate our estimates, including those related to the valuation of our real estate properties, tenant relationship value, goodwill, contingent

Index to Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

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consideration, accounts receivable and deferred rent receivable, performance-based equity compensation plans and the completeness of accrued liabilities. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could vary under different assumptions or conditions.

(aa) Segment and Geographic Information

The Company is managed on a consolidated basis based on customer demand considerations. Deployment of capital is geared to satisfy this demand. In this regard, the sale and delivery of our products is consistent throughout the portfolio. Services are provided to customers typical of the data center industry. Rent, and the cost of services are billed and collected. The Company has one operating segment and therefore one reporting segment.

Operating revenues from properties in the United States were $2.6 billion, $2.5 billion and $1.9 billion and outside the United States were $627.4 million, $564.4 million and $515.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. We had investments in real estate located in the United States of $10.6 billion, $11.1 billion and $10.5 billion and outside the United States of $3.7 billion, $3.8 billion and $3.1 billion as of December 31, 2019, 2018 and 2017, respectively.

Operating revenues from properties located in the United Kingdom were $288.2 million, $295.3 million and $275.1 million, or 9.0 %, 9.7% and 11.2% of total operating revenues, for the years ended December 31, 2019, 2018 and 2017, respectively. No other foreign country comprised more than 10% of total operating revenues for each of these years. We had investments in real estate located in the United Kingdom of $1.7 billion, $1.6 billion and $1.7 billion, or 12.0 %, 10.9% and 12.1% of total investments in real estate, as of December 31, 2019, 2018 and 2017, respectively. No other foreign country comprised more than 10% of total investments in real estate as of each of December 31, 2019, 2018 and 2017.

(bb) New Accounting Pronouncements

New Accounting Standards Issued but not yet Adopted

In January 2017, the FASB issued guidance codified in ASU No. 2017-04, "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". ASU No. 2017-04 simplifies the accounting for goodwill impairment by eliminating the process of measuring the implied value of goodwill, known as step two, from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard will be effective for us as of January 1, 2020, with early adoption permitted. We do not expect the provisions of ASU No. 2017-04 to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU amends existing fair value measurement disclosure requirements by adding, changing, or removing certain disclosures. ASU No. 2018-13 will be effective for us as of January 1, 2020, and earlier adoption is permitted. We are currently reviewing the impact this ASU will have on our consolidated financial statements.

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which amends the accounting for credit losses for certain financial instruments. ASU 2016-13 introduced the “current expected credit losses” (CECL) model, which requires

Index to Financial Statements

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companies to estimate credit losses immediately upon exposure. The guidance applies to financial assets measured at amortized cost including financing receivables (loans) and trade receivables. On November 26, 2018, the FASB issued ASU 2018-19, _C_odification Improvements to Topic 326, Financial Instrument - Credit Losses, which clarifies that operating lease receivables are outside the scope of ASC Topic 326 and instead should be accounted for under ASC 842. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of ASU 2016-13 to have a material impact on our consolidated financial statements or notes to our consolidated financial statements.

(cc) Reclassification

We have reclassified certain items in the December 31, 2018 consolidated balance sheet to conform to the current presentation as follows (in thousands):


	As Previously						As
	Reported			Adjustments			Revised
Land		$	1,509,764		$	(650,651)		$	859,113
Building and improvements			16,745,210			(1,134,218)			15,610,992
Construction in progress and space held for development			—			1,621,928			1,621,928
Land held for future development			—			162,941			162,941

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

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Business Combinations and Deconsolidation

Ascenty Acquisition

We completed the Ascenty Acquisition on December 20, 2018 for total cash and equity consideration of approximately $2.0 billion, including approximately $116.0 million of assumed cash and cash equivalents. As of December 31, 2018, the estimated fair values of acquired assets and assumed liabilities were provisional estimates, but were based on the best information available.

The following table summarizes the provisional amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):


Building and improvements	$	425,000
Goodwill		982,667
Tenant relationship value		375,000
Acquired in-place lease value		120,000
Cash and cash equivalents		116,000
Other assets		30,000
Other liabilities		(40,000)
Capital lease and other long-term obligations		(50,000)
Total purchase price	$	1,958,667

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired and tangible and intangible liabilities assumed in the acquisition. As shown above, we recorded approximately $1.0 billion of goodwill related to the Ascenty Acquisition. The strategic benefits of the acquisition include the Company’s ability to continue its strategy to provide foundational data center real estate solutions on a global basis with a diversified product offering of both small and large footprint deployments as well as interconnection services. These factors contributed to the goodwill that was recorded upon consummation of the transaction.

The transaction was initially funded with $600.0 million of proceeds from a non-recourse, five-year secured term loan; the issuance of approximately $254 million of Operating Partnership common units in exchange for the substantial majority of the Ascenty management’s equity interests; and approximately $1.0 billion of unsecured corporate borrowings.

Ascenty Deconsolidation

On March 29, 2019, we formed a joint venture with Brookfield Infrastructure, an affiliate of Brookfield Asset Management. Brookfield invested approximately $702 million in exchange for approximately 49% of the total equity interests and a subsidiary of the Operating Partnership retained the remaining 51% equity interests (including an approximate 2% ownership interest held by a non-controlling interest in our entity that holds the investment in the Ascenty joint venture) in the joint venture which owns and operates Ascenty. The governing documents related to the Ascenty joint venture provide Brookfield and the Company share power to direct the activities of the Ascenty joint venture that most significantly impact the Ascenty joint venture's economic performance. As a result of the formation of the joint venture, the Company determined that the joint venture is a variable interest entity (VIE) since the Ascenty joint venture's equity investment at risk is not sufficient to finance the Ascenty joint venture's ongoing data center development activities without additional subordinated financial support. The Company concluded that it is not the primary beneficiary because power is shared and it does not have substantive kick-out rights to obtain control and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

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deconsolidated Ascenty. We recognized a gain of approximately $67.5 million (net of the accumulated foreign currency translation loss related to Ascenty) on the deconsolidation and subsequent recognition of our subsidiary's 51% equity investment in the Ascenty joint venture at its estimated fair value of $727 million on March 29, 2019. The fair value of the Company’s retained equity investment is based on Level 2 measurements within the fair value hierarchy based on the cash price paid by Brookfield for their 49% interest. The gain was calculated based on the: (i) the sum of the cash proceeds of $702 million received from Brookfield for its 49% interest and the estimated fair value of $727 million for our 51% retained interest less (ii) the carrying value of the Ascenty assets and liabilities deconsolidated as of March 29, 2019. The gain related to the remeasurement of the Company's retained equity interests to fair value was approximately $43.7 million. The reported gain of $67.5 million was net of a foreign currency translation loss of approximately $21.7 million previously included in accumulated other comprehensive loss, net, which accumulated during the period the Company consolidated Ascenty and translated the Brazilian Real, Ascenty's functional currency, into the Company's functional currency. The Company has no other subsidiaries or businesses with the Brazilian Real as its functional currency and, therefore, the deconsolidation of Ascenty resulted in the reclassification out of accumulated other comprehensive loss into a component of income from continuing operations in the 2019 consolidated income statement. The Ascenty deconsolidation did not meet the criteria to be presented as a discontinued operation in accordance with ASC 205-20, Presentation of Financial Statements Discontinued Operations, because the deconsolidation of Ascenty does not represent a strategic shift in and does not have a major effect on the Company's operations, as defined by ASC 205-20.

4. Leases

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 2048. As of December 31, 2019 and 2018, certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of December 31, 2019, the termination dates of these ground leases range from 2024 to 2981. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 2021 to 2027.

The leases may contain renewal and/or early termination options that are not reasonably certain of exercise as of December 31, 2019. Also, 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.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Supplemental balance sheet information related to leases as of December 31, 2019 was as follows (in thousands):


	Balance Sheet	Balance as of
	Classification	December 31, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets, net (1)	$	628,681
Finance lease assets	Buildings and improvements, net (2)		131,072
Total leased assets		$	759,753

Liabilities:
Operating lease liabilities	Operating lease liabilities	$	693,539
Finance lease liabilities	Accounts payable and other accrued liabilities		178,086
Total lease liabilities		$	871,625

_________________________

(1) Net of accumulated depreciation and amortization of $51.7 million as of December 31, 2019.

(2) Net of accumulated depreciation and amortization of $4.9 million as of December 31, 2019.

The components of lease expense for the year ended December 31, 2019 were as follows (in thousands):


		Year Ended
Lease cost	Income Statement Classification	December 31, 2019

Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization	$	5,074
Interest on lease liabilities	Interest expense		6,044
Operating lease cost	Rental property operating and maintenance / General and administrative		90,980
Total lease cost		$	102,098

As of December 31, 2019, the weighted average remaining lease term for our operating leases and finance leases was 12 years and 24 years, respectively. We do not include renewal options in the lease term for calculating the lease liability unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. The weighted average incremental borrowing rate was 4.1% for operating leases and 3.5% for finance leases at December 31, 2019. We assigned a collateralized interest rate to each lease based on the term of the lease and the currency in which the lease is denominated.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

The minimum commitment under operating leases, excluding fully prepaid ground leases, as of December 31, 2018 was as follows (in thousands):


2019	$	84,712
2020		87,396
2021		86,212
2022		81,976
2023		80,707
Thereafter		539,047
Total	$	960,050

Future minimum lease payments and their present value for property under capital lease obligations as of December 31, 2018, are as follows (in thousands):


2019	$	11,657
2020		13,108
2021		13,207
2022		13,706
2023		14,219
Thereafter		285,774
		351,671
Less amount representing interest		(137,827)
Present value	$	213,844

Maturities of lease liabilities as of December 31, 2019 were as follows (in thousands):


	Operating		Finance
	lease liabilities		lease liabilities
2020	$	85,277	$	8,881
2021		84,796		8,927
2022		81,021		9,399
2023		79,751		9,865
2024		73,612		9,914
Thereafter		478,241		226,261
Total undiscounted future cash flows		882,698		273,247
Less: Imputed interest		(189,159)		(95,161)
Present value of undiscounted future cash flows	$	693,539	$	178,086

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Lessor accounting

The following table summarizes the minimum lease payments due from our customers on leases with lease periods greater than one year for space in our operating properties, prestabilized development properties and leases of land subject to ground leases at December 31, 2019 (in thousands):


	Operating leases
2020	$	2,810,508
2021		1,947,216
2022		1,552,045
2023		1,333,620
2024		1,089,305
Thereafter		4,091,199
Total	$	12,823,893

These amounts do not reflect future rental revenues from the renewal or replacement of existing leases unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. We exclude reimbursements of operating expenses and rental increases that are not fixed.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Investments in Real Estate

A summary of our investments in properties as of December 31, 2019 and 2018 is as follows:


	As of December 31, 2019
	(in thousands)
									Accumulated
			Acquired						Depreciation		Net Investments				Land Held		Net
			Ground		Buildings and		Tenant		and		in Operating		Construction in		For Future		Investment
Property Type	Land		Lease		Improvements		Improvements		Amortization		Properties		Progress		Development		in Properties
Internet Gateway Data Centers	$	99,653	$	—	$	2,133,198	$	126,264	$	(995,202)	$	1,363,913	$	85,605	$	—	$	1,449,518
Data Centers (1)		659,184		10,725		13,046,742		494,052		(3,481,542)		10,729,161		1,543,534		147,597		12,420,292
Technology Manufacturing		11,959		—		1,603		76		(161)		13,477		10		—		13,487
Technology Office		27,807		—		29,071		—		(22,188)		34,690		59,229		—		93,919
Other		6,227		—		239,270		761		(37,076)		209,182		44,177		—		253,359
	$	804,830	$	10,725	$	15,449,884	$	621,153	$	(4,536,169)	$	12,350,423	$	1,732,555	$	147,597	$	14,230,575


	As of December 31, 2018
	(in thousands)
									Accumulated
			Acquired						Depreciation		Net Investments				Land Held		Net
			Ground		Buildings and		Tenant		and		in Operating		Construction in		For Future		Investment
Property Type	Land		Lease		Improvements		Improvements		Amortization		Properties		Progress		Development		in Properties
Internet Gateway Data Centers	$	99,313	$	—	$	2,036,041	$	114,013	$	(885,214)	$	1,364,153	$	42,615	$	—	$	1,406,768
Data Centers (1)		688,494		10,575		12,924,596		460,247		(3,004,365)		11,079,547		1,548,643		157,039		12,785,229
Technology Manufacturing		11,959		—		1,582		76		(100)		13,517		—		—		13,517
Technology Office		58,066		—		26,106		—		(20,015)		64,157		—		—		64,157
Other		1,281		—		622,667		—		(25,573)		598,375		30,670		5,902		634,947
	$	859,113	$	10,575	$	15,610,992	$	574,336	$	(3,935,267)	$	13,119,749	$	1,621,928	$	162,941	$	14,904,618

(1)	Balances include vacant land to support ground-up development.

On September 16, 2019, we announced the proposed sale of 10 Powered Base Building® properties, which comprise 12 data centers, in North America to Mapletree Investments Pte Ltd (“Mapletree Investments”) and Mapletree Industrial Trust (“MIT” and together with Mapletree Investments, “Mapletree”), at a purchase consideration of approximately $557.0 million. As of December 31, 2019, these 12 data centers had an aggregate carrying value of $229.9 million within total assets and $2.7 million within total liabilities and are shown as assets held for sale and obligations associated with assets held for sale on the consolidated balance sheet. The 12 data centers are not representative of a significant component of our portfolio, nor does the potential sales represent a significant shift in our strategy. Subsequent to year-end, we closed on the sale of the 12 data centers in January 2020, for a gain of approximately $303.3 million. We will provide transitional property management services for one year from the closing date at a customary market rate.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Acquisitions

We acquired the following real estate during the years ended December 31, 2019 and 2018 (excluding business combinations already discussed in Note 3):

2019 Acquisitions


	Amount
Property Type	(in millions) (2)
Land parcels (1)	$	47.7
Technology office (3)		28.0
	$	75.7

2018 Acquisitions


	Amount
Property Type	(in millions)(2)
Land Parcels (1)	$	296.1
Data Centers		114.6
	$	410.7

(1)	Represents currently vacant land which is not included in our operating property count.

(2)	Purchase price in U.S. dollars and excludes capitalized closing costs.

(3)	Property to be redeveloped.

The table below reflects the purchase price allocation for the above properties acquired in 2019 and 2018 (in thousands):


							Above-				Below-		Acquisition
			Buildings and		Tenant		Market		In-Place		Market		Date Fair
Property Type	Land		Improvements		Improvements		Leases		Leases		Leases		Value
2019
Land Parcels	$	47,712	$	—	$	—	$	—	$	—	$	—	$	47,712
Technology office		24,315		3,039		—		—		638		—		27,992
Total	$	72,027	$	3,039	$	—	$	—	$	638	$	—	$	75,704

2018
Land Parcels	$	296,071	$	—	$	—	$	—	$	—	$	—	$	296,071
Data Centers		60,633		54,008		—		—		—		—		114,641
Total	$	356,704	$	54,008	$	—	$	—	$	—	$	—	$	410,712

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Dispositions

We sold the following real estate properties during the years ended December 31, 2019 and 2018:

2019 Dispositions


				Fair Value		Gain on contribution
Location / Portfolio	Metro Area	Date Sold		(in millions)		(in millions)
Mapletree portfolio (1)	Northern Virginia		Nov 1, 2019	$	996.6	$	266.0

(1)	Consists of three data centers that were contributed to a joint venture (see note 6).

2018 Dispositions


					Gross Proceeds		Gain on Sale
Location	Metro Area		Date Sold		(in millions)		(in millions)
200 Quannapowitt Parkway		Boston		Jan 25, 2018	$	15.0	$	(0.4)
34551 Ardenwood Boulevard		Silicon Valley		Feb 9, 2018		73.3		25.3
3065 Gold Camp Drive		Sacramento		Mar 14, 2018		14.2		5.4
11085 Sun Center Drive		Sacramento		Mar 14, 2018		36.8		9.1
Austin Portfolio		Austin		Apr 19, 2018		47.6		12.0
2010 East Centennial Circle		Phoenix		May 22, 2018		5.5		(0.5)
1125 Energy Park Drive		Minneapolis		May 31, 2018		7.0		2.8
360 Spear Street		San Francisco		Sep 21, 2018		92.3		26.7
					$	291.7	$	80.4

6. Investments in Unconsolidated Joint Ventures

As of December 31, 2019 and 2018, our investments in unconsolidated joint ventures accounted for under the equity method of accounting presented in our consolidated balance sheets consist of the following (in thousands):


	Year Joint	# of	Metropolitan			Balance as of		Balance as of
Joint Venture	Venture Formed	Data Centers	Area	% Ownership		December 31, 2019		December 31, 2018

Ascenty (1)(3)	2019	19	Brazil / Chile	51	% (2)	$	774,853	$	—
Mapletree	2019	3	Northern Virginia	20	%		208,354		—
Mitsubishi	2017	4	Osaka / Tokyo	50	%		200,652		66,835
CenturyLink	2012	1	Hong Kong	50	%		88,647		96,094
Other	Various	14	U.S.	Various			14,603		12,179
Total		41				$	1,287,109	$	175,108

(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 joint venture, which has a carrying value of approximately $25.0 million and is classified with redeemable noncontrolling interests in our consolidated balance sheet.

(3) See note 3 for additional information on the Ascenty joint venture.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Mapletree Joint Venture

On November 1, 2019, we formed a joint venture with Mapletree. We contributed three Turn-Key Flex® data centers, valued at approximately $1.0 billion, to the new joint venture in exchange for a 20% interest in the joint venture and approximately $0.8 billion of cash, net of closing costs. An entity jointly owned by Mapletree Investments and MIT contributed such cash to the joint venture in exchange for an 80% interest in the joint venture. We perform the day-to-day accounting and property management functions for the joint venture and, as such, will earn a management fee based on market rates. Although we are the managing member of the joint venture and manage the day-to-day activities, the joint venture is governed by a board of directors, in which power to make decisions that most significantly impact the investment returns to the members of the joint venture, including approval of annual budgets, is shared equally between Mapletree and us. As such, we concluded we do not own a controlling interest and accounted for our interest in the joint venture under the equity method of accounting.

As a result of the transaction, we received approximately $0.8 billion of cash, net of closing costs, from Mapletree’s equity contribution and a 20% equity interest in the joint venture with an estimated fair value of $193.2 million, less our share of closing costs. We recognized a gain of approximately $266.2 million, which represented the excess of the fair value received less the carrying value of the assets and liabilities contributed to the joint venture, of which, $53.2 million of the gain was related to the remeasurement of the Company's retained equity interest to fair value. The fair value of the Company’s retained equity interest is based on Level 2 measurements within the fair value hierarchy based on the cash price paid by Mapletree for their 80% interest.

The following tables present summarized financial information for our unconsolidated joint ventures for the years ended December 31, 2019, 2018, and 2017 (in thousands):


															Property		Net		Net
	%		Net Investment		Total		Mortgage		Total		Equity /				Operating		Operating		Income
2019	Ownership		in Properties		Assets		Loans		Liabilities		(Deficit)		Revenues		Expense			Income	(Loss)
Unconsolidated Joint Ventures
2001 Sixth Avenue	50.00	%	$	30,748	$	47,485	$	134,583	$	140,354	$	(92,869)	$	56,266	$	(19,254)	$	37,012	$	27,422
2020 Fifth Avenue	50.00	%		43,918		54,325		48,000		48,703		5,622		9,868		(2,544)		7,324		4,649
CenturyLink	50.00	%		148,941		187,241		—		9,947		177,294		24,680		(9,251)		15,429		6,712
Mitsubishi	50.00	%		554,828		753,743		231,046		303,130		450,613		84,344		(39,300)		45,044		18,751
Ascenty	51.00	%		548,114		2,178,663		629,500		764,603		1,414,060		112,052		(40,250)		71,802		(54,606)
Mapletree	20.00	%		765,443		1,042,661		—		23,796		1,018,865		17,852		(6,774)		11,078		(1,872)
PREI ®	20.00	%		365,993		421,635		210,915		281,344		140,291		42,157		(9,918)		32,239		9,968
GCEAR	20.00	%		109,803		127,444		101,902		104,363		23,081		21,120		(9,073)		12,047		(2,636)
Other	7%-17	%		59,901		64,553		4,438		4,706		59,847		11,261		(6,779)		4,482		(31)
Total Unconsolidated Joint Ventures			$	2,627,689	$	4,877,750	$	1,360,384	$	1,680,946	$	3,196,804	$	379,600	$	(143,143)	$	236,457	$	8,357
Our investment in and share of equity in earnings of unconsolidated joint ventures											$	1,287,109							$	8,067

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8


															Property		Net		Net
	%		Net Investment		Total		Mortgage		Total		Equity /				Operating		Operating		Income
2018	Ownership		in Properties		Assets		Loans		Liabilities		(Deficit)		Revenues		Expense		Income		(Loss)
Unconsolidated Joint Ventures
2001 Sixth Avenue	50.00	%	$	32,786	$	49,278	$	134,527	$	139,569	$	(90,291)	$	52,806	$	(17,264)	$	35,542	$	25,612
2020 Fifth Avenue	50.00	%		44,644		54,855		48,000		48,333		6,522		9,417		(2,156)		7,261		4,689
CenturyLink	50.00	%		151,256		201,527		—		9,337		192,190		21,394		(7,164)		14,230		6,958
Mitsubishi	50.00	%		332,373		469,159		228,075		285,424		183,735		59,300		(26,360)		32,940		15,884
PREI ®	20.00	%		375,016		433,024		210,626		283,899		149,125		42,058		(8,457)		33,601		(4,159)
GCEAR	20.00	%		111,909		139,268		101,885		104,268		35,000		20,457		(8,546)		11,911		(2,177)
Other	17.00	%		22,677		24,320		5,225		5,327		18,993		9,383		(5,879)		3,504		415
Total Unconsolidated Joint Ventures			$	1,070,661	$	1,371,431	$	728,338	$	876,157	$	495,274	$	214,815	$	(75,826)	$	138,989	$	47,222
Our investment in and share of equity in earnings of unconsolidated joint ventures											$	175,108							$	32,979


															Property		Net		Net
	%		Net Investment		Total		Mortgage		Total		Equity /				Operating		Operating		Income
2017	Ownership		in Properties		Assets		Loans		Liabilities		(Deficit)		Revenues		Expense		Income		(Loss)
Unconsolidated Joint Ventures
2001 Sixth Avenue	50.00	%	$	26,933	$	50,481	$	134,472	$	138,564	$	(88,083)	$	49,369	$	(16,719)	$	32,650	$	20,833
2020 Fifth Avenue	50.00	%		45,309		54,594		47,000		47,249		7,345		9,088		(1,820)		7,268		4,881
CenturyLink	50.00	%		133,435		192,071		—		5,598		186,473		19,235		(6,504)		12,731		5,467
Mitsubishi	50.00	%		325,977		452,063		221,851		288,962		163,101		7,927		(4,218)		3,709		1,108
PREI ®	20.00	%		399,967		456,912		207,687		285,050		171,862		41,464		(7,978)		33,486		13,889
GCEAR	20.00	%		114,376		151,191		101,680		104,220		46,971		18,924		(7,362)		11,562		(1,962)
Other	17.00	%		15,953		17,694		—		236		17,458		5,958		(4,629)		1,329		(272)
Total Unconsolidated Joint Ventures			$	1,061,950	$	1,375,006	$	712,690	$	869,879	$	505,127	$	151,965	$	(49,230)	$	102,735	$	43,944
Our investment in and share of equity in earnings of unconsolidated joint ventures											$	163,477							$	25,516

The amounts reflected in the tables above, except for our investment in and share of equity in earnings of unconsolidated joint ventures, are based on the historical financial information of the individual joint ventures. The debt of our unconsolidated joint ventures generally is non-recourse to us, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions, and material misrepresentations.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Acquired Intangible Assets and Liabilities

The following summarizes our acquired intangible assets (real estate intangibles, comprised of acquired in-place lease value and tenant relationship value along with acquired above-market lease value) and intangible liabilities (acquired below-market lease value) as of December 31, 2019 and 2018.


	Balance as of
(Amounts in thousands)	December 31, 2019		December 31, 2018
Real Estate Intangibles:
Acquired in-place lease value:
Gross amount	$	1,357,190	$	1,569,401
Accumulated amortization		(899,071)		(795,033)
Net	$	458,119	$	774,368
Tenant relationship value:
Gross amount	$	1,845,949	$	2,339,606
Accumulated amortization		(400,570)		(291,818)
Net	$	1,445,379	$	2,047,788
Acquired above-market leases:
Gross amount	$	279,048	$	277,796
Accumulated amortization		(204,233)		(158,037)
Net	$	74,815	$	119,759
Acquired below-market leases:
Gross amount	$	396,509	$	442,535
Accumulated amortization		(247,735)		(242,422)
Net	$	148,774	$	200,113

Amortization of acquired below-market lease value, net of acquired above-market lease value, resulted in a decrease in rental revenues of $(17.1) million, $(27.3) million and $(2.2) million for the years ended December 31, 2019, 2018 and 2017, respectively. The expected average remaining lives for acquired below-market leases and acquired above-market leases was 8.0 years and 2.5 years, respectively, as of December 31, 2019. Estimated annual amortization of acquired below-market lease value, net of acquired above-market lease value, for each of the five succeeding years and thereafter, commencing January 1, 2020 is as follows:


(Amounts in thousands)
2020	$	(10,648)
2021		(3,501)
2022		4,735
2023		9,500
2024		10,149
Thereafter		63,724
Total	$	73,959

Amortization of acquired in-place lease value (a component of depreciation and amortization expense) was $143.0 million, $211.0 million and $101.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. The expected average amortization period for acquired in-place lease value was 5.8 years as of December 31, 2019. The weighted average remaining contractual life for acquired leases excluding renewals or extensions was 5.5 years as of

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

December 31, 2019. Estimated annual amortization of acquired in-place lease value for each of the five succeeding years and thereafter, commencing January 1, 2020 is as follows:


(Amounts in thousands)
2020	$	98,875
2021		78,329
2022		58,621
2023		47,449
2024		40,217
Thereafter		134,628
Total	$	458,119

Amortization of tenant relationship value (a component of depreciation and amortization expense) was approximately $128.4 million, $123.5 million and $85.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, the weighted average remaining contractual life for tenant relationship value was 13.0 years. Estimated annual amortization of tenant relationship value for each of the five succeeding years and thereafter, commencing January 1, 2020 is as follows:


(Amounts in thousands)
2020	$	116,673
2021		116,673
2022		116,673
2023		116,673
2024		116,673
Thereafter		862,014
Total	$	1,445,379

Debt of the Company

In this Note 8, the “Company” refers only to Digital Realty Trust, Inc. and not to any of its subsidiaries.

The Company itself does not have any indebtedness. All debt is held directly or indirectly by the Operating Partnership.

Guarantee of Debt

The Company guarantees the Operating Partnership’s obligations with respect to its 3.950% notes due 2022 (3.950% 2022 Notes), 3.625% notes due 2022 (3.625% 2022 Notes), 2.750% notes due 2023 (2.750% 2023 Notes), 4.750% notes due 2025 (4.750% 2025 Notes), 3.700% notes due 2027 (2027 Notes), 4.450% notes due 2028 (2028 Notes) and 3.600% notes due 2029 (3.600% 2029 Notes). The Company and the Operating Partnership guarantee the obligations of Digital Stout Holding, LLC, a wholly owned subsidiary of the Operating Partnership, with respect to its 4.750% notes due 2023 (4.750% 2023 Notes), 2.750% notes due 2024 (2.750% 2024 Notes), 4.250% notes due 2025 (4.250% 2025 Notes), 3.300% notes due 2029 (2029 Notes) and 3.750% notes due 2030 (2030 Notes) and the obligations of Digital Euro Finco, LLC, a wholly owned subsidiary of the Operating Partnership, with respect to its 2.625% notes due 2024 (2.625% 2024 Notes), 2.500% notes due 2026 (2026 Notes) and 1.125% notes due 2028 (1.125% 2028 Notes). The Company is also the guarantor of the Operating Partnership’s and its subsidiary borrowers’ obligations under the global revolving credit facilities and unsecured term loans.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Debt of the Operating Partnership

A summary of outstanding indebtedness of the Operating Partnership as of December 31, 2019 and 2018 is as follows (in thousands):


	Interest Rate at					Principal			Principal
	December 31,					Outstanding at			Outstanding at
Indebtedness	2019		Maturity Date			December 31, 2019			December 31, 2018
Global revolving credit facilities	Various	(1)		Jan 24, 2023	(1)	$	245,766	(2)	$	1,663,156	(2)
Deferred financing costs, net							(11,661)			(15,421)
Global revolving credit facilities, net							234,105			1,647,735
Unsecured Term Loans
2019 Term Loan	Base Rate + 1.000	%		Jan 19, 2019			—			375,000
2023 Term Loan	Various	(3)(4)		Jan 15, 2023			300,000	(5)		300,000	(5)
2024 Term Loan	Various	(3)(4)		Jan 24, 2023			513,205	(5)		508,120	(5)
Deferred financing costs, net							(2,986)			(4,216)
Unsecured term loans, net							810,219			1,178,904
Unsecured senior notes:
Floating rate notes due 2019	EURIBOR + 0.500	%		May 22, 2019			—	(11)		143,338	(6)
5.875% notes due 2020	5.875	%		Feb 1, 2020			—	(8)		500,000
3.400% notes due 2020	3.400	%		Oct 1, 2020			—	(12)		500,000
5.250% notes due 2021	5.250	%		Mar 15, 2021			—	(12)		400,000
3.950% notes due 2022	3.950	%		Jul 1, 2022			500,000			500,000
3.625% notes due 2022	3.625	%		Oct 1, 2022			300,000			300,000
2.750% notes due 2023	2.750	%		Feb 1, 2023			350,000			350,000
4.750% notes due 2023	4.750	%		Oct 13, 2023			397,710	(7)		382,620	(7)
2.625% notes due 2024	2.625	%		Apr 15, 2024			672,780	(6)		688,020	(6)
2.750% notes due 2024	2.750	%		Jul 19, 2024			331,425	(7)		318,850	(7)
4.250% notes due 2025	4.250	%		Jan 17, 2025			530,280	(7)		510,160	(7)
4.750% notes due 2025	4.750	%		Oct 1, 2025			450,000			450,000
2.500% notes due 2026	2.500	%		Jan 16, 2026			1,205,398	(6)		—
3.700% notes due 2027	3.700	%		Aug 15, 2027			1,000,000			1,000,000
1.125% notes due 2028	1.125	%		Apr 9, 2028			560,650	(6)		—
4.450% notes due 2028	4.450	%		Jul 15, 2028			650,000			650,000
3.600% notes due 2029	3.600	%		Jul 1, 2029			900,000			—
3.300% notes due 2029	3.300	%		Jul 19, 2029			463,995	(7)		446,390	(7)
3.750% notes due 2030	3.750	%		Oct 17, 2030			729,135	(7)(9)		510,160	(7)
Unamortized discounts, net of premiums							(16,145)			(19,859)
Total senior notes, net of discount							9,025,228			7,629,679
Deferred financing costs, net							(52,038)			(40,553)
Total unsecured senior notes, net of discount and deferred financing costs							8,973,190			7,589,126

Secured Debt:
731 East Trade Street	8.22	%		Jul 1, 2020		$	1,089		$	1,776
Secured note due March 2023	LIBOR + 1.000	% (4)		Mar 1, 2023			104,000			104,000
Secured note due December 2023	Base Rate + 4.250	%		Dec 20, 2023			—	(10)		600,000
Unamortized net premiums							54			148
Total secured debt, including premiums							105,143			705,924
Deferred financing costs, net							(209)			(20,210)
Total secured debt, including premiums and net of deferred financing costs							104,934			685,714
Total indebtedness						$	10,122,448		$	11,101,479

(1)

The interest rate for borrowings under the global revolving credit facility equals the applicable index plus a margin of 90 basis points, which is based on the current credit ratings of our long-term debt. An annual facility fee of 20 basis points, which is based on the credit ratings of our long-term debt, is due and payable quarterly on the total commitment amount of the facility. Two six-month extensions are available, which we may exercise if certain conditions are met. The interest rate for borrowings under the Yen revolving credit facility equals the applicable index plus a margin of 50 basis points, which is based on the current credit ratings of our long-term debt.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(2)	Balances as of December 31, 2019 and December 31, 2018 are as follows (balances, in thousands):


	Balance as of			Weighted-		Balance as of			Weighted-
	December 31,			average		December			average
Denomination of Draw	2019			interest rate		31, 2018			interest rate
Floating Rate Borrowing (a) (d)
U.S. dollar ($)	$	—		—	%	$	890,000		3.37	%
British pound sterling (£)		—		—	%		8,290	(c)	1.61	%
Euro (€)		44,852	(b)	0.90	%		451,800	(c)	0.90	%
Australian dollar (AUD)		1,264	(b)	1.74	%		27,632	(c)	2.82	%
Hong Kong dollar (HKD)		—		—	%		8,797	(c)	3.14	%
Japanese yen (JPY)		—		—	%		4,105	(c)	0.90	%
Singapore dollar (SGD)		53,199	(b)	2.46	%		77,112	(c)	2.79	%
Canadian dollar (CAD)		—		—	%		60,856	(c)	3.16	%
Total	$	99,315		1.75	%	$	1,528,592		2.57	%

Yen Revolving Credit Facility (a)	$	146,451	(e)	0.50	%	$	134,564	(e)	0.50	%

Total borrowings	$	245,766		1.00	%	$	1,663,156		2.41	%

	(a)	The interest rates for floating rate borrowings under the global revolving credit facility currently equal the applicable index plus a margin of 90 basis points, which is based on the credit rating of our long-term debt. The interest rate for borrowings under the Yen revolving credit facility equals the applicable index plus a margin of 50 basis points, which is based on the current credit rating of our long-term debt.

	(b)	Based on exchange rates of $1.12 to €1.00, $0.70 to 1.00 AUD and $0.74 to 1.00 SGD, respectively, as of December 31, 2019.

	(c)	Based on exchange rates of $1.28 to £1.00, $1.15 to €1.00, $0.70 to 1.00 AUD, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY, $0.73 to 1.00 SGD and $0.73 to 1.00 CAD, respectively, as of December 31, 2018.

	(d)	As of December 31, 2019, approximately $45.2 million of letters of credit were issued.

	(e)	Based on exchange rates of $0.01 to 1.00 JPY for December 31, 2019 and 2018.

(3)	Interest rates are based on our current senior unsecured debt ratings and is currently 100 basis points over the applicable index for floating rate advances for the 2023 Term Loan and the 2024 Term Loan.

(4)	We have entered into interest rate swap agreements as a cash flow hedge for interest generated by a portion of U.S. dollar and Canadian dollar borrowings under the 2023 Term Loan and 2024 Term Loan, and the secured note due March 2023. See Note 16. "Derivative Instruments" for further information.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(5)	Balances as of December 31, 2019 and December 31, 2018 are as follows (balances, in thousands):


	Balance as of			Weighted-		Balance as of			Weighted-
	December 31,			average		December 31,			average
Denomination of Draw	2019			interest rate		2018			interest rate
U.S. dollar ($)	$	300,000		2.74	% (b)	$	300,000		3.46	% (d)
Singapore dollar (SGD)		147,931	(a)	2.68	%		146,080	(c)	2.76	%
Australian dollar (AUD)		203,820	(a)	1.85	%		204,632	(c)	2.94	%
Hong Kong dollar (HKD)		85,629	(a)	3.60	%		85,188	(c)	3.32	%
Canadian dollar (CAD)		75,825	(a)	3.00	% (b)		72,220	(c)	3.24	% (d)
Total	$	813,205		2.62	% (b)	$	808,120		3.17	% (d)

	(a)	Based on exchange rates of $0.74 to 1.00 SGD, $0.70 to 1.00 AUD, $0.13 to 1.00 HKD and $0.77 to 1.00 CAD, respectively, as of December 31, 2019.

	(b)	As of December 31, 2019, the weighted-average interest rate reflecting interest rate swaps was 2.44% (U.S. dollar), 1.78% (Canadian dollar) and 2.39% (Total). See Note 16 for further discussion on interest rate swaps.

	(c)	Based on exchange rates of $0.73 to 1.00 SGD, $0.70 to 1.00 AUD, $0.13 to 1.00 HKD and $0.73 to 1.00 CAD, respectively, as of December 31, 2018.

	(d)	As of December 31, 2018, the weighted-average interest rate reflecting interest rate swaps was 2.44% (U.S. dollar), 1.78% (Canadian dollar) and 2.66% (Total). See Note 16 for further discussion on interest rate swaps.

(6)	Based on exchange rates of $1.12 to €1.00 as of December 31, 2019 and $1.15 to €1.00 as of December 31, 2018.

(7)	Based on exchange rates of $1.33 to £1.00 as of December 31, 2019 and $1.28 to £1.00 as of December 31, 2018.

(8)	The 5.875% 2020 Notes were paid in full in January 2019 (by tender offer) and February 2019 (by redemption of the remaining balance after the tender offer). The tender offer and redemption resulted in an early extinguishment charge of approximately $12.9 million during the three months ended March 31, 2019.

(9)

On March 5, 2019, Digital Stout Holding, LLC, a wholly owned subsidiary of the Operating Partnership, issued and sold an additional £150.0 million aggregate principal amount of 2030 Notes. The terms of the 2030 Notes are governed by an indenture, dated as of October 17, 2018, among Digital Stout Holding, LLC, Digital Realty Trust, Inc., the Operating Partnership, Deutsche Trustee Company Limited, as trustee, Deutsche Bank AG, London Branch, as paying agent and a transfer agent, and Deutsche Bank Luxembourg S.A., as registrar and a transfer agent (the “GBP Notes Indenture”), pursuant to which Digital Stout Holding, LLC previously issued £400.0 million in aggregate principal amount of its 2030 Notes. The 2030 Notes are treated as a single series with the notes previously issued under the GBP Notes Indenture.

(10)	The debt was deconsolidated as a result of the Ascenty joint venture formed with Brookfield.

(11)	Paid in full at maturity in May 2019.

(12)	The 3.400% 2020 Notes and 2021 Notes were paid in full in June 2019 (by tender offer) and July 2019 (by redemption of the remaining balances after the tender offer). The tender offer resulted in an early extinguishment charge of approximately $26.3 million during the year ended December 31, 2019.

Global Revolving Credit Facilities

On October 24, 2018, we refinanced our global revolving credit facility and entered into a global senior credit agreement for a $2.35 billion senior unsecured revolving credit facility, which we refer to as the 2018 global revolving credit facility, that replaced the $2.0 billion revolving credit facility executed on January 15, 2016. In addition, we have the ability from time to time to increase the size of the global revolving credit facility and the unsecured term loans (discussed below), in any combination, by up to $1.25 billion, subject to the receipt of lender commitments and other conditions precedent. The 2018 global revolving credit facility matures on January 24, 2023, with two six-month

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

extension options available. The interest rate for borrowings under the 2018 global revolving credit facility equals the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 90 basis points. An annual facility fee on the total commitment amount of the facility, based on the credit ratings of our long-term debt, currently 20 basis points, is payable quarterly. The 2018 global revolving credit facility provides for borrowings in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as Euro, British pound sterling and Japanese yen and includes the ability to add additional currencies in the future. As of December 31, 2019, interest rates are based on 1-month EURIBOR, 1-month HIBOR, 1-month SOR and 1-month CDOR, plus a margin of 0.90%. We have used and intend to use available borrowings under the 2018 global revolving credit facility to acquire additional properties, fund development opportunities and for general working capital and other corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities.

The 2018 global revolving credit facility contains various restrictive covenants, including limitations on our ability to incur additional indebtedness, make certain investments or merge with another company, and requirements to maintain financial coverage ratios, including with respect to unencumbered assets. In addition, the 2018 global revolving credit facility restricts Digital Realty Trust, Inc. from making distributions to its stockholders, or redeeming or otherwise repurchasing shares of its capital stock, after the occurrence and during the continuance of an event of default, except in limited circumstances including as necessary to enable Digital Realty Trust, Inc. to maintain its qualification as a REIT and to minimize the payment of income or excise tax. As of December 31, 2019, we were in compliance with all of such covenants.

On October 24, 2018, we entered into a credit agreement for a ¥33.3 billion (approximately $296.5 million based on the exchange rate on October 24, 2018) senior unsecured revolving credit facility, which we refer to as the Yen revolving credit facility. The Yen revolving credit facility provides for borrowings in Japanese yen. In addition, we have the ability from time to time to increase the size of the Yen revolving credit facility to up to ¥93.3 billion (approximately $831.1 million based on the exchange rate on October 24, 2018), subject to receipt of lender commitments and other conditions precedent. The Yen revolving credit facility matures on January 24, 2024. The interest rate for borrowings under the Yen revolving credit facility equals the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 50 basis points. A quarterly unused commitment fee, which is calculated using the average daily unused revolving credit commitment, is based on the credit ratings of our long-term debt, and is currently 10 basis points.

The Yen revolving credit facility contains various restrictive covenants, including limitations on our ability to incur additional indebtedness, make certain investments or merge with another company, and requirements to maintain financial coverage ratios, including with respect to unencumbered assets. In addition, the Yen revolving credit facility restricts Digital Realty Trust, Inc. from making distributions to its stockholders, or redeeming or otherwise repurchasing shares of its capital stock, after the occurrence and during the continuance of an event of default, except in limited circumstances including as necessary to enable Digital Realty Trust, Inc. to maintain its qualification as a REIT and to minimize the payment of income or excise tax. As of December 31, 2019, we were in compliance with all of such covenants.

Unsecured Term Loans

On October 24, 2018, we refinanced our senior unsecured multi-currency term loan facility and entered into an amended and restated term loan agreement, which we refer to as the 2018 term loan agreement, which governs (i) a $300.0 million 5-year senior unsecured term loan, which we refer to as the 2023 Term Loan, and (ii) an approximately $512 million 5-year senior unsecured term loan, which we refer to as the 2024 Term Loan. The 2018 term loan agreement replaced the $1.55 billion term loan agreement executed on January 15, 2016. The 2023 Term Loan matures

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

on January 15, 2023 and the 2024 Term Loan matures on January 24, 2023 with two six-month extension options. In addition, we have the ability from time to time to increase the aggregate size of lending under the 2018 term loan agreement and the 2018 global revolving credit facility (discussed above), in any combination, by up to $1.25 billion, subject to receipt of lender commitments and other conditions precedent. Interest rates are based on our senior unsecured debt ratings and are currently 100 basis points over the applicable index for floating rate advances for the 2023 Term Loan and the 2024 Term Loan. Funds may be drawn in U.S., Canadian, Singapore, Australian and Hong Kong dollars. Based on exchange rates in effect at December 31, 2019, the balance outstanding is approximately $0.8 billion, excluding deferred financing costs. We have used borrowings under the term loans for acquisitions, repayment of indebtedness, development, working capital and general corporate purposes. The covenants under the 2023 Term Loan and 2024 Term Loan are consistent with our 2018 global revolving credit facility and, as of December 31, 2019, we were in compliance with all of such covenants.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Unsecured Senior Notes


			Amount
			Issued (in
Unsecured Senior Notes and Annual		Maturity	millions, local		Net Proceeds		Interest Payment
Interest Rate	Date Issued	Date	currency)		(in millions) (1)		Dates	Initial Issuer (2)
3.950% Notes due 2022	Jun 23, 2015	Jul 1, 2022	$	500.0		491.8	Semi-annually, commencing January 1, 2016	Digital Realty Trust, L.P.
3.625% Notes due 2022	Sep 24, 2012	Oct 1, 2022	$	300.0		293.1	Semi-annually, commencing April 1, 2013	Digital Realty Trust, L.P.
2.750% Notes due 2023	Aug 7, 2017	Feb 1, 2023	$	350.0		346.9	Semi-annually, commencing February 1, 2018	Digital Realty Trust, L.P.
4.750% Notes due 2023	Apr 1, 2014	Oct 13, 2023	£	300.0		490.9	Semi-annually, commencing October 13, 2014	Digital Stout Holding, LLC (3)
2.625% Notes due 2024	Apr 15, 2016	Apr 15, 2024	€	600.0		670.3	Annually, commencing April 15, 2017	Digital Euro Finco, LLC (3)
2.750% Notes due 2024	Jul 21, 2017	Jul 19, 2024	£	250.0		321.3	Annually, commencing July 19, 2018	Digital Stout Holding, LLC (3)
4.250% Notes due 2025	Jan 18, 2013	Jan 17, 2025	£	400.0		624.2	Semi-annually, commencing July 17, 2013	Digital Stout Holding, LLC (3)
4.750% Notes due 2025	Oct 1, 2015	Oct 1, 2025	$	450.0		445.8	Semi-annually, commencing April 1, 2016	Digital Delta Holdings, LLC (4)
2.500% Notes due 2026	Jan 16, 2019	Jan 16, 2026	€	1,075.0		1,218.6	Annually, commencing January 16, 2020	Digital Euro Finco, LLC (3)
3.700% Notes due 2027	Aug 7, 2017	Aug 15, 2027	$	1,000.0		991.0	Semi-annually, commencing February 15, 2018	Digital Realty Trust, L.P.
1.125% Notes due 2028	Oct 9, 2019	Apr 9, 2028	€	500.0		539.7	Annually, commencing April 9, 2020	Digital Euro Finco, LLC (3)
4.450% Notes due 2028	Jun 21, 2018	Jul 15, 2028	$	650.0		643.3	Semi-annually, commencing January 15, 2019	Digital Realty Trust, L.P.
3.600% Notes due 2029	Jun 14, 2019	Jul 1, 2029	$	900.0		890.6	Semi-annually, commencing January 1, 2020	Digital Realty Trust, L.P.
3.300% Notes due 2029	Jul 21, 2017	Jul 19, 2029	£	350.0		448.6	Annually, commencing July 19, 2018	Digital Stout Holding, LLC (3)
3.750% Notes due 2030	Oct 17, 2018 and Mar 9, 2019	Oct 17, 2030	£	550.0		716.8	Annually, commencing October 17, 2019	Digital Stout Holding, LLC (3)

(1)	Amounts are in U.S. dollars, based on the exchange rate on the date of issuance. Net proceeds are equal to principal amount less initial purchaser discount and other debt issuance costs.

(2)	Digital Realty Trust, Inc. guarantees the senior notes issued by Digital Realty Trust, L.P. Both Digital Realty Trust, L.P. and Digital Realty Trust, Inc. guarantee the senior notes issued by Digital Stout Holding, LLC and Digital Euro Finco, LLC.

(3)	A wholly owned subsidiary of Digital Realty Trust, L.P.

(4)	Initially a wholly owned subsidiary of Digital Realty Trust, Inc., pursuant to the terms of the indenture, following the consummation of the Telx Acquisition, on October 13, 2015, Digital Delta Holdings, LLC merged with and into Digital Realty Trust, L.P., with Digital Realty Trust, L.P. surviving the merger and assuming Digital Delta

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

	Holdings, LLC’s obligations under the 4.750% 2025 Notes, the related indenture and registration rights agreement by operation of law.

The indentures governing each of the 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, and also requires us to maintain total unencumbered assets of not less than 150% of the aggregate principal amount of unsecured debt. At December 31, 2019, we were in compliance with each of these financial covenants.

The table below summarizes our debt maturities and principal payments as of December 31, 2019 (in thousands):


	Global Revolving		Unsecured
	Credit Facilities(1)		Term Loans(1)		Senior Notes		Secured Debt		Total Debt
2020	$	—	$	—	$	—	$	1,089	$	1,089
2021		—		—		—		—		—
2022		—		—		800,000		—		800,000
2023		99,315		813,205		747,710		104,000		1,764,230
2024		146,451		—		1,004,205		—		1,150,656
Thereafter		—		—		6,489,458		—		6,489,458
Subtotal	$	245,766	$	813,205	$	9,041,373	$	105,089	$	10,205,433
Unamortized discount		—		—		(22,554)		—		(22,554)
Unamortized premium		—		—		6,409		54		6,463
Total	$	245,766	$	813,205	$	9,025,228	$	105,143	$	10,189,342

	(1)	The global revolving credit facility and unsecured term loans are subject to two six-month extension options exercisable by us. The bank group is obligated to grant the extension options provided we give proper notice, we make certain representations and warranties and no default exists under the global revolving credit facility or unsecured term loans, as applicable.

Income per Share

The following is a summary of basic and diluted income per share (in thousands, except share and per share amounts):


	Year Ended December 31,
	2019		2018		2017
Net income available to common stockholders	$	493,011	$	249,930	$	173,148
Weighted average shares outstanding—basic		208,325,823		206,035,408		174,059,386
Potentially dilutive common shares:
Unvested incentive units		165,185		141,260		141,136
Forward equity offering		813,073		33,315		124,527
Market performance-based awards		158,166		463,488		570,049
Weighted average shares outstanding—diluted		209,462,247		206,673,471		174,895,098
Income per share:
Basic	$	2.37	$	1.21	$	0.99
Diluted	$	2.35	$	1.21	$	0.99

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

We have excluded the following potentially dilutive securities in the calculations above as they would be antidilutive or not dilutive:


	Year Ended December 31,
	2019	2018	2017
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.	9,087,726	8,227,463	3,996,550
Potentially dilutive Series C Cumulative Redeemable Perpetual Preferred Stock	1,695,765	1,876,584	540,773
Potentially dilutive Series F Cumulative Redeemable Preferred Stock	—	—	463,301
Potentially dilutive Series G Cumulative Redeemable Preferred Stock	2,102,655	2,326,861	2,261,153
Potentially dilutive Series H Cumulative Redeemable Preferred Stock	789,846	3,409,772	3,313,484
Potentially dilutive Series I Cumulative Redeemable Preferred Stock	2,105,116	2,329,584	2,263,799
Potentially dilutive Series J Cumulative Redeemable Preferred Stock	1,679,534	1,858,622	720,803
Potentially dilutive Series K Cumulative Redeemable Preferred Stock	1,334,691	—	—
Potentially dilutive Series L Cumulative Redeemable Preferred Stock	670,823	—	—
Total	19,466,156	20,028,886	13,559,863

Income per Unit

The following is a summary of basic and diluted income per unit (in thousands, except unit and per unit amounts):


	Year Ended December 31,
	2019		2018		2017
Net income available to common unitholders	$	514,111	$	260,110	$	176,918
Weighted average units outstanding—basic		217,284,755		214,312,871		178,055,936
Potentially dilutive common units:
Unvested incentive units		165,185		141,260		141,136
Forward equity offering		813,073		33,315		124,527
Market performance-based awards		158,166		463,488		570,049
Weighted average units outstanding—diluted		218,421,179		214,950,934		178,891,648
Income per unit:
Basic	$	2.37	$	1.21	$	0.99
Diluted	$	2.35	$	1.21	$	0.99

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

We have excluded the following potentially dilutive securities in the calculations above as they would be antidilutive or not dilutive:


	Year Ended December 31,
	2019	2018	2017
Potentially dilutive Series C Cumulative Redeemable Perpetual Preferred Units	1,695,765	1,876,584	540,773
Potentially dilutive Series F Cumulative Redeemable Preferred Units	—	—	463,301
Potentially dilutive Series G Cumulative Redeemable Preferred Units	2,102,655	2,326,861	2,261,153
Potentially dilutive Series H Cumulative Redeemable Preferred Units	789,846	3,409,772	3,313,484
Potentially dilutive Series I Cumulative Redeemable Preferred Units	2,105,116	2,329,584	2,263,799
Potentially dilutive Series J Cumulative Redeemable Preferred Units	1,679,534	1,858,622	720,803
Potentially dilutive Series K Cumulative Redeemable Preferred Units	1,334,691	—	—
Potentially dilutive Series L Cumulative Redeemable Preferred Units	670,823	—	—
Total	10,378,430	11,801,423	9,563,313

Income Taxes

Digital Realty Trust, Inc. has elected to be treated and believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT for federal income tax purposes. As a REIT, Digital Realty Trust, Inc. is generally not subject to corporate level federal income taxes on taxable income distributed currently to its stockholders. Since inception, Digital Realty Trust, Inc. has distributed at least 100% of its taxable income annually. As such, no provision for federal income taxes has been included in the accompanying consolidated financial statements for the years ended December 31, 2019, 2018 and 2017.

The Operating Partnership is a partnership and is not required to pay federal income tax. Instead, taxable income is allocated to its partners, who include such amounts on their federal income tax returns. As such, no provision for federal income taxes has been included in the Operating Partnership’s accompanying consolidated financial statements.

We have elected taxable REIT subsidiary (“TRS”) status for some of our consolidated subsidiaries. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that REITs cannot hold directly. Income taxes for TRS entities were accrued, as necessary, for the years ended December 31, 2019, 2018 and 2017.

For our TRS entities and foreign subsidiaries that are subject to U.S. federal, state, local and foreign income taxes, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if we believe it is more likely than not that the deferred tax asset may not be realized, based on available evidence at the time the determination is made. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in the income statement. Deferred tax assets (net of valuation allowance) and liabilities for our TRS entities and foreign subsidiaries were accrued, as necessary, for the years ended December 31, 2019, 2018 and 2017. As of December 31, 2019 and 2018, we had deferred tax liabilities net of deferred tax assets of approximately $143.4 million and $146.6 million, respectively, primarily related to our foreign properties, classified in accounts payable and other accrued expenses in the consolidated balance sheet. The majority of our net deferred tax liability relates to differences between tax basis and book basis of the assets acquired in the Sentrum portfolio acquisition during 2012 and the European portfolio acquisition in July 2016. The valuation allowance against

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

the deferred tax assets at December 31, 2019 and 2018 relate primarily to net operating loss carryforwards that we do not expect to utilize attributable to certain foreign jurisdictions.

Deferred income tax assets and liabilities as of December 31, 2019 and 2018 were as follows (in thousands):


	2019		2018
Gross deferred income tax assets:
Net operating loss carryforwards	$	63,280	$	71,656
Basis difference - real estate property		9,955		8,490
Basis difference - intangibles		1,071		256
Other - temporary differences		19,028		24,341
Total gross deferred income tax assets		93,334		104,743
Valuation allowance		(40,795)		(51,439)
Total deferred income tax assets, net of valuation allowance		52,539		53,304
Gross deferred income tax liabilities:
Basis difference - real estate property		162,095		164,077
Basis difference - equity investments		4,000		—
Basis difference - intangibles		1,547		6,855
Straight-line rent		8,044		5,340
Other - temporary differences		20,218		23,584
Total gross deferred income tax liabilities		195,904		199,856
Net deferred income tax liabilities	$	143,365	$	146,552

The federal tax legislation enacted in December 2017, commonly known as the Tax Cuts and Jobs Act (the “TCJA”), reduced the corporate federal tax rate in the U.S. to 21%, generally effective on January 1, 2018. As such, deferred tax assets and liabilities were remeasured using the lower corporate federal tax rate at December 31, 2017. While we do not expect other material impacts, the new tax rules are complex and, in some respects, lack developed administrative guidance. We continue to work with our tax advisors to analyze and determine the full impact that the TCJA as a whole will have on us.

Equity and Accumulated Other Comprehensive Loss, Net

(a) Equity Distribution Agreements

On January 4, 2019, Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into equity distribution agreements, which we refer to as the 2019 Equity Distribution Agreements, with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., BTIG, LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Mizuho Securities USA LLC, Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., PNC Capital Markets LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc., SMBC Nikko Securities America, Inc., SunTrust Robinson Humphrey, Inc., TD Securities (USA) LLC, and Wells Fargo Securities, LLC, or the Agents, under which it could issue and sell shares of its common stock having an aggregate offering price of up to $1.0 billion from time to time through, at its discretion, any of the Agents as its sales agents or as principals. Sales may also be made on a forward basis pursuant to separate forward sale agreements. The sales of common stock made under the 2019 Equity Distribution Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. To date, no sales have been made under the program.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(b) Forward Equity Sale

On September 27, 2018, Digital Realty Trust, Inc. completed an underwritten public offering of 9,775,000 shares of its common stock (including 1,275,000 shares from the exercise in full of the underwriters’ option to purchase additional shares), 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 9,775,000 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 its common stock by the forward purchasers in the public offering. The Company expects to receive net proceeds of approximately $1.1 billion (net of fees and estimated expenses) upon full physical settlement of the forward sale agreements. On September 17, 2019, the Company amended the forward sale agreements to extend the maturity date of such forward sales agreements from September 27, 2019 to September 25, 2020.


				Total
				Liquidation		Annual		Shares Outstanding as of		Balance (in thousands, net of
	Date(s)	Initial Date to		Value (in		Dividend		December 31,		issuance costs) as of December 31,
Preferred Stock (1)	Issued	Redeem (2)	Share Cap (3)	thousands) (4)		Rate (5)		2019	2018	2019		2018
6.625% Series C Cumulative Redeemable Perpetual Preferred Stock	Sep 14, 2017	May 15, 2021	0.6389035	$	201,250	$	1.65625	8,050,000	8,050,000	$	219,250	$	219,250
5.875% Series G Cumulative Redeemable Preferred Stock	Apr 9, 2013	Apr 9, 2018	0.7532000		250,000		1.46875	10,000,000	10,000,000		241,468		241,468
7.375% Series H Cumulative Redeemable Preferred Stock	Mar 26, 2014	Mar 26, 2019	0.9632000		—		1.84375	—	14,600,000		—		353,290
6.350% Series I Cumulative Redeemable Preferred Stock	Aug 24, 2015	Aug 24, 2020	0.7623100		250,000		1.58750	10,000,000	10,000,000		242,012		242,012
5.250% Series J Cumulative Redeemable Preferred Stock	Aug 7, 2017	Aug 7, 2022	0.4252100		200,000		1.31250	8,000,000	8,000,000		193,540		193,540
5.850% Series K Cumulative Redeemable Preferred Stock	Mar 13, 2019	Mar 13, 2024	0.4361100		210,000		1.46250	8,400,000	—		203,264		—
5.200% Series L Cumulative Redeemable Preferred Stock	Oct 10, 2019	Oct 10, 2024	0.3851800		345,000		1.30000	13,800,000	—		334,886		—
				$	1,456,250			58,250,000	50,650,000	$	1,434,420	$	1,249,560

(1)

All series of preferred stock do not have a stated maturity date and are not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, each series of preferred stock will rank senior to Digital Realty Trust, Inc. common stock and on parity with the other series of preferred stock. Holders of each series of preferred stock generally have no voting rights except for limited voting rights if Digital Realty Trust, Inc. fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(2)	Except in limited circumstances, reflects earliest date that Digital Realty Trust, Inc. may exercise its option to redeem the preferred stock, at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but excluding the date of redemption.

(3)

Upon the occurrence of specified changes of control, as a result of which neither Digital Realty Trust, Inc.’s common stock nor the common securities of the acquiring or surviving entity (or American Depositary Receipts representing such securities) is listed on the New York Stock Exchange, the NYSE MKT, LLC or the NASDAQ Stock Market or listed or quoted on a successor exchange or quotation system, each holder of preferred stock will have the right (unless, prior to the change of control conversion date specified in the applicable Articles Supplementary governing the preferred stock, Digital Realty Trust, Inc. has provided or provides notice of its election to redeem the preferred stock) to convert some or all of the preferred stock held by it into a number of shares of Digital Realty Trust, Inc.’s common stock per share of preferred stock to be converted equal to the lesser of (i) the quotient obtained by dividing (a) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends to, but not including, the change of control conversion date (unless the change of control conversion date is after a record date for a preferred stock dividend payment and prior to the corresponding dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (b) the common stock price specified in the applicable Articles Supplementary governing the preferred stock; and (ii) the Share Cap, subject to certain adjustments; subject, in each case, to provisions for the receipt of alternative consideration as described in the applicable Articles Supplementary governing the preferred stock. Except in connection with specified change of control transactions, the preferred stock is not convertible into or exchangeable for any other property or securities of Digital Realty Trust, Inc.

(4)	Liquidation preference is $25.00 per share.

(5)	Dividends on preferred shares are cumulative and payable quarterly in arrears.

(d) Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the interests that are not owned by Digital Realty Trust, Inc. The following table shows the ownership interest in the Operating Partnership as of December 31, 2019 and 2018:


	December 31, 2019			December 31, 2018
	Number of	Percentage of		Number of	Percentage of
	units	total		units	total
Digital Realty Trust, Inc.	208,900,758	95.9	%	206,425,656	95.1	%
Noncontrolling interests consist of:
Common units held by third parties	6,820,201	3.1	%	6,297,272	2.9	%
Issuance of units in connection with Ascenty Acquisition	—	—	%	2,338,874	1.1	%
Incentive units held by employees and directors (see Note 15)	2,022,954	0.9	%	1,944,738	0.9	%
	217,743,913	100.0	%	217,006,540	100.0	%

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

to issue the maximum number of shares that could be required to be delivered under the share settlement of the noncontrolling Operating Partnership common and incentive units. Based on the results of this analysis, we concluded that the common units and incentive units of the Operating Partnership met the criteria to be classified within equity, except for certain common units issued to certain former DFT Operating Partnership unitholders in the DFT Merger, which are subject to certain restrictions and, accordingly, are not presented as permanent equity in the consolidated balance sheet.

In connection with the initial public offering of DFT in 2007, DFT, the DFT Operating Partnership and certain DFT Operating Partnership unitholders entered into a tax protection agreement to assist such unitholders in deferring certain U.S. federal income tax liabilities that may have otherwise resulted from the contribution transactions undertaken in connection with the initial public offering and the ownership of interests in the DFT Operating Partnership and to set forth certain agreements with respect to other tax matters. In connection with the DFT Merger, certain DFT Operating Partnership unitholders entered into a new tax protection agreement with Digital Realty Trust, Inc. and the Operating Partnership that replaced and superseded the DFT tax protection agreement, effective as of the closing of the merger. Pursuant to the new tax protection agreement, such DFT Operating Partnership unitholders entered into a guarantee of certain debt of a subsidiary of the Operating Partnership. The Operating Partnership must offer such DFT Operating Partnership unitholders a new guarantee opportunity in the event any guaranteed debt is repaid prior to March 1, 2023. If the Operating Partnership fails to offer the guarantee opportunity or to allocate guaranteed debt to any such DFT Operating Partnership unitholder as required under the new tax protection agreement, the Operating Partnership generally would be required to indemnify each such DFT Operating Partnership unitholder for the tax liability resulting from such failure, as determined under the new tax protection agreement.

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $997.6 million and $1,076.9 million based on the closing market price of Digital Realty Trust, Inc. common stock on December 31, 2019 and 2018, respectively.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

The following table shows activity for the noncontrolling interests in the Operating Partnership for the years ended December 31, 2019, 2018 and 2017:


	Common Units	Incentive Units	Total
As of December 31, 2016	1,141,814	1,333,849	2,475,663
Common units issued in connection with the DFT Merger	6,111,770	—	6,111,770
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(354,490)	—	(354,490)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(208,092)	(208,092)
Incentive units issued upon achievement of market performance condition	—	390,795	390,795
Grant of incentive units to employees and directors	—	73,449	73,449
As of December 31, 2017	6,899,094	1,590,001	8,489,095
Common units issued in connection with the Ascenty Acquisition	2,338,874	—	2,338,874
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(601,822)	—	(601,822)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(110,070)	(110,070)
Incentive units issued upon achievement of market performance condition	—	357,956	357,956
Grant of incentive units to employees and directors	—	128,986	128,986
Cancellation / forfeitures of incentive units held by employees and directors	—	(22,135)	(22,135)
As of December 31, 2018	8,636,146	1,944,738	10,580,884
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(1,815,945)	—	(1,815,945)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(338,515)	(338,515)
Incentive units issued upon achievement of market performance condition	—	319,279	319,279
Grant of incentive units to employees and directors	—	120,368	120,368
Cancellation / forfeitures of incentive units held by employees and directors	—	(22,916)	(22,916)
As of December 31, 2019	6,820,201	2,022,954	8,843,155

(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 in capital based on the book value per unit in the accompanying consolidated balance sheet of Digital Realty Trust, Inc.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(e) Dividends

We have declared and paid the following dividends on our common and preferred stock for the years ended December 31, 2019, 2018 and 2017 (in thousands):


		Series C			Series F			Series G		Series H			Series I		Series J			Series K			Series L
		Preferred			Preferred			Preferred		Preferred			Preferred		Preferred			Preferred			Preferred			Common
Date dividend declared	Dividend payment date	Stock			Stock			Stock		Stock			Stock		Stock			Stock			Stock			Stock
March 1, 2017	March 31, 2017	$	—		$	3,023		$	3,672	$	6,730		$	3,969	$	—		$	—		$	—		$	148,358	(1)
May 8, 2017	June 30, 2017		—			—	(2)		3,672		6,730			3,969		—			—			—			150,814	(1)
August 7, 2017	September 29, 2017		—			—			3,672		6,730			3,969		—			—			—			191,041	(1)
November 2, 2017	December 29, 2017 for Preferred Stock; January 12, 2018 for Common Stock		3,963	(3)		—			3,672		6,730			3,969		4,200	(3)		—			—			191,067	(1)
		$	3,963		$	3,023		$	14,688	$	26,920		$	15,876	$	4,200		$	—		$	—		$	681,280
March 1, 2018	March 30, 2018	$	3,333		$	—		$	3,672	$	6,730		$	3,969	$	2,625		$	—		$	—		$	208,015	(4)
May 8, 2018	June 29, 2018		3,333			—			3,672		6,730			3,969		2,625			—			—			208,071	(4)
August 14, 2018	September 28, 2018		3,333			—			3,672		6,730			3,969		2,625			—			—			208,166	(4)
November 12, 2018	December 31, 2018 for Preferred Stock; January 15, 2019 for Common Stock		3,333			—			3,672		6,730			3,969		2,625			—			—			208,415	(4)
		$	13,332		$	—		$	14,688	$	26,920		$	15,876	$	10,500		$	—		$	—		$	832,667

February 21, 2019	March 29, 2019	$	3,333			—		$	3,672	$	6,730		$	3,969	$	2,625		$	—		$	—		$	224,802	(5)
May 13, 2019	June 28, 2019		3,333			—			3,672		—	(6)		3,969		2,625			3,686	(7)		—			224,895	(5)
August 13, 2019	September 30, 2019		3,333			—			3,672		—			3,969		2,625			3,071			—			225,188	(5)
November 19, 2019	December 31, 2019 for Preferred Stock; January 15, 2020 for Common Stock		3,333			—			3,672		—			3,969		2,625			3,071			4,036	(8)		225,488	(5)
		$	13,332		$	—		$	14,688	$	6,730		$	15,876	$	10,500		$	9,828		$	4,036		$	900,373
Annual rate of dividend per share		$	1.65625		$	1.65625		$	1.46875	$	1.84375		$	1.58750	$	1.31250		$	1.46250		$	1.30000

(1)	$3.720 annual rate of dividend per share.

(2)

Redeemed on April 5, 2017 for $25.01840 per share, or a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date of approximately $0.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $6.3 million were recorded as a reduction to net income available to common stockholders.

(3)	Represents a pro rata dividend from and including the original issue date to and including December 31, 2017.

(4)	$4.040 annual rate of dividend per share.

(5)	$4.320 annual rate of dividend per share.

(6)	Redeemed on April 1, 2019 for $25.00 per share, or a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date. In connection with the redemption, the previously incurred offering costs of approximately $11.8 million were recorded as a reduction to net income available to common stockholders.

(7)	Represents a pro rata dividend from and including the original issue date to and including June 30, 2019.

(8)	Represents a pro rata dividend from and including the original issue date to and including December 31, 2019.

Distributions out of Digital Realty Trust, Inc.’s current or accumulated earnings and profits are generally classified as dividends whereas distributions in excess of its current and accumulated earnings and profits, to the extent of a stockholder’s U.S. federal income tax basis in Digital Realty Trust, Inc.’s stock, are generally classified as a return of

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

capital. Distributions in excess of a stockholder’s U.S. federal income tax basis in Digital Realty Trust, Inc.’s stock are generally characterized as capital gain. Cash provided by operating activities has generally been sufficient to fund all distributions, however, in the future we may also need to utilize borrowings under the global revolving credit facility to fund all or a portion of distributions.

(f) Accumulated Other Comprehensive Income (Loss), Net

The accumulated balances for each item within other comprehensive income (loss), net are as follows (in thousands):


	Foreign currency		Cash flow		Foreign currency net		Accumulated other
	translation		hedge		investment hedge		comprehensive
	adjustments		adjustments		adjustments		income (loss), net
Balance as of December 31, 2017	$	(147,370)	$	13,200	$	25,738	$	(108,432)
Net current period change		(11,279)		7,890		—		(3,389)
Reclassification to interest expense from interest rate swaps		—		(3,826)		—		(3,826)
Balance as of December 31, 2018	$	(158,649)	$	17,264	$	25,738	$	(115,647)
Net current period change		22,015		(8,839)		—		13,176
Reclassification of foreign currency translation adjustment due to deconsolidation of Ascenty		21,687		—		—		21,687
Reclassification to interest expense from interest rate swaps		—		(7,138)		—		(7,138)
Balance as of December 31, 2019	$	(114,947)	$	1,287	$	25,738	$	(87,922)

Capital and Accumulated Other Comprehensive Income (Loss)

(a) Allocations of Net Income and Net Losses to Partners

Except for special allocations to holders of profits interest units described below in Note 15(a) under the heading “Incentive Plan-Long-Term Incentive Units,” the Operating Partnership’s net income will generally be allocated to Digital Realty Trust, Inc. (the General Partner) to the extent of the accrued preferred return on its preferred units, and then to the General Partner and the Operating Partnership’s limited partners in accordance with the respective percentage interests in the common units issued by the Operating Partnership. Net loss will generally be allocated to the General Partner and the Operating Partnership’s limited partners in accordance with the respective common percentage interests in the Operating Partnership until the limited partner’s capital is reduced to zero and any remaining net loss would be allocated to the General Partner. However, in some cases, losses may be disproportionately allocated to partners who have guaranteed our debt. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Code, and the associated Treasury Regulations.

(b) Forward Equity Sale

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

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 expects to receive net proceeds of approximately $1.1 billion (net of fees and estimated expenses) upon full physical settlement of the forward sale agreements. On September 17, 2019, Digital Realty Trust, Inc. amended the forward sale agreements to extend the maturity date of such forward sales agreements from September 27, 2019 to September 25, 2020. Upon physical settlement of the forward sale agreements, the Operating Partnership is expected to issue partnership units to Digital Realty Trust, Inc. in exchange for contribution of the net proceeds.


			Total
			Liquidation		Annual		Units Outstanding as		Balance (in thousands, net of
	Date(s)	Initial Date to	Value (in		Distribution		of December 31,		issuance costs) as of December 31,
Preferred Units (1)	Issued	Redeem (2)	thousands) (3)		Rate (4)		2019	2018	2019		2018
6.625% Series C Cumulative Redeemable Perpetual Preferred Units	Sep 14, 2017	May 15, 2021	$	201,250	$	1.65625	8,050,000	8,050,000	$	219,250	$	219,250
5.875% Series G Cumulative Redeemable Preferred Units	Apr 9, 2013	Apr 9, 2018		250,000		1.46875	10,000,000	10,000,000		241,468		241,468
7.375% Series H Cumulative Redeemable Preferred Units	Mar 26, 2014	Mar 26, 2019		—		1.84375	—	14,600,000		—		353,290
6.350% Series I Cumulative Redeemable Preferred Units	Aug 24, 2015	Aug 24, 2020		250,000		1.58750	10,000,000	10,000,000		242,012		242,012
5.250% Series J Cumulative Redeemable Preferred Units	Aug 7, 2017	Aug 7, 2022		200,000		1.31250	8,000,000	8,000,000		193,540		193,540
5.850% Series K Cumulative Redeemable Preferred Units	Mar 13, 2019	Mar 13, 2024		210,000		1.46250	8,400,000	—		203,264		—
5.200% Series L Cumulative Redeemable Preferred Units	Oct 10, 2019	Oct 10, 2024		345,000		1.30000	13,800,000	—		334,886		—
			$	1,456,250			58,250,000	50,650,000	$	1,434,420	$	1,249,560

(1)	All series of preferred units do not have a stated maturity date and are not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, each series of preferred units will rank senior to Digital Realty Trust, Inc. common units and on parity with the other series of preferred units.

(2)

Except in limited circumstances, reflects earliest date that Digital Realty Trust, Inc. may exercise its option to redeem the corresponding series of preferred stock, at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but excluding the date of redemption. The Operating Partnership is required to redeem the corresponding series of preferred units in the event that the General Partner redeems a series of preferred stock.

(3)	Liquidation preference is $25.00 per unit.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(4)	Distributions on preferred units are cumulative and payable quarterly in arrears.

(d) Partnership Units

Limited partners have the right to require the Operating Partnership to redeem part or all of their common units for cash based on the fair market value of an equivalent number of shares of the General Partner’s common stock at the time of redemption. Alternatively, the General Partner may elect to acquire those common units in exchange for shares of the General Partner’s 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. Pursuant to authoritative accounting guidance, the Operating Partnership evaluated whether it controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement of the limited partners’ common units and the vested incentive units. Based on the results of this analysis, the Operating Partnership concluded that the common units and incentive units of the Operating Partnership met the criteria to be classified within capital, except for certain common units issued to certain former DFT Operating Partnership unitholders in the DFT Merger which are subject to certain restrictions and are not presented as permanent capital in the consolidated balance sheet.

The redemption value of the limited partners’ common units and the vested incentive units was approximately $997.6 million and $1,076.9 million based on the closing market price of Digital Realty Trust, Inc.’s common stock on December 31, 2019 and 2018, respectively.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(e) Distributions

All distributions on our units are at the discretion of Digital Realty Trust, Inc.’s Board of Directors. We have declared and paid the following distributions on our common and preferred units for the years ended December 31, 2019, 2018 and 2017 (in thousands):


		Series C			Series F			Series G		Series H			Series I		Series J			Series K			Series L
		Preferred			Preferred			Preferred		Preferred			Preferred		Preferred			Preferred			Preferred			Common
Date distribution declared	Distribution payment date	Units			Units			Units		Units			Units		Units			Units			Units			Units
Mar 1, 2017	March 31, 2017	$	—		$	3,023		$	3,672	$	6,730		$	3,969	$	—		$	—		$	—		$	150,968	(1)
May 8, 2017	June 30, 2017		—			—	(2)		3,672		6,730			3,969		—			—			—			153,176	(1)
Aug 7, 2017	September 29, 2017		—			—			3,672		6,730			3,969		—			—			—			199,049	(1)
Nov 2, 2017	December 29, 2017 for Preferred Units; January 12, 2018 for Common Units		3,963	(3)		—			3,672		6,730			3,969		4,200	(5)		—			—			199,061	(1)
		$	3,963		$	3,023		$	14,688	$	26,920		$	15,876	$	4,200		$	—		$	—		$	702,254
Mar 1, 2017	March 30, 2018	$	3,333		$	—		$	3,672	$	6,730		$	3,969	$	2,625		$	—		$	—		$	216,953	(4)
May 8, 2018	June 29, 2018		3,333			—			3,672		6,730			3,969		2,625			—			—			216,789	(4)
Aug 14, 2018	September 28, 2018		3,333			—			3,672		6,730			3,969		2,625			—			—			216,825	(4)
Nov 12, 2018	December 31, 2018 for Preferred Units; January 15, 2019 for Common Units		3,333			—			3,672		6,730			3,969		2,625			—			—			216,838	(4)
		$	13,332		$	—		$	14,688	$	26,920		$	15,876	$	10,500		$	—		$	—		$	867,405

February 21, 2019	March 29, 2019	$	3,333		$	—		$	3,672	$	6,730		$	3,969	$	2,625		$	—		$	—		$	235,256	(5)
May 13, 2019	June 28, 2019		3,333			—			3,672		—	(6)		3,969		2,625			3,686	(7)		—			235,142	(5)
August 13, 2019	September 30, 2019		3,333			—			3,672		—			3,969		2,625			3,071			—			235,164	(5)
November 19, 2019	December 31, 2019 for Preferred Units; January 15, 2020 for Common Units		3,333			—			3,672		—			3,969		2,625			3,071			4,036	(8)		235,154	(5)
		$	13,332		$	—		$	14,688	$	6,730		$	15,876	$	10,500		$	9,828		$	4,036		$	940,716

Annual rate of distribution per unit		$	1.65625		$	1.65625		$	1.46875	$	1.84375		$	1.58750	$	1.31250		$	1.46250		$	1.30000

(1)	$3.720 annual rate of distribution per unit.

(2)

Redeemed on April 5, 2017 for $25.01840 per unit, or a redemption price of $25.00 per unit, plus accrued and unpaid distributions up to but not including the redemption date of approximately $0.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $6.3 million were recorded as a reduction to net income available to common unitholders.

(3)	Represents a pro rata distribution from and including the original issue date to and including December 31, 2017.

(4)	$4.040 annual rate of distribution per unit.

(5)	$4.320 annual rate of distribution per unit.

(6)	Redeemed on April 1, 2019 for $25.00 per unit, or a redemption price of $25.00 per unit, plus accrued and unpaid distributions up to but not including the redemption date. In connection with the redemption, the previously incurred offering costs of approximately $11.8 million were recorded as a reduction to net income available to common unitholders.

(7)	Represents a pro rata distribution from and including the original issue date to and including June 30, 2019.

(8)	Represents a pro rata distribution from and including the original issue date to and including December 31, 2019.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

(f) Accumulated Other Comprehensive Income (Loss)

The accumulated balances for each item within other comprehensive income (loss) are as follows (in thousands):



	Foreign currency				Foreign currency net		Accumulated other
	translation		Cash flow hedge		investment hedge		comprehensive
	adjustments		adjustments		adjustments		loss
Balance as of December 31, 2017	$	(151,795)	$	12,758	$	26,152	$	(112,885)
Net current period change		(11,736)		8,197		—		(3,539)
Reclassification to interest expense from interest rate swaps		—		(3,969)		—		(3,969)
Balance as of December 31, 2018	$	(163,531)	$	16,986	$	26,152	$	(120,393)
Net current period change		23,975		(9,232)		—		14,743
Reclassification of foreign currency translation adjustment due to deconsolidation of Ascenty		21,687		—		—		21,687
Reclassification to interest expense from interest rate swaps		—		(7,446)		—		(7,446)
Balance as of December 31, 2019	$	(117,869)	$	308	$	26,152	$	(91,409)

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Incentive Plan

On April 28, 2014, our stockholders approved the Digital Realty Trust, Inc., Digital Services, Inc., and Digital Realty Trust, L.P. 2014 Incentive Award Plan (as amended, the 2014 Incentive Award Plan). The 2014 Incentive Award Plan became effective and replaced the Amended and Restated 2004 Incentive Award Plan, as amended, as of the date of such stockholder approval. The material features of the 2014 Incentive Award Plan are described in our definitive Proxy Statement filed on March 19, 2014 in connection with the 2014 Annual Meeting of Stockholders, which description is incorporated herein by reference. Effective as of September 14, 2017, the 2014 Incentive Award Plan was amended to provide that shares which remained available for issuance under DFT’s Amended and Restated 2011 Equity Incentive Plan immediately prior to the closing of the DFT Merger (as adjusted and converted into shares of Digital Realty Trust, Inc.’s common stock) may be used for awards under the 2014 Incentive Award Plan and will not reduce the shares authorized for grant under the 2014 Incentive Award Plan, to the extent that using such shares is permitted without stockholder approval under applicable stock exchange rules. In connection with the amendment to the 2014 Incentive Award Plan, on September 22, 2017, Digital Realty Trust, Inc. registered an additional 3.7 million shares that may be issued pursuant to the 2014 Incentive Award Plan.

As of December 31, 2019, approximately 6.6 million shares of common stock, including awards convertible into or exchangeable for shares of common stock, remained available for future issuance under the 2014 Incentive Award Plan. Each long-term incentive unit and each Class D unit issued under the 2014 Incentive Award Plan counts as one share of common stock for purposes of calculating the limit on shares that may be issued under the 2014 Incentive Award Plan and the individual award limits set forth therein.

Below is a summary of our compensation expense for the years ended December 31, 2019, 2018 and 2017 and our unearned compensation as of December 31, 2019 and December 31, 2018 (in millions):


																	Expected
																	period to
	Deferred Compensation												Unearned Compensation				recognize
	Expensed						Capitalized						As of		As of		unearned
	Year Ended December 31,						Year Ended December 31,						December 31,		December 31,		compensation
Type of incentive award	2019		2018		2017		2019		2018		2017		2019		2018		(in years)
Long-term incentive units	$	8.7	$	6.8	$	3.9	$	0.2	$	0.2	$	1.7	$	15.4	$	11.5	2.2
Market performance-based awards		13.0		12.7		9.6		0.8		0.8		2.3		28.4		24.8	2.5
Restricted stock		11.5		6.1		4.5		2.8		4.2		3.3		29.1		23.6	2.6

The following table sets forth the weighted average fair value of for each type of incentive award at the date of grant for the years ended December 31, 2019, 2018 and 2017:


	Weighted Average Fair Value at Date of Grant
Type of incentive award	2019		2018		2017
Long-term incentive units	$	116.22	$	101.86	$	109.71
Market performance-based awards	$	114.97	$	119.29	$	111.06
Restricted stock	$	115.25	$	100.33	$	108.65

(a) Long-Term Incentive Units

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Long-term incentive units, which are also referred to as profits interest units, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. Long-term incentive units (other than Class D units), whether vested or not, will receive the same quarterly per unit distributions as Operating Partnership common units, which equal the per share distributions on Digital Realty Trust, Inc. common stock. Initially, long-term incentive units do not have full parity with common units with respect to liquidating distributions. If such parity is reached, vested long-term incentive units may be converted into an equal number of common units of the Operating Partnership at any time, and thereafter enjoy all the rights and privileges of common units of the Operating Partnership, including redemption rights.

In order to achieve full parity with common units, long-term incentive units must be fully vested and the holder’s capital account balance in respect of such long-term incentive units must be equal to the capital account balance of a holder of an equivalent number of common units. The capital account balance attributable to each common unit is generally expected to be the same, in part because of the amount credited to a partner’s capital account upon the partner’s contribution of property to the Operating Partnership, and in part because the partnership agreement provides, in most cases, that allocations of income, gain, loss and deduction (which will adjust the partner’s capital accounts) are to be made to the common units on a proportionate basis. As a result, with respect to a number of long-term incentive units, it is possible to determine the capital account balance of an equivalent number of common units by multiplying the number of long-term incentive units by the capital account balance with respect to a common unit.

A partner’s initial capital account balance is equal to the amount the partner paid (or contributed to the Operating Partnership) for the partner’s units and is subject to subsequent adjustments, including with respect to the partner’s share of income, gain or loss of the Operating Partnership. Because a holder of long-term incentive units generally will not pay for the long-term incentive units, the initial capital account balance attributable to such long-term incentive units will be zero. However, the Operating Partnership is required to allocate income, gain, loss and deduction to the partner’s capital accounts in accordance with the terms of the partnership agreement, subject to applicable Treasury Regulations. The partnership agreement provides that holders of long-term incentive units will receive special allocations of gain in the event of a sale or “hypothetical sale” of assets of the Operating Partnership prior to the allocation of gain to Digital Realty Trust, Inc. or other limited partners with respect to their common units. The amount of any such allocation will, to the extent of any such gain, be equal to the difference between the capital account balance of a holder of long-term incentive units attributable to such units and the capital account balance attributable to an equivalent number of common units. If and when such gain allocation is fully made, a holder of long-term incentive units will have achieved full parity with holders of common units. To the extent that, upon an actual sale or a “hypothetical sale” of the Operating Partnership’s assets as described above, there is not sufficient gain to allocate to a holder’s capital account with respect to long-term incentive units, or if such sale or “hypothetical sale” does not occur, such units will not achieve parity with common units.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

The term “hypothetical sale” refers to circumstances that are not actual sales of the Operating Partnership’s assets but that require certain adjustments to the value of the Operating Partnership’s assets and the partners’ capital account balances. Specifically, the partnership agreement provides that, from time to time, in accordance with applicable Treasury Regulations, the Operating Partnership will adjust the value of its assets to equal their respective fair market values, and adjust the partners’ capital accounts, in accordance with the terms of the partnership agreement, as if the Operating Partnership sold its assets for an amount equal to their value. Such adjustments will generally be made upon the liquidation of the Operating Partnership, the acquisition of an additional interest in the Operating Partnership by a new or existing partner in exchange for more than a de minimis capital contribution, the distribution by the Operating Partnership to a partner of more than a de minimis amount of partnership property as consideration for an interest in the Operating Partnership, the grant of an interest in the Operating Partnership (other than a de minimis interest) as consideration for the performance of services to or for the benefit of the Operating Partnership (including the grant of a long-term incentive unit), and at such other times as may be desirable or required to comply with the Treasury Regulations.

Below is a summary of our long-term incentive unit activity for the year ended December 31, 2019.


		Weighted-Average
		Grant Date Fair
Unvested Long-term Incentive Units	Units	Value
Unvested, beginning of period	162,186	$	100.59
Granted	120,368		116.22
Vested	(55,039)		100.33
Cancelled or expired	(19,228)		97.32
Unvested, end of period	208,287	$	110.00

The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock on the applicable grant date(s), are being expensed on a straight-line basis for service awards between two and four years, the current vesting periods of the long-term incentive units.

(b) Market Performance-Based Awards

During the years ended December 31, 2019, 2018 and 2017, the Compensation Committee of the Board of Directors of Digital Realty Trust, Inc. approved the grant of market performance-based Class D units of the Operating Partnership and market performance-based restricted stock units, or RSUs, covering shares of Digital Realty Trust, Inc.’s common stock (collectively, the “awards”), under the 2014 Incentive Award Plan to officers and employees of the Company.

The awards, which were determined to contain a market condition, utilize total shareholder return, or TSR, over a three-year measurement period as the market performance metric. Awards will vest based on the Company’s TSR relative to the MSCI US REIT Index, or RMS, over a three-year market performance period, or the Market Performance Period, commencing in January 2017, January 2018 or January 2019, as applicable (or, if earlier, ending on the date on which a change in control of the Company occurs), subject to continued services. Vesting with respect to the market condition is measured based on the difference between Digital Realty Trust, Inc.’s TSR percentage and the TSR percentage of the RMS, or the RMS Relative Market Performance. In the event that the RMS Relative Market Performance during the applicable Market Performance Period is achieved at the “threshold,” “target” or “high” level as set forth below, the awards will become vested as to the market condition with respect to the percentage of Class D units or RSUs, as applicable, set forth below:

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8


		Market
		Performance
	RMS Relative	Vesting
Level	Market Performance	Percentage
Below Threshold Level	≤ -300 basis points	0	%
Threshold Level	-300 basis points	25	%
Target Level	100 basis points	50	%
High Level	≥ 500 basis points	100	%

If the RMS Relative Market Performance falls between the levels specified above, 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.

In January 2020, following the completion of the applicable Market Performance Period, the Compensation Committee determined that the RMS Relative Market Performance fell between the target and high level for the 2017 awards and, accordingly, 137,816 Class D units (including 10,971 distribution equivalent units that immediately vested on December 31, 2019) and 29,141 RSUs performance vested, subject to service-based vesting. On February 27, 2020, 50% of the 2017 awards vested and the remaining 50% will vest on February 27, 2021, subject to continued employment through each applicable vesting date.

In January 2019, following the completion of the applicable Market Performance Period, the Compensation Committee determined that the high level had been achieved for the 2016 awards and, accordingly, 339,317 Class D units (including 31,009 distribution equivalent units that immediately vested on December 31, 2018, upon the high level being achieved) and 56,778 RSUs performance vested, subject to service-based vesting. On February 27, 2019, 50% of the 2016 awards vested and the remaining 50% vested on February 27, 2020.

In January 2018, following the completion of the applicable Market Performance Period, the Compensation Committee determined that the high level had been achieved for the 2015 awards and, accordingly, 363,193 Class D units (including 36,246 distribution equivalent units that immediately vested on December 31, 2017, upon the high level being achieved) and 49,707 RSUs performance vested, subject to service-based vesting. On February 27, 2018, 50% of the 2015 awards vested and the remaining 50% vested on February 27, 2019.

Following the completion of the applicable Market Performance Period, the 2018 awards that satisfy the market condition, if any, will vest 50% on February 27, 2021 and 50% on February 27, 2022, subject to continued employment through each applicable vesting date. Following the completion of the Market Performance Period, the 2019 awards that satisfy the market condition, if any, will vest 50% on February 27, 2022 and 50% on February 27, 2023, subject to continued employment through each applicable vesting date.

Service-based vesting will be accelerated, in full or on a pro rata basis, as applicable, in the event of a change in control, termination of employment by the Company without cause, or termination of employment by the award recipient for good reason, death, disability or retirement, in any case, prior to the completion of the applicable Market Performance Period. However, vesting with respect to the market condition will continue to be measured based on RMS Relative Market Performance during the applicable three-year Market Performance Period (or, in the case of a change in control, shortened Market Performance Period).

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

The fair values of the awards 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 total shareholder return of the RMS. 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
January 1, 2017	25	%	1.49	%
February 28, 2017	23	%	1.43	%
January 1, 2018	22	%	1.98	%
March 1, 2018	22	%	2.34	%
March 9, 2018	22	%	2.42	%
January 1, 2019	23	%	2.44	%
February 21, 2019	23	%	2.48	%

These valuations were performed in a risk-neutral framework, and no assumption was made with respect to an equity risk premium.

As of December 31, 2019, 2,509,963 Class D units and 696,379 market performance-based RSUs had been awarded to our executive officers and other employees. The number of units granted reflects the maximum number of Class D units or market performance-based RSUs, as applicable, which will become vested assuming the achievement of the highest level of RMS Relative Market Performance under the awards and, in the case of the Class D units, also includes distribution equivalent units. The grant date fair value of these awards was approximately $22.3 million, $21.8 million and $19.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. We will recognize compensation expense on a straight-line basis over the expected service period of approximately four years.

Below is a summary of our restricted stock activity for the year ended December 31, 2019.


		Weighted-Average
		Grant Date Fair
Unvested Restricted Stock	Shares	Value
Unvested, beginning of period	299,215	$	97.55
Granted (1)	226,902		115.25
Vested	(111,950)		93.38
Cancelled or expired	(41,375)		107.52
Unvested, end of period	372,792	$	108.47

(1)	All restricted stock awards granted in 2019 are subject only to service conditions.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock on the grant date, are expensed on a straight-line basis for service awards over the vesting period of the restricted stock, which is generally four years.

(d) 401(k) Plan

We have a 401(k) plan whereby our employees may contribute a portion of their compensation to their respective retirement accounts, in an amount not to exceed the maximum allowed under the Code. The 401(k) plan complies with Internal Revenue Service requirements as a 401(k) safe harbor plan whereby matching contributions made by us are 100% vested. The aggregate cost of our contributions to the 401(k) plan was approximately $5.2 million, $4.8 million, and $4.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Derivative Instruments

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of December 31, 2019, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have any fair value measurements on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2019 or December 31, 2018.

The Company presents its interest rate derivatives in its consolidated balance sheets on a gross basis as interest rate swap assets (recorded in other assets) and interest rate swap liabilities (recorded in accounts payable and other accrued liabilities). As of December 31, 2019, there was no impact from netting arrangements as the Company did not have any derivatives in liability positions.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements related to certain floating rate debt obligations. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

hedges involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

We record all our interest rate swaps on the consolidated balance sheets at fair value. In determining the fair value of our interest rate swaps, we consider the credit risk of our counterparties. These counterparties are generally larger financial institutions engaged in providing a variety of financial services. These institutions generally face similar risks regarding adverse changes in market and economic conditions, including, but not limited to, fluctuations in interest rates, exchange rates, equity and commodity prices and credit spreads. The recent and pervasive disruptions in the financial markets have heightened the risks to these institutions.

As of December 31, 2019 and December 31, 2018, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands):


										Fair Value at Significant Other
Notional Amount										Observable Inputs (Level 2)
As of			As of							As of		As of
December 31,			December 31,			Type of	Strike	Effective	Expiration	December 31,		December 31,
2019			2018			Derivative	Rate	Date	Date	2019 (3)		2018 (3)
Currently-paying contracts
$	—		$	206,000	(1)	Swap	1.611	Jun 15, 2017	Jan 15, 2020	$	—	$	1,976
	—			54,905	(1)	Swap	1.605	Jun 6, 2017	Jan 6, 2020		—		517
	29,000	(1)		75,000	(1)	Swap	1.016	Apr 6, 2016	Jan 6, 2021		175		2,169
	75,000	(1)		75,000	(1)	Swap	1.164	Jan 15, 2016	Jan 15, 2021		345		1,970
	300,000	(1)		300,000	(1)	Swap	1.435	Jan 15, 2016	Jan 15, 2023		945		11,463
	75,825	(2)		72,220	(2)	Swap	0.779	Jan 15, 2016	Jan 15, 2021		931		2,024
$	479,825		$	783,125						$	2,396	$	20,119

(1)	Represents debt which bears interest based on one-month U.S. LIBOR.

(2)	Represents debt which bears interest based on one-month CDOR. Translation to U.S. dollars is based on exchange rates of $0.77 to 1.00 CAD as of December 31, 2019 and $0.73 to 1.00 CAD as of December 31, 2018.

(3)	Balance recorded in other assets in the consolidated balance sheets if positive and recorded in accounts payable and other accrued liabilities in the consolidated balance sheets if negative.

Amounts reported in accumulated other comprehensive loss related to interest rate swaps will be reclassified to interest expense as interest payments are made on our debt. As of December 31, 2019, we estimate that an additional $1.6 million will be reclassified as a decrease to interest expense during the year ending December 31, 2020, when the hedged forecasted transactions impact earnings.

Foreign Currency Net Investment Hedges

During the three months ended June 30, 2016, we entered into a series of forward contracts pursuant to which we agreed to sell an amount of foreign currency for an agreed upon amount of U.S. dollars. These forward contracts were executed to manage foreign currency exposures associated with certain transactions. As of June 30, 2016, the forward contracts did not meet the criteria for hedge accounting under GAAP and had a fair value of approximately $37.8 million. On July 1, 2016, the four forward contracts still in place met the criteria for net investment hedge accounting. During the year ended December 31, 2017, we terminated the four forward contracts with a notional amount of GBP 357.3 million. In connection with the settlement, we received approximately $64.0 million in proceeds and the

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

related amount of approximately $26.2 million of accumulated other comprehensive income (AOCI) will remain in AOCI until the Company sells or liquidates its GBP-denominated investments, which has not occurred as of December 31, 2019.

Fair Value of Instruments

We disclose fair value information about all financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate fair value. Current accounting guidance requires the Company to disclose fair value information about all financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate fair value.

The Company’s disclosures of estimated fair value of financial instruments at December 31, 2019 and December 31, 2018 were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

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. As described in Note 16. "Derivative Instruments", the interest rate swaps and foreign currency forward contracts are recorded at fair value.

We calculate the fair value of our mortgage loans, unsecured term loans 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. The carrying value of our global revolving credit facilities approximates fair value, due to the variability of interest rates.

As of December 31, 2019 and December 31, 2018, the aggregate estimated fair value and carrying value of our global revolving credit facilities, unsecured term loans, unsecured senior notes and mortgage loans were as follows (in thousands):


	Categorization	As of December 31, 2019				As of December 31, 2018
	under the fair value	Estimated Fair				Estimated Fair
	hierarchy	Value		Carrying Value		Value		Carrying Value
Global revolving credit facilities (1)(4)	Level 2	$	245,766	$	245,766	$	1,663,156	$	1,663,156
Unsecured term loans (2)(4)	Level 2		813,205		813,205		1,183,121		1,183,121
Unsecured senior notes (3)(4)	Level 2		9,697,166		9,025,229		7,684,368		7,629,679
Secured debt (3)(4)	Level 2		105,245		105,143		706,086		705,924
		$	10,861,382	$	10,189,343	$	11,236,731	$	11,181,880

(1)	The carrying value of our global revolving credit facility approximates estimated fair value, due to the variability of interest rates and the stability of our credit ratings.

(2)	The carrying value of our unsecured term loans approximates estimated fair value, due to the variability of interest rates and the stability of our credit ratings.

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

(4)	The carrying value excludes unamortized premiums (discounts) and deferred financing costs (see note 9).

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Commitments and Contingencies

(a) Contingent Liabilities

On October 29, 2019, Digital Realty Trust, Inc., Digital Intrepid Holding B.V., an indirect subsidiary of Digital Realty Trust, Inc. (the “Buyer”), and InterXion Holding N.V. (“InterXion”) entered into a purchase agreement, pursuant to which, subject to the terms and conditions of the purchase agreement, the Buyer commenced an exchange offer to purchase all of the outstanding ordinary shares of InterXion in exchange for shares of common stock of Digital Realty Trust, Inc. The transaction is expected to close in 2020 and is subject to customary closing conditions. Generally, all fees and expenses incurred in connection with the transaction will be paid by the party incurring those fees and expenses. Additionally, upon termination of the purchase agreement in certain circumstances, the purchase agreement provides for the payment of a termination fee to the Company by InterXion of $72.6 million. The purchase agreement also provides for the payment of a termination fee to InterXion by the Company of $254.3 million upon termination of the purchase agreement in certain circumstances.

(b) Construction Commitments

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements and 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 December 31, 2019, we had open commitments, including amounts reimbursable of approximately $25.4 million, related to construction contracts of approximately $472.7 million.

Although the Company is involved in legal proceedings arising in the ordinary course of business, as of December 31, 2019, the Company is not currently a party to any legal proceedings nor, to its knowledge, is any legal proceeding threatened against it that it believes would have a material adverse effect on its financial position, results of operations or liquidity.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Quarterly Financial Information (Digital Realty Trust, Inc.) (unaudited)

The tables below reflect selected quarterly information for the years ended December 31, 2019 and 2018. Certain amounts have been reclassified to conform to the current year presentation (in thousands, except per share amounts).


	Three Months Ended
	December 31,		September 30,
	2019		2019		June 30, 2019		March 31, 2019
Total operating revenues	$	787,463	$	806,466	$	800,797	$	814,515
Net income		349,326		67,574		61,324		120,997
Net income attributable to Digital Realty Trust, Inc.		336,284		66,497		60,168		116,812
Preferred stock dividends and issuance costs associated with redeemed preferred stock		(20,707)		(16,670)		(28,430)		(20,943)
Net income available to common stockholders		315,577		49,827		31,738		95,869
Basic net income per share available to common stockholders	$	1.51	$	0.24	$	0.15	$	0.46
Diluted net income per share available to common stockholders	$	1.50	$	0.24	$	0.15	$	0.46


	Three Months Ended
	December 31,		September 30,
	2018		2018		June 30, 2018		March 31, 2018
Total operating revenues	$	778,267	$	768,924	$	754,919	$	744,368
Net income		52,597		90,264		88,159		110,095
Net income attributable to Digital Realty Trust, Inc.		51,559		87,597		85,463		106,627
Preferred stock dividends and issuance costs associated with redeemed preferred stock		(20,329)		(20,329)		(20,329)		(20,329)
Net income available to common stockholders		31,230		67,268		65,134		86,298
Basic net income per share available to common stockholders	$	0.15	$	0.33	$	0.32	$	0.42
Diluted net income per share available to common stockholders	$	0.15	$	0.33	$	0.32	$	0.42

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

December 31, 2019 and 201****8

Quarterly Financial Information (Digital Realty Trust, L.P.) (unaudited)


	Three Months Ended
	December 31,		September 30,
	2019		2019		June 30, 2019		March 31, 2019
Total operating revenues	$	787,463	$	806,466	$	800,797	$	814,515
Net income		349,326		67,574		61,324		120,997
Net income attributable to Digital Realty Trust, L.P.		349,384		68,797		61,568		121,112
Preferred unit distributions and issuance costs associated with redeemed preferred units		(20,707)		(16,670)		(28,430)		(20,943)
Net income available to common unitholders		328,677		52,127		33,138		100,169
Basic net income per unit available to common unitholders	$	1.51	$	0.24	$	0.15	$	0.46
Diluted net income per unit available to common unitholders	$	1.50	$	0.24	$	0.15	$	0.46


	Three Months Ended
	December 31,		September 30,
	2018		2018		June 30, 2018		March 31, 2018
Total operating revenues	$	778,267	$	768,924	$	754,919	$	744,368
Net income		52,597		90,264		88,159		110,095
Net income attributable to Digital Realty Trust, L.P.		52,859		90,297		88,163		110,107
Preferred unit distributions and issuance costs associated with redeemed preferred units		(20,329)		(20,329)		(20,329)		(20,329)
Net income available to common unitholders		32,530		69,968		67,834		89,778
Basic net income per unit available to common unitholders	$	0.15	$	0.33	$	0.32	$	0.42
Diluted net income per unit available to common unitholders	$	0.15	$	0.33	$	0.32	$	0.42

Subsequent Events

On January 17, 2020, Digital Dutch Finco B.V., a wholly owned indirect finance subsidiary of the Operating Partnership, issued and sold €300.0 million aggregate principal amount of 0.125% Guaranteed Notes due 2022 (the “2022 Notes”), €650.0 million aggregate principal amount of 0.625% Guaranteed Notes due 2025 (the “2025 Notes”) and €750.0 million aggregate principal amount of 1.500% Guaranteed Notes due 2030 (the “2030 Notes” and, together with the 2022 Notes and 2025 Notes, the “Euro Notes”). The Euro Notes are senior unsecured obligations of Digital Dutch Finco B.V. and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and the Operating Partnership. Net proceeds from the offering were approximately €1,678.6 million (approximately $1,861.9 million based on the exchange rate on January 17, 2020) after deducting managers’ discounts and estimated offering expenses.

On February 25, 2020, we closed on the acquisition of a 49% ownership interest in the Westin Building Exchange in Seattle for a purchase price of approximately $305 million plus closing costs. The acquisition of the interest held by seller increases our ownership interest to 99% of the property.

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION

December 31, 2019

(In thousands)


							Costs capitalized
							subsequent to
				Initial costs			acquisition		Total costs				Accumulated	Date of	Acquisition
					Acquired					Acquired			depreciation	acquisition	(A) or
	Metropolitan				ground	Buildings and		Carrying		ground	Buildings and		and	or	construction
	Area	Encumbrances		Land	lease	improvements	Improvements	costs	Land	lease	improvements	Total	amortization	construction	(C)
PROPERTIES:
36 NE 2nd Street	Miami	—		1,942	—	24,184	28,557	—	1,943	—	52,740	54,683	(20,112)	2002	(A)
2323 Bryan Street	Dallas	—		1,838	—	77,604	51,961	—	1,672	—	129,731	131,403	(77,314)	2002	(A)
300 Boulevard East	New York	—		5,140	—	48,526	56,701	—	5,140	—	105,227	110,367	(70,773)	2002	(A)
2334 Lundy Place	Silicon Valley	—		3,607	—	23,008	63	—	3,607	—	23,071	26,678	(11,349)	2002	(A)
2440 Marsh Lane	Dallas	—		1,477	—	10,330	74,858	—	1,486	—	85,179	86,665	(70,641)	2003	(A)
4849 Alpha Road	Dallas	—		2,983	—	10,650	44,117	—	2,983	—	54,767	57,750	(37,360)	2004	(A)
600 West Seventh Street	Los Angeles	—		18,478	—	50,824	78,054	—	18,537	—	128,819	147,356	(73,549)	2004	(A)
2045 & 2055 LaFayette Street	Silicon Valley	—		6,065	—	43,817	45	—	6,065	—	43,862	49,927	(20,264)	2004	(A)
11830 Webb Chapel Road	Dallas	—		5,881	—	34,473	2,534	—	5,881	—	37,007	42,888	(18,292)	2004	(A)
150 South First Street	Silicon Valley	—		2,068	—	29,214	1,499	—	2,068	—	30,713	32,781	(14,486)	2004	(A)
200 Paul Avenue	San Francisco	—		14,427	—	75,777	122,607	—	13,162	—	199,649	212,811	(95,975)	2004	(A)
1100 Space Park Drive	Silicon Valley	—		5,130	—	18,206	43,521	—	5,130	—	61,727	66,857	(36,889)	2004	(A)
3015 Winona Avenue	Los Angeles	—		6,534	—	8,356	6	—	6,534	—	8,362	14,896	(4,007)	2004	(A)
350 East Cermak Road	Chicago	—		8,466	—	103,232	248,477	—	8,620	—	351,555	360,175	(238,555)	2005	(A)
2401 Walsh Street	Silicon Valley	—		5,775	—	19,267	115	—	5,775	—	19,382	25,157	(9,323)	2005	(A)
2403 Walsh Street	Silicon Valley	—		5,514	—	11,695	124	—	5,514	—	11,819	17,333	(5,944)	2005	(A)
200 North Nash Street	Los Angeles	—		4,562	—	12,503	344	—	4,562	—	12,847	17,409	(7,010)	2005	(A)
731 East Trade Street	Charlotte	1,089	(1)	1,748	—	5,727	267	—	1,748	—	5,994	7,742	(2,782)	2005	(A)
113 North Myers	Charlotte	—		1,098	—	3,127	5,007	—	1,098	—	8,134	9,232	(2,942)	2005	(A)
125 North Myers	Charlotte	—		1,271	—	3,738	6,378	—	1,271	—	10,116	11,387	(7,820)	2005	(A)
Paul van Vlissingenstraat 16	Amsterdam	—		—	—	15,255	26,000	—	—	—	41,255	41,255	(22,108)	2005	(A)
600-780 S. Federal	Chicago	—		7,849	—	27,881	44,112	—	7,304	—	72,538	79,842	(20,834)	2005	(A)
Chemin de l’Epinglier 2	Geneva	—		—	—	20,071	(990)	—	—	—	19,081	19,081	(8,548)	2005	(A)
7500 Metro Center Drive	Austin	—		1,177	—	4,877	71,399	—	1,177	—	76,276	77,453	(16,572)	2005	(A)
3 Corporate Place	New York	—		1,543	—	12,678	92,737	—	1,543	—	105,415	106,958	(87,175)	2005	(A)
1115 Centennial Avenue	New York	—		581	—	—	58,202	—	581	—	58,202	58,783	(2,518)	2005	(C)
4025 Midway Road	Dallas	—		2,196	—	14,037	30,398	—	2,017	—	44,614	46,631	(32,501)	2006	(A)
Clonshaugh Industrial Estate	Dublin	—		—	1,444	5,569	1,493	—	—	93	8,413	8,506	(5,526)	2006	(A)
Digital Houston	Houston	—		6,965	—	23,492	148,349	—	6,594	—	172,212	178,806	(80,689)	2006	(A)
120 E Van Buren	Phoenix	—		4,524	—	157,822	121,422	—	4,524	—	279,244	283,768	(148,484)	2006	(A)

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION- (Continued)

December 31, 2019

(In thousands)


						Costs capitalized
						subsequent to
			Initial costs			acquisition		Total costs				Accumulated	Date of	Acquisition
				Acquired					Acquired			depreciation	acquisition	(A) or
	Metropolitan			ground	Buildings and		Carrying		ground	Buildings and		and	or	construction
	Area	Encumbrances	Land	lease	improvements	Improvements	costs	Land	lease	improvements	Total	amortization	construction	(C)
PROPERTIES:
Gyroscoopweg 2E-2F	Amsterdam	—	—	—	13,450	(1,643)	—	—	—	11,807	11,807	(5,260)	2006	(A)
Clonshaugh Industrial Estate II	Dublin	—	—	—	—	77,840	—	—	—	77,840	77,840	(50,061)	2006	(C)
600 Winter Street	Boston	—	1,429	—	6,228	456	—	1,429	—	6,684	8,113	(2,757)	2006	(A)
2300 NW 89th Place	Miami	—	1,022	—	3,767	19	—	1,022	—	3,786	4,808	(1,800)	2006	(A)
Unit 9, Blanchardstown Corporate Park	Dublin	—	1,927	—	40,024	23,867	—	1,623	—	64,195	65,818	(28,897)	2006	(A)
111 8th Avenue	New York	—	—	—	17,688	29,149	—	—	—	46,837	46,837	(33,612)	2006	(A)
8100 Boone Boulevard	N. Virginia	—	—	—	158	2,034	—	—	—	2,192	2,192	(2,192)	2006	(A)
3011 Lafayette Street	Silicon Valley	—	3,354	—	10,305	53,352	—	3,354	—	63,657	67,011	(52,456)	2007	(A)
44470 Chilum Place	N. Virginia	—	3,531	—	37,360	1	—	3,531	—	37,361	40,892	(13,154)	2007	(A)
43881 Devin Shafron Drive	N. Virginia	—	4,653	—	23,631	97,322	—	4,653	—	120,953	125,606	(98,771)	2007	(A)
43831 Devin Shafron Drive	N. Virginia	—	3,027	—	16,247	1,441	—	3,027	—	17,688	20,715	(7,156)	2007	(A)
43791 Devin Shafron Drive	N. Virginia	—	3,490	—	17,444	78,515	—	3,490	—	95,959	99,449	(66,593)	2007	(A)
Mundells Roundabout	London	—	31,354	—	—	44,158	—	21,131	—	54,381	75,512	(15,485)	2007	(C)
1500 Space Park Drive	Silicon Valley	—	6,732	—	6,325	46,593	—	4,106	—	55,544	59,650	(53,696)	2007	(A)
Cressex 1	London	—	3,629	—	9,036	21,335	—	2,548	—	31,452	34,000	(22,054)	2007	(A)
Naritaweg 52	Amsterdam	—	—	1,192	23,441	(5,561)	—	—	917	18,155	19,072	(6,396)	2007	(A)
1 St. Anne’s Boulevard	London	—	1,490	—	1,045	(736)	—	1,014	—	785	1,799	(238)	2007	(A)
2 St. Anne’s Boulevard	London	—	922	—	695	34,379	—	676	—	35,320	35,996	(7,647)	2007	(A)
3 St. Anne’s Boulevard	London	—	22,079	—	16,351	81,570	—	14,901	—	105,099	120,000	(70,353)	2007	(A)
365 South Randolphville Road	New York	—	3,019	—	17,404	296,533	—	2,853	—	314,103	316,956	(155,008)	2008	(A)
701 & 717 Leonard Street	Dallas	—	2,165	—	9,934	969	—	2,165	—	10,903	13,068	(3,608)	2008	(A)
Manchester Technopark	Manchester	—	—	—	23,918	(7,539)	—	—	—	16,379	16,379	(5,427)	2008	(A)
1201 Comstock Street	Silicon Valley	—	2,093	—	1,606	27,687	—	3,398	—	27,988	31,386	(20,843)	2008	(A)
1550 Space Park Drive	Silicon Valley	—	—	—	—	—	—	—	—	—	—	—	2008	(A)
1525 Comstock Street	Silicon Valley	—	2,293	—	16,216	32,286	—	2,061	—	48,734	50,795	(36,862)	2008	(C)
43830 Devin Shafron Drive	N. Virginia	—	5,509	—	—	74,322	—	4,928	—	74,903	79,831	(50,129)	2009	(C)
1232 Alma Road	Dallas	—	2,267	—	3,740	66,014	—	2,266	—	69,755	72,021	(49,754)	2009	(A)
900 Quality Way	Dallas	—	1,446	—	1,659	69,987	—	1,437	—	71,655	73,092	(25,389)	2009	(A)
1210 Integrity Drive	Dallas	—	2,041	—	3,389	187,448	—	3,204	—	189,674	192,878	(13,445)	2009	(A)
907 Security Row	Dallas	—	333	—	344	97,851	—	2,112	—	96,416	98,528	(12,469)	2009	(A)
908 Quality Way	Dallas	—	6,730	—	4,493	13,954	—	2,067	—	23,110	25,177	(18,696)	2009	(A)
904 Quality Way	Dallas	—	760	—	744	6,812	—	1,151	—	7,165	8,316	(1,382)	2009	(A)
1215 Integrity Drive	Dallas	—	—	—	—	69,926	—	995	—	68,931	69,926	(23,033)	2009	(C)
1350 Duane & 3080 Raymond	Silicon Valley	—	7,081	—	69,817	354	—	7,081	—	70,171	77,252	(18,445)	2009	(A)

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION- (Continued)

December 31, 2019

(In thousands)


						Costs capitalized
						subsequent to
			Initial costs			acquisition		Total costs				Accumulated	Date of	Acquisition
				Acquired					Acquired			depreciation	acquisition	(A) or
	Metropolitan			ground	Buildings and		Carrying		ground	Buildings and		and	or	construction
	Area	Encumbrances	Land	lease	improvements	Improvements	costs	Land	lease	improvements	Total	amortization	construction	(C)
PROPERTIES:
60 & 80 Merritt	New York	—	3,418	—	71,477	94,485	—	3,148	—	166,232	169,380	(49,071)	2010	(A)
55 Middlesex	Boston	—	9,975	—	68,363	14,499	—	9,975	—	82,862	92,837	(29,930)	2010	(A)
128 First Avenue	Boston	—	5,465	—	185,348	39,134	—	5,465	—	224,482	229,947	(80,988)	2010	(A)
Cateringweg 5	Amsterdam	—	—	3,518	3,517	37,814	—	—	3,223	41,626	44,849	(9,429)	2010	(A)
1725 Comstock Street	Silicon Valley	—	3,274	—	6,567	39,308	—	3,274	—	45,875	49,149	(29,302)	2010	(A)
3105 Alfred Street	Silicon Valley	—	6,533	—	3,725	123,691	—	6,533	—	127,416	133,949	(38,853)	2010	(A)
365 Main Street	San Francisco	—	22,854	—	158,709	35,001	—	22,854	—	193,710	216,564	(60,449)	2010	(A)
720 2nd Street	San Francisco	—	3,884	—	116,861	13,601	—	3,884	—	130,462	134,346	(36,724)	2010	(A)
2260 East El Segundo	Los Angeles	—	11,053	—	51,397	17,433	—	11,053	—	68,830	79,883	(23,640)	2010	(A)
2121 South Price Road	Phoenix	—	7,335	—	238,452	215,183	—	4,835	—	456,135	460,970	(147,927)	2010	(A)
4030 Lafayette	N. Virginia	—	2,492	—	16,912	12,780	—	2,492	—	29,692	32,184	(9,100)	2010	(A)
4040 Lafayette	N. Virginia	—	1,246	—	4,267	24,887	—	1,246	—	29,154	30,400	(5,804)	2010	(A)
4050 Lafayette	N. Virginia	—	1,246	—	4,371	36,244	—	1,246	—	40,615	41,861	(26,913)	2010	(A)
2805 Lafayette Street	Silicon Valley	—	8,976	—	18,155	131,011	—	8,294	—	149,848	158,142	(38,954)	2010	(A)
29A International Business Park	Singapore	—	—	—	137,545	223,342	—	—	—	360,887	360,887	(152,206)	2010	(A)
43940 Digital Loudoun Plaza	N. Virginia	—	6,229	—	—	285,614	—	7,524	—	284,319	291,843	(90,924)	2011	(C)
44060 Digital Loudoun Plaza	N. Virginia	—	3,700	—	—	187,004	—	3,441	—	187,263	190,704	(31,598)	2011	(C)
44100 Digital Loudoun Plaza	N. Virginia	—	3,700	—	—	141,840	—	3,493	—	142,047	145,540	(17,596)	2011	(C)
43780 Digital Loudoun Plaza	N. Virginia	—	3,671	—	—	123,368	—	4,186	—	122,853	127,039	(12,532)	2011	(C)
1-11 Templar Road	Sydney	—	6,937	—	—	62,836	—	4,349	—	65,424	69,773	(19,316)	2011	(C)
13-23 Templar Road	Sydney	—	4,236	—	—	52,379	—	2,501	—	54,114	56,615	(1,034)	2011	(C)
Fountain Court	London	—	7,544	—	12,506	100,446	—	6,569	—	113,927	120,496	(30,892)	2011	(A)
72 Radnor Drive	Melbourne	—	2,568	—	—	66,029	—	1,737	—	66,860	68,597	(12,370)	2011	(C)
98 Radnor Drive	Melbourne	—	1,899	—	—	36,140	—	1,339	—	36,700	38,039	(17,738)	2011	(C)
105 Cabot Street	Boston	—	2,386	—	—	35,876	—	1,161	—	37,101	38,262	(11,061)	2011	(C)

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION- (Continued)

December 31, 2019

(In thousands)


						Costs capitalized
						subsequent to
			Initial costs			acquisition		Total costs				Accumulated	Date of	Acquisition
				Acquired					Acquired			depreciation	acquisition	(A) or
	Metropolitan			ground	Buildings and		Carrying		ground	Buildings and		and	or	construction
	Area	Encumbrances	Land	lease	improvements	Improvements	costs	Land	lease	improvements	Total	amortization	construction	(C)
PROPERTIES:
3825 NW Aloclek Place	Portland	—	1,689	—	—	58,230	—	1,689	—	58,230	59,919	(24,836)	2011	(C)
Profile Park	Dublin	—	6,288	—	—	56,087	—	2,050	—	60,325	62,375	(6,256)	2011	(C)
760 Doug Davis Drive	Atlanta	—	4,837	—	53,551	3,373	—	4,837	—	56,924	61,761	(15,131)	2011	(A)
2501 S. State Hwy 121	Dallas	—	23,137	—	93,943	11,954	—	16,242	—	112,792	129,034	(35,468)	2012	(A)
9333 Grand Avenue	Chicago	—	5,686	—	14,515	75,076	—	1,205	—	94,072	95,277	(40,321)	2012	(A)
9355 Grand Avenue	Chicago	—	—	—	—	228,171	—	2,518	—	225,653	228,171	(30,014)	2012	(A)
9377 Grand Avenue	Chicago	—	—	—	—	133,910	—	2,799	—	131,111	133,910	(6,039)	2012	(A)
850 E Collins	Dallas	—	1,614	—	—	86,565	—	1,614	—	86,565	88,179	(23,682)	2012	(C)
950 E Collins	Dallas	—	1,546	—	—	75,695	—	1,546	—	75,695	77,241	(15,163)	2012	(C)
400 S. Akard	Dallas	—	10,075	—	62,730	2,943	—	10,075	—	65,673	75,748	(13,571)	2012	(A)
410 Commerce Boulevard	New York	—	—	—	—	30,260	—	—	—	30,260	30,260	(15,310)	2012	(C)
Croydon	London	—	1,683	—	104,728	47,591	—	2,367	—	151,635	154,002	(31,430)	2012	(A)
Watford	London	—	—	7,355	219,273	5,018	—	—	6,492	225,154	231,646	(48,278)	2012	(A)
Unit 21 Goldsworth Park	London	—	17,334	—	928,129	(121,080)	—	13,237	—	811,146	824,383	(182,102)	2012	(A)
23 Waterloo Road	Sydney	—	7,112	—	3,868	(3,564)	—	4,804	—	2,612	7,416	(500)	2012	(A)
1 Rue Jean-Pierre	Paris	—	9,621	—	35,825	(6,820)	—	8,177	—	30,449	38,626	(7,732)	2012	(A)
Liet-dit le Christ de Saclay	Paris	—	3,402	—	3,090	(975)	—	2,891	—	2,626	5,517	(861)	2012	(A)
127 Rue de Paris	Paris	—	8,637	—	10,838	(2,923)	—	7,341	—	9,211	16,552	(2,910)	2012	(A)
1900 S. Price Road	Phoenix	—	5,380	—	16,975	(11,394)	—	2,423	—	8,538	10,961	(2,412)	2013	(A)
371 Gough Road	Toronto	—	7,394	—	677	93,801	—	5,838	—	96,034	101,872	(13,452)	2013	(A)
1500 Towerview Road	Minneapolis	—	10,190	—	20,054	3,191	—	10,190	—	23,245	33,435	(5,566)	2013	(A)
Principal Park	London	—	11,837	—	—	76,060	—	7,097	—	80,800	87,897	(13,080)	2013	(C)
Liverpoolweg 10	Amsterdam	—	733	—	3,122	9,429	—	630	—	12,654	13,284	(3,020)	2013	(A)
DePresident	Amsterdam	—	6,737	—	—	116,399	—	6,996	—	116,140	123,136	(5,534)	2013	(C)
Crawley 2	London	—	24,305	—	—	33,139	—	4,252	—	53,192	57,444	(2,048)	2014	(C)
3 Loyang Way	Singapore	—	—	—	—	180,615	—	—	—	180,615	180,615	(11,645)	2015	(A)
Digital Loudoun III	N. Virginia	—	43,000	—	—	800,087	—	47,399	—	795,688	843,087	(37,172)	2015	(C)
Digital Frankfurt	Frankfurt	—	5,543	—	—	137,399	—	4,111	—	138,831	142,942	(3,706)	2015	(C)

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION- (Continued)

December 31, 2019

(In thousands)


							Costs capitalized
							subsequent to
				Initial costs			acquisition		Total costs				Accumulated	Date of	Acquisition
					Acquired					Acquired			depreciation	acquisition	(A) or
	Metropolitan				ground	Buildings and		Carrying		ground	Buildings and		and	or	construction
	Area		Encumbrances	Land	lease	improvements	Improvements	costs	Land	lease	improvements	Total	amortization	construction	(C)
56 Marietta Street	Atlanta	(2)	—	1,700	—	211,397	28,272	—	1,715	—	239,654	241,369	(42,690)	2015	(A)
2 Peekay Drive	New York	(2)	—	—	—	115,439	(16,103)	—	—	—	99,336	99,336	(23,282)	2015	(A)
100 Delawanna Avenue	New York	(2)	—	3,600	—	85,438	11,712	—	3,600	—	97,150	100,750	(14,734)	2015	(A)
60 Hudson Street	New York	(2)	—	—	—	32,280	18,735	—	—	—	51,015	51,015	(17,575)	2015	(A)
32 Avenue of the Americas	New York	(2)	—	—	—	30,980	4,362	—	—	—	35,342	35,342	(12,081)	2015	(A)
3433 S 120th Place	Seattle	(2)	—	—	—	11,688	(1,312)	(5,351)	—	—	5,025	5,025	(5,024)	2015	(A)
8435 Stemmons Freeway	Dallas	(2)	—	—	—	5,023	2,725	—	—	—	7,748	7,748	(2,818)	2015	(A)
2625 Walsh Avenue	Silicon Valley	(2)	—	—	—	4,276	9,051	—	—	—	13,327	13,327	(4,017)	2015	(A)
111 8th Avenue - Telx	New York	(2)	—	—	—	42,454	18,899	—	—	—	61,353	61,353	(23,063)	2015	(A)
350 East Cermak Road - Telx	Chicago	(2)	—	—	—	13,933	11,031	—	—	—	24,964	24,964	(8,114)	2015	(A)
200 Paul Avenue - Telx	San Francisco	(2)	—	—	—	6,719	4,632	—	—	—	11,351	11,351	(3,864)	2015	(A)
2323 Bryan Street - Telx	Dallas	(2)	—	—	—	5,191	5,621	—	—	—	10,812	10,812	(3,728)	2015	(A)
600 W. 7th Street - Telx	Los Angeles	(2)	—	—	—	3,689	8,050	—	—	—	11,739	11,739	(3,018)	2015	(A)
3825 NW Aloclek Place - Telx	Portland	(2)	—	—	—	3,131	1,347	—	—	—	4,478	4,478	(1,857)	2015	(A)
120 E. Van Buren Street - Telx	Phoenix	(2)	—	—	—	2,848	3,451	—	—	—	6,299	6,299	(1,910)	2015	(A)
36 NE 2nd Street - Telx	Miami	(2)	—	—	—	1,842	4,374	—	—	—	6,216	6,216	(1,929)	2015	(A)
600-780 S. Federal Street - Telx	Chicago	(2)	—	—	—	1,815	4,577	—	—	—	6,392	6,392	(1,588)	2015	(A)
113 N. Myers Street - Telx	Charlotte	(2)	—	—	—	476	1,142	—	—	—	1,618	1,618	(482)	2015	(A)
1100 Space Park Drive - Telx	Silicon Valley	(2)	—	—	—	352	2,265	—	—	—	2,617	2,617	(484)	2015	(A)
300 Boulevard East - Telx	New York	(2)	—	—	—	197	168	—	—	—	365	365	(186)	2015	(A)
Science Park	Amsterdam	(3)	—	665	—	75,095	13,037	—	—	—	88,797	88,797	(8,152)	2016	(A)
Sovereign House	London	(3)	—	7,943	—	75,184	58,238	—	—	—	141,365	141,365	(20,816)	2016	(A)
Amstel Business Park	Amsterdam	(3)	—	2,991	—	58,138	12,448	—	3,028	—	70,549	73,577	(20,491)	2016	(A)
Olivers Yard	London	(3)	—	7,943	—	34,744	2,357	—	—	—	45,044	45,044	(13,783)	2016	(A)
Bonnington House	London	(3)	—	—	—	14,127	64,055	—	—	—	78,182	78,182	(1,405)	2016	(A)
West Drayton	London	(3)	—	—	—	10,135	3,519	—	—	—	13,654	13,654	(7,281)	2016	(A)
Lyonerstrasse	Frankfurt	(3)	—	—	—	8,407	6,393	—	—	—	14,800	14,800	(5,137)	2016	(A)
Meridian Gate	London	(3)	—	—	—	5,893	1,621	—	—	—	7,514	7,514	(3,829)	2016	(A)
2425-2553 Edgington Street	Chicago		—	11,950	—	1,615	64	—	11,959	—	1,670	13,629	(160)	2017	(C)
44520 Hastings Drive	N. Virginia	(4)	104,000	6,140	—	108,105	1,581	—	6,140	—	109,686	115,826	(14,806)	2017	(A)

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION- (Continued)

December 31, 2019

(In thousands)


											Costs capitalized
											subsequent to
					Initial costs						acquisition				Total costs								Accumulated		Date of	Acquisition
							Acquired										Acquired						depreciation		acquisition	(A) or
	Metropolitan						ground			Buildings and			Carrying				ground		Buildings and				and		or	construction
	Area		Encumbrances		Land		lease		improvements		Improvements		costs		Land		lease		improvements		Total		amortization		construction	(C)
44480 Hastings Drive	N. Virginia	(4)		—		12,860		—		278,384		1,227		—		12,860		—		279,611		292,471		(38,147)	2017	(A)
44521 Hastings Drive	N. Virginia	(4)		—		13,210		—		315,539		361		—		13,210		—		315,900		329,110		(43,315)	2017	(A)
44461 Chilum Place	N. Virginia	(4)		—		9,620		—		249,371		523		—		9,620		—		249,894		259,514		(34,452)	2017	(A)
21625 Gresham Drive	N. Virginia	(4)		—		17,500		—		448,968		488		—		17,500		—		449,456		466,956		(62,151)	2017	(A)
2200 Busse Road	Chicago	(4)		—		17,270		—		384,558		1,905		—		17,270		—		386,463		403,733		(50,399)	2017	(A)
2299 Busse Road	Chicago	(4)		—		12,780		—		348,348		(1,687)		—		12,780		—		346,661		359,441		(47,004)	2017	(A)
1780 Business Center Drive	N. Virginia	(4)		—		7,510		—		106,363		1,122		—		7,510		—		107,485		114,995		(13,001)	2017	(A)
8217 Linton Hall Road	N. Virginia	(4)		—		22,340		—		81,985		355		—		22,340		—		82,340		104,680		(9,386)	2017	(A)
1400 East Devon Avenue	Chicago	(4)		—		11,012		—		178,627		45,871		—		9,994		—		225,516		235,510		(17,462)	2017	(A)
2220 De La Cruz Blvd	Silicon Valley	(4)		—		84,650		—		634,007		4,588		—		84,650		—		638,595		723,245		(81,549)	2017	(A)
1 Century Place	Toronto	(4)		—		26,600		—		116,863		1,302		—		8,479		—		136,286		144,765		(4,861)	2017	(C)
505 North Railroad Avenue	Chicago			—		20,431		—		245,810		(33,149)		—		12,271		—		220,821		233,092		(12,612)	2017	(A)
250 Williams	Atlanta			—		—		—		—		26,774		—		—		—		26,774		26,774		(5,240)	2017	(C)
CME Agreement	Chicago			—		—		—		—		42,875		—		—		—		42,875		42,875		(21,741)	2017	(C)
De President II	Amsterdam			—		6,315		—		—		37,181		—		2,453		—		41,043		43,496		—	2017	(C)
2825-2845 Lafayette Street	Silicon Valley			—		—		—		2,941		60		—		—		—		3,001		3,001		(3,001)	2018	(C)
21780 Filigree Court	N. Virginia			—		24,315		—		3,039		1,346		—		25,740		—		2,960		28,700		(491)	2019	(C)
Other				—		—		—		—		55,482		—		25		—		55,457		55,482		(18,053)
			$	105,089	$	930,961	$	13,509	$	8,327,303	$	7,620,170	$	(5,351)	$	804,830	$	10,725	$	16,071,037	$	16,886,592	$	(4,536,169)

(1)	The balance shown excludes an unamortized premium of $54.

(2)	Represents properties acquired in the Telx Acquisition.

(3)	Represents properties acquired in the European Portfolio Acquisition.

(4)	Represents properties acquired in the DFT Merger.

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION

December 31, 2019

(In thousands)

(1) Tax Cost

The aggregate gross cost of the Company’s properties for federal income tax purposes approximated $19.7 billion (unaudited) as of December 31, 2019.

(2) Historical Cost and Accumulated Depreciation and Amortization

The following table reconciles the historical cost of the Company’s properties for financial reporting purposes for each of the years in the three-year period ended December 31, 2019.


	Year Ended December 31,
	2019		2018		2017
Balance, beginning of year	$	17,055,016	$	16,915,936	$	11,558,469
Additions during period (acquisitions and improvements)		833,836		223,163		5,663,404
Deductions during period (dispositions, impairments and assets held for sale)		(1,002,260)		(84,083)		(305,937)
Balance, end of year	$	16,886,592	$	17,055,016	$	16,915,936

The following table reconciles accumulated depreciation and amortization of the Company’s properties for financial reporting purposes for each of the years in the three-year period ended December 31, 2019.


	Year Ended December 31,
	2019		2018		2017
Balance, beginning of year	$	3,935,267	$	3,238,227	$	2,668,509
Additions during period (depreciation and amortization expense)		805,916		714,336		612,970
Deductions during period (dispositions and assets held for sale)		(205,014)		(17,296)		(43,252)
Balance, end of year	$	4,536,169	$	3,935,267	$	3,238,227

Schedules other than those listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto.

Index to Financial Statements

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE