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		79
Reports of Independent Registered Public Accounting Firm (Auditor Firm ID: 185)		80
Consolidated Financial Statements of Digital Realty Trust, Inc.
Consolidated Balance Sheets as of December 31, 2022 and 2021		86
Consolidated Income Statements for each of the years in the three-year period ended December 31, 2022		87
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2022		88
Consolidated Statements of Equity for each of the years in the three-year period ended December 31, 2022		91
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2022		92
Consolidated Financial Statements of Digital Realty Trust, L.P.
Consolidated Balance Sheets as of December 31, 2022 and 2021		93
Consolidated Income Statements for each of the years in the three-year period ended December 31, 2022		94
Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2022		95
Consolidated Statements of Capital for each of the years in the three-year period ended December 31, 2022		96
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2022		99
Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P.
Notes to Consolidated Financial Statements		100
Supplemental Schedule—Schedule III—Properties and Accumulated Depreciation		151
Notes to Schedule III—Properties and Accumulated Depreciation		153

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, 2022. 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). We acquired a majority interest in Teraco during the year ended December 31, 2022. We have excluded from our overall assessment of the Company's internal control over financial reporting as of December 31, 2022, internal control over financial reporting associated with Teraco and its total assets of $4.1 billion and total revenues of $71.4 million. Based on our assessment, management concluded that as of December 31, 2022, 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 83.

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, 2022. 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). We acquired a majority interest in Teraco during the year ended December 31, 2022. We have excluded from our overall assessment of the Operating Partnership’s internal control over financial reporting as of December 31, 2022, internal control over financial reporting associated with Teraco and its total assets of $4.1 billion and total revenues of $71.4 million. Based on our assessment, management concluded that as of December 31, 2022, 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, 2022 and 2021, the related consolidated income statements, and statements of comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

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.

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 judgments. 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.

Index to Financial Statements

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 on a lease-by lease basis it is probable substantially all lease payments over the term of the lease will be collected. Whenever the results of that assessment 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 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 collected basis. Rental and other services revenue was $4.7 billion for the year ended December 31, 2022 and deferred rent and rent receivable, net was $601.6 million and $560.6 million, respectively, as of December 31, 2022.

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 judgement because of the subjective nature of the evidence obtained. Specifically, evaluating the creditworthiness of the customer and any guarantors required significant auditor judgement.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s probability assessment of lease payment collection process, including controls related to the assessment of the creditworthiness of the customer and any guarantors. For a selection of the Company’s leases, we evaluated the Company’s determination of the collectability of substantially all of the lease payments by: (i) comparing the legal name of customer and any guarantor to the underlying lease agreements and third-party credit rating report, (ii) evaluating the creditworthiness of the customer by assessing their credit rating, (iii) reading publicly available information, including the customer’s financial statements, recent public filings, and news articles, and (iv) inquiring of Company employees to obtain evidence regarding creditworthiness of the customers.

.
		/s/ KPMG LLP

We have served as the Company’s auditor since 2004

Dallas, Texas
February 24, 2023

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, 2022, 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, 2022, 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, 2022 and 2021, 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, 2022, and the related notes and financial statement schedule III, properties and accumulated depreciation (collectively, the consolidated financial statements), and our report dated February 24, 2023 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired TDE Investments Pty Ltd. during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, TDE Investments Pty Ltd.’s internal control over financial reporting associated with total assets of $4,100,000,000 and total revenues of $71,400,000 included in the consolidated financial statements of the Company as of and for the year ended December 31, 2022. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of TDE Investments Pty Ltd.

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 on 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

Index to Financial Statements

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
Dallas, Texas
February 24, 2023

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Partners of Digital Realty Trust, L.P. and the Board of Directors of Digital Realty Trust, Inc. 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, 2022 and 2021, 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, 2022, 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 Operating Partnership as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

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.

Critical Audit Matter

Index to Financial Statements

Evaluation of lease revenue

As discussed in Note 2 to the consolidated financial statements, the Operating Partnership records rental revenue on a straight-line basis if the Operating Partnership determines on a lease-by-lease basis it is probable substantially all lease payments over the term of the lease will be collected. Whenever the results of that assessment indicate that it is not probable that the Operating Partnership will be able to collect substantially all lease payments over the remaining term of the lease, the Operating Partnership records a reduction to rental 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 consolidated basis. Rental and other services revenue was $4.7 billion for the year ended December 31, 2022 and deferred rent and rent receivable, net was $601.6 million and $560.6 million, respectively, as of December 31, 2022.

We identified the evaluation of the probability of collection of lease payments as a critical audit matter. Evaluating the Operating Partnership’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. Specifically, evaluating the creditworthiness of the customer and any guarantors required significant auditor judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Operating Partnership’s probability assessment of lease payment collection process, including controls related to the assessment of the creditworthiness of the customer and any guarantors. For a selection of the Operating Partnership’s leases, we evaluated the Operating Partnership’s determination of the collectibility of substantially all of the lease payments by: (i) comparing the legal name of customer and any guarantor to the underlying lease agreements and third-party credit rating report, (ii) evaluating the creditworthiness of the customer by assessing their credit rating, (iii) reading publicly available information, including the customer’s financial statements, recent public filings, and news articles, and (iv) inquiring of Operating Partnership employees to obtain evidence regarding creditworthiness of the customers.


		/s/ KPMG LLP

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

Dallas, Texas
February 24, 2023

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	December 31,		December 31,
	2022		2021
ASSETS
Investments in real estate:
Investments in properties, net	$	23,774,662	$	20,762,241
Investments in unconsolidated entities		1,991,426		1,807,689
Net investments in real estate		25,766,088		22,569,930
Operating lease right-of-use assets, net		1,351,329		1,405,441
Cash and cash equivalents		141,773		142,698
Accounts and other receivables, net		969,292		671,721
Deferred rent, net		601,590		547,385
Goodwill		9,208,497		7,937,440
Customer relationship value, deferred leasing costs and intangibles, net		3,092,627		2,735,486
Other assets		353,802		359,459
Total assets	$	41,484,998	$	36,369,560
LIABILITIES AND EQUITY
Global revolving credit facilities, net	$	2,150,451	$	398,172
Unsecured term loans, net		797,449		—
Unsecured senior notes, net of discount		13,120,033		12,903,370
Secured and other debt, including premiums		528,870		146,668
Operating lease liabilities		1,471,044		1,512,187
Accounts payable and other accrued liabilities		1,868,885		1,543,623
Deferred tax liabilities, net		1,192,752		666,451
Accrued dividends and distributions		363,716		338,729
Security deposits and prepaid rents		369,654		336,578
Total liabilities		21,862,854		17,845,778

Redeemable noncontrolling interests		1,514,679		46,995
Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 110,000 shares authorized; $755,000 liquidation preference ($25.00 per share), 30,200 shares issued and outstanding as of December 31, 2022 and December 31, 2021		731,690		731,690
Common Stock: $0.01 par value per share, 392,000 shares authorized; 291,148 and 284,415 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively		2,887		2,824
Additional paid-in capital		22,142,868		21,075,863
Accumulated dividends in excess of earnings		(4,698,313)		(3,631,929)
Accumulated other comprehensive loss, net		(595,798)		(173,880)
Total stockholders’ equity		17,583,334		18,004,568
Noncontrolling interests		524,131		472,219
Total equity		18,107,465		18,476,787
Total liabilities and equity	$	41,484,998	$	36,369,560

See accompanying notes to the consolidated financial statements.

Index to Financial Statements

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share data)


	Year Ended December 31,
	2022		2021		2020
Operating Revenues:
Rental and other services	$	4,662,683	$	4,395,039	$	3,886,546
Fee income and other		29,151		32,843		17,063
Total operating revenues		4,691,834		4,427,882		3,903,609
Operating Expenses:
Rental property operating and maintenance		1,825,817		1,570,506		1,331,493
Property taxes and insurance		191,745		207,814		182,623
Depreciation and amortization		1,577,933		1,486,632		1,366,379
General and administrative		422,167		400,654		351,369
Transactions and integration		68,766		47,426		106,662
Impairment of investments in real estate		3,000		18,291		6,482
Other		12,438		2,550		1,075
Total operating expenses		4,101,866		3,733,873		3,346,083
Operating income		589,968		694,009		557,526
Other Income (Expenses):
Equity in (loss) earnings of unconsolidated entities		(13,497)		62,283		(57,629)
Gain on disposition of properties, net		176,754		1,380,795		316,894
Other income (expenses), net		8,917		(4,358)		20,222
Interest expense		(299,132)		(293,846)		(333,021)
Loss from early extinguishment of debt		(51,135)		(18,672)		(103,215)
Income tax expense		(31,550)		(72,799)		(38,047)
Net income		380,325		1,747,412		362,730
Net income attributable to noncontrolling interests		(2,641)		(38,153)		(6,332)
Net income attributable to Digital Realty Trust, Inc.		377,684		1,709,259		356,398
Preferred stock dividends, including undeclared dividends		(40,724)		(45,761)		(76,536)
Gain (loss) on redemption of preferred stock		—		18,000		(16,520)
Net income available to common stockholders	$	336,960	$	1,681,498	$	263,342
Net income per share available to common stockholders:
Basic	$	1.18	$	5.95	$	1.01
Diluted	$	1.11	$	5.94	$	1.00
Weighted average common shares outstanding:
Basic		286,334		282,475		260,099
Diluted		297,919		283,222		262,523

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,
	2022		2021		2020
Net income	$	380,325	$	1,747,412	$	362,730
Other comprehensive income (loss):
Foreign currency translation adjustments		(377,873)		(318,828)		230,340
(Decrease) Increase in fair value of interest rate swaps		(93,803)		1,279		(12,425)
Reclassification to interest expense from interest rate swaps		(7,044)		1,304		8,294
Other comprehensive income (loss)		(478,720)		(316,245)		226,209
Comprehensive (loss) income		(98,395)		1,431,167		588,939
Comprehensive loss attributable to noncontrolling interests		54,161		947		3,168
Comprehensive (loss) income attributable to Digital Realty Trust, Inc.	$	(44,234)	$	1,432,114	$	592,107

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
	Redeemable				Number of			Additional		Dividends in		Comprehensive		Total
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Loss,		Noncontrolling		Total
	Interests		Stock		Shares	Stock		Capital		Earnings		Net		Interests		Equity
Balance as of December 31, 2019	$	41,465	$	1,434,420	208,900,758	$	2,073	$	11,577,320	$	(3,046,579)	$	(87,922)	$	728,788	$	10,608,100
Conversion of common units to common stock		—		—	1,070,014		10		92,543		—		—		(92,553)		—
Common stock and share-based awards issued in connection with business combinations		—		—	54,487,997		545		7,012,675		—		—		—		7,013,220
Issuance of common stock, net of costs		—		—	15,920,893		160		1,888,366		—		—		—		1,888,526
Shares issued under employee stock purchase plan		—		—	58,136		—		6,503		—		—		—		6,503
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		—		(8,570)		—		—		—		(8,570)
Amortization of share-based compensation		—		—	—		—		78,757		—		—		—		78,757
Vesting of restricted stock, net		—		—	(148,072)		—		—		—		—		—		—
Reclassification of vested share-based awards		—		—	—		—		(17,611)		—		—		17,611		—
Redemption of series G preferred stock		—		(241,468)	—		—		—		(8,532)		—		—		(250,000)
Redemption of series I preferred stock		—		(242,012)	—		—		—		(7,988)		—		—		(250,000)
Adjustment to redeemable noncontrolling interests		3,086		—	—		—		(3,086)		—		—		—		(3,086)
Dividends declared on preferred stock		—		—	—		—		—		(76,536)		—		—		(76,536)
Dividends and distributions on common stock and common and incentive units		(700)		—	—		—		—		(1,214,701)		—		(37,147)		(1,251,848)
Contributions from noncontrolling interests		2,089		—	—		—		—		—		—		97,914		97,914
Net income (loss)		(4,417)		—	—		—		—		356,398		—		10,749		367,147
Other comprehensive income—foreign currency translation adjustments		488		—	—		—		—		—		226,849		3,491		230,340
Other comprehensive loss—fair value of interest rate swaps		—		—	—		—		—		—		(11,980)		(445)		(12,425)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		8,063		231		8,294
Balance as of December 31, 2020	$	42,011	$	950,940	280,289,726	$	2,788	$	20,626,897	$	(3,997,938)	$	135,010	$	728,639	$	18,446,336

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
	Redeemable				Number of			Additional		Dividends in		Comprehensive		Total
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Income (Loss),		Noncontrolling		Total
	Interests		Stock		Shares	Stock		Capital		Earnings		Net		Interests		Equity
Balance as of December 31, 2020	$	42,011	$	950,940	280,289,726	$	2,788	$	20,626,897	$	(3,997,938)	$	135,010	$	728,639	$	18,446,336
Conversion of common units to common stock		—		—	2,502,331		25		206,695		—		—		(206,720)		—
Issuance of common units in connection with acquisition		—		—	125,395		1		18,269		—		—		—		18,270
Issuance of common stock, net of costs		—		—	1,060,943		11		172,085		—		—		—		172,096
Shares issued under employee stock purchase plan		—		—	82,129		—		9,895		—		—		—		9,895
Redemption of series C preferred stock		—		(219,250)	—		—		—		18,000		—		—		(201,250)
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		(1)		(16,733)		—		—		—		(16,734)
Amortization of unearned compensation on share-based awards		—		—	—		—		88,414		—		—		—		88,414
Vesting of restricted stock, net		—		—	354,489		—		—		—		—		—		—
Reclassification of vested share-based awards		—		—	—		—		(23,829)		—		—		23,829		—
Adjustment to redeemable noncontrolling interests		5,830		—	—		—		(5,830)		—		—		—		(5,830)
Dividends declared on preferred stock		—		—	—		—		—		(45,761)		—		—		(45,761)
Dividends and distributions on common stock and common and incentive units		(724)		—	—		—		—		(1,315,489)		—		(31,567)		(1,347,056)
Contributions from (distributions to) noncontrolling interests		(1,052)		—	—		—		—		—		—		125,186		125,186
Deconsolidation of consolidated entities		—		—	—		—		—		—		—		(197,016)		(197,016)
Net income		930		—	—		—		—		1,709,259		—		37,223		1,746,482
Other comprehensive loss—foreign currency translation adjustments		—		—	—		—		—		—		(311,413)		(7,415)		(318,828)
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		1,250		29		1,279
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		1,273		31		1,304
Balance as of December 31, 2021	$	46,995	$	731,690	284,415,013	$	2,824	$	21,075,863	$	(3,631,929)	$	(173,880)	$	472,219	$	18,476,787

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
	Redeemable				Number of			Additional		Dividends in		Comprehensive		Total
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Income (Loss),		Noncontrolling		Total
	Interests		Stock		Shares	Stock		Capital		Earnings		Net		Interests		Equity
Balance as of December 31, 2021	$	46,995	$	731,690	284,415,013	$	2,824	$	21,075,863	$	(3,631,929)	$	(173,880)	$	472,219	$	18,476,787
Conversion of common units to common stock		—		—	36,284		—		2,942		—		—		(2,942)		—
Vesting of restricted stock, net		—		—	340,874		—		—		—		—		—		—
Partial settlement of forward sale agreements, net of costs		—		—	6,250,000		63		923,400		—		—		—		923,463
Shares issued under equity plans, net of share settlement to satisfy tax withholding upon vesting		—		—	106,051		—		1,496		—		—		—		1,496
Amortization of unearned compensation regarding share based awards		—		—	—		—		92,461		—		—		—		92,461
Reclassification of vested share based awards		—		—	—		—		(29,864)		—		—		29,864		—
Adjustment to redeemable noncontrolling interests		(11,954)		—	—		—		11,954		—		—		—		11,954
Dividends declared on preferred stock		—		—	—		—		—		(40,724)		—		—		(40,724)
Dividends and distributions on common stock and common and incentive units		(760)		—	—		—		—		(1,403,344)		—		(30,796)		(1,434,140)
Redeemable noncontrolling interests associated with acquisition of Teraco		1,530,090		—	—		—		—		—		—		—		—
Contributions from (distributions to) noncontrolling interests		1,703		—	—		—		—		—		—		46,277		46,277
Sale of noncontrolling interest in property to DCRU		—		—	—		—		64,616		—		—		12,275		76,891
Net income		(4,653)		—	—		—		—		377,684		—		7,294		384,978
Other comprehensive loss—foreign currency translation adjustments		(46,742)		—	—		—		—		—		(323,366)		(7,765)		(331,131)
Other comprehensive loss—fair value of interest rate swaps		—		—	—		—		—		—		(91,644)		(2,159)		(93,803)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		(6,908)		(136)		(7,044)
Balance as of December 31, 2022	$	1,514,679	$	731,690	291,148,222	$	2,887	$	22,142,868	$	(4,698,313)	$	(595,798)	$	524,131	$	18,107,465

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,
	2022		2021		2020
Cash flows from operating activities:
Net income	$	380,325	$	1,747,412	$	362,730
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(176,754)		(1,380,795)		(316,894)
Equity in loss (earnings) of unconsolidated entities		13,497		(62,283)		57,629
Distributions from unconsolidated entities		42,376		66,232		39,878
Depreciation and amortization		1,577,933		1,486,632		1,366,379
Amortization of share-based compensation		92,461		84,083		74,577
Loss from early extinguishment of debt		51,135		18,672		103,215
Straight-lined rents and amortization of above and below market leases		(64,954)		(30,793)		(17,744)
Amortization of deferred financing costs and debt discount / premium		18,848		18,694		19,202
Other items, net		(45,141)		81,038		6,102
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(272,452)		(389,116)		(72,897)
Increase in accounts payable and other liabilities		42,114		62,452		84,364
Net cash provided by operating activities		1,659,388		1,702,228		1,706,541
Cash flows from investing activities:
Improvements to investments in real estate		(2,643,097)		(2,520,772)		(2,064,066)
Cash paid for business combination / asset acquisitions, net of cash acquired		(1,930,178)		(192,015)		(908,567)
(Investment in) proceeds from unconsolidated entities, net		(296,095)		2,665		(144,323)
Proceeds from sale of real estate		271,567		1,691,072		564,615
Other investing activities, net		(101,600)		(42,671)		(47,006)
Net cash used in investing activities		(4,699,403)		(1,061,721)		(2,599,347)
Cash flows from financing activities:
Net proceeds from (payments on) credit facilities		1,690,181		(89,554)		162,111
Borrowings on secured / unsecured debt		2,791,027		1,824,389		3,573,120
Repayments on secured / unsecured debt		(1,036,577)		(990,968)		(2,928,924)
Premium paid for early extinguishment of debt		(49,662)		(16,482)		(96,124)
Capital contributions from noncontrolling interests, net		44,312		124,134		102,285
Proceeds from issuance of common stock, net		928,432		172,096		1,879,957
Redemption of preferred stock		—		(201,250)		(500,000)
Payments of dividends and distributions		(1,450,637)		(1,379,198)		(1,239,318)
Other financing activities, net		52,073		(33,797)		(17,418)
Net cash provided by (used in) financing activities		2,969,149		(590,630)		935,689
Net (decrease) increase in cash, cash equivalents and restricted cash		(70,866)		49,877		42,883
Effect of exchange rate changes on cash, cash equivalents and restricted cash		70,077		(22,044)		(16,484)
Cash, cash equivalents and restricted cash at beginning of period		151,485		123,652		97,253
Cash, cash equivalents and restricted cash at end of period	$	150,696	$	151,485	$	123,652

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 per unit data)


	December 31,		December 31,
	2022		2021
ASSETS
Investments in real estate:
Investments in properties, net	$	23,774,662	$	20,762,241
Investments in unconsolidated entities		1,991,426		1,807,689
Net investments in real estate		25,766,088		22,569,930
Operating lease right-of-use assets, net		1,351,329		1,405,441
Cash and cash equivalents		141,773		142,698
Accounts and other receivables, net		969,292		671,721
Deferred rent, net		601,590		547,385
Goodwill		9,208,497		7,937,440
Customer relationship value, deferred leasing costs and intangibles, net		3,092,627		2,735,486
Other assets		353,802		359,459
Total assets	$	41,484,998	$	36,369,560
LIABILITIES AND CAPITAL
Global revolving credit facilities, net	$	2,150,451	$	398,172
Unsecured term loans, net		797,449		—
Unsecured senior notes, net		13,120,033		12,903,370
Secured and other debt, including premiums		528,870		146,668
Operating lease liabilities		1,471,044		1,512,187
Accounts payable and other accrued liabilities		1,868,885		1,543,623
Deferred tax liabilities, net		1,192,752		666,451
Accrued dividends and distributions		363,716		338,729
Security deposits and prepaid rents		369,654		336,578
Total liabilities		21,862,854		17,845,778

Redeemable noncontrolling interests		1,514,679		46,995
Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Preferred units, $755,000 liquidation preference ($25.00 per unit), 30,200 units issued and outstanding as of December 31, 2022 and December 31, 2021		731,690		731,690
Common units, 291,148 and 284,415 units issued and outstanding as of December 31, 2022 and December 31, 2021, respectively		17,447,442		17,446,758
Limited Partners, 6,289 and 5,932 units issued and outstanding as of December 31, 2022 and December 31, 2021, respectively		436,942		432,902
Accumulated other comprehensive loss		(613,423)		(181,445)
Total partners’ capital		18,002,651		18,429,905
Noncontrolling interests in consolidated entities		104,814		46,882
Total capital		18,107,465		18,476,787
Total liabilities and capital	$	41,484,998	$	36,369,560

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 per unit data)


	Year Ended December 31,
	2022		2021		2020
Operating Revenues:
Rental and other services	$	4,662,683	$	4,395,039	$	3,886,546
Fee income and other		29,151		32,843		17,063
Total operating revenues		4,691,834		4,427,882		3,903,609
Operating Expenses:
Rental property operating and maintenance		1,825,817		1,570,506		1,331,493
Property taxes and insurance		191,745		207,814		182,623
Depreciation and amortization		1,577,933		1,486,632		1,366,379
General and administrative		422,167		400,654		351,369
Transactions and integration		68,766		47,426		106,662
Impairment of investments in real estate		3,000		18,291		6,482
Other		12,438		2,550		1,075
Total operating expenses		4,101,866		3,733,873		3,346,083
Operating income		589,968		694,009		557,526
Other Income (Expenses):
Equity in earnings (loss) of unconsolidated entities		(13,497)		62,283		(57,629)
Gain on disposition of properties, net		176,754		1,380,795		316,894
Other income (expense), net		8,917		(4,358)		20,222
Interest expense		(299,132)		(293,846)		(333,021)
Loss from early extinguishment of debt		(51,135)		(18,672)		(103,215)
Income tax expense		(31,550)		(72,799)		(38,047)
Net income		380,325		1,747,412		362,730
Net loss attributable to noncontrolling interests		5,459		947		3,168
Net income attributable to Digital Realty Trust, L.P.		385,784		1,748,359		365,898
Preferred units distributions, including undeclared distributions		(40,724)		(45,761)		(76,536)
Gain (loss) on redemption of preferred units		—		18,000		(16,520)
Net income available to common unitholders	$	345,060	$	1,720,598	$	272,842
Net income per unit available to common unitholders:
Basic	$	1.18	$	5.95	$	1.02
Diluted	$	1.12	$	5.94	$	1.01
Weighted average common units outstanding:
Basic		292,123		289,165		268,073
Diluted		303,708		289,912		270,497

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,
	2022		2021		2020
Net income	$	380,325	$	1,747,412	$	362,730
Other comprehensive income (loss):
Foreign currency translation adjustments		(377,873)		(318,828)		230,340
(Decrease) Increase in fair value of interest rate swaps		(93,803)		1,279		(12,425)
Reclassification to interest expense from interest rate swaps		(7,044)		1,304		8,294
Other comprehensive income (loss)		(478,720)		(316,245)		226,209
Comprehensive (loss) income attributable to Digital Realty Trust, L.P.	$	(98,395)	$	1,431,167	$	588,939
Comprehensive loss attributable to noncontrolling interests		52,202		947		3,168
Comprehensive (loss) income attributable to Digital Realty Trust, L.P.	$	(46,193)	$	1,432,114	$	592,107

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
	Redeemable		General Partner						Limited Partners			Other
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
	Interests		Units	Amount		Units	Amount		Units	Amount		Loss		Interests		Total Capital
Balance as of December 31, 2019	$	41,465	58,250,000	$	1,434,420	208,900,758	$	8,532,814	8,843,155	$	711,650	$	(91,409)	$	20,625	$	10,608,100
Conversion of limited partner common units to general partner common units		—	—		—	1,070,014		92,553	(1,070,014)		(92,553)		—		—		—
Common units and share-based awards issued in connection with business combinations		—	—		—	54,487,997		7,013,220	—		—		—		—		7,013,220
Issuance of common units, net of offering costs		—	—		—	15,920,893		1,888,526	—		—		—		—		1,888,526
Issuance of common units, net of forfeitures		—	—		—	—		—	273,126		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	58,136		6,503	—		—		—		—		6,503
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(7,320)	—		—		—		—		(7,320)
Amortization of share-based compensation		—	—		—	—		77,507	—		—		—		—		77,507
Vesting of restricted common units, net		—	—		—	(148,072)		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(17,611)	—		17,611		—		—		—
Redemption of series G preferred units		—	(10,000,000)		(241,468)	—		(8,532)	—		—		—		—		(250,000)
Redemption of series I preferred units		—	(10,000,000)		(242,012)	—		(7,988)	—		—		—		—		(250,000)
Adjustment to redeemable partnership units		3,086	—		—	—		(3,086)	—		—		—		—		(3,086)
Distributions		(700)	—		—	—		(1,214,701)	—		(37,147)		—		—		(1,251,848)
Contributions from noncontrolling interests in consolidated entities		2,089	—		—	—		—	—		—		—		97,914		97,914
Net income (loss)		(4,417)	—		—	—		279,862	—		9,629		—		1,120		290,611
Other comprehensive income—foreign currency translation adjustments		488	—		—	—		—	—		—		230,340		—		230,340
Other comprehensive loss—fair value of interest rate swaps		—	—		—	—		—	—		—		(12,425)		—		(12,425)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—	—		—	—		—	—		—		8,294		—		8,294
Balance as of December 31, 2020	$	42,011	38,250,000	$	950,940	280,289,726	$	16,631,747	8,046,267	$	609,190	$	134,800	$	119,659	$	18,446,336

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
	Redeemable		General Partner						Limited Partners			Other
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
	Interests		Units	Amount		Units	Amount		Units	Amount		Income (Loss)		Interests		Total Capital
Balance as of December 31, 2020	$	42,011	38,250,000	$	950,940	280,289,726	$	16,631,747	8,046,267	$	609,190	$	134,800	$	119,659	$	18,446,336
Conversion of limited partner common units to general partner common units		—	—		—	2,502,331		206,720	(2,502,331)		(206,720)		—		—		—
Issuance of common units in connection with acquisition		—	—		—	125,395		18,270	—		—		—		—		18,270
Issuance of common units, net offering costs		—	—		—	1,060,943		172,096	—		—		—		—		172,096
Issuance of common units, net of forfeitures		—	—		—	—		—	387,835		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	82,129		9,895	—		—		—		—		9,895
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(16,734)	—		—		—		—		(16,734)
Amortization of unearned compensation regarding share-based awards		—	—		—	—		88,414	—		—		—		—		88,414
Vesting of restricted common units, net		—	—		—	354,489		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(23,829)	—		23,829		—		—		—
Redemption of series C preferred units		—	(8,050,000)		(219,250)	—		18,000	—		—		—		—		(201,250)
Adjustment to redeemable partnership units		5,830	—		—	—		(5,830)	—		—		—		—		(5,830)
Distributions		(724)	—		(45,761)	—		(1,315,989)	—		(31,067)		—		—		(1,392,817)
Contribution from noncontrolling interests in consolidated entities		(1,052)	—		—	—		—	—		—		—		125,186		125,186
Deconsolidation of consolidated entities		—	—		—	—		—	—		—		—		(197,016)		(197,016)
Net income		930	—		45,761	—		1,663,998	—		37,670		—		(947)		1,746,482
Other comprehensive loss—foreign currency translation adjustments		—	—		—	—		—	—		—		(318,828)		—		(318,828)
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		1,279		—		1,279
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—	—		—	—		—	—		—		1,304		—		1,304
Balance as of December 31, 2021	$	46,995	30,200,000	$	731,690	284,415,013	$	17,446,758	5,931,771	$	432,902	$	(181,445)	$	46,882	$	18,476,787

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
	Redeemable		General Partner						Limited Partners			Other
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
	Interests		Units	Amount		Units	Amount		Units	Amount		Income (Loss)		Interests		Total Capital
Balance as of December 31, 2021	$	46,995	30,200,000	$	731,690	284,415,013	$	17,446,758	5,931,771	$	432,902	$	(181,445)	$	46,882	$	18,476,787
Conversion of limited partner common units to general partner common units		—	—		—	36,284		2,942	(36,284)		(2,942)		—		—		—
Vesting of restricted common units, net		—	—		—	340,874		—	—		—		—		—		—
Partial settlement of forward sale agreements, net of costs		—	—		—	6,250,000		923,463	—		—		—		—		923,463
Issuance of limited partner common units, net		—	—		—	—		—	393,182		—		—		—		—
Units issued under equity plans, net of unit settlement to satisfy tax withholding upon vesting		—	—		—	106,051		8,639	—		—		—		—		8,639
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(7,143)	—		—		—		—		(7,143)
Amortization of share-based compensation		—	—		—	—		92,461	—		—		—		—		92,461
Reclassification of vested share-based awards		—	—		—	—		(29,864)	—		29,864		—		—		—
Adjustment to redeemable partnership units		(11,954)	—		—	—		11,954	—		—		—		—		11,954
Distributions		(760)	—		(40,724)	—		(1,403,344)	—		(30,610)		—		—		(1,474,678)
Redeemable noncontrolling interests associated with acquisition of Teraco		1,530,090	—		—	—		—	—		—		—		—		—
Contributions from noncontrolling interests in consolidated entities		1,703	—		—	—		—	—		—		—		46,277		46,277
Sale of noncontrolling interest in property to DCRU		—	—		—	—		64,616	—		—		—		12,275		76,891
Net income		(4,653)	—		40,724	—		336,960	—		7,728		—		(620)		384,792
Other comprehensive loss—foreign currency translation adjustments		(46,742)	—		—	—		—	—		—		(331,131)		—		(331,131)
Other comprehensive loss—fair value of interest rate swaps		—	—		—	—		—	—		—		(93,803)		—		(93,803)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		(7,044)		—		(7,044)
Balance as of December 31, 2022	$	1,514,679	30,200,000	$	731,690	291,148,222	$	17,447,442	6,288,669	$	436,942	$	(613,423)	$	104,814	$	18,107,465

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,
	2022		2021		2020
Cash flows from operating activities:
Net income	$	380,325	$	1,747,412	$	362,730
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(176,754)		(1,380,795)		(316,894)
Equity in loss (earnings) of unconsolidated entities		13,497		(62,283)		57,629
Distributions from unconsolidated entities		42,376		66,232		39,878
Depreciation and amortization		1,577,933		1,486,632		1,366,379
Amortization of share-based compensation		92,461		84,083		74,577
Loss from early extinguishment of debt		51,135		18,672		103,215
Straight-lined rents and amortization of above and below market leases		(64,954)		(30,793)		(17,744)
Amortization of deferred financing costs and debt discount / premium		18,848		18,694		19,202
Other items, net		(45,141)		81,038		6,102
Changes in assets and liabilities:				—		—
Increase in accounts receivable and other assets		(272,452)		(389,116)		(72,897)
Increase in accounts payable and other liabilities		42,114		62,452		84,364
Net cash provided by operating activities		1,659,388		1,702,228		1,706,541
Cash flows from investing activities:
Improvements to investments in real estate		(2,643,097)		(2,520,772)		(2,064,066)
Cash paid for business combination / asset acquisitions, net of cash acquired		(1,930,178)		(192,015)		(908,567)
(Investment in) proceeds from unconsolidated entities, net		(296,095)		2,665		(144,323)
Proceeds from sale of real estate		271,567		1,691,072		564,615
Other investing activities, net		(101,600)		(42,671)		(47,006)
Net cash used in investing activities		(4,699,403)		(1,061,721)		(2,599,347)
Cash flows from financing activities:
Net proceeds from (payments on) credit facilities		1,690,181		(89,554)		162,111
Borrowings on secured / unsecured debt		2,791,027		1,824,389		3,573,120
Repayments on secured / unsecured debt		(1,036,577)		(990,968)		(2,928,924)
Premium paid for early extinguishment of debt		(49,662)		(16,482)		(96,124)
Capital contributions from noncontrolling interests, net		44,312		124,134		102,285
General partner contributions		928,432		172,096		1,879,957
General partner distributions		—		(201,250)		(500,000)
Payments of dividends and distributions		(1,450,637)		(1,379,198)		(1,239,318)
Other financing activities, net		52,073		(33,797)		(17,418)
Net cash provided by (used in) financing activities		2,969,149		(590,630)		935,689
Net (decrease) increase in cash, cash equivalents and restricted cash		(70,866)		49,877		42,883
Effect of exchange rate changes on cash, cash equivalents and restricted cash		70,077		(22,044)		(16,484)
Cash, cash equivalents and restricted cash at beginning of period		151,485		123,652		97,253
Cash, cash equivalents and restricted cash at end of period	$	150,696	$	151,485	$	123,652

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, 2022 and 2021

General

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

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

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

Accounting Principles and Basis of Presentation. The accompanying consolidated Financial Statements are prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") and are presented in our reporting currency, the U.S. dollar. All of the accounts of the Parent, the OP, and the subsidiaries of the OP are included in the accompanying financial statements. All material intercompany transactions with consolidated entities have been eliminated.

Management Estimates and Assumptions. U.S. GAAP requires us to make estimates and assumptions that affect reported amounts of revenue and expenses during the reporting period, reported amounts for assets and liabilities as of the date of the financial statements, and disclosures of contingent assets and liabilities as of the date of the financial statements. Although we believe the estimates and assumptions we made are reasonable and appropriate, as discussed in the applicable sections throughout the consolidated financial statements, different assumptions and estimates could materially impact our reported results. Actual results and outcomes may differ from our assumptions.

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, 2022 and 2021

Summary of Significant Accounting Policies

Consolidation. We consolidate all entities that are wholly owned as well as all partially-owned entities that we control. In addition, we consolidate any variable interest entities (“VIEs”) for which we are the primary beneficiary. We evaluate whether or not an entity is a VIE (and we are the primary beneficiary) through consideration of substantive terms in the arrangement to identify which enterprise has the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses/receive benefits from the entity.

For entities that do not meet the definition of VIEs, we first consider if we are the general partner or a limited partner (or the equivalent in investments not structured as partnerships). We consolidate entities in which we are the general partner and the limited partners do not have rights that would preclude control. For entities in which we are the general partner, but the limited partners hold substantive participating or kick-out rights that prohibit our ability to control the entity, we apply the equity method of accounting since, as the general partner, we have the ability to exercise significant influence over the operating and financial policies of the entities. For entities in which we are a limited partner, or that are not structured similar to a partnership, we consider factors such as ownership interest, voting control, authority to make decisions and contractual and substantive participating rights of the partners. When factors indicate we have a controlling financial interest in an entity, we consolidate the entity.

Foreign Operations and Foreign Currencies. The functional currency of each of our consolidated subsidiaries and unconsolidated entities operating in other countries is the principal currency in which each entity’s assets, liabilities, income and expenses are denominated, which may be different from the local currency of incorporation or the currency with which the entities conduct their operations. The primary functional currencies impacting our business include the Euro, Japanese yen, British pound sterling, Singapore dollar, South African rand and Brazilian real.

For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate financial statements into U.S. dollars at the time we consolidate these subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Certain balance sheet items, such as equity and capital-related accounts are reflected at historical exchange rates. Income statement accounts are generally translated at the average exchange rates for the reporting periods.

We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in the functional currency of the entities. When debt is denominated in a currency other than the functional currency of an entity, a gain or loss can result. The associated adjustment is reflected in other (expenses) income, net, in the consolidated income statements, unless it is intercompany debt that is deemed to be long-term in nature or third-party debt that has been designated as a nonderivative net investment hedge – in which case the associated adjustments are reflected as a cumulative translation adjustments 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 respective cash flows or at average exchange rates for the period, depending on the nature of the cash flow items.

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, 2022 and 2021

Acquisition Accounting. We evaluate whether or not substantially all of the value of acquired assets is concentrated in a single identifiable asset or group of identifiable assets to determine whether a transaction is accounted for as an asset acquisition or a business combination. For asset acquisitions: (1) transaction costs 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 acquired, (2) real estate assets acquired are measured based on their cost or total consideration exchanged with any excess consideration or bargain purchase amount allocated to real estate properties and their associated intangibles such as above and below-market leases, in-place leases, acquired ground leases, and customer relationship value and (3) all other assets and liabilities assumed, including any debt, are recorded at fair value. For business combinations: (1) transaction costs are expensed as incurred, (2) all acquired tangible and identifiable intangible assets are recognized at fair value, (3) the amount of any purchase consideration that exceeds the fair value of the tangible and identifiable intangible assets acquired is recognized as goodwill, and (4) to the extent the purchase consideration is less than the fair value of the tangible and identifiable intangible assets acquired, a gain on bargain purchase is recognized.

When we obtain control of an unconsolidated entity that we previously held as an equity method investment and the acquisition qualifies as a business combination, we remeasure our previously held interest in the unconsolidated entity at its acquisition-date fair value, derecognize the book value associated with that interest, and recognize any resulting gain or loss in earnings.

We allocate purchase price primarily using Level 2 and Level 3 inputs (further defined in Fair Value Measurements) as follows:

Real Estate. The fair value of acquired land is determined based on relevant market data, such as comparable land sales. The fair value of acquired improvements is determined based on replacement cost as adjusted for any physical and/or market obsolescence. Operating properties are valued as if they are vacant (“as-if-vacant”) by applying an income approach methodology using either a discounted cash flow analysis or by applying a capitalization rate to the estimated Net Operating Income (“NOI”) of a property. As-if-vacant values consider estimated carrying costs during expected lease-up periods and costs to execute similar leases (based on current market conditions). Carrying costs during expected lease up periods include real estate taxes, insurance and other operating expenses as well as estimates of lost rental revenue during the expected lease-up periods. Costs to execute similar leases include lease commissions, tenant improvements, legal and other related costs.

Lease Intangibles. The portion of the purchase price related to acquired in-place leases is recorded as intangible assets and liabilities as follows:

	●	Above and below market leases: We use a discounted cash flow approach to determine the estimated present value of any difference between contractual rents for acquired in-place leases as compared to current market rents. If rents on acquired in-place leases are higher than current market rents, we record an intangible asset for the favorable rents. If rents on acquired in-place leases are lower than current market rents, we record a liability for the unfavorable rents. Favorable rent assets are amortized as a reduction to rental income over the remaining non-cancelable term of the lease. Unfavorable rent liabilities are amortized as an increase to rental income over the initial lease term plus any below-market fixed rate renewal periods.

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, 2022 and 2021

	●	In-place lease value: Since the as-if-vacant model is used to determine the value of acquired operating properties, the value of such properties does not include the value associated with having existing tenants who are leasing space in the purchased properties. Having in-place tenants allows buyers to avoid costs associated with leasing the property as well as any rent losses and unreimbursed operating expenses during the lease-up period. An asset for such benefits is recorded separately as in-place lease value. In-place lease value is determined based on estimated carrying costs during hypothetical expected lease-up periods as well as costs to execute similar leases. We determine expected carrying costs and costs to execute similar leases in the same manner as described in the previous discussion of the valuation of operating properties using the as-if-vacant model. The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases.

	●	Customer relationship value: In some transactions, customers acquired are expected to generate recurring revenues beyond existing in-place lease terms. We utilize the multi-period excess earnings method to determine value customer relationship value, if any. Key factors reflected in this approach include: (1) projected revenue growth from existing customers, (2) historical customer lease renewals and attrition rates, (3) rental renewal probabilities and related market terms, (4) estimated operating costs, and (5) discount rate. Customer relationship value is amortized to expense ratably over the anticipated life of substantially all of the acquired customer relationships that are expected to generate excess earnings.

Debt. We recognize the fair value of any acquired debt based on contractual future cash flows discounted using borrowing spreads and market interest rates that would be available to us for issuance of debt with similar terms and remaining maturities. If acquired debt is publicly-traded, we utilize available market data to determine fair value of the debt. Any discount or premium on the principal is included in the carrying value of the debt and amortized to interest expense over the remaining term of the debt using the effective interest method.

Noncontrolling interests. The fair value of the ownership percentage of acquired entities held by third parties is determined based on the fair value of the consolidated net assets acquired – adjusted for any put or call options or other such features associated of the noncontrolling interests.

Other acquired assets and liabilities. The fair value of other acquired assets and liabilities is determined using the best information available. For working capital items that are short-term in nature, fair value is generally presumed to equal the seller’s carrying value, unless facts and circumstances suggest otherwise.

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, 2022 and 2021

Fair Value Measurements. Fair value is intended to reflect the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date (the exit price). We estimate fair value using available market information and valuation methods we believe to be appropriate for these purposes. Given the significant amount of judgement and subjectivity involved in the determination of fair value, estimated fair value is not necessarily indicative of amounts that would be realized on disposition. There are three levels in the fair value hierarchy under US GAAP, which are:

	●	Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity can access at the measurement date.

	●	Level 2 – Inputs that are directly or indirectly observable for the associated asset or liability, but which do not qualify as Level 1 inputs.

	●	Level 3 – Unobservable inputs for the asset or liability.

In instances where inputs from multiple different levels of the fair value hierarchy are used to determine fair value, the lowest level input that is significant is used to determine the fair-value measurement in its entirety. Our assessment of the significance of a particular input to a fair-value measurement requires judgment and considers factors specific to the asset or liability. We utilize fair value measurements on a recurring basis to determine the fair value of: marketable equity securities, share-based compensation awards, derivative instruments, and outstanding debt. Such measurements are also regularly utilized in assessing whether or not impairments may exist on intangible assets (including goodwill). In addition, we utilize fair value measurements on a non-recurring basis to determine the fair value associated with assets held for sale, acquisitions of assets, and acquisitions of businesses.

Investments in Unconsolidated Entities. Investments in unconsolidated entities as reflected on the consolidated balance sheets includes all investments accounted for using the equity method. We use the equity method to account for these investments, because we have the ability to exercise significant influence over their operating and financial policies, but do not control them. Equity method investments are initially recognized at our cost. Transaction costs related to the formation of equity method investments are also capitalized. We subsequently adjust these balances to reflect: (1) our proportionate share of net earnings/losses of the entities and accumulated other comprehensive income or loss, (2) distributions received, (3) contributions made, (4) sales and redemptions of our investments, and (5) certain other adjustments, as appropriate. When circumstances indicate there may have been a reduction in the value of an equity method investment, we evaluate whether or not the loss in value is other than temporary. If we determine that a loss in value is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value.

With regard to the cash flow classifications of distributions from unconsolidated entities, we have elected the nature of the distribution approach as the information is available to us to determine the nature of the underlying activity that generated the distributions. In accordance with this approach, cash flows generated from the operations of an unconsolidated entity are classified as a return on investment (cash inflow from operating activities) and cash flows that are generated from property sales, debt refinancing or sales and redemptions of our investments are classified as a return of investment (cash inflow from investing activities).

The Company has a negligible value of investments accounted for under the cost-method. These investments are included in Other Assets on the consolidated balance sheets.

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, 2022 and 2021

Cash, Cash Equivalents and Restricted Cash. We consider all cash on hand, demand deposits with financial institutions, and short-term highly-liquid investments with original maturities of 90 days or less to be cash and cash equivalents. Our cash and cash equivalents are financial instruments exposed to concentrations of credit risk. We invest our cash with high-credit quality institutions. We may invest our cash balances in money market accounts that are not insured. We do not believe we are exposed to any significant credit risk associated with our cash and cash equivalents, and have not realized any losses associated with cash investments or accounts.

Restricted Cash**.** Cash that is held for a specific purpose and thus not available to us for immediate or general business use is categorized separately from cash and cash equivalents and is included in other assets on the consolidated balance sheet. Restricted cash primarily consists of contractual capital expenditures and other deposits.

Assets Held for Sale. We classify an asset as held for sale when the following criteria are met: 1). management that has the proper authority has approved and committed to a plan to sell, 2). the asset is available for immediate sale, 3). an active program to locate a buyer has commenced, 4). the sale of the asset is probable, and 5). transfer of the asset is expected to occur within one year. Assets classified as held for sale are recorded at the lower of carrying value or fair value less costs to sell and are no longer depreciated.

Investments in Real Estate. Investments in real estate are stated at cost, less accumulated depreciation and amortization. Land is not depreciated. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the respective assts. Depreciable lives of assets are stated below.

Investments in Real Estate. Investments in real estate are stated at cost, less accumulated depreciation and amortization. Land is not depreciated. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the respective assts. Depreciable lives of assets are stated below.vestments in Real Estate. Investments in real estate are stated at cost, less accumulated depreciation and amortization. Land is not depreciated. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets. Depreciable lives of assets are stated below.
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.

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, 2022 and 2021

Capitalization of Costs.

Development costs – During the land development and construction periods of qualifying projects, we capitalize direct and indirect project costs that are clearly associated with the development of properties. Capitalized project costs include all costs associated with the development of a property. Such costs include the cost of: land and buildings, improvements and fixed equipment, design and engineering, other construction costs, interest, property taxes, insurance, legal fees, personnel working on the project, and corporate supervision. Capitalization of costs ceases when development projects are substantially complete and ready for their intended use. We generally consider development projects to be substantially complete and ready for intended use upon receipt of a certificate of occupancy.

Leasing commissions – Leasing commissions and other direct 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, 2022, 2021 and 2020, we capitalized deferred leasing costs of approximately $51.8 million, $42.8 million and $40.8 million, respectively. Deferred leasing costs are included in customer relationship value, deferred leasing costs and intangibles on the consolidated balance sheet and amounted to approximately $257.0 million and $249.3 million, net of accumulated amortization of $514.3 million and $453.0 million, as of December 31, 2022 and 2021, respectively. Amortization expense on leasing costs was approximately $79.2 million, $83.4 million, and $76.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Recoverability of Real Estate Assets. We assess the carrying value of our properties whenever events or circumstances indicate carrying amounts of these assets may not be fully recoverable (“triggering events"). Triggering events typically relate to a change in the expected holding period of a property, an adverse change in expected future cash flows of the property, or a trend of past cash flow losses that is expected to continue in the future. If our assessment of triggering events indicates the carrying value of a property or asset group might not be recoverable, we estimate the future undiscounted net cash flows expected to be generated by the assets and compare that amount to the book value of the assets. If our future undiscounted net cash flow evaluation indicates we are unable to recover the carrying value of a property or asset group, we record an impairment loss to the extent the carrying value of the property or asset group exceeds fair value.

We generally estimate fair value of rental properties using a discounted cash flow analysis that includes projections of future revenues, expenses, and capital improvements that a market participant would use. In certain cases, we may supplement this analysis by obtaining outside broker opinions of value. When determining undiscounted future cash flows, we consider factors such as future operating income trends and prospects as well as the effects of leasing demand, competition and other factors.

Goodwill and Other Acquired Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is not amortized. Goodwill is evaluated for impairment at the reporting unit level. The Company has one reportable segment and one reporting unit. We evaluate goodwill for impairment whenever events or changes in circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. In addition to monitoring for impactful events and circumstances, we perform an annual one-step quantitative test in which we compare the reporting unit’s carrying value to its fair value. We determine the fair value of the reporting unit based on quoted market prices of the Company’s publicly-traded shares. To the extent the fair value of the reporting unit is less than its carrying value, we would record an impairment charge equal to the amount by which the carrying value of the reporting unit exceeds its fair value. We have not recognized any goodwill impairments since our inception. Since a significant aspect of our goodwill is denominated in foreign currencies, changes to our goodwill balance can 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, 2022 and 2021

Other acquired intangible assets consist primarily of customer relationship value and in-place lease value. All of our other acquired intangible assets have finite useful lives. If impairment indicators arise with respect to these finite-lived intangible assets, we evaluate for impairment by comparing the carrying amount of the assets to the estimated future undiscounted net cash flows expected to be generated by the assets. If estimated future undiscounted cash flows exceed the carrying value of the assets, we record an impairment charge equal to the amount by which the carrying value exceeds the estimated fair value of the assets. We have no indefinite-lived intangible assets other than goodwill.

Share-Based Compensation. The Company provides a variety of share-based compensation awards to employees and directors, including awards that contain: time-based vesting criteria and a combination of time-based and performance based criteria. The Company measures all share-based compensation awards at grant date fair value. The fair value of awards that include only a time-based service condition (“time-based awards”) is the closing price of the Company’s publicly-traded shares at the grant date – and is expensed over the requisite service period. The fair value of awards that include a combination of market performance based criteria and time-based vesting is measured using a Monte Carlo simulation method. The fair value of these awards is expensed over the requisite service period – and is not adjusted based on actual achievement of the market performance condition.

Derivative Instruments. 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 and foreign currency exposures. The Company utilizes derivative instruments to manage risks, and not for trading or speculative purposes. All derivatives are recorded at fair value. The majority of inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. However, credit valuation adjustments utilize Level 3 inputs (such as estimates of current credit spreads). Based on the insignificance of credit valuation adjustments to the overall valuation of our derivatives, we have determined that valuation of our outstanding derivatives is properly categorized in Level 2 of the fair value hierarchy.

Changes in the fair value of derivatives are recognized periodically either in earnings or in 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.

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.

Interest Rate Swaps – The Company uses interest rate swaps to add stability to interest expense and to manage our exposure to interest rate movements related to certain floating rate debt obligations. Interest rate swaps designated as cash flow 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 interest rate swaps on the balance sheet at fair value. The fair value of interest rate swaps is determined using the market standard methodology of netting discounted future fixed cash receipts (or payments) and discounted expected variable cash payments (or receipts). Variable cash payments (or receipts) are based on expected future interest rates derived from observable market interest rate curves. We incorporate credit valuation adjustments to appropriately reflect nonperformance risk for the Company and for the respective counterparties. The counterparties of interest rate swaps are generally larger financial institutions engaged in providing a variety of financial services.

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, 2022 and 2021

Interest rate derivatives are presented on a gross basis on the consolidated balance sheets – with interest rate swap assets presented in other assets, and interest rate swap liabilities presented in accounts payable and other accrued liabilities. As of December 31, 2022, there was no impact from netting arrangements, because the Company had no derivatives in liability positions. 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.

Foreign Currency Contracts – The Company may, from time to time, enter into forward contracts pursuant to which we agree to sell an amount of one currency in exchange for an agreed-upon amount of another currency. These agreements are typically entered into to manage exposures related to transactions that are settled in currencies other than the functional currency of the legal entity that is party to the transactions. To the extent the Company does not designate such instruments as hedges, changes in the fair value of these instruments are reflected in earnings. The Company had no outstanding derivative foreign currency contracts as of December 31, 2022.

Hedge of Net Investment in Foreign Operations – The Company has no outstanding derivatives that function as hedges of net investments in foreign operations. However, notes denominated in the Swiss franc with a total outstanding principle balance of 545 million Swiss francs (“CHF”) issued by Digital Intrepid Holding B.V. (“DIH”, a wholly-owned subsidiary of the OP with Euro functional currency) are designated as non-derivative hedges of DIH’s net investment in certain of its subsidiaries that have CHF as the functional currency. Changes in the fair value of these hedges, to the extent they are included in the assessment of effectiveness, are reported in other comprehensive income (loss) and will be deferred until disposal of the underlying assets (which is currently not expected to occur). Any amounts excluded from the assessment of effectiveness are reflected as foreign-currency transaction gains/losses which are included as Other (expense) income, net in the consolidated income statements.

Cross-Currency Interest Rate Swaps – The Company's cross-currency interest rate swap agreements synthetically swap U.S. dollar-denominated fixed rate debt for foreign currency-denominated fixed rate debt and are designated as net investment hedges for accounting purposes. The gain or loss on the net investment hedge derivative instruments is included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Interest payments received from the cross-currency swaps are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense on the consolidated income statements.

See Note 17. “Derivative Instruments” for further discussion on the Company’s outstanding derivative instruments.

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. were to fail to qualify as a REIT in any taxable year, it would be subject to U.S. federal and state income taxes (including any applicable alternative minimum tax) 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 the Company and its taxable REIT subsidiaries, including for U.S. federal, state, local and foreign jurisdictions, as applicable.

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, 2022 and 2021

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, 2022 and 2021, 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, 2022, 2021 and 2020, we had no such interest or penalties. We are open to examination by the major taxing jurisdictions for the tax years that are within the statute of limitations for those jurisdictions.

See Note 13. “Income Taxes” for further discussion on income taxes.

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

Noncontrolling Interests and Redeemable Noncontrolling Interests. Noncontrolling interests represent the share of consolidated entities owned by third parties. We recognize each noncontrolling holder’s share of the fair value of the respective entity’s net assets as noncontrolling interest on our consolidated balance sheets at the date of formation or acquisition. Noncontrolling interest balances are adjusted for the noncontrolling holder’s share of additional contributions, distributions, and net earnings or losses.

Partnership units which are contingently redeemable for cash are classified as redeemable noncontrolling interests and presented in the mezzanine section of the Company’s consolidated balance sheets between total liabilities and stockholder’s equity. 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.

The amounts of consolidated net income attributable to noncontrolling interests and redeemable noncontrolling interests are presented on the Company’s consolidated income statements as income (or loss) attributable to noncontrolling interests.

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, 2022 and 2021

Revenue Recognition.

Rental And Other Services Revenue – We generate the majority of our revenue by leasing our properties to customers under operating lease agreements, which are accounted for under Accounting Standards Codification 842, Leases (“ASC 842”). We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term if we determine it is probable that substantially all of the lease payments will be collected over the lease term. We commence recognition of revenue from rentals 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. The excess of rents recognized as revenue over amounts contractually due pursuant to the underlying leases is included in deferred rent. Rental payments received in excess of revenue recognized are classified as accounts payable and other accrued liabilities. Unpaid rents that are contractually due are included in accounts and other receivables.

We estimate the probability of collection of lease payments based on customer creditworthiness, outstanding accounts receivable balances, and historical bad debts – as well as current economic trends. If collection of substantially all lease payments over the lease term is not probable, rental revenue is recognized when payment is received, and we record a full valuation allowance on the balance of any rent receivable, less the balance of any security deposits or letters of credit. If collection is subsequently determined to be probable, we: 1). resume recognizing rental revenue on a straight-line basis, 2). record incremental revenue such that the cumulative amount recognized is equal to the amount that would have been recorded on a straight-line basis since inception of the lease, and 3). reverse the allowance for bad debt recorded on outstanding receivables.

Generally, under the terms of our leases, the majority of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers. We record amounts reimbursable by customers (“tenant recoveries”) as revenue in the period the applicable expenses are incurred – which is generally on a ratable basis through the term of the lease.

We account for and present rental revenue and tenant recoveries as a single component under rental and other services as the timing of recognition is the same, the pattern with which we transfer the right of use of the property and related services to the lessee are both on a straight-line basis and our leases qualify as operating leases.

Interconnection services include port and cross-connect services generally provided on a month-to-month, one-year or multi-year term. We bill for these services 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 leased space are accounted for under Topic 606 and have terms that are generally one year or less.

Fee Income And Other – Fee income arises primarily from contractual management agreements with entities in which we have a noncontrolling interest. Management fees are recognized as earned under the respective agreements. The Company also provides property and construction management services. Depending on the nature of the agreements, revenue for these services is recognized either on a ratable monthly basis as the service is provided, or when certain performance milestones are met. 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.

We utilize the practical expedient in ASC 842 that allows us to account for lease and non-lease components associated with each lease as a single lease component recorded within rental and other services, instead of accounting for such items separately under Accounting Standards Codification 606, Revenue (“ASC 606”). We recognize revenue for items

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, 2022 and 2021

that do not qualify for revenue recognition under ASC 842 under ASC 606. Revenue recognized as a result of applying ASC 606 was less than 8% of total rental and other services revenue for the years ended December 31, 2022, 2021 and 2020.

Transaction and Integration Expense. 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.

Gains on Disposition of Properties. We recognize gains on the disposition of real estate when the recognition criteria have been met, generally at the time the risks and rewards and title have transferred, and we no longer have substantial continuing involvement with the real estate sold. We recognize losses from the disposition of real estate when known.

New Accounting Pronouncements.

Reference Rate Reform. The Financial Conduct Authority and other independent groups announced in July 2017, that beginning in 2021, they would stop requiring banks to submit rates for the calculation of the London Inter-bank Offered Rate (“LIBOR”). As a result, in the U.S. the Federal Reserve Board and the Federal Reserve Bank of New York identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for USD LIBOR in debt and derivative financial instruments. Other global regulators have also undertaken reference rate reform initiatives to identify a preferred alternative rate for other interbank offered rates (“IBORs”). Both LIBOR and IBOR are herein referred to as “IBOR-indexed rate”. In November 2020, the Federal Reserve Board along with various independent groups announced the potential for certain USD LIBOR tenors to continue to be published until June 2023. This change would allow most legacy USD LIBOR contracts to mature before disruptions occur in the USD LIBOR market, without the need to transition these contracts to SOFR.

In March 2020, the FASB issued an Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, that provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from an IBOR-indexed rate to alternative reference rates, such as SOFR for LIBOR (“reference rate reform”).

The first practical expedient within the ASU allows companies to elect to not apply certain modification accounting requirements to debt, derivative, and lease contracts affected by reference rate reform if certain criteria are met. The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to designate the hedging relationship – allowing companies to continue applying hedge accounting to existing cash flow and net investment hedges.

The ASU was effective on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. We will continue to evaluate debt, derivative, and lease contracts that are modified in the future to ensure they are eligible for modification relief and apply the available practical expedients as needed. Also, in December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”), which was issued to defer the sunset date of Topic 848 to December 31, 2024. ASU 2022-06 is effective immediately for all companies. ASU 2022-06 had no impact on the Company’s consolidated financial statements for the year ended December 31, 2022.

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, 2022 and 2021

Business Combinations. In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers," as if the acquirer had originated the contracts. ASU 2021-08 is applicable on a prospective basis and is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2022 (or in January 1, 2023 for the Company). Early adoption is permitted. The Company is currently evaluating the effect, if any, the adoption of this guidance will have on the Company’s results of operations, financial position and liquidity.

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

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, 2022 and 2021

Business Combinations

On August 1, 2022, we completed the acquisition of a 61.1% indirect controlling interest in Teraco, a leading carrier-neutral data center and interconnection services provider in South Africa (the “Teraco Acquisition”). The total purchase price was $1.7 billion cash, funded by our global revolving credit facility and partial settlement of our forward equity sale agreements described under Note 14. “Equity and Capital—Forward Equity Sale.” Teraco controls (and consolidates) the Teraco Connect Trust (“the Trust”) that was created as part of the Broad Based Black Economic Empowerment Program in South Africa. The Trust owns a 12% interest in Teraco’s primary operating company, however, because Teraco (and the Company) controls the Trust, the Trust is consolidated by Teraco (and the Company). If the Trust was not consolidated by Teraco, the Company’s ownership interest in Teraco would have been approximately 55%.

The following table summarizes the amounts recorded at the acquisition date (in thousands):


	Final Amounts
Building and improvements	$	1,376,128
Construction in progress and space held for development		521,153
Operating lease right-of-use assets		2,784
Assumed cash and cash equivalents		5,528
Goodwill		1,625,994
Customer relationship value and other intangibles (weighted-average amortization life of 14 years)		720,126
Debt assumed		(355,688)
Operating lease liabilities		(4,031)
Deferred tax liabilities, net		(632,841)
Redeemable noncontrolling interests		(1,530,090)
Working capital assets, net		1,112
Total purchase consideration	$	1,730,175

Goodwill — The purchase price of the Teraco Acquisition exceeded the fair value of net tangible and intangible assets acquired and liabilities assumed by $1.6 billion. This amount was recorded as goodwill. We believe the strategic benefits of the acquisition support the value of goodwill recorded. Specifically, Teraco has numerous cross-connects, cloud on-ramps and data centers in addition to direct access to multiple subsea cables. The acquisition of Teraco adds South Africa to the Company’s three existing markets on the continent, including Kenya, Mozambique, and Nigeria. The strategic importance of these markets has been enhanced by the recent and ongoing implementation of new subsea cable networks encircling Africa. When combined with the Company’s highly connected facilities in Marseille, France, and across EMEA, our customers will now have a range of strategic connectivity hubs from which to serve all corners of the African market.

The Teraco acquisition was not material and neither the investment in the assets nor the results of operations of the acquisition was significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not required to be presented.

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, 2022 and 2021

Redeemable Noncontrolling Interest (“Redeemable NCI”) — As part of the Teraco Acquisition, the Company and certain of its subsidiaries entered into a put/call agreement with the owners of the interest in Teraco that was not acquired by the Company (the “Put/Call Agreement”). The interest retained by these owners is hereafter referred to as the “Remaining Teraco Interest” and the owners of such interest are hereafter referred to as the “Rollover Shareholders”. Pursuant to the Put/Call Agreement, the Rollover Shareholders have the right to sell all or a portion of the Remaining Teraco Interest to the Company for a two-year period beginning on February 1, 2026, and the Company has the right to purchase all or a portion of the Remaining Teraco Interest from the Rollover Shareholders for a one-year period beginning on February 1, 2028. Per the terms of the agreement, the purchase price of the Remaining Teraco Interest for the put right and the call right can be settled by the Company with cash, shares in the Company, or a combination of cash and shares. In the event the Company elects to settle a put or call in whole or in part with shares of Digital Realty Trust, Inc.’s common stock, such shares will be issued in a private placement transaction with customary accompanying registration rights.

Since the Rollover Shareholders can redeem the put right at their discretion and such redemption, which could be in cash, is outside the Company’s control, the Company recorded the noncontrolling interest as Redeemable NCI and classified it in temporary equity within its consolidated balance sheets. The Redeemable NCI was initially recorded at its acquisition-date fair value and will be adjusted each reporting period for income (or loss) attributable to the noncontrolling interest (a $4.8 million net loss for the period from August 1, 2022 to December 31, 2022). If the contractual redemption value of the Redeemable NCI is greater than its carrying value, an adjustment is made to reflect Redeemable NCI at the higher of its contractual redemption value or its carrying value each reporting period. Changes to the redemption value are recognized immediately in the period the change occurs. If the redemption value of the Redeemable NCI is equal to or less than the fair market value of the Remaining Teraco Interest, the change in the redemption value will be adjusted through Additional Paid in Capital. If the redemption value is greater than the fair market value of the Remaining Teraco Interest, the change in redemption value will be adjusted through Retained Earnings. These adjustments are not reflected on the Company’s income statement, but are instead reflected as adjustments to the net income component of the Company’s earnings per share calculations. When calculating earnings per share attributable to Digital Realty Trust, Inc., the Company adjusts net income attributable to Digital Realty Trust, Inc. to the extent the redemption value exceeds the fair value of the Redeemable NCI on a cumulative basis. For the period from August 1, 2022 to December 31, 2022, no such adjustment was required.

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, 2022 and 2021

4. Leases

Lessor Accounting

We generate the majority of our revenue by leasing our operating properties to customers under operating lease agreements. The manner in which we recognize these transactions in our financial statements is described in Note 2. “Summary of Significant Accounting Policies—Revenue Recognition” to these consolidated financial statements.

A summary of minimum lease payments due from our customers under operating leases of land, prestabilized development properties, and operating properties with lease periods of greater than one year at December 31, 2022 (in thousands) is shown below. These amounts do not reflect future rental revenues from renewal or replacement of existing leases unless we are reasonably certain we will exercise the option or the lessee has the sole ability to exercise the option. Reimbursements of operating expenses and variable rent increases are excluded from the table below.


	Operating leases
2023	$	2,835,319
2024		2,215,332
2025		1,803,357
2026		1,454,495
2027		1,113,265
Thereafter		3,670,829
Total	$	13,092,597

Lessee Accounting

We lease space and equipment at certain of our data centers from third parties under noncancelable lease agreements. Leases for our data centers expire on various dates through 2069. Certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of December 31, 2022, the termination dates of these ground leases ranged from 2027 to 2108. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 2023 to 2033.

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 do not contain residual value guarantees and do not impose material restrictions or covenants on us. Further, the leases have been classified and accounted for as either operating or finance leases. Rent expense related to operating leases included in rental property operating and maintenance expense in the consolidated income statements amounted to approximately $144.0 million, $145.7 million and $120.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, the weighted average remaining lease term for our operating leases and finance leases was 12 years and 16 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 3.0% for operating leases and 1.8% for finance leases at December 31, 2022. 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, 2022 and 2021

Maturities of lease liabilities as of December 31, 2022 were as follows (in thousands):


	Operating		Finance
	lease liabilities		lease liabilities (1)
2023	$	190,279	$	36,905
2024		193,379		20,423
2025		195,002		20,468
2026		191,457		20,516
2027		187,873		21,003
Thereafter		840,640		281,633
Total undiscounted future cash flows		1,798,630		400,948
Less: Imputed interest		(327,586)		(75,720)
Present value of undiscounted future cash flows	$	1,471,044	$	325,228

(1) Included in accounts payable and other accrued liabilities on the consolidated balance sheet.

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, 2022 and 2021

5. Receivables

Refer to Note 2 “Summary of Significant Accounting Policies—Revenue Recognition” for discussion of our accounting policies related to accounts receivable, deferred rent and related allowances.

Accounts and Other Receivables, Net

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


	Balance as of		Balance as of
(Amounts in thousands):	December 31, 2022		December 31, 2021
Accounts receivable – trade	$	551,393	$	393,110
Allowance for doubtful accounts		(33,048)		(28,574)
Accounts receivable – trade, net		518,345		364,536

Accounts receivable – customer recoveries		170,012		131,538
Value-added tax receivables		167,459		104,036
Accounts receivable – installation fees		60,663		43,626
Other receivables		52,813		27,985
Accounts and other receivables, net	$	969,292	$	671,721

Deferred Rent

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


	Balance as of		Balance as of
(Amounts in thousands):	December 31, 2022		December 31, 2021
Deferred rent receivables	$	612,439	$	556,251
Allowance for deferred rent receivables		(10,849)		(8,866)
Deferred rent receivables, net	$	601,590	$	547,385

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, 2022 and 2021

Investments in Properties

A summary of our investments in properties is below (in thousands):


Property Type	As of December 31, 2022		As of December 31, 2021
Land	$	1,061,408	$	1,019,723
Acquired ground lease		6,006		6,721
Buildings and improvements		24,287,103		21,914,091
Tenant improvements		781,540		684,915
		26,136,057		23,625,450
Accumulated depreciation and amortization		(7,268,981)		(6,210,281)
Investments in operating properties, net		18,867,076		17,415,169
Construction in progress and space held for development		4,789,134		3,213,389
Land held for future development		118,452		133,683
Investments in properties, net	$	23,774,662	$	20,762,241

Acquisitions and Dispositions of Properties

Acquisitions of Properties

For the years ended December 31, 2022, 2021 and 2020, acquisitions of properties that did not qualify as business combinations were immaterial to our financial statements – both individually and in the aggregate.

Disposition of Properties to Digital Core REIT

On December 6, 2021, we completed the listing of Digital Core REIT as a standalone real estate investment trust publicly traded on the Singapore Exchange (“SGX”) under the ticker symbol: DCRU. Hereafter, Digital Core REIT and its associated subsidiaries are collectively referred to as the Singapore REIT (“SREIT”). In connection with the listing, the Company contributed a portfolio of 10 operating data center properties to the SREIT. The fair value of these properties was determined to be approximately $1.4 billion based on two separate third party appraisal reports. In exchange for the contribution of these properties, the Company received: 1). $919 million cash and 2). a 39.4% equity interest in the publicly-traded Digital Core REIT entity, while retaining a 10% direct interest in the operating properties that were contributed by the Company to the SREIT. In addition, the Company received approximately $13 million of acquisition fees paid to the Company by Digital Core REIT in the form of additional units in Digital Core REIT.

The Company determined the fair market value of its 10% retained investment in the properties contributed to the SREIT based on its retained ownership percentage applied to the appraised value of the properties. This approach was deemed appropriate because the Company determined that a discount for lack of marketability and/or lack of control associated with its 10% direct interest in the properties was not warranted.

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, 2022 and 2021

As a result of this transaction, the Company recognized a gain on sale of assets of approximately $1.0 billion – which is summarized below (in millions).


Cash received	$	919.1
Fair market value of retained investment in SREIT		521.4
Acquisition fees paid in Digital Core REIT units		13.0
Tax on acquisition fees		(3.0)
Net book value of assets contributed		(439.3)
Gain on disposition of properties	$	1,011.2

The Company provides property management and other services to the SREIT in exchange for contractual fees that are payable to the Company in cash or in additional units of the SREIT. The Company’s retained investment in the SREIT is accounted for as an equity method investment, based on the conclusion that the Company has significant influence over (but does not control) the SREIT.

On December 13, 2022, we completed the sale of a 25% interest in a data center facility in Frankfurt, Germany to the SREIT for total consideration of approximately $146 million. Because the Company still controls this asset, no gain or loss was recorded on this 25% interest. In connection with this transaction, the SREIT loaned the consolidated subsidiary that owns the data center $79.8 million.

The assets and liabilities sold to the SREIT were not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy.

Disposition of Other Properties

The Company sold the following other real estate properties during the years ended December 31, 2022, 2021 and 2020:


			Gross Proceeds / Fair Value		Gain on Sale / contribution
Location / Portfolio	Metro Area	Date Sold	(in millions)		(in millions)
Non-core building	Dallas	Aug 8, 2022	$	203.0	$	174.0
Other	Various	2022		2.8		2.8
European Portfolio	Various	Mar 16, 2021		680.0		332.0
Other	Various	2021		109.6		37.7
Naritaweg 52	Amsterdam	Dec 30, 2020		6.1		—
Liverpoolweg 10	Amsterdam	Jul 17, 2020		21.5		10.4
Mapletree portfolio	Various	Jan 14, 2020		557.0		306.5

Non-core Building - On August 8, 2022, we sold a non-core building in Dallas for net proceeds of approximately $203 million resulting in a net gain on sale of approximately $174 million. The assets and liabilities sold were not representative of a significant component of our portfolio nor did the sale represent a significant shift in our strategy.

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, 2022 and 2021

European Portfolio - On March 16, 2021, we sold a portfolio of 11 data centers in Europe (four in the United Kingdom, three in the Netherlands, three in France and one in Switzerland) to Ascendas Reit, a CapitaLand sponsored REIT, for total consideration of approximately $680.0 million (subject to customary final adjustments for working capital and other items). The total gain recorded during the three months ended March 31, 2021 as a result of this sale was approximately $332.0 million. The assets and liabilities sold were not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy.

Mapletree Portfolio - In January 2020, we closed on the 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, which resulted in a gain of approximately $306.5 million. The 12 data centers were not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy. We provided transitional property management services for one year from the closing date at a customary market rate. Prior to sale of the 10 Powered Base Building properties in January 2020, we contributed three data centers to the joint venture with Mapletree in November 2019 – total gain on contribution of these assets was $266.0 million.

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, 2022 and 2021

8. Investments in Unconsolidated Entities

As of December 31, 2022 and 2021, our investments in unconsolidated entities accounted for under the equity method presented in our consolidated balance sheets consist of the following (in thousands):


	Year	Metropolitan			Balance as of		Balance as of
Entity	Entity Formed	Area of Properties	% Ownership			December 31, 2022		December 31, 2021
Digital Core REIT (DCRU)	2021	U.S. / Canada	35	%	$	328,584	$	343,317
Ownership interest in DCRU operating properties	2021	U.S. / Canada / Frankfurt	10	%		136,431		144,050
Ascenty	2019	Brazil / Chile / Mexico	51	%		606,141		553,031
Mapletree	2019	Northern Virginia	20	%		160,200		172,465
Mitsubishi	Various	Osaka / Tokyo	50	%		453,420		401,509
Lumen	2012	Hong Kong	50	%		68,821		68,854
Other	Various	U.S. / India / Nigeria	Various			237,829		124,463
Total					$	1,991,426	$	1,807,689

DCREIT – Digital Core REIT is a standalone real estate investment trust under Singapore law, which is publicly-traded on the Singapore Exchange under the ticker symbol “DCRU”. Digital Core REIT owns 11 operating data center properties. The Company’s ownership interest in the units of DCRU, as well as its ownership interest in certain operating properties of DCRU are collectively referred to as the Company’s investment in DCREIT.

As of December 31, 2022, the Company held a 35% interest in the DCRU and separately owns a 10% direct retained interest in the underlying North American operating properties and a 75% direct retained interest in the underlying German operating property. The Company’s 35% interest in DCRU consists of 396 million units and 390 million units as of December 31, 2022 and December 31, 2021, respectively. Based on the closing price per unit of $0.55 and $1.16 as of December 31, 2022 and 2021, the fair value of the units the Company owns in DCRU was approximately $218 million and $453 million as of December 31, 2022 and 2021, respectively.

These values do not include the value of the Company’s 10% interest in the North American operating properties and 75% interest in the German operating property of DCRU, because the associated ownership interests are not publicly traded. The Company accounts for its investment in DCREIT as an equity method investment (and not at fair value) based on the significant influence it is able to exert on DCREIT. The Company determined that the decline in fair value of the investment in DCRU as compared to the Company’s book basis as of December 31, 2022 was temporary in nature.

Pursuant to contractual agreements with DCRU and its operating properties, the Company will earn fees for asset and property management services as well as fees for aiding in future acquisition, disposition and development activities. Certain of these fees are payable to the Company in the form of additional units in DCRU or in cash. During the years ended December 31, 2022 and 2021, the Company earned fees pursuant to these contractual agreements of approximately $10.6 million and $0.5 million, respectively, which is recorded as fee income and other on the consolidated income statement.

Ascenty – The Company’s ownership percentage in Ascenty includes an approximate 2% interest held by one of the Company’s non-controlling interest holders. This 2% interest had a carrying value of approximately $18.0 million and $20.9 million as of December 31, 2022 and December 31, 2021, respectively. Ascenty is a variable interest entity (“VIE”) and the Company’s maximum exposure to loss related to this VIE is limited to our equity investment in the entity.

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, 2022 and 2021

PREI ® – In the third quarter of 2021, the existing unconsolidated partnership between the Company and PGIM Real Estate (the “PGIM Joint Venture”), completed the sale of a portfolio of 10 data centers in North America for $581 million. PGIM Real Estate owned an 80% interest and the Company owned a 20% interest in the partnership. We recognized a gain of approximately $64 million from the sale of the data centers. This gain is reflected in equity in earnings (loss) of unconsolidated entities in our consolidated income statements. In addition, we received a promote in the amount of $19 million related to the partnership exceeding certain investor return thresholds over the life of the partnership, which is included in fee income and other in our consolidated income statements.

Summarized Financial Information of Investments in Unconsolidated Entities

The subsequent tables provide summarized financial information for all of our investments in unconsolidated entities accounted for using the equity method. Amounts are shown in thousands.


									Net		Net
	Total		Total						Operating		Income
December 31, 2022	Assets		Liabilities		Equity		Revenues		Income		(Loss)
Unconsolidated entities
Ascenty	$	2,410,845	$	1,209,852	$	1,200,993	$	254,884	$	155,847	$	(35,726)
Mitsubishi		1,441,935		495,394		946,541		175,833		78,859		24,768
Digital Core REIT		1,602,725		551,088		1,051,636		111,408		72,937		(19,055)
Lumen		148,323		10,681		137,642		25,572		15,211		4,909
Mapletree		861,290		22,289		839,001		122,775		67,003		(7,736)
Other		613,279		221,679		391,600		37,123		19,998		(5,018)
Total Unconsolidated entities	$	7,078,397	$	2,510,983	$	4,567,413	$	727,595	$	409,855	$	(37,858)
Our investment in and share of equity in earnings of unconsolidated entities					$	1,991,426					$	(13,497)


									Net		Net
	Total		Total						Operating		Income
December 31, 2021	Assets		Liabilities		Equity		Revenues		Income		(Loss)
Unconsolidated entities
Ascenty	$	2,079,401	$	1,046,079	$	1,033,322	$	204,696	$	128,827	$	(41,461)
Mitsubishi		1,376,763		537,581		839,182		168,203		88,462		31,125
Digital Core REIT		1,440,500		350,000		1,090,500		8,184		5,844		(4,648)
Lumen		148,576		10,868		137,708		25,541		15,506		2,718
Mapletree		925,190		24,865		900,325		111,010		65,701		(9,825)
Other		440,694		190,996		249,698		59,881		36,427		233,298
Total Unconsolidated entities	$	6,411,124	$	2,160,389	$	4,250,735	$	577,515	$	340,767	$	211,207
Our investment in and share of equity in loss of unconsolidated entities					$	1,807,689					$	62,283


									Net		Net
	Total		Total						Operating		Income
December 31, 2020	Assets		Liabilities		Equity		Revenues		Income		(Loss)
Unconsolidated entities
Ascenty	$	1,862,402	$	833,801	$	1,028,601	$	165,680	$	105,040	$	(191,161)
Mitsubishi		968,957		358,749		610,208		154,114		83,113		43,746
Lumen		181,464		8,264		173,200		25,006		14,765		5,581
Mapletree		985,900		38,140		947,760		106,966		66,062		(11,473)
Other		604,215		421,349		182,866		83,475		57,674		18,210
Total Unconsolidated entities	$	4,602,938	$	1,660,303	$	2,942,635	$	535,241	$	326,654	$	(135,097)
Our investment in and share of equity in earnings of unconsolidated entities					$	1,148,158					$	(57,629)

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, 2022 and 2021

The amounts reflected in the previous tables on this topic are based on the historical financial information of the respective individual entities and have not been adjusted to show only the portion that is owned by the Company. The debt of our unconsolidated entities generally is non-recourse to us, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions, and material misrepresentations.

9. Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Changes in the value of goodwill at December 31, 2022 as compared to December 31, 2021 were primarily driven by the acquisition of an indirect majority interest in Teraco in August 2022 and changes in exchange rates associated with goodwill balances denominated in foreign currencies – primarily the devaluation of the Euro as compared to the U.S. dollar.

The following is a summary of goodwill activity for the years ended December 31, 2022 and 2021 (in thousands):


	Balance as of								Impact of Change		Balance as of
	December 31,						Goodwill		in Foreign		December 31,
Merger / Portfolio Acquisition	2021		Acquisition		Deconsolidation		Adjustments		Exchange Rates		2022

Telx Acquisition	$	330,845	$	—	$	—	$	—	$	—	$	330,845
European Portfolio Acquisition		448,124		—		—		—		(40,069)		408,055
DFT Merger		2,592,147		—		—		—		—		2,592,147
Interxion Combination		4,547,153		—		—		5,409		(264,354)		4,288,208
Teraco Combination		—		1,625,994		—		—		(49,290)		1,576,704
Other Combination		19,171		—		—		(6,633)		—		12,538
Total	$	7,937,440	$	1,625,994	$	—	$	(1,224)	$	(353,713)	$	9,208,497

	Balance as of								Impact of Change		Balance as of
	December 31,		Merger /				Goodwill		in Foreign		December 31,
Merger / Portfolio Acquisition	2020		Acquisition		Deconsolidation		Adjustments		Exchange Rates		2021

Telx Acquisition	$	330,845	$	—	$	—	$	—	$	—	$	330,845
European Portfolio Acquisition		463,154		—		—		—		(15,030)		448,124
DFT Merger		2,592,147		—		—		—		—		2,592,147
Interxion Combination		4,944,851		—		—		(59,142)		(338,556)		4,547,153
Other		—		19,171		—		—		—		19,171
Total	$	8,330,997	$	19,171	$	—	$	(59,142)	$	(353,586)	$	7,937,440

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, 2022 and 2021

Acquired Intangible Assets and Liabilities

The following summarizes our acquired intangible assets and intangible liabilities as of December 31, 2022 and 2021.


	Balance as of
	December 31, 2022						December 31, 2021
(Amounts in thousands)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationship value	$	3,327,765	$	(888,105)	$	2,439,660	$	2,838,842	$	(721,983)	$	2,116,859
Acquired in-place lease value		1,369,526		(1,041,631)		327,895		1,278,012		(995,883)		282,129
Other		94,829		(26,788)		68,041		101,869		(14,688)		87,181
Acquired above-market leases		264,071		(253,693)		10,378		268,724	$	(247,135)		21,589
Acquired below-market leases		(344,256)		255,821		(88,435)		(351,052)		247,877		(103,175)

Amortization of customer relationship value, acquired in-place lease value and other intangibles (a component of depreciation and amortization expense) was approximately $253.3 million, $262.9 million and $266.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase in rental and other services revenue of $2.9 million for the year ended December 31, 2022 and a decrease of $(3.6) million and $(10.5) million for the years ended December 31, 2021 and 2020, respectively. Estimated annual amortization for each of the five succeeding years and thereafter, commencing January 1, 2023 is as follows:


(Amounts in thousands)		Customer relationship value		Acquired in-place lease value		Other (1)		Acquired above-market leases		Acquired below-market leases
2023	$	199,837	$	65,309	$	4,488	$	4,758	$	(12,496)
2024		199,257		59,705		3,084		2,584		(11,203)
2025		198,755		56,680		3,084		1,452		(10,215)
2026		198,320		52,625		3,084		684		(8,659)
2027		197,943		41,843		3,084		214		(8,010)
Thereafter		1,445,548		51,733		13,818		686		(37,852)
Total	$	2,439,660	$	327,895	$	30,642	$	10,378	$	(88,435)

Remaining Contractual Life (in years)		14.9		5.0				1.8		7.3

(1)	Excludes power grid rights in the amount of approximately $37.4 million that are currently not being amortized. Amortization of these assets will begin once the data centers associated with the power grid rights are placed into service.

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, 2022 and 2021

Debt of the Operating Partnership

All debt is currently held by the OP or its consolidated subsidiaries, and the Parent is the guarantor or co-guarantor of such debt. A summary of outstanding indebtedness is as follows (in thousands):


	December 31, 2022				December 31, 2021
	Weighted-				Weighted-
	average		Amount		average		Amount
	interest rate		Outstanding		interest rate		Outstanding
Global revolving credit facilities	3.04	%	$	2,167,889	0.96	%	$	415,116
Unsecured term loans	2.49	%		802,875	—	%		—
Unsecured senior notes	2.44	%		13,220,961	2.26	%		13,000,042
Secured and other debt	7.12	%		532,130	3.47	%		147,082
Total	2.68	%	$	16,723,855	2.23	%	$	13,562,240

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

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


	December 31, 2022				December 31, 2021
	Amount				Amount
Denomination of Draw	Outstanding		% of Total		Outstanding		% of Total
U.S. dollar ($)	$	3,855,903	23.1	%	$	3,141,951	23.2	%
British pound sterling (£)		1,929,051	11.5	%		2,117,758	15.6	%
Euro (€)		9,325,126	55.8	%		7,532,057	55.5	%
Other		1,613,775	9.6	%		770,474	5.7	%
Total	$	16,723,855			$	13,562,240

The table below summarizes our debt maturities and principal payments as of December 31, 2022 (in thousands):


	Global Revolving		Unsecured		Unsecured		Secured and
	Credit Facilities (1)		Term Loans		Senior Notes		Other Debt		Total Debt
2023	$	—	$	—	$	108,121	$	9,335	$	117,456
2024		—		—		944,375		9,381		953,756
2025		—		401,438		1,179,145		—		1,580,583
2026		2,167,889		—		1,448,119		58,575		3,674,583
2027		—		401,437		1,162,181		135,000		1,698,618
Thereafter		—		—		8,379,020		319,839		8,698,859
Subtotal	$	2,167,889	$	802,875	$	13,220,961	$	532,130	$	16,723,855
Unamortized net discounts		—		—		(37,280)		—		(37,280)
Unamortized deferred financing costs		(17,438)		(5,426)		(63,648)		(3,260)		(89,772)
Total	$	2,150,451	$	797,449	$	13,120,033	$	528,870	$	16,596,803

(1)	Includes amounts outstanding for the global revolving credit facility and the Yen revolving credit facility (together, we refer to as the “global revolving credit facilities”) – but are discussed separately in these footnotes given slightly different fees/terms.

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, 2022 and 2021

Global Revolving Credit Facility

We have a global revolving senior credit facility (“global revolving credit facility”) under which we may draw up to $3.75 billion on a revolving basis (subject to currency fluctuations). The global revolving credit facility can be drawn in Australian dollars, British pounds sterling, Canadian dollars, Euros, Hong Kong dollars, Japanese yen, Singapore dollars, Indonesian rupiah, Swiss francs, Korean won and U.S. dollars (with the ability to add other currencies in the future).

On April 5, 2022, we entered into an amendment (the “Amendment”) to the Second Amended and Restated Global Senior Credit Agreement (the “Credit Agreement”). The Amendment provided for, among other things: (1) an increase in the size of the global revolving credit facility from $3.0 billion to $3.75 billion and (2) the transition from U.S. dollar London Interbank Offered Rate (LIBOR) to Term Secured Overnight Financing Rate (SOFR) for floating rate borrowings denominated in U.S. dollars for all purposes under the Credit Agreement.

We have the ability to increase the size of the global revolving credit facility by up to $750 million, subject to the receipt of lender commitments and other conditions precedent. Other key terms of the global revolving credit facility are as follows:

	●	Maturity date: January 24, 2026, with two six-month extension options available. 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 facilities.

	●	Interest rate: the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 85 basis points.

	●	Annual facility fee: based on the total commitment amount of the facility and the credit ratings of our long-term debt is currently 20 basis points and is payable quarterly.

	●	Sustainability-linked pricing component: pricing can increase by up to 5 basis points or decrease by up to 5 basis points depending on whether or not the OP or its subsidiaries meet certain sustainability performance targets.

Yen Revolving Credit Facility

In addition to the global revolving credit facility, we have a revolving credit facility that provides for borrowings in Japanese Yen of up to ¥33.3 billion (approximately $253.9 million based on the exchange rate on December 31, 2022), hereafter referred to as the “Yen revolving credit facility”). 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 $711.5 million based on the exchange rate on December 31, 2022), subject to receipt of lender commitments and other conditions precedent. Other key terms of the Yen revolving credit facility are as follows:

	●	Maturity date: January 24, 2026, with two six-month extension options available. 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 facilities.

	●	Interest rate: the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 50 basis points.

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, 2022 and 2021

	●	Quarterly unused commitment fee: currently is 10 basis points, calculated using the average daily unused revolving credit commitment and is based on the credit ratings of our long-term debt

	●	Sustainability-linked pricing component: pricing can increase by up to 5 basis points or decrease by up to 5 basis points depending on whether or not the OP or its subsidiaries meet certain sustainability performance targets.

Restrictive Covenants in Global Revolving Credit Facility and Yen Revolving Credit Facility

The global revolving credit facility and the Yen revolving credit facility both contain various restrictive covenants, including limitations on our ability to incur additional indebtedness, make certain investments, or merge with another company. In addition, we are required to maintain financial coverage ratios, including with ratios respect to unencumbered assets. After the occurrence of and during the continuance of any event of default, these credit facilities restrict the Parent’s ability to make distributions to stockholders or redeem or otherwise repurchase shares of its capital stock, except in limited circumstances (such as those 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, 2022, we were in compliance with all of such covenants for both of these revolving credit facilities.

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, 2022 and 2021

Unsecured Senior Notes

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


	Aggregate Principal Amount at Issuance					Balance as of
	Borrowing Currency		USD		Maturity Date	December 31, 2022		December 31, 2021
Floating rate notes due 2022	€	300,000	$	349,800	Sep 23, 2022	$	—	$	341,100
0.125% notes due 2022	€	300,000		332,760	Oct 15, 2022		—		341,100
0.600% notes due 2023	CHF	100,000		108,310	Oct 02, 2023		108,121		—
2.625% notes due 2024	€	600,000		677,040	Apr 15, 2024		642,300		682,200
2.750% notes due 2024	£	250,000		324,925	Jul 19, 2024		302,075		338,300
4.250% notes due 2025	£	400,000		634,480	Jan 17, 2025		483,320		541,280
0.625% notes due 2025	€	650,000		720,980	Jul 15, 2025		695,825		739,050
4.750% notes due 2025	$	450,000		450,000	Oct 01, 2025		—		450,000
2.500% notes due 2026	€	1,075,000		1,224,640	Jan 16, 2026		1,150,788		1,222,275
0.200% notes due 2026	CHF	275,000		298,404	Dec 15, 2026		297,331		301,419
1.700% notes due 2027	CHF	150,000		162,465	Mar 30, 2027		162,181		—
3.700% notes due 2027 (1)	$	1,000,000		1,000,000	Aug 15, 2027		1,000,000		1,000,000
5.550% notes due 2028 (1)	$	900,000		900,000	Jan 15, 2028		900,000		—
1.125% notes due 2028	€	500,000		548,550	Apr 09, 2028		535,250		568,500
4.450% notes due 2028	$	650,000		650,000	Jul 15, 2028		650,000		650,000
0.550% notes due 2029	CHF	270,000		292,478	Apr 16, 2029		291,925		295,938
3.600% notes due 2029	$	900,000		900,000	Jul 01, 2029		900,000		900,000
3.300% notes due 2029	£	350,000		454,895	Jul 19, 2029		422,905		473,620
1.500% notes due 2030	€	750,000		831,900	Mar 15, 2030		802,875		852,750
3.750% notes due 2030	£	550,000		719,825	Oct 17, 2030		664,565		744,260
1.250% notes due 2031	€	500,000		560,950	Feb 01, 2031		535,250		568,500
0.625% notes due 2031	€	1,000,000		1,220,700	Jul 15, 2031		1,070,500		1,137,000
1.000% notes due 2032	€	750,000		874,500	Jan 15, 2032		802,875		852,750
1.375% notes due 2032	€	750,000		849,375	Jul 18, 2032		802,875		—
						$	13,220,961	$	13,000,042
Unamortized discounts, net of premiums							(37,280)		(33,612)
Deferred financing costs, net							(63,648)		(63,060)
Total unsecured senior notes, net of discount and deferred financing costs						$	13,120,033	$	12,903,370

(1)	Subject to cross-currency swaps.

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, 2022 and 2021

Restrictive Covenants in Unsecured Senior Notes

The indentures governing our senior notes contain certain covenants, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40% and (3) an interest coverage ratio of greater than 1.50. The covenants also require us to maintain total unencumbered assets of not less than 150% of the aggregate principal amount of unsecured debt. At December 31, 2022, we were in compliance with each of these financial covenants.

Early Extinguishment of Unsecured Senior Notes

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

	●	During the year ended December 31, 2022: $51.1 million primarily due to redemption of the 4.750% Notes due 2025 in February 2022.

	●	During the year ended December 31, 2021: $18.3 million primarily due to redemption of the 2.750% Notes due 2023 in February 2021.

	●	During the year ended December 31, 2020: $103.2 million primarily due to redemption of:

	o	3.950% Notes due 2022 and 3.625% Notes due 2022 in August 2020; and

	o	4.750% Notes due 2023 in October 2020

Euro Term Loan Agreement

On August 11, 2022, Digital Dutch Finco B.V., a wholly owned subsidiary of the Operating Partnership, entered into a term loan agreement (the “Euro Term Loan Agreement”) which governs (i) a €375.0 million three-year senior unsecured term loan facility (the “2025 Term Facility”), the entire amount of which was funded on the closing date, and (ii) a €375.0 million five-year senior unsecured term loan facility (the “2025-27 Term Facility” and, together with the 2025 Term Facility, the “Euro Term Facilities”), comprised of €125.0 million of initial term loans, the entire amount of which was funded on the closing date, and €250.0 million of delayed draw term loan commitments that were not funded on the closing date, and were funded on September 9, 2022. The Euro Term Facilities provide for borrowings in Euros. The 2025 Term Facility matures on August 11, 2025. The 2025-27 Term Facility matures on August 11, 2025, subject to two maturity extension options of one year each. The interest rate for borrowings under the Euro Term Facilities is based on EURIBO, plus a margin based on the corporate credit rating of our long-term senior unsecured debt of between 0.80% and 1.60% per annum. As of the closing date, the applicable rate for borrowings is EURIBO plus 0.95% per annum. We are also required to pay certain fees to the administrative agent under the Euro Term Facilities. The Euro Term Facilities may be voluntarily prepaid in whole or in part at any time without premium or penalty. Amounts borrowed under the Euro Term Facilities and repaid or prepaid may not be reborrowed.

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, 2022 and 2021

Issuance of Unsecured Senior Notes

Digital Intrepid Holding B.V., an indirect wholly owned holding and finance subsidiary of the Operating Partnership through which the Interxion business is held, issued and sold the following notes during 2022:

	●	January 18, 2022: Issued and sold €750.0 million aggregate principal amount of 1.375% Guaranteed Notes due 2032 (the “2032 Notes”). Net proceeds from the offering were approximately €737.5 million (approximately $835.3 million based on the exchange rate on January 18, 2022) after deducting managers’ discounts and estimated offering expenses.

	●	March 30, 2022: Issued and sold CHF 100 million aggregate principal amount of 0.600% Guaranteed Notes due 2023 (the “2023 Notes”) and CHF 150 million aggregate principal amount of 1.700% Guaranteed Notes due 2027 (the “2027 Notes” and, together with the “2023 Notes,” the “Swiss Franc Notes”). Net proceeds from the offering of the Swiss Franc Notes were approximately CHF 248.6 million (approximately $269.2 million based on the exchange rate on March 30, 2022) after deducting the managers’ commissions and certain offering expenses.

On September 27, 2022 and December 6, 2022, Digital Realty Trust, L.P. completed underwritten public offerings of $900.0 million aggregate principal amount of its 5.550% Notes due 2028 (the “2028 Notes”). Interest on the 2028 Notes is payable on January 15 and July 15 of each year, beginning on January 15, 2023, until the maturity date of January 15, 2028. Our obligations under the 2028 Notes are fully and unconditionally guaranteed by Digital Realty Trust, Inc. Net proceeds from the offering of the 2028 Notes were approximately $888.4 million, after deducting the managers’ commissions and certain offering expenses.

Secured and other debt

This amount consists of a variety of loans at fixed rates ranging from 3.29% to 11.65%. The largest component of the balance is a Teraco term loan facility in the amount of $288.8 million, with an effective interest rate of 8.52%, along with a $135.0 million mortgage loan for the Company’s Westin building in Seattle – which bears interest at 3.29%. The loan bearing interest at 11.65% is an unsecured loan with a balance of less than $8 million.

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, 2022 and 2021

Earnings per Common Share or Unit

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

Digital Realty Trust, Inc. Earnings per Common Share


	Year Ended December 31,
	2022		2021		2020
Numerator:
Net income available to common stockholders	$	336,960	$	1,681,498	$	263,342
Plus: Loss attributable to redeemable noncontrolling interest (1)		(4,839)		—		—
Net income available to common stockholders - diluted EPS		332,121		1,681,498		263,342

Denominator:
Weighted average shares outstanding—basic		286,334		282,475		260,099
Potentially dilutive common shares:
Unvested incentive units		257		253		121
Unvested restricted stock		45		192		177
Forward equity offering		—		—		1,597
Market performance-based awards		103		302		529
Redeemable noncontrolling interest shares (1)		11,180		—		—
Weighted average shares outstanding—diluted		297,919		283,222		262,523
Income per share:
Basic	$	1.18	$	5.95	$	1.01
Diluted	$	1.11	$	5.94	$	1.00

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, 2022 and 2021

Digital Realty Trust, L.P. Earnings per Unit


	Year Ended December 31,
	2022		2021		2020
Numerator:
Net income available to common unitholders	$	345,060	$	1,720,598	$	272,842
Plus: Loss attributable to redeemable noncontrolling interest (1)		(4,839)		—		—
Net income available to common unitholders - diluted EPS		340,221		1,720,598		272,842

Denominator:
Weighted average units outstanding—basic		292,123		289,165		268,073
Potentially dilutive common units:
Unvested incentive units		257		253		121
Unvested restricted units		45		192		177
Forward equity offering		—		—		1,597
Market performance-based awards		103		302		529
Redeemable noncontrolling interest shares (1)		11,180		—		—
Weighted average units outstanding—diluted		303,708		289,912		270,497
Income per unit:
Basic	$	1.18	$	5.95	$	1.02
Diluted	$	1.12	$	5.94	$	1.01

(1)

Pursuant to the Put/Call Agreement with the Rollover Shareholders who remained after the Teraco Acquisition, the Rollover Shareholders have a put right on the Remaining Interest of Teraco that can be settled by the Company in the Company’s shares, in cash, or a combination of cash and shares. Under U.S. GAAP, diluted earnings per share must be reflected in a manner that assumes such put right was exercised at the beginning of the respective periods and settled entirely in shares. The amounts shown represent the redemption value of the Remaining Interest of Teraco divided by the Company's average share price for the respective periods. The put right is exercisable by the Rollover Shareholders for a two-year period commencing on February 1, 2026.

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, 2022 and 2021

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


	Year Ended December 31,
	2022	2021	2020
Shares subject to Forward Equity Offering	—	6,250	—
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.	5,789	6,691	7,974
Potentially dilutive Series C Cumulative Redeemable Perpetual Preferred Stock	—	541	1,490
Potentially dilutive Series G Cumulative Redeemable Preferred Stock	—	—	1,453
Potentially dilutive Series I Cumulative Redeemable Preferred Stock	—	—	1,269
Potentially dilutive Series J Cumulative Redeemable Preferred Stock	1,736	1,318	1,476
Potentially dilutive Series K Cumulative Redeemable Preferred Stock	1,825	1,386	1,552
Potentially dilutive Series L Cumulative Redeemable Preferred Stock	2,993	2,274	2,544
Total	12,343	18,460	17,758

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 Company’s accompanying consolidated financial statements for the years ended December 31, 2022, 2021 and 2020.

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, 2022, 2021 and 2020.

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, 2022 and 2021

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, 2022, 2021 and 2020.

As of December 31, 2022 and 2021, we had deferred tax liabilities net of deferred tax assets of approximately $1,184.6 million and $658.8 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 foreign tax basis and book basis of the assets acquired in the Teraco Acquisition in August 2022, Interxion Combination in March 2020, the European Portfolio Acquisition in July 2016 and the Sentrum portfolio acquisition in 2012. The valuation allowance against the deferred tax assets at December 31, 2022 and 2021 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, 2022 and 2021 were as follows (in thousands):


	2022		2021
Gross deferred income tax assets:
Net operating loss carryforwards	$	175,935	$	155,152
Basis difference - real estate property		14,027		9,078
Basis difference - intangibles		7,682		2,357
Basis difference - equity investments		5,694		—
Straight-line rent		—		8,097
Other - temporary differences		132,578		175,766
Total gross deferred income tax assets		335,916		350,450
Valuation allowance		(125,491)		(130,893)
Total deferred income tax assets, net of valuation allowance		210,425		219,557
Gross deferred income tax liabilities:
Basis difference - real estate property		1,160,412		798,640
Basis difference - equity investments		—		3,543
Basis difference - intangibles		219,653		63,222
Straight-line rent		9,215		10,942
Other - temporary differences		5,744		1,976
Total gross deferred income tax liabilities		1,395,024		878,323
Net deferred income tax liabilities (1)	$	1,184,599	$	658,766

(1)	Net of deferred tax assets of $8.2 million and $7.7 million for the year ended December 31, 2022 and 2021, 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, 2022 and 2021

Equity and Capital

Equity Distribution Agreement

Digital Realty Trust, Inc. and Digital Realty Trust, L.P. are parties to an at-the-market (ATM) equity offering sales agreement dated April 1, 2022 (the “Sales Agreement”). Pursuant to the Sales Agreement, Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $1.5 billion through various named agents from time to time. For the year ended December 31, 2022, we had no sales under the Sales Agreement and $1.5 billion is still available.

Forward Equity Sale

On September 13, 2021, the Parent completed an underwritten public offering of 6,250,000 shares of its common stock, all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. The forward purchasers borrowed and sold an aggregate of 6,250,000 shares of the Parent’s common stock in the public offering. The Parent did not receive any proceeds from the sale of common stock by the forward purchasers in the public offering. During the year ended December 31, 2022, we settled the forward sale agreements in full by issuing approximately 6.3 million shares, resulting in proceeds of approximately $939.0 million. Upon physical settlement of the forward sale agreements, the OP issued general partner common partnership units to the Parent in exchange for contribution of the net proceeds. We accounted for our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives.

Redeemable Preferred Stock

The Company has issued and outstanding the following series of cumulative redeemable preferred stock, which are governed by the articles supplementary for the applicable series of preferred stock as of December 31, 2022 and 2021.


				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)		2022	2021	2022		2021
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	8,400,000		203,264		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	13,800,000		334,886		334,886
				$	755,000			30,200,000	30,200,000	$	731,690	$	731,690

(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.

(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.

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, 2022 and 2021

(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.

Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the proportion of entities consolidated by the Company that are owned by third parties. The following table shows the ownership interest in the Operating Partnership as of December 31, 2022 and 2021:


	December 31, 2022			December 31, 2021
	Number of	Percentage of		Number of	Percentage of
	units	total		units	total
Digital Realty Trust, Inc.	291,148	97.9	%	284,415	98.0	%
Noncontrolling interests consist of:
Common units held by third parties	4,375	1.5	%	4,389	1.5	%
Incentive units held by employees and directors (see Note 16. Incentive Plan)	1,914	0.6	%	1,543	0.5	%
	297,437	100.0	%	290,347	100.0	%

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

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, 2022 and 2021

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $591.2 million and $1,074.7 million based on the closing market price of Digital Realty Trust, Inc. common stock on December 31, 2022 and December 31, 2021, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the years ended December 31, 2022 and 2021:


	Common Units	Incentive Units	Total
As of December 31, 2020	6,212	1,834	8,046
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(1,823)	—	(1,823)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(679)	(679)
Incentive units issued upon achievement of market performance condition	—	239	239
Grant of incentive units to employees and directors	—	151	151
Cancellation / forfeitures of incentive units held by employees and directors	—	(2)	(2)
As of December 31, 2021	4,389	1,542	5,931
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(14)	—	(14)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(22)	(22)
Incentive units issued upon achievement of market performance condition	—	221	221
Grant of incentive units to employees and directors	—	170	170
Cancellation / forfeitures of incentive units held by employees and directors	—	3	3
As of December 31, 2022	4,375	1,914	6,289

(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, 2022 and 2021

Dividends and Distributions

Digital Realty Trust, Inc. Dividends

We have declared and paid the following dividends on our common and preferred stock for the years ended December 31, 2022, 2021 and 2020 (in thousands, except per share data):


		Series C			Series G			Series I			Series J		Series K		Series L
		Preferred			Preferred			Preferred			Preferred		Preferred		Preferred		Common
Date dividend declared	Dividend payment date	Stock			Stock			Stock			Stock		Stock		Stock		Stock
February 26, 2020	March 31, 2020	$	3,333		$	3,672		$	3,969		$	2,625	$	3,071	$	4,485	$	295,630	(3)
May 12, 2020	June 30, 2020		3,333			3,672			3,969			2,625		3,071		4,485		301,005	(3)
August 11, 2020	September 30, 2020		3,333			3,672			—	(2)		2,625		3,071		4,485		303,006	(3)
November 10, 2020	December 31, 2020 for Preferred Stock; January 15, 2021 for Common Stock		3,333			—	(1)		—			2,625		3,071		4,485		314,280	(3)
		$	13,332		$	11,016		$	7,938		$	10,500	$	12,284	$	17,940	$	1,213,921

February 25, 2021	March 31, 2021	$	3,333		$	—		$	3,969		$	2,625	$	3,071	$	4,485	$	326,965	(5)
May 10, 2021	June 30, 2021		—	(4)		—			3,969			2,625		3,071		4,485		328,279	(5)
August 10, 2021	September 30, 2021		—			—			—			2,625		3,071		4,485		329,720	(5)
November 17, 2021	December 31, 2021 for Preferred Stock; January 14, 2022 for Common Stock		—			—			—			2,625		3,071		4,485		329,772	(5)
		$	3,333		$	—		$	7,938		$	10,500	$	12,284	$	17,940	$	1,314,736

March 3, 2022	March 31, 2022	$	—		$	—		$	—		$	2,625	$	3,071	$	4,485	$	348,025	(6)
May 24, 2022	June 30, 2022		—			—			—			2,625		3,071		4,485		348,077	(6)
August 17, 2022	September 30, 2022		—			—			—			2,625		3,071		4,485		351,410	(6)
November 29, 2022	December 31, 2022 for Preferred Stock; January 13, 2023 for Common Stock		—			—			—			2,625		3,071		4,485		355,832	(6)
		$	—		$	—		$	—		$	10,500	$	12,284	$	17,940	$	1,403,344
Annual rate of dividend per share		$	1.65625		$	1.46875		$	1.58750		$	1.31250	$	1.46250	$	1.30000	$	4.88000

(1)	Redeemed on October 15, 2020 for $25.057118 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 $8.2 million were recorded as a reduction to net income available to common stockholders.

(2)	Redeemed on September 8, 2020 for $25.29545 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 $8.0 million were recorded as a reduction to net income available to common stockholders.

(3)	$4.480 annual rate of dividend per share.

(4)

Redeemed on May 17, 2021 for $ 25.211632 per share, or a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date. The transaction resulted in a gain on redemption of $18.0 million, measured as the difference between the cash consideration paid upon redemption, which was $201.3 million and the carrying value of the preferred stock at the time of the redemption, which was $219.3 million. This amount is reflected as gain on redemption of preferred stock which increased net income available to common stockholders.

(5)	$4.640 annual rate of dividend per share.

(6)	$4.880 annual rate of dividend per share.

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, 2022 and 2021

Digital Realty Trust, L.P. Distributions

All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s Board of Directors. The table below shows the distributions declared and paid by the Operating Partnership on its common and preferred units for the years ended December 31, 2022, 2021 and 2020, (in thousands, except for per unit data):


		Series C			Series G			Series I			Series J		Series K		Series L
		Preferred			Preferred			Preferred			Preferred		Preferred		Preferred		Common
Date distribution declared	Distribution payment date	Units			Units			Units			Units		Units		Units		Units
February 26, 2020	March 31, 2020	$	3,333		$	3,672		$	3,969		$	2,625	$	3,071	$	4,485	$	305,267	(3)
May 12, 2020	June 30, 2020		3,333			3,672			3,969			2,625		3,071		4,485		310,421	(3)
August 11, 2020	September 30, 2020		3,333			3,672			—	(2)		2,625		3,071		4,485		312,262	(3)
November 10, 2020	December 31, 2020 for Preferred Units; January 15, 2021 for Common Units		3,333			—	(1)		—			2,625		3,071		4,485		323,453	(3)
		$	13,332		$	11,016		$	7,938		$	10,500	$	12,284	$	17,940	$	1,251,403

February 25, 2021	March 31, 2021	$	3,333		$	—		$	3,969		$	2,625	$	3,071	$	4,485	$	336,041	(5)
May 10, 2021	June 30, 2021		—	(4)		—			3,969			2,625		3,071		4,485		336,543	(5)
August 10, 2021	September 30, 2021		—			—			—			2,625		3,071		4,485		337,447	(5)
November 17, 2021	December 31, 2021 for Preferred Units; January 14, 2022 for Common Units		—			—			—			2,625		3,071		4,485		337,476	(5)
		$	3,333		$	—		$	7,938		$	10,500	$	12,284	$	17,940	$	1,347,507

March 3, 2022	March 31, 2022	$	—		$	—		$	—		$	2,625	$	3,071	$	4,485	$	355,812	(6)
May 24, 2022	June 30, 2022		—			—			—			2,625		3,071		4,485		355,885	(6)
August 17, 2022	September 30, 2022		—			—			—			2,625		3,071		4,485		—	(6)
November 29, 2022	December 31, 2022 for Preferred Units; January 13, 2023 for Common Units		—			—			—			2,625		3,071		4,485		363,616	(6)
		$	—		$	—		$	—		$	10,500	$	12,284	$	17,940	$	1,075,313
Annual rate of distribution per unit		$	—		$	—		$	—		$	1.31250	$	1.46250	$	1.30000	$	4.88000

(1)	Redeemed on October 15, 2020 for $25.057118 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 $8.2 million were recorded as a reduction to net income available to common unitholders.

(2)	Redeemed on September 8, 2020 for $25.29545 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 $8.0 million were recorded as a reduction to net income available to common unitholders.

(3)	$4.480 annual rate of distribution per unit.

(4)

Redeemed on May 17, 2021 for $ 25.211632 per unit, or a redemption price of $25.00 per unit, plus accrued and unpaid distributions up to but not including the redemption date. The transaction resulted in a gain on redemption of $18.0 million, measured as the difference between the cash consideration paid upon redemption, which was $201.3 million and the carrying value of the preferred stock at the time of the redemption, which was $219.3 million. This amount is reflected as gain on redemption of preferred stock which increased net income available to common unitholders.

(5)	$4.640 annual rate of distribution per unit.

(6)	$4.880 annual rate of distribution 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, 2022 and 2021

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 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.

15. Accumulated Other Comprehensive Income (Loss), Net

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

Digital Realty Trust, Inc.


	Foreign currency		Cash flow		Foreign currency net		Accumulated other
	translation		hedge		investment hedge		comprehensive
	adjustments		adjustments		adjustments		income (loss), net
Balance as of December 31, 2020	$	98,760	$	(2,630)	$	38,880	$	135,010
Net current period change		(311,413)		1,250		—		(310,163)
Reclassification to interest expense from interest rate swaps		—		1,273		—		1,273
Balance as of December 31, 2021	$	(212,653)	$	(107)	$	38,880	$	(173,880)
Net current period change		(323,366)		(91,644)		—		(415,010)
Reclassification to interest expense from interest rate swaps		—		(6,908)		—		(6,908)
Balance as of December 31, 2022	$	(536,019)	$	(98,659)	$	38,880	$	(595,798)

Digital Realty Trust, L.P.


	Foreign currency		Cash flow		Foreign currency net		Accumulated other
	translation		hedge		investment hedge		comprehensive
	adjustments		adjustments		adjustments		income (loss)
Balance as of December 31, 2020	$	98,946	$	(3,823)	$	39,677	$	134,800
Net current period change		(318,828)		1,279		—		(317,549)
Reclassification to interest expense from interest rate swaps		—		1,304		—		1,304
Balance as of December 31, 2021	$	(219,882)	$	(1,240)	$	39,677	$	(181,445)
Net current period change		(331,131)		(93,803)		—		(424,934)
Reclassification to interest expense from interest rate swaps		—		(7,044)		—		(7,044)
Balance as of December 31, 2022	$	(551,013)	$	(102,087)	$	39,677	$	(613,423)

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, 2022 and 2021

Incentive Plans

2014 Incentive Award Plan

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

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

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

Market Performance-Based Awards (“the Performance Awards”)****: Market performance-based Class D units of the Operating Partnership and market performance-based Restricted Stock Units covering shares of Digital Realty Trust, Inc.’s common stock may be issued to officers and employees of the Company. The Performance Awards include performance-based and time-based vesting criteria. Depending on the type of award, the total number of units that qualify to fully vest is determined based on either a market performance criterion (“Market-Based Performance Awards”) or financial performance criterion (“Financial-Based Performance Awards”) (subject to time-based vesting).

Market-Based Performance Awards.

The market performance criterion compares the Company’s total shareholder return (“TSR”) relative to the MSCI US REIT Index (“RMS”) over a three-year performance period (“Market Performance Period”), subject to continued service, in order to determine the percentage of the total eligible pool of units that qualifies to be awarded. Following the completion of the Market Performance Period, the awards then have a time-based vesting element that allows for 50% of the performance-vested units to fully vest in the February immediately following the end of the Market Performance Period and 50% of the performance-vested units to fully vest in the subsequent February.

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 as is shown in the subsequent table (the “RMS Relative Market Performance”).


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

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, 2022 and 2021

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

Following the completion of the applicable Market Performance Period, the Compensation Committee made the following determinations regarding the vesting of these awards.

2020 Awards

	●	In January 2023, the RMS Relative Market Performance fell between the threshold and target level for the 2020 awards and accordingly, 72,230 Class D units and 7,083 Restricted Stock Units performance vested and qualified for time-based vesting.

	●	The Class D units included 5,841 distribution equivalent units that immediately vested on December 31, 2022.

	●	On February 27, 2023, 50% of the 2020 awards will vest and the remaining 50% will vest on February 27, 2024, subject to continued employment through the applicable vesting date.

2019 Awards

	●	In January 2022, the RMS Relative Market Performance fell between the target and high level for the 2019 awards and accordingly, 239,436 Class D units and 70,721 Restricted Stock Units performance vested and qualified for time-based vesting.

	●	The Class D units included 18,966 distribution equivalent units that immediately vested on December 31, 2021.

	●	On February 27, 2022, 50% of the 2019 awards vested and the remaining 50% will vest on February 27, 2023, subject to continued employment through the applicable vesting date.

2018 Awards

	●	In January 2021, the high level of the performance metric was determined to have been achieved and, accordingly, 240,377 Class D units and 63,498 Restricted Stock Units performance vested and qualified for time-based vesting.

	●	The Class D units included 20,725 distribution equivalent units that immediately vested on December 31, 2020.

	●	On February 27, 2021, 50% of the 2018 awards vested and the remaining 50% vested on February 27, 2022, subject to continued employment through the applicable vesting date.

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, 2022 and 2021

Financial-Based Performance Awards.

On March 4, 2022, the Company granted Financial-Based Performance Awards, based on growth in core funds from operation (“Core FFO”) during the three-year period commencing on January 1, 2022. The awards then have a time-based vesting element consistent with the Market-Based Performance Awards discussed above. For these awards, fair value is based on market value on the date of grant and compensation cost is recognized based on the probable achievement of the performance condition at each reporting period. The grant date fair value of these awards is $12.3 million, based on the Company’s closing stock price at the grant date.

Fair Value of Market Performance-Based Awards

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


	Expected Stock Price		Risk-Free Interest
Award Date	Volatility		rate
February 19, 2020	22	%	1.39	%
February 20, 2020	22	%	1.35	%
January 1, 2021	27	%	0.17	%
February 25, 2021	26	%	0.31	%
January 1, 2022	26	%	0.97	%

The expected stock price volatility assumption is calculated based on our historical volatility, which is calculated over a period of time commensurate with the expected term of the awards being valued. The expected dividend yield assumption used in the Monte Carlo simulation represents the percent of return to a stock that is available to the holder of an award. Because the holders of the awards receive dividend equivalents, an expected dividend yield assumption of 0.00% was used in the valuation. These valuations were performed in a risk-neutral framework, and no assumption was made with respect to an equity risk premium.

The grant date fair value of the Performance Awards was approximately $12.3 million, $25.0 million and $17.2 million for the years ended years ended December 31, 2022, 2021 and 2020, respectively. We will recognize compensation expense on a straight-line basis over the expected service period of approximately four years.

The aggregate intrinsic value of the Performance Awards that vested in 2022, 2021 and 2020 was $41.2 million, $28.6 million and $24.3 million, respectively.

Other Items**:** In addition to the LTIP Units, service-based Restricted Stock Units and Performance Awards described above, one-time grants of time and/or performance-based Class D units and Restricted Stock Units were issued in connection with the Interxion Combination. These awards vest over a period of two and three years based on continued service and/or the attainment of performance metrics related to successful integration of the Interxion business.

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, 2022 and 2021

As of December 31, 2022, approximately 4.9 million shares of common stock, including awards that can be converted to or exchanged for shares of common stock, remained available for future issuance under the Incentive Plan.

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

Below is a summary of compensation expense and unearned compensation (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	2022		2021		2020		2022		2021		2020		2022		2021		(in years)
Long-term incentive units	$	21.7	$	15.4	$	12.8	$	0.2	$	0.2	$	0.2	$	20.7	$	19.8	1.6
Performance-based awards		21.4		23.9		24.8		0.5		0.7		0.6		30.3		39.2	1.6
Service-based restricted stock units		25.9		23.2		15.1		5.4		3.3		3.2		55.4		44.5	2.5
Interxion awards		4.7		17.7		19.7		—		—		—		1.9		8.5	0.7

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, 2022, 2021 and 2020:


	Weighted Average Fair Value at Date of Grant
Type of incentive award	2022		2021		2020
Long-term incentive units	$	146.37	$	132.66	$	134.55
Performance-based awards		154.26		137.69		159.34
Restricted stock		131.57		129.52		138.82
Interxion awards		—		—		120.67

Activity for LTIP Units and service-based Restricted Stock Units for the year ended December 31, 2022 is shown below.


		Weighted-Average		Weighted-Average		Aggregate
		Grant Date Fair		Remaining Contractual		Intrinsic Value (1)
Unvested LTIP Units	Units	Value		Life (Years)		(in thousands)
Unvested, beginning of period	250,468	$	132.66
Granted	169,663		153.67
Vested	(140,873)		130.79
Cancelled or expired	—		—
Unvested, end of period	279,258	$	146.37		1.55	$	28,001

(1)	The intrinsic value is calculated based on the market value of our common stock as of December 31, 2022.

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, 2022 and 2021

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.

The aggregate intrinsic value of long-term incentive units that vested in 2022, 2021 and 2020 was $18.1 million, $17.5 million and $11.6 million, respectively. As of December 31, 2022, we had approximately 1.0 million long-term incentive units that were outstanding and exercisable with an aggregate intrinsic value of approximately $102.6 million (based on the market price of our common stock as of December 31, 2022).


		Weighted-Average		Weighted-Average			Aggregate
		Grant Date Fair		Remaining Contractual			Intrinsic Value (1)
Unvested Restricted Stock Units	Shares	Value		Life (Years)			(in thousands)
Unvested, beginning of period	509,369	$	129.52
Granted	373,953		131.69
Vested	(309,631)		128.22
Cancelled or expired	(65,854)		132.14
Unvested, end of period	507,837	$	131.57		2.36	$		50,921

(1)	The intrinsic value is calculated based on the market value of our common stock as of December 31, 2022.

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.

The aggregate intrinsic value of restricted stock that vested in 2022, 2021 and 2020 was $39.5 million, $59.0 million and $53.4 million, respectively.

Interxion Equity Plans

On March 9, 2020, in connection with the Interxion Combination, certain outstanding awards granted under various Interxion equity plans were assumed by Digital Realty Trust, Inc. and converted into adjusted equity-based awards of Digital Realty Trust, Inc. common stock in accordance with the terms of the Purchase Agreement for the Interxion Combination. All such awards will continue to be governed by the terms of the applicable Interxion equity plan and underlying award agreement evidencing the award. Approximately 0.6 million shares of Digital Realty Trust, Inc. common stock are registered and issuable pursuant to such awards. The impact of these plans is included in the tables above.

Defined Contribution Plans

We have a 401(k) plan whereby our U.S. 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 $5.9 million, $5.9 million, and $5.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. In addition, Interxion has a defined contribution pension plan for most of its employees. Contributions are made in accordance with the terms of such defined contribution pension plan and are expensed as incurred.

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, 2022 and 2021

Derivative Instruments

Derivatives Designated as Hedging Instruments

Net Investment Hedges

In September 2022, we entered into cross-currency interest rate swaps, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt in order to hedge the currency exposure associated with our net investment in foreign subsidiaries. As of December 31, 2022, we had cross-currency interest rate swaps outstanding with notional amounts of $1.67 billion and maturity dates ranging through 2028. We had no such instruments outstanding as of December 31, 2021.

The effect of these net investment hedges on accumulated other comprehensive income and the consolidated income statements for the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands):


	Year Ended December 31,
	2022		2021		2020
Cross-currency interest rate swaps (included component) (1)	$	116,550	$	—	$	—
Cross-currency interest rate swaps (excluded component) (2)		(7,929)		—		—
Total	$	108,621	$	—	$	—


		Year Ended December 31,
	Location of gain or (loss)	2022		2021		2020
Cross-currency interest rate swaps (excluded component) (2)	Interest expense	$	6,260	$	—	$	—

(1)	Included component represents foreign exchange spot rates.

(2)	Excluded component represents cross-currency basis spread and interest rates.

Cash Flow Hedges

We had no material outstanding derivatives designated as cash flow hedges as of the years ended December 31, 2022 and 2021. Amounts reported in accumulated other comprehensive loss related to interest rate swaps are reclassified to interest expense as interest payments are made on our debt. As of December 31, 2022, we had no material interest rate swap agreements outstanding.

On December 13, 2021, in connection with the paydown of our secured note due March 2023, we terminated interest rate swap agreements with notional amounts in the aggregate of $104.0 million and, as a result of the termination, the accumulated fair value of the interest rate swap will be ratably reclassified from accumulated other comprehensive income to interest expense on the accompanying consolidated income statement over the original term of the interest rate swap. On September 24, 2020, in connection with the paydown of our Term Loan maturing in 2023, we terminated interest rate swap agreements with notional amounts in the aggregate of $300.0 million, as a result of the termination, the accumulated fair value of the interest rate swap was reclassified from accumulated other comprehensive income to interest expense on the accompanying consolidated income statement, which resulted in a realized loss of approximately $6.4 million for the year ended December 31, 2020.

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, 2022 and 2021

Fair Value of Derivative Instruments

The subsequent table presents the fair value of derivative instruments recognized in our consolidated balance sheets as of December 31, 2022 and 2021 (in thousands):


	December 31, 2022				December 31, 2021
	Assets (1)		Liabilities (2)		Assets (1)		Liabilities (2)
Cross-currency interest rate swaps	$	—	$	108,621	$	—	$	—

(1)	As presented in our consolidated balance sheets within other assets.

(2)	As presented in our consolidated balance sheets within accounts payable and other accrued liabilities.

Credit-Risk Related Contingent Features

Upon entering into derivatives, we have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness.

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, 2022 and 2021

Fair Value of Financial Instruments

We disclose fair value information for all financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate fair value. Considerable judgment is necessary to interpret market data in order to estimate the fair value of financial instruments. 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. The carrying value of our global revolving credit facilities and unsecured term loans approximates estimated fair value, because these liabilities have variable interest rates and our credit ratings have remained stable. Differences between the carrying value and fair value of our unsecured senior notes and secured and other debt are caused by differences in interest rates or borrowing spreads that were available to us on December 31, 2022 and 2021 as compared to those in effect when the debt was issued or assumed. As described in Note 17. "Derivative Instruments", outstanding derivative contracts are recorded at fair value.

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

The aggregate estimated fair value and carrying value of our global revolving credit facilities, unsecured term loans, unsecured senior notes and secured debt as of the respective periods is shown below (in thousands):


	Categorization	As of December 31, 2022				As of December 31, 2021
	under the fair value	Estimated Fair				Estimated Fair
	hierarchy	Value		Carrying Value		Value		Carrying Value
Global revolving credit facilities	Level 2	$	2,167,889	$	2,167,889	$	415,116	$	415,116
Unsecured term loans (1)	Level 2		802,875		802,875		—		—
Unsecured senior notes (2)	Level 2		11,331,989		13,220,961		13,580,262		13,000,042
Secured and other debt (2)	Level 2		517,226		532,130		152,511		147,082
		$	14,819,979	$	16,723,855	$	14,147,889	$	13,562,240

(1)	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.

(2)	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.

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, 2022 and 2021

Commitments and Contingencies

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, 2022, we had open commitments, including amounts reimbursable of approximately $41.5

million, related to construction contracts of approximately $2.6 billion.

Legal Proceedings – Although the Company is involved in legal proceedings arising in the ordinary course of business, as of December 31, 2022, 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_._

20. Supplemental Cash Flow Information

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


	Balance as of
(Amounts in thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Cash and cash equivalents	$	141,773	$	142,698	$	108,501
Restricted cash (included in other assets)		8,923		8,787		15,151
Total	$	150,696	$	151,485	$	123,652

We paid $271.5 million, $274.7 million and $301.9 million for interest, net of amounts capitalized, for the years ended December 31, 2022, 2021 and 2020, respectively. During the years ended December 31, 2022, 2021 and 2020, we capitalized interest of approximately $70.6 million, $53.5 million and $47.3 million, respectively.

During the years ended December 31, 2022, 2021 and 2020, we capitalized amounts relating to compensation and other overhead expense of employees direct and incremental to construction activities of approximately $86.1 million, $71.2 million and $53.7 million, respectively.

We paid $41.7 million, $29.9 million and $20.1 million for income taxes, net of refunds, for the years ended December 31, 2022, 2021 and 2020, respectively.

Accrued construction related costs totaled $417.1 million, $423.0 million and $358.7 million as of years ended December 31, 2022, 2021 and 2020, 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, 2022 and 2021

21. Segment and Geographic Information

A majority of the Company’s largest customers are global entities that transact with the Company across multiple geographies worldwide. In order to better address the needs of these global customers, the Company manages critical decisions around development, operations, and leasing globally based on customer demand considerations. In this regard, the Company manages customer relationships on a global basis in order to achieve consistent sales and delivery experience of our products for our customers throughout the global portfolio. In order to best accommodate the needs of global customers (and customers that might one day become global), the Company manages its operations as a single global business – with one operating segment and therefore one reporting segment.


	Operating Revenues
	Year Ended December 31,
(Amounts in millions)	2022			2021			2020
Inside the United States	$	2,760.4		$	2,769.5		$	2,601.9
Outside the United States		1,931.4			1,658.4			1,301.8
Revenue Outside of U.S. %		41.2	%		37.5	%		33.3	%


	Investments in Properties, net				Operating lease right-of-use assets, net
	As of December 31,				As of December 31,
(Amounts in millions)	2022		2021		2022		2021
Inside the United States	$	11,517.3	$	11,167.9	$	647.0	$	719.1
Outside the United States		12,257.4		9,594.3		704.3		686.4

Net Assets in Foreign Operations	$	6,330.2	$	3,865.4

Subsequent Events

On October 25, 2022, the Company, the Operating Partnership, and certain of the Operating Partnership’s subsidiaries entered into an escrow agreement (the “Escrow Agreement”) with Bank of America, N.A., as administrative agent (the “Administrative Agent”), certain lenders (the “Lenders”), and Arnold & Porter Kaye Scholer LLP, as escrow agent (the “Escrow Agent”), pursuant to which the Operating Partnership, the Company, the Administrative Agent and the Lenders delivered executed signature pages to a new term loan agreement among the Operating Partnership, the Company, the Lenders and the Administrative Agent (the “Term Loan Agreement”) to be held in escrow by the Escrow Agent and released by the Escrow Agent upon satisfaction of specific terms. On January 9, 2023, the terms and conditions of the Escrow Agreement were satisfied, and, on such date, the Term Loan was deemed executed and became effective. The Term Loan Agreement provides for a $740 million senior unsecured term loan facility (the “Term Loan Facility”). The Term Loan Facility provides for borrowings in U.S. dollars. The Term Loan Facility will mature on March 31, 2025, subject to one twelve-month extension option at the Operating Partnership’s option; provided, that the Operating Partnership must pay a 0.1875% extension fee based on the then-outstanding principal amount of the term loans under the Term Loan Facility.

On January 24, 2023, Teraco entered into a syndicated loan facility worth R11.8 billion (approximately $686 million based on the exchange rate on January 24, 2023), of which R5.7 billion (approximately $331 million based on the exchange rate on January 24, 2023) will be used to finance the company’s continued growth and R6.1 billion (approximately $355 million based on the exchange rate on January 24, 2023) will refinance and extend the average maturity profile of existing drawn debt. The new facilities mature in December 2028.

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION

December 31, 2022

(Dollar amounts in thousands)


											Costs capitalized
					Initial costs						subsequent to acquisition				Total costs								Accumulated	Date of
							Acquired										Acquired						depreciation	acquisition
	Data Center						ground		Buildings and				Carrying				ground		Buildings and				and	or
	Buildings		Encumbrances		Land		lease		improvements		Improvements		costs		Land		lease		improvements		Total		amortization	construction
North American Markets
Northern Virginia	25	$	—	$	167,482	$	—	$	1,505,807	$	2,618,109	$	—	$	179,078	$	—	$	4,112,320	$	4,291,398	$	(1,272,037)	2005 - 2019
Chicago	10		—		95,444		—		1,320,334		1,016,898		—		105,830		—		2,326,846		2,432,676		(827,834)	2005 - 2017
New York	13		—		17,301		—		474,561		1,070,775		—		21,449		—		1,541,188		1,562,637		(724,143)	2002 - 2015
Dallas	22		—		60,608		—		303,811		1,139,833		—		53,120		—		1,451,132		1,504,252		(627,679)	2002 - 2015
Silicon Valley	15		—		129,702		—		842,693		477,036		—		128,467		—		1,320,964		1,449,431		(537,202)	2002 - 2018
Phoenix	2		—		11,859		—		399,122		374,339		—		11,859		—		773,461		785,320		(387,613)	2006 - 2015
San Francisco	4		—		41,165		—		358,066		308,561		—		41,478		—		666,314		707,792		(279,312)	2004 - 2015
Portland	3		—		1,689		—		3,131		569,477		—		8,870		—		565,427		574,297		(80,745)	2011 - 2015
Seattle	1		135,000		43,110		—		329,283		17,089		—		43,110		—		346,372		389,482		(36,879)	2,020
Toronto	2		—		26,600		—		116,863		245,111		—		21,555		—		367,019		388,574		(42,250)	2013 - 2017
Boston	3		—		17,826		—		253,711		103,228		—		16,600		—		358,165		374,765		(169,392)	2006 - 2011
Atlanta	4		—		6,537		—		264,948		91,717		—		6,552		—		356,650		363,202		(114,769)	2011 - 2017
Los Angeles	2		—		29,531		—		105,910		153,248		—		29,118		—		259,571		288,689		(135,732)	2004 - 2015
Houston	6		—		6,965		—		23,492		151,424		—		6,594		—		175,287		181,881		(110,946)	2006
Austin	1		—		1,177		—		4,877		71,978		—		1,177		—		76,855		78,032		(25,822)	2005
Miami	2		—		2,964		—		29,793		39,156		—		2,964		—		68,949		71,913		(35,313)	2002 - 2015
North America - Other	4		—		14,307		—		33,122		214,263		—		14,308		—		247,384		261,692		(69,402)
Total North America	119		135,000		674,267		—		6,369,524		8,662,242		—		692,129		—		15,013,904		15,706,033		(5,477,070)

EMEA Markets
London	16		—		101,397		7,355		1,423,194		290,277		—		49,335		5,917		1,766,971		1,822,223		(583,258)	2007 - 2020
Frankfurt	29		—		31,260		—		876,342		772,546		—		88,802		—		1,591,346		1,680,148		(209,311)	2015 - 2020
Amsterdam	13		—		40,709		—		968,935		135,114		—		35,278		—		1,109,480		1,144,758		(190,018)	2005 - 2020
Johannesburg	5		—		10,099		—		1,008,751		(31,977)		—		9,791		—		977,082		986,873		(22,365)	2022
Paris	13		—		45,722		—		355,386		462,942		—		48,296		—		815,754		864,050		(65,761)	2012 - 2020
Marseille	4		—		1,121		—		220,737		229,272		—		1,048		—		450,083		451,131		(48,626)	2020
Dublin	9		—		11,722		1,444		89,597		260,019		—		7,341		89		355,352		362,782		(116,178)	2006 - 2020
Vienna	3		—		14,159		—		364,949		(19,197)		—		12,708		—		347,203		359,911		(50,614)	2020
Cape Town	2		—		5,100		—		276,021		(8,376)		—		4,944		—		267,801		272,745		(6,494)	2022
Zurich	3		—		20,605		—		48,325		168,806		—		21,352		—		216,384		237,736		(23,708)	2020
Madrid	4		—		8,456		—		134,817		(4,907)		—		7,055		—		131,311		138,366		(18,182)	2020
Stockholm	6		—		—		—		93,861		32,446		—		—		—		126,307		126,307		(19,202)	2020
Brussels	3		—		3,874		—		118,034		(12,801)		—		3,477		—		105,630		109,107		(13,566)	2020
Copenhagen	3		—		11,665		—		107,529		(33,155)		—		1,418		—		84,621		86,039		(13,357)	2020
Durban	1		—		900		—		66,646		(2,068)		—		872		—		64,606		65,478		(1,613)	2022
Dusseldorf	3		—		—		—		30,093		20,793		—		—		—		50,886		50,886		(7,095)	2020

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION- (Continued)

December 31, 2022

(Dollar amounts in thousands)

Europe - Other	5		—		3,144		—		43,046		207,648		—		32,005		—		221,833		253,838		(43,877)
Africa - Other	4		—		—		—		—		68,038		—		3,361		—		64,677		68,038		(2,995)
Total EMEA	126		—		309,933		8,799		6,226,262		2,535,422		—		327,083		6,006		8,747,327		9,080,416		(1,436,220)

APAC Markets
Singapore	3		—		—		—		137,545		693,952		—		—		—		831,497		831,497		(258,904)	2010 - 2015
Sydney	4		—		18,285		—		3,868		189,334		—		21,162		—		190,325		211,487		(40,020)	2011 - 2012
Seoul	1		—		—		—		—		130,243		—		18,048		—		112,195		130,243		(587)	2022
Melbourne	2		—		4,467		—		—		102,186		—		2,986		—		103,667		106,653		(47,597)	2011
Hong Kong	1		—		—		—		—		58,277		—		—		—		58,277		58,277		(3,467)	2021
Asia Pacific - Other	1		—		—		—		—		11,451		—		—		—		11,451		11,451		(5,116)
Total APAC	12		—		22,752		—		141,413		1,185,443		—		42,196		—		1,307,412		1,349,608		(355,691)

Total Portfolio	257	$	135,000	$	1,006,952	$	8,799	$	12,737,199	$	12,383,107	$	—	$	1,061,408	$	6,006	$	25,068,643	$	26,136,057	$	(7,268,981)

Index to Financial Statements

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

SCHEDULE III

PROPERTIES AND ACCUMULATED DEPRECIATION

December 31, 2022

(Dollar amounts in thousands)

(1) Tax Cost

The aggregate gross cost of the Company’s properties for federal income tax purposes approximated $39.1 billion (unaudited) as of December 31, 2022.

(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, 2022.


	Year Ended December 31,
	2022		2021		2020
Balance, beginning of year	$	23,625,450	$	23,142,988	$	16,886,592
Additions during period (acquisitions and improvements)		2,553,946		1,570,162		6,514,218
Deductions during period (dispositions, impairments and assets held for sale)		(43,339)		(1,087,700)		(257,822)
Balance, end of year	$	26,136,057	$	23,625,450	$	23,142,988

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, 2022.


	Year Ended December 31,
	2022		2021		2020
Balance, beginning of year	$	6,210,281	$	5,555,221	$	4,536,169
Additions during period (depreciation and amortization expense)		1,079,497		1,042,011		1,029,863
Deductions during period (dispositions and assets held for sale)		(20,797)		(386,951)		(10,811)
Balance, end of year	$	7,268,981	$	6,210,281	$	5,555,221

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

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