Cover and table of contents

148K characters. Original on sec.gov · Markdown

Cover and table of contents

]]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021

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

For the Transition Period From to .

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

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

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

(Exact name of registrant as specified in its charter)



Maryland (Digital Realty Trust, Inc.)			26-0081711
Maryland (Digital Realty Trust, L.P.)			20-2402955
(State or other jurisdiction of			(IRS employer
incorporation or organization)			identification number)

5707 Southwest Parkway, Building 1, Suite 275
Austin, Texas 78735
(Address of principal executive offices)

(737) 281-0101

(Registrant’s telephone number, including area code)

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	DLR	New York Stock Exchange
Series J Cumulative Redeemable Preferred Stock	DLR Pr J	New York Stock Exchange
Series K Cumulative Redeemable Preferred Stock	DLR Pr K	New York Stock Exchange
Series L Cumulative Redeemable Preferred Stock	DLR Pr L	New York Stock Exchange

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


Digital Realty Trust, Inc.		Yes ⌧ No ◻
Digital Realty Trust, L.P.		Yes ⌧ No ◻

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


Digital Realty Trust, Inc.		Yes ⌧ No ◻
Digital Realty Trust, L.P.		Yes ⌧ No ◻

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

Digital Realty Trust, Inc.:


Large accelerated filer ⌧		Accelerated filer ◻

Non-accelerated filer ◻		Smaller reporting company ☐

		Emerging growth company ☐

Digital Realty Trust, L.P.:


Large accelerated filer ◻		Accelerated filer ◻

Non-accelerated filer ⌧		Smaller reporting company ☐

		Emerging growth company ☐

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


Digital Realty Trust, Inc.		◻
Digital Realty Trust, L.P.		◻

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


Digital Realty Trust, Inc.		Yes ☐ No ⌧
Digital Realty Trust, L.P.		Yes ☐ No ⌧

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

Digital Realty Trust, Inc.:



Class		Outstanding at November 3, 2021
Common Stock, $.01 par value per share		283,787,456

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2021 of Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, of which Digital Realty Trust, Inc. is the sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “our Company”, or “the Company” refer to Digital Realty Trust, Inc. together with its consolidated subsidiaries, including Digital Realty Trust, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to the “Parent” refer to Digital Realty Trust, Inc., and all references to “our Operating Partnership” or “the Operating Partnership” or “the OP” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.

The Parent is a real estate investment trust, or REIT, and the sole general partner of the OP. As of September 30, 2021, the Parent owned an approximate 97.8% common general partnership interest in the OP. The remaining approximate 2.2% of the common limited partnership interests of the OP are owned by non-affiliated third parties and certain directors and officers of the Parent. As of September 30, 2021, the Parent owned all of the preferred limited partnership interests of the OP. As the sole general partner of the OP, the Parent has the full, exclusive and complete responsibility for the OP’s day-to-day management and control.

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

	●	enhancing investors’ understanding of the Parent and the OP by enabling investors to view the business as a whole in the same manner as management views and operates the business;

	●	eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Parent and the OP; and

	●	creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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

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

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

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

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

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

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

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

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page Number
PART I.	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements of Digital Realty Trust, Inc.:

	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 (unaudited)	5

	Condensed Consolidated Income Statements for the three and nine months ended September 30, 2021 and 2020 (unaudited)	6

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020 (unaudited)	7

	Condensed Consolidated Statement of Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)	8

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	12

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

	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 (unaudited)	13

	Condensed Consolidated Income Statements for the three and nine months ended September 30, 2021 and 2020 (unaudited)	14

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020 (unaudited)	15

	Condensed Consolidated Statement of Capital for the three and nine months ended September 30, 2021 and 2020 (unaudited)	16

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	20

	Notes to Condensed Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (unaudited)	21

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	57

ITEM 4.	Controls and Procedures (Digital Realty Trust, Inc.)	58

	Controls and Procedures (Digital Realty Trust, L.P.)	58

PART II.	OTHER INFORMATION	60

ITEM 1.	Legal Proceedings	60

ITEM 1A.	Risk Factors	60

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

ITEM 3.	Defaults Upon Senior Securities	60

ITEM 4.	Mine Safety Disclosures	60

ITEM 5.	Other Information	60

ITEM 6.	Exhibits	61

	Signatures	62

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	September 30,		December 31,
	2021		2020
ASSETS
Investments in real estate:
Investments in properties, net	$	20,581,993	$	20,582,954
Investments in unconsolidated entities		1,292,325		1,148,158
Net investments in real estate		21,874,318		21,731,112
Operating lease right-of-use assets, net		1,442,661		1,386,959
Cash and cash equivalents		116,002		108,501
Accounts and other receivables, net		610,416		603,111
Deferred rent		552,850		528,180
Goodwill		8,062,914		8,330,996
Customer relationship value, deferred leasing costs and intangibles, net		2,871,622		3,122,904
Other assets		316,863		264,528
Total assets	$	35,847,646	$	36,076,291
LIABILITIES AND EQUITY
Global revolving credit facilities, net	$	832,322	$	531,905
Unsecured term loans, net		—		536,580
Unsecured senior notes, net of discount		13,012,790		11,997,010
Secured and other debt, including premiums		242,427		239,222
Operating lease liabilities		1,543,231		1,468,712
Accounts payable and other accrued liabilities		1,341,864		1,420,162
Deferred tax liabilities, net		725,955		698,308
Accrued dividends and distributions		—		324,386
Security deposits and prepaid rents		341,778		371,659
Total liabilities		18,040,367		17,587,944

Redeemable noncontrolling interests		40,920		42,011
Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 110,000,000 shares authorized; $755,000 and $956,250 liquidation preference ($25.00 per share), 30,200,000 and 38,250,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		731,690		950,940
Common Stock: $0.01 par value per share, 392,000,000 shares authorized; 283,846,802 and 280,289,726 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		2,818		2,788
Additional paid-in capital		21,010,202		20,626,897
Accumulated dividends in excess of earnings		(4,359,033)		(3,997,938)
Accumulated other comprehensive (loss) income, net		(111,560)		135,010
Total stockholders’ equity		17,274,117		17,717,697
Noncontrolling interests		492,242		728,639
Total equity		17,766,359		18,446,336
Total liabilities and equity	$	35,847,646	$	36,076,291

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating Revenues:
Rental and other services	$	1,110,904	$	1,020,931	$	3,288,205	$	2,828,678
Fee income and other		22,232		3,737		28,510		12,322
Total operating revenues		1,133,136		1,024,668		3,316,715		2,841,000
Operating Expenses:
Rental property operating and maintenance		406,329		358,679		1,151,324		957,034
Property taxes and insurance		60,633		42,659		161,634		136,770
Depreciation and amortization		369,035		365,842		1,107,749		1,006,464
General and administrative		98,460		91,352		295,946		249,181
Transactions and integration		13,804		14,953		34,999		87,372
Impairment of investments in real estate		—		6,482		—		6,482
Other		510		298		2,551		434
Total operating expenses		948,771		880,265		2,754,203		2,443,737
Operating income		184,365		144,403		562,512		397,263
Other Income (Expenses):
Equity in earnings (loss) of unconsolidated entities		40,884		(2,056)		69,996		(88,684)
(Loss) gain on disposition of properties, net		(635)		10,410		333,785		315,211
Other income (expenses), net		(2,947)		4,348		(9)		22,969
Interest expense		(71,417)		(89,499)		(222,084)		(255,173)
Loss from early extinguishment of debt		—		(53,007)		(18,347)		(53,639)
Income tax expense		(13,709)		(16,053)		(68,838)		(34,725)
Net income (loss)		136,541		(1,454)		657,015		303,222
Net (income) loss attributable to noncontrolling interests		(2,266)		1,316		(15,566)		(4,515)
Net income (loss) attributable to Digital Realty Trust, Inc.		134,275		(138)		641,449		298,707
Preferred stock dividends, including undeclared dividends		(10,181)		(20,712)		(35,580)		(63,022)
Gain (loss) on redemption of preferred stock		—		(16,520)		18,000		(16,520)
Net income (loss) available to common stockholders	$	124,094	$	(37,370)	$	623,869	$	219,165
Net income (loss) per share available to common stockholders:
Basic	$	0.44	$	(0.14)	$	2.21	$	0.86
Diluted	$	0.44	$	(0.14)	$	2.21	$	0.85
Weighted average common shares outstanding:
Basic		283,105,966		270,214,413		282,004,907		253,377,527
Diluted		283,799,538		270,214,413		282,672,720		256,362,579

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	136,541	$	(1,454)	$	657,015	$	303,222
Other comprehensive income (loss):
Foreign currency translation adjustments		(147,120)		233,747		(254,444)		(34,796)
Increase (decrease) in fair value of interest rate swaps		209		137		772		(12,711)
Reclassification to interest expense from interest rate swaps		358		7,673		1,070		7,899
Other comprehensive income (loss)		(146,553)		241,557		(252,602)		(39,608)
Comprehensive income (loss)		(10,012)		240,103		404,413		263,614
Comprehensive (income) loss attributable to noncontrolling interests		995		(5,516)		(9,533)		(609)
Comprehensive income (loss) attributable to Digital Realty Trust, Inc.	$	(9,017)	$	234,587	$	394,880	$	263,005

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
	Redeemable				Number of			Additional		Dividends in		Other
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Three Months Ended September 30, 2021	Interests		Stock		Shares	Stock		Capital		Earnings		Income (Loss), Net		Interests		Total Equity

Balance as of June 30, 2021	$	41,490	$	731,690	282,603,152	$	2,806	$	20,844,834	$	(4,153,407)	$	31,733	$	706,591	$	18,164,247
Conversion of common units to common stock		—		—	562,151		6		46,509		—		—		(46,515)		—
Issuance of common stock, net of costs		—		—	583,181		6		92,865		—		—		—		92,871
Shares issued under employee stock purchase plan		—		—	52,654		—		6,468		—		—		—		6,468
Amortization of share-based compensation		—		—	—		—		19,427		—		—		—		19,427
Vesting of restricted stock, net		—		—	45,664		—		—		—		—		—		—
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		—		(701)		—		—		—		(701)
Reclassification of vested share-based awards		—		—	—		—		(138)		—		—		138		—
Adjustment to redeemable noncontrolling interests		(938)		—	—		—		938		—		—		—		938
Dividends declared on preferred stock		—		—	—		—		—		(10,181)		—		—		(10,181)
Dividends and distributions on common stock and common and incentive units		(181)		—	—		—		—		(329,720)		—		(7,277)		(336,997)
Contributions from noncontrolling interests in consolidated entities		484		—	—		—		—		—		—		37,380		37,380
Deconsolidation of consolidated entities		—		—	—		—		—		—		—		(197,016)		(197,016)
Net income		65		—	—		—		—		134,275		—		2,201		136,476
Other comprehensive loss—foreign currency translation adjustments		—		—	—		—		—		—		(143,847)		(3,273)		(147,120)
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		204		5		209
Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense		—		—	—		—		—		—		350		8		358
Balance as of September 30, 2021	$	40,920	$	731,690	283,846,802	$	2,818	$	21,010,202	$	(4,359,033)	$	(111,560)	$	492,242	$	17,766,359

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
					Number of			Additional		Dividends in		Other		Total
	Redeemable		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Nine Months Ended September 30, 2021	Noncontrolling Interests		Stock		Shares	Stock		Capital		Earnings		Income (Loss), Net		Interests		Total Equity

Balance as of December 31, 2020	$	42,011	$	950,940	280,289,726	$	2,788	$	20,626,897	$	(3,997,938)	$	135,010	$	728,639	$	18,446,336
Conversion of common units to common stock		—		—	1,902,826		19		157,893		—		—		(157,912)		—
Common stock issued in connection with acquisition		—		—	125,395		1		18,269		—		—		—		18,270
Issuance of common stock, net of costs		—		—	1,060,943		11		168,298		—		—		—		168,309
Shares issued under employee stock purchase plan		—		—	82,129		—		9,895		—		—		—		9,895
Amortization of share-based compensation		—		—	—		—		69,278		—		—		—		69,278
Vesting of restricted stock, net		—		—	385,783		—		—		—		—		—		—
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		(1)		(16,549)		—		—		—		(16,550)
Reclassification of vested share-based awards		—		—	—		—		(23,008)				—		23,008		—
Redemption of series C preferred stock		—		(219,250)	—		—				18,000				—		(201,250)
Adjustment to redeemable noncontrolling interests		771		—	—		—		(771)		—		—		—		(771)
Dividends declared on preferred stock		—		—	—		—		—		(35,580)		—		—		(35,580)
Dividends and distributions on common stock and common and incentive units		(543)		—	—		—		—		(984,964)		—		(23,779)		(1,008,743)
Contributions from (distributions to) noncontrolling interests in consolidated entities		(1,666)		—	—		—		—		—		—		110,115		110,115
Deconsolidation of consolidated joint venture															(197,016)		(197,016)
Net income		347		—	—		—		—		641,449		—		15,219		656,668
Other comprehensive loss—foreign currency translation adjustments		—		—	—		—		—		—		(248,367)		(6,077)		(254,444)
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		753		19		772
Other comprehensive income— reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		1,044		26		1,070
Balance as of September 30, 2021	$	40,920	$	731,690	283,846,802	$	2,818	$	21,010,202	$	(4,359,033)	$	(111,560)	$	492,242	$	17,766,359

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
	Redeemable				Number of			Additional		Dividends in		Other
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Three Months Ended September 30, 2020	Interests		Stock		Shares	Stock		Capital		Earnings		Loss, Net		Interests		Total Equity

Balance as of June 30, 2020	$	40,584	$	1,434,420	268,399,073	$	2,670	$	19,292,311	$	(3,386,525)	$	(358,349)	$	698,122	$	17,682,649
Conversion of common units to common stock		—		—	121,967		1		10,303		—		—		(10,304)		—
Issuance of common stock, net of costs		—		—	11,329,722		113		1,244,990		—		—		—		1,245,103
Shares issued under employee stock purchase plan		—		—	32,902		—		3,865		—		—		—		3,865
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		—		(3,820)		—		—		—		(3,820)
Amortization of share-based compensation		—		—	—		—		20,334		—		—		—		20,334
Vesting of restricted stock, net		—		—	36,957		—		—		—		—		—		—
Reclassification of vested share-based awards		—		—	—		—		(612)		—		—		612		—
Reclassification of series G preferred stock to accounts payable and other accrued liabilities		—		(241,468)	—		—		—		(8,532)		—		—		(250,000)
Redemption of series I preferred stock		—		(242,012)	—		—		—		(7,988)		—		—		(250,000)
Adjustment to redeemable noncontrolling interests		726		—	—		—		(726)		—		—		—		(726)
Dividends declared on preferred stock		—		—	—		—		—		(20,712)		—		—		(20,712)
Dividends and distributions on common stock and common and incentive units		(175)		—	—		—		—		(303,006)		—		(9,314)		(312,320)
Contributions from noncontrolling interests in consolidated entities		522		—	—		—		—		—		—		43,663		43,663
Net (loss)		(347)		—	—		—		—		(138)		—		(969)		(1,107)
Other comprehensive income—foreign currency translation adjustments		(45)		—	—		—		—		—		227,136		6,611		233,747
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		134		4		138
Other comprehensive income— reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		7,456		217		7,673

Balance as of September 30, 2020	$	41,265	$	950,940	279,920,621	$	2,784	$	20,566,645	$	(3,726,901)	$	(123,623)	$	728,642	$	18,398,487

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
					Number of			Additional		Dividends in		Other		Total
	Redeemable		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Nine Months Ended September 30, 2020	Noncontrolling Interests		Stock		Shares	Stock		Capital		Earnings		Loss, Net		Interests		Total Equity

Balance as of December 31, 2019	$	41,465	$	1,434,420	208,900,758	$	2,073	$	11,577,320	$	(3,046,579)	$	(87,922)	$	728,788	$	10,608,100
Conversion of common units to common stock		—		—	927,779		9		80,577		—		—		(80,586)		—
Common stock and share-based awards issued in connection with Interxion combination		—		—	54,298,595		543		6,984,509		—		—		—		6,985,052
Issuance of common stock, net of costs		—		—	15,915,673		159		1,889,575		—		—		—		1,889,734
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		—		—	—		—		58,064		—		—		—		58,064
Vesting of restricted stock, net		—		—	(180,320)		—		—		—		—		—		—
Reclassification of vested share-based awards		—		—	—		—		(17,116)		—		—		17,116		—
Reclassification of series G preferred stock to accounts payable and other accrued liabilities		—		(241,468)	—		—		—		(8,532)		—		—		(250,000)
Redemption of series I preferred stock		—		(242,012)	—		—		—		(7,988)		—		—		(250,000)
Adjustment to redeemable noncontrolling interests		4,217		—	—		—		(4,217)		—		—		—		(4,217)
Dividends declared on preferred stock		—		—	—		—		—		(63,022)		—		—		(63,022)
Dividends and distributions on common stock and common and incentive units		(525)		—	—		—		—		(899,487)		—		(28,464)		(927,951)
Contributions from noncontrolling interests in consolidated entities		2,089		—	—		—		—		—		—		87,645		87,645
Net income (loss)		(3,535)		—	—		—		—		298,707		—		8,050		306,757
Other comprehensive loss—foreign currency translation adjustments		(2,446)		—	—		—		—		—		(31,121)		(3,675)		(34,796)
Other comprehensive loss—fair value of interest rate swaps		—		—	—		—		—		—		(12,259)		(452)		(12,711)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		7,679		220		7,899
Balance as of September 30, 2020	$	41,265	$	950,940	279,920,621	$	2,784	$	20,566,645	$	(3,726,901)	$	(123,623)	$	728,642	$	18,398,487

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	657,015	$	303,222
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(333,785)		(315,211)
Equity in (earnings) loss of unconsolidated entities		(69,996)		88,684
Distributions from unconsolidated entities		62,649		18,939
Depreciation and amortization		1,107,749		1,006,464
Amortization of share-based compensation		66,036		54,938
Loss from early extinguishment of debt		18,347		53,639
Amortization of acquired above-market leases and acquired below-market leases, net		5,322		9,447
Amortization of deferred financing costs and debt discount / premium		14,319		14,463
Other items, net		4,191		(7,802)
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(241,104)		(103,083)
(Decrease) increase in accounts payable and other liabilities		(40,454)		57,039
Net cash provided by operating activities		1,250,290		1,180,739
Cash flows from investing activities:
Improvements to investments in real estate		(1,748,075)		(1,376,795)
Cash paid for business combinations and assets acquisition, net of cash and restricted cash acquired		(168,439)		(496,646)
Proceeds from (investment in) unconsolidated entities, net		9,306		(128,898)
Proceeds from sale of real estate		719,764		547,913
Other investing activities, net		7,627		(65,093)
Net cash used in investing activities		(1,179,817)		(1,519,519)
Cash flows from financing activities:
Net proceeds from (payments on) credit facilities	$	323,441	$	(228,867)
Borrowings on secured / unsecured debt		1,816,178		3,573,121
Repayments on secured / unsecured debt		(886,968)		(2,536,362)
Premium paid for early extinguishment of debt		(16,482)		(48,191)
Capital contributions from noncontrolling interests		108,448		81,061
Proceeds from issuance of common stock, net		168,309		1,881,164
Redemption of preferred stock		(201,250)		(250,000)
Payments of dividends and distributions		(1,369,251)		(1,225,547)
Other financing activities, net		(19,595)		(15,229)
Net cash (used in) provided by financing activities		(77,170)		1,231,150
Net (decrease) increase in cash, cash equivalents and restricted cash		(6,698)		892,370
Effect of exchange rate changes on cash, cash equivalents and restricted cash		10,138		(3,034)
Cash, cash equivalents and restricted cash at beginning of period		123,652		97,253
Cash, cash equivalents and restricted cash at end of period	$	127,092	$	986,589

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	September 30,		December 31,
	2021		2020
ASSETS
Investments in real estate:
Investments in properties, net	$	20,581,993	$	20,582,954
Investments in unconsolidated entities		1,292,325		1,148,158
Net investments in real estate		21,874,318		21,731,112
Operating lease right-of-use assets, net		1,442,661		1,386,959
Cash and cash equivalents		116,002		108,501
Accounts and other receivables, net		610,416		603,111
Deferred rent		552,850		528,180
Goodwill		8,062,914		8,330,996
Customer relationship value, deferred leasing costs and intangibles, net		2,871,622		3,122,904
Other assets		316,863		264,528
Total assets	$	35,847,646	$	36,076,291
LIABILITIES AND CAPITAL
Global revolving credit facilities, net	$	832,322	$	531,905
Unsecured term loans, net		—		536,580
Unsecured senior notes, net		13,012,790		11,997,010
Secured and other debt, including premiums		242,427		239,222
Operating lease liabilities		1,543,231		1,468,712
Accounts payable and other accrued liabilities		1,341,864		1,420,162
Deferred tax liabilities, net		725,955		698,308
Accrued dividends and distributions		—		324,386
Security deposits and prepaid rents		341,778		371,659
Total liabilities		18,040,367		17,587,944

Redeemable noncontrolling interests		40,920		42,011
Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Preferred units, $755,000 and $956,250 liquidation preference ($25.00 per unit), 30,200,000 and 38,250,000 units issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		731,690		950,940
Common units, 283,846,802 and 280,289,726 units issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		16,653,987		16,631,747
Limited Partners, 6,494,065 and 8,046,267 units issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		466,160		609,190
Accumulated other comprehensive (loss) income		(117,802)		134,800
Total partners’ capital		17,734,035		18,326,677
Noncontrolling interests in consolidated entities		32,324		119,659
Total capital		17,766,359		18,446,336
Total liabilities and capital	$	35,847,646	$	36,076,291

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating Revenues:
Rental and other services	$	1,110,904	$	1,020,931	$	3,288,205	$	2,828,678
Fee income and other		22,232		3,737		28,510		12,322
Total operating revenues		1,133,136		1,024,668		3,316,715		2,841,000
Operating Expenses:
Rental property operating and maintenance		406,329		358,679		1,151,324		957,034
Property taxes and insurance		60,633		42,659		161,634		136,770
Depreciation and amortization		369,035		365,842		1,107,749		1,006,464
General and administrative		98,460		91,352		295,946		249,181
Transactions and integration		13,804		14,953		34,999		87,372
Other		510		298		2,551		434
Total operating expenses		948,771		880,265		2,754,203		2,443,737
Operating income		184,365		144,403		562,512		397,263
Other Income (Expenses):
Equity in earnings (loss) of unconsolidated entities		40,884		(2,056)		69,996		(88,684)
(Loss) gain on disposition of properties, net		(635)		10,410		333,785		315,211
Other (expense) income, net		(2,947)		4,348		(9)		22,969
Interest expense		(71,417)		(89,499)		(222,084)		(255,173)
Loss from early extinguishment of debt		—		(53,007)		(18,347)		(53,639)
Income tax expense		(13,709)		(16,053)		(68,838)		(34,725)
Net income (loss)		136,541		(1,454)		657,015		303,222
Net loss attributable to noncontrolling interests		734		316		434		3,685
Net income (loss) attributable to Digital Realty Trust, L.P.		137,275		(1,138)		657,449		306,907
Preferred units distributions, including undeclared distributions		(10,181)		(20,712)		(35,580)		(63,022)
Gain (loss) on redemption of preferred units		—		(16,520)		18,000		(16,520)
Net income (loss) available to common unitholders	$	127,094	$	(38,370)	$	639,869	$	227,365
Net income (loss) per unit available to common unitholders:
Basic	$	0.44	$	(0.14)	$	2.21	$	0.87
Diluted	$	0.44	$	(0.14)	$	2.21	$	0.86
Weighted average common units outstanding:
Basic		289,535,213		278,079,187		288,897,093		261,416,412
Diluted		290,228,785		278,079,187		289,564,906		264,401,464

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	136,541	$	(1,454)	$	657,015	$	303,222
Other comprehensive income (loss):
Foreign currency translation adjustments		(147,120)		233,747		(254,444)		(34,796)
Increase (decrease) in fair value of interest rate swaps		209		137		772		(12,711)
Reclassification to interest expense from interest rate swaps		358		7,673		1,070		7,899
Other comprehensive income (loss)		(146,553)		241,557		(252,602)		(39,608)
Comprehensive income (loss) attributable to Digital Realty Trust, L.P.	$	(10,012)	$	240,103	$	404,413	$	263,614
Comprehensive loss attributable to noncontrolling interests		734		316		434		3,685
Comprehensive income (loss) attributable to Digital Realty Trust, L.P.	$	(9,278)	$	240,419	$	404,847	$	267,299

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Three Months Ended September 30, 2021	Common Units		Units	Amount		Units	Amount		Units	Amount		Income (Loss), Net		Interests		Total Capital

Balance as of June 30, 2021	$	41,490	30,200,000	$	731,690	282,603,152	$	16,694,233	7,055,409	$	516,879	$	28,751	$	192,694	$	18,164,247
Conversion of limited partner common units to general partner common units		—	—		—	562,151		46,515	(562,151)		(46,515)		—		—		—
Issuance of common units, net of offering costs		—	—		—	583,181		92,871	—		—		—		—		92,871
Issuance of common units, net of forfeitures		—	—		—	—		—	807		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	52,654		6,468	—		—		—		—		6,468
Amortization of share-based compensation		—	—		—	—		19,427	—		—		—		—		19,427
Vesting of restricted common units, net		—	—		—	45,664		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(138)	—		138		—		—		—
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(701)	—		—		—		—		(701)
Adjustment to redeemable partnership units		(938)	—		—	—		938	—		—		—		—		938
Distributions		(181)			(10,181)	—		(329,720)	—		(7,277)		—		—		(347,178)
Contributions from noncontrolling interests in consolidated entities		484	—		—	—		—	—		—		—		37,380		37,380
Deconsolidation of consolidated entities		—	—		—	—		—	—		—		—		(197,016)		(197,016)
Net income (loss)		65	—		10,181	—		124,094	—		2,935		—		(734)		136,476
Other comprehensive loss—foreign currency translation adjustments		—	—		—	—		—	—		—		(147,120)		—		(147,120)
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		209		—		209
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		358		—		358

Balance as of September 30, 2021	$	40,920	30,200,000	$	731,690	283,846,802	$	16,653,987	6,494,065	$	466,160	$	(117,802)	$	32,324	$	17,766,359

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Nine Months Ended September 30, 2021	Common Units		Units	Amount		Units	Amount		Units	Amount		Income (Loss), Net		Interests		Total Capital

Balance as of December 31, 2020	$	42,011	38,250,000	$	950,940	280,289,726	$	16,631,747	8,046,267	$	609,190	$	134,800	$	119,659	$	18,446,336
Conversion of limited partner common units to general partner common units		—	—		—	1,902,826		157,912	(1,902,826)		(157,912)		—		—		—
Common units issued in connection with acquisition		—	—		—	125,395		18,270	—		—		—		—		18,270
Issuance of common units, net of offering costs		—	—		—	1,060,943		168,309	—		—		—		—		168,309
Issuance of common units, net of forfeitures		—	—		—	—		—	350,624		—		—		—		—
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		—	—		—	—		(16,550)	—		—		—		—		(16,550)
Amortization of share-based compensation		—	—		—	—		69,278	—		—		—		—		69,278
Vesting of restricted common units, net		—	—		—	385,783		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(23,008)	—		23,008		—		—		—
Redemption of series C preferred units		—	(8,050,000)		(219,250)	—		18,000	—		—		—		—		(201,250)
Adjustment to redeemable partnership units		771	—		—	—		(771)	—		—		—		—		(771)
Distributions		(543)	—		(35,580)	—		(984,964)	—		(23,779)		—		—		(1,044,323)
Distributions to noncontrolling interests in consolidated entities, net of contributions		(1,666)	—		—	—		—	—		—		—		110,115		110,115
Deconsolidation of consolidated entities															(197,016)		(197,016)
Net income (loss)		347	—		35,580	—		605,869	—		15,653				(434)		656,668
Other comprehensive loss—foreign currency translation adjustments		—	—		—	—		—	—		—		(254,444)		—		(254,444)
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		772		—		772
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		1,070		—		1,070

Balance as of September 30, 2021	$	40,920	30,200,000	$	731,690	283,846,802	$	16,653,987	6,494,065	$	466,160	$	(117,802)	$	32,324	$	17,766,359

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Three Months Ended September 30, 2020	Common Units		Units	Amount		Units	Amount		Units	Amount		Loss, Net		Interests		Total Capital

Balance as of June 30, 2020	$	40,584	58,250,000	$	1,434,420	268,399,073	$	15,908,456	8,287,819	$	648,057	$	(372,575)	$	64,291	$	17,682,649
Conversion of limited partner common units to general partner common units		—	—		—	121,967		10,304	(121,967)		(10,304)		—		—		—
Issuance of common units, net of offering costs		—	—		—	11,329,722		1,245,103	—		—		—		—		1,245,103
Issuance of common units, net of forfeitures		—	—		—	—		—	809		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	32,902		3,865	—		—		—		—		3,865
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(3,820)	—		—		—		—		(3,820)
Amortization of share-based compensation		—	—		—	—		20,334	—		—		—		—		20,334
Vesting of restricted common units, net		—	—		—	36,957		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(612)	—		612		—		—		—
Reclassification of series G preferred units to accounts payable and other accrued liabilities		—	(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		726	—		—	—		(726)	—		—		—		—		(726)
Distributions		(175)	—		(20,712)	—		(303,006)	—		(9,314)		—		—		(333,032)
Contributions from noncontrolling interests in consolidated joint ventures		522	—		—	—		—	—		—		—		43,663		43,663
Net income (loss)		(347)	—		20,712	—		(20,850)	—		(981)		—		12		(1,107)
Other comprehensive income (loss)—foreign currency translation adjustments		(45)	—		—	—		—	—		—		233,747		—		233,747
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		138		—		138
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		7,673		—		7,673

Balance as of September 30, 2020	$	41,265	38,250,000	$	950,940	279,920,621	$	16,842,528	8,166,661	$	628,070	$	(131,017)	$	107,966	$	18,398,487

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Nine Months Ended September 30, 2020	Common Units		Units	Amount		Units	Amount		Units	Amount		Loss, Net		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		—	—		—	927,779		80,586	(927,779)		(80,586)		—		—		—
Common units and share-based awards issued in connection with Interxion combination		—	—		—	54,298,595		6,985,052	—		—		—		—		6,985,052
Issuance of common units, net of offering costs		—	—		—	15,915,673		1,889,734	—		—		—		—		1,889,734
Issuance of common units, net of forfeitures		—	—		—	—		—	251,285		—		—		—		—
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		—	—		—	—		56,814	—		—		—		—		56,814
Vesting of restricted common units, net		—	—		—	(180,320)		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(17,116)	—		17,116		—		—		—
Reclassification of series G preferred units to accounts payable and other accrued liabilities		—	(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		4,217	—		—	—		(4,217)	—		—		—		—		(4,217)
Distributions		(525)	—		(63,022)	—		(899,487)	—		(28,464)		—		—		(990,973)
Contributions from noncontrolling interests in consolidated joint ventures		2,089	—		—	—		—	—		—		—		87,645		87,645
Net income (loss)		(3,535)	—		63,022	—		235,685	—		8,354		—		(304)		306,757
Other comprehensive loss—foreign currency translation adjustments		(2,446)	—		—	—		—	—		—		(34,796)		—		(34,796)
Other comprehensive loss—fair value of interest rate swaps		—	—		—	—		—	—		—		(12,711)		—		(12,711)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		7,899		—		7,899
Balance as of September 30, 2020	$	41,265	38,250,000	$	950,940	279,920,621	$	16,842,528	8,166,661	$	628,070	$	(131,017)	$	107,966	$	18,398,487

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	657,015	$	303,222
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(333,785)		(315,211)
Equity in (earnings) loss of unconsolidated entities		(69,996)		88,684
Distributions from unconsolidated entities		62,649		18,939
Depreciation and amortization		1,107,749		1,006,464
Amortization of share-based compensation		66,036		54,938
Loss from early extinguishment of debt		18,347		53,639
Amortization of acquired above-market leases and acquired below-market leases, net		5,322		9,447
Amortization of deferred financing costs and debt discount / premium		14,319		14,463
Other items		4,191		(7,802)
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(241,104)		(103,083)
(Decrease) increase in accounts payable and other liabilities		(40,454)		57,039
Net cash provided by operating activities		1,250,290		1,180,739
Cash flows from investing activities:
Improvements to investments in real estate		(1,748,075)		(1,376,795)
Cash paid for business combinations and assets acquisition, net of cash and restricted cash acquired		(168,439)		(496,646)
Proceeds from (investment in) unconsolidated entities, net		9,306		(128,898)
Proceeds from sale of real estate		719,764		547,913
Other investing activities, net		7,627		(65,093)
Net cash used in investing activities		(1,179,817)		(1,519,519)
Cash flows from financing activities:
Net proceeds from (payments on) credit facilities	$	323,441	$	(228,867)
Borrowings on secured / unsecured debt		1,816,178		3,573,121
Repayments on secured / unsecured debt		(886,968)		(2,536,362)
Premium paid for early extinguishment of debt		(16,482)		(48,191)
Capital contributions from noncontrolling interests		108,448		81,061
General partner contributions		168,309		1,881,164
General partner distributions		(201,250)		(250,000)
Payments of dividends and distributions		(1,369,251)		(1,225,547)
Other financing activities, net		(19,595)		(15,229)
Net cash (used in) provided by financing activities		(77,170)		1,231,150
Net (decrease) increase in cash, cash equivalents and restricted cash		(6,698)		892,370
Effect of exchange rate changes on cash, cash equivalents and restricted cash		10,138		(3,034)
Cash, cash equivalents and restricted cash at beginning of period		123,652		97,253
Cash, cash equivalents and restricted cash at end of period	$	127,092	$	986,589

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

General

Business

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

Accounting Principles

Our unaudited interim condensed consolidated financial statements and accompanying notes are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). All material intercompany transactions with consolidated entities have been eliminated. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not always indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”), as filed with the U.S. Securities and Exchange Commission (“SEC”), our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, as filed with the SEC, and other filings with the SEC.

Basis of Presentation

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

The Parent’s only material asset is its ownership of partnership interests of the OP. As a result, 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.

Management Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience, current market conditions, and various other assumptions that we believe to be reasonable under the circumstances. Examples of estimates and assumptions include: the probability of collection of lease payments from customers, the recoverability of the carrying values of investments in real estate, the fair value of share-based compensation awards, loss contingencies, the fair value of and/or potential impairment of goodwill and intangible assets, useful lives of tangible and intangible assets, and the fair value of customer relationships, buildings & improvements, and other tangible and intangible assets acquired in business

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

New Accounting Pronouncements

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Business Combinations

We obtained control of InterXion Holding N.V. (“Interxion”) on March 9, 2020 and completed the Company’s combination with Interxion (“Interxion Combination”) on March 12, 2020 for total equity consideration of approximately $7.0 billion, including approximately $108.5 million of assumed cash and cash equivalents. Revenues attributable to Interxion amounted to $254.5 million and $216.5 million for the three months ended September 30, 2021 and 2020, respectively, and $735.2 million and $458.4 million for the nine months ended September 30, 2021 and 2020, respectively. Net income attributable to Interxion amounted to $25.6 million and $15.4 million for the three months ended September 30, 2021 and 2020, respectively, and $67.8 million and $27.6 million for nine months ended September 30, 2021 and 2020, respectively.

Investments in Properties

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


Property Type	As of September 30, 2021		As of December 31, 2020
Land	$	1,094,838	$	1,106,392
Acquired ground lease		6,695		10,308
Buildings and improvements		21,588,688		21,335,396
Tenant improvements		694,524		690,892
		23,384,745		23,142,988
Accumulated depreciation and amortization		(6,159,294)		(5,555,221)
Investments in operating properties, net		17,225,451		17,587,767
Construction in progress and space held for development		3,238,451		2,768,325
Land held for future development		118,091		226,862
Investments in properties, net	$	20,581,993	$	20,582,954

Disposition

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 $333.3 million. We are providing transitional property management services for one year from the closing date at a customary market rate. The assets and liabilities sold were not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Leases

Lessor Accounting

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

Lessee Accounting

We lease space at certain of our data centers from third parties and certain equipment under noncancelable lease agreements. Leases for our data centers expire at various dates through 2069. As of September 30, 2021, certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of September 30, 2021, the termination dates of these ground leases generally range from 2041 to 2108. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 2021 to 2028. The leases generally require us to make fixed rental payments that increase at defined intervals during the term of the lease plus pay our share of common area, real estate and utility expenses as incurred. The leases neither contain residual value guarantees nor impose material restrictions or covenants on us. Further, the leases have been classified and accounted for as either operating or finance leases. Rent expense related to operating leases included in rental property operating and maintenance expense in the condensed consolidated income statements amounted to approximately $36.6 million and $34.9 million for the three months ended September 30, 2021 and 2020, respectively, and approximately $108.9 million and $92.8 million for the nine months ended September 30, 2021 and 2020, respectively.

Investments in Unconsolidated Entities

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


	Year	Metropolitan			Balance as of		Balance as of
Entity	Entity Formed	Area	% Ownership		September 30, 2021		December 31, 2020

Ascenty (1)	2019	Brazil / Chile / Mexico	51	% (2)	$	547,398	$	567,192
Mapletree	2019	Northern Virginia	20	%		175,282		184,890
Mitsubishi (3)	Various	Osaka / Tokyo	50	%		392,349		278,947
Lumen	2012	Hong Kong	50	%		77,987		86,600
Other	Various	U.S. / India	Various			99,309		30,529
Total					$	1,292,325	$	1,148,158

(1)	Our maximum exposure to loss related to this unconsolidated variable interest entity (VIE) is limited to our equity investment in this VIE.

(2)	Includes an approximate 2% ownership interest held by a non-controlling interest in our entity that holds the investment in the Ascenty entity, which has a carrying value as of September 30, 2021 and December 31, 2020 of

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	approximately $20.2 million and $21.9 million, respectively, and is classified within redeemable noncontrolling interests in our condensed consolidated balance sheet.

(3)

As of September 30, 2021, we derecognized all assets, liabilities and 50% noncontrolling interests related to two joint ventures that were previously consolidated and recognized an equity method investment of $197.0 million based on the value of our 50% noncontrolling interest in the joint ventures. We had concluded that we would consolidate the joint ventures during the development phase of the buildings because we had the power to direct activities that most significantly impact the joint ventures’ economic performance, however, upon the building’s completion and commencing the operational phase, we no longer have the power to direct the activities that most significantly impact the joint ventures’ economic performance and deconsolidated the joint ventures and recognized the investment under the equity method.

During the three months ended September 30, 2021, the existing unconsolidated partnership between the Company and PGIM Real Estate, the real estate investment management and advisory business of Prudential Financial, 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 condensed 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 condensed consolidated income statements.

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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 September 30, 2021 as compared to December 31, 2020 were immaterial and driven primarily by changes in exchange rates associated with goodwill balances denominated in foreign currencies.

Acquired Intangible Assets and Liabilities

The following table summarizes our acquired intangible assets and liabilities.


(Amounts in thousands)
	Balance as of
	September 30, 2021						December 31, 2020
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationship value	$	2,930,218	$	(697,471)	$	2,232,747	$	2,993,093	$	(570,886)	$	2,422,207
Acquired in-place lease value		1,338,554		(1,025,673)		312,881		1,382,563		(1,004,421)		378,142
Other		76,432		(12,904)		63,528		57,370		(7,107)		50,263
Acquired above-market leases		274,365		(248,085)		26,280		280,216		(236,923)		43,293
Acquired below-market leases		(382,237)		269,599		(112,638)		(401,539)		270,648		(130,891)

Amortization of customer relationship value, acquired in-place lease value and other intangibles (a component of depreciation and amortization expense) was approximately $65.2 million and $75.1 million for the three months ended September 30, 2021 and 2020, respectively, and approximately $199.3 million and $210.9 million for the nine months ended September 30, 2021 and 2020, respectively. Amortization of acquired below-market leases, net of acquired above-market leases, resulted in a decrease in rental and other services revenue of $(0.7) million and $(2.4) million for the three months ended September 30, 2021 and 2020, respectively, and $(3.3) million and $(8.7) million for the nine months ended September 30, 2021 and 2020, respectively. Estimated annual amortization for each of the five succeeding years and thereafter, commencing October 1, 2021 is as follows:

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(Amounts in thousands)
		Customer relationship value		Acquired in-place lease value		Other (1)		Acquired above-market leases		Acquired below-market leases
Remainder of 2021	$	43,556	$	18,376	$	2,055	$	4,691	$	(4,487)
2022		173,452		58,514		8,222		11,209		(15,934)
2023		172,784		47,606		1,484		4,759		(14,249)
2024		172,204		40,948		—		2,584		(12,637)
2025		171,702		35,723		—		1,452		(10,741)
Thereafter		1,499,049		111,714		—		1,585		(54,590)
Total	$	2,232,747	$	312,881	$	11,761	$	26,280	$	(112,638)

(1)	Excludes power grid rights in the amount of approximately $51.8 million that are currently not being amortized. Amortization of these assets will begin once the data centers associated with the power grid rights are placed into service.

Debt

On a standalone basis (e.g., excluding its subsidiaries), Digital Realty Trust, Inc. does not have any indebtedness. The Parent is the guarantor or co-guarantor on all debt held by the OP or its subsidiaries. All debt is currently held directly or indirectly by the OP. A summary of outstanding indebtedness of the OP, together with its subsidiaries, as of September 30, 2021 and December 31, 2020 is as follows (in thousands):


	September 30, 2021				December 31, 2020
	Weighted-				Weighted-
	average		Amount		average		Amount
	interest rate		Outstanding		interest rate		Outstanding
Global revolving credit facilities	0.98	%	$	838,054	0.91	%	$	540,184
Unsecured term loans	—	%		—	1.20	%		537,470
Unsecured senior notes	2.25	%		13,113,785	2.49	%		12,096,029
Secured and other debt	3.06	%		242,870	2.92	%		239,330
Total	2.19	%	$	14,194,709	2.38	%	$	13,413,013

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

We 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):


	September 30, 2021				December 31, 2020
	Amount				Amount
Denomination of Draw	Outstanding		% of Total		Outstanding		% of Total
U.S. dollar ($)	$	3,497,870	24.7	%	$	3,629,000	27.1	%
British pound sterling (£)		2,088,470	14.7	%		2,166,695	16.2	%
Euro (€)		7,569,846	53.3	%		6,912,142	51.5	%
Other		1,038,523	7.3	%		705,176	5.2	%
Total	$	14,194,709			$	13,413,013

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	Aggregate Principal at Issuance					Balance as of
	Borrowing Currency		USD		Maturity Date		September 30, 2021		December 31, 2020
Floating rate notes due 2022	€	300,000	$	349,800	Sep 23, 2022	$	347,400	$	366,480
0.125% notes due 2022	€	300,000		332,760	Oct 15, 2022		347,400		366,480
2.750% notes due 2023	$	350,000		350,000	Feb 1, 2023		-		350,000
2.625% notes due 2024	€	600,000		677,040	Apr 15, 2024		694,800		732,960
2.750% notes due 2024	£	250,000		324,925	Jul 19, 2024		336,850		341,750
4.250% notes due 2025	£	400,000		634,480	Jan 17, 2025		538,960		546,800
0.625% notes due 2025	€	650,000		720,980	Jul 15, 2025		752,700		794,040
4.750% notes due 2025	$	450,000		450,000	Oct 1, 2025		450,000		450,000
2.500% notes due 2026	€	1,075,000		1,224,640	Jan 16, 2026		1,244,850		1,313,219
0.200% notes due 2026	CHF	275,000		298,404	Dec 15, 2026		295,267		-
3.700% notes due 2027	$	1,000,000		1,000,000	Aug 15, 2027		1,000,000		1,000,000
1.125% notes due 2028	€	500,000		548,550	Apr 09, 2028		579,000		610,800
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		289,898		-
3.300% notes due 2029	£	350,000		454,895	Jul 19, 2029		471,590		478,450
3.600% notes due 2029	$	900,000		900,000	Jul 01, 2029		900,000		900,000
1.500% notes due 2030	€	750,000		831,900	Mar 15, 2030		868,500		916,200
3.750% notes due 2030	£	550,000		719,825	Oct 17, 2030		741,070		751,850
1.250% notes due 2031	€	500,000		560,950	Feb 1, 2031		579,000		610,800
0.625% notes due 2031	€	1,000,000		1,220,700	Jul 15, 2031		1,158,000		-
1.000% notes due 2032	€	750,000		874,500	Jan 15, 2032		868,500		916,200
						$	13,113,785	$	12,096,029
Unamortized discounts, net of premiums							(35,156)		(34,988)
Deferred financing costs, net							(65,839)		(64,031)
Total unsecured senior notes, net of discount and deferred financing costs						$	13,012,790	$	11,997,010

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 September 30, 2021, we were in compliance with each of these financial covenants.

The table below summarizes our debt maturities and principal payments as of September 30, 2021 (in thousands):


	Global Revolving		Unsecured
	Credit Facilities(1)		Senior Notes		Secured and Other Debt		Total Debt
Remainder of 2021	$	—	$	—	$	—	$	—
2022		—		694,800		—		694,800
2023		753,396		—		104,000		857,396
2024		84,658		1,031,650		—		1,116,308
2025		—		1,741,660		—		1,741,660
Thereafter		—		9,645,675		138,870		9,784,545
Subtotal	$	838,054	$	13,113,785	$	242,870	$	14,194,709
Unamortized net discounts		—		(35,156)		—		(35,156)
Unamortized deferred financing costs		(5,732)		(65,839)		(443)		(72,014)
Total	$	832,322	$	13,012,790	$	242,427	$	14,087,539

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

During the nine months ended September 30, 2021, we recognized a loss on early extinguishment of debt of approximately $18.3 million, mostly due to the redemption of the 2.750% Notes due 2023 in February. During the three and nine months ended September 30, 2020, we recognized a loss on early extinguishment of debt of approximately $53.0 million and $53.6 million, respectively, primarily due to the redemption of the 3.950% 2022 Notes and 3.625% 2022 Notes in August 2020.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

9. Earnings per Common Share or Unit

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

Digital Realty Trust, Inc. Earnings per Common Share


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) available to common stockholders	$	124,094	$	(37,370)	$	623,869	$	219,165
Weighted average shares outstanding—basic		283,105,966		270,214,413		282,004,907		253,377,527
Potentially dilutive common shares:
Unvested incentive units		217,652		—		207,826		103,159
Unvested restricted stock		187,549		—		164,916		273,755
Forward equity offering		43,816		—		—		2,087,607
Market performance-based awards		244,555		—		295,071		520,531
Weighted average shares outstanding—diluted		283,799,538		270,214,413		282,672,720		256,362,579
Income (loss) per share:
Basic	$	0.44	$	(0.14)	$	2.21	$	0.86
Diluted	$	0.44	$	(0.14)	$	2.21	$	0.85

Digital Realty Trust, L.P. Earnings per Unit


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) available to common unitholders	$	127,094	$	(38,370)	$	639,869	$	227,365
Weighted average units outstanding—basic		289,535,213		278,079,187		288,897,093		261,416,412
Potentially dilutive common units:
Unvested incentive units		217,652		—		207,826		103,159
Unvested restricted units		187,549		—		164,916		273,755
Forward equity offering		43,816		—		—		2,087,607
Market performance-based awards		244,555		—		295,071		520,531
Weighted average units outstanding—diluted		290,228,785		278,079,187		289,564,906		264,401,464
Income (loss) per unit:
Basic	$	0.44	$	(0.14)	$	2.21	$	0.87
Diluted	$	0.44	$	(0.14)	$	2.21	$	0.86

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Unvested incentive units	—	154,178	—	—
Unvested restricted stock	—	2,459,322	—	—
Shares subject to Forward Equity Offering	—	512,442	6,250,000	—
Market performance-based awards	—	318,386	—	—
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc. (excluded only from calculation of earnings per share)	6,429,247	7,864,774	6,892,186	8,038,885
Potentially dilutive Series C Cumulative Redeemable Perpetual Preferred Stock	—	1,417,537	721,665	1,485,177
Potentially dilutive Series G Cumulative Redeemable Preferred Stock	—	1,757,668	—	1,841,538
Potentially dilutive Series I Cumulative Redeemable Preferred Stock	—	1,304,786	—	1,692,046
Potentially dilutive Series J Cumulative Redeemable Preferred Stock	1,319,861	1,403,969	1,366,311	1,470,961
Potentially dilutive Series K Cumulative Redeemable Preferred Stock	1,387,905	1,476,350	1,436,750	1,546,796
Potentially dilutive Series L Cumulative Redeemable Preferred Stock	2,276,479	2,421,547	2,356,596	2,535,929
Total	11,413,492	21,090,959	19,023,508	18,611,332

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Equity and Capital

Equity Distribution Agreement

Digital Realty Trust, Inc. and Digital Realty Trust, L.P., are parties to an at-the-market (ATM) equity offering sales agreement dated January 4, 2019, as amended in 2020 (the “Sales Agreement”). Pursuant to the Sales Agreement, Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $1.0 billion through various named agents from time to time. For the nine months ended September 30, 2021, Digital Realty Trust, Inc. issued approximately 1.1 million common shares under the Sales Agreement at an average price of $161.92 per share. For the nine months ended September 30, 2020, Digital Realty Trust, Inc. issued approximately 6.1 million common shares under the Sales Agreement at an average price of $146.89 per share. As of September 30, 2021, approximately $577.6 million remains available for future sales under the program.

Forward Equity Sale

On September 13, 2021, Digital Realty Trust, Inc. completed an underwritten public offering of 6,250,000 shares of its common stock, all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. The forward purchasers borrowed and sold an aggregate of 6,250,000 shares of Digital Realty Trust, Inc.’s common stock in the public offering. Digital Realty Trust, Inc. did not receive any proceeds from the sale of our common stock by the forward purchasers in the public offering. The Company may receive gross proceeds of approximately $1.0 billion (based on the offering price of $155.69 per share) upon full physical settlement of the forward sale agreements, which is to be no later than March 13, 2023. Upon physical settlement of the forward sale agreements, the Operating Partnership is expected to issue general partner common partnership units to Digital Realty Trust, Inc. in exchange for contribution of the net proceeds. The forward purchasers had also granted to the underwriters an option, exercisable until October 13, 2021, to purchase up to 937,500 additional shares at a price of $155.69, which represents the initial price to the public less the underwriting discount. The underwriters opted not to exercise their option within the specified time period. We account for our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives. As of September 30, 2021, none of our forward equity sales agreements were deemed to be liabilities as they did not embody obligations to repurchase our shares, nor did they embody obligations to issue a variable number of shares for which the monetary value was predominantly fixed, varied with something other than the fair value of our shares, or varied inversely in relation to our shares. We also evaluated whether the agreements met the derivatives and hedging guidance scope exception to be accounted for as equity instruments and concluded that the agreements can be classified as equity contracts based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

Noncontrolling Interests

Noncontrolling interests are interests in consolidated subsidiaries that are not owned by Digital Realty Trust, Inc. The following table details the components of noncontrolling interests (in thousands):


	September 30, 2021		December 31, 2020
Noncontrolling interests in Operating Partnership	$	459,918	$	608,980
Noncontrolling interests in consolidated entities		32,324		119,659
Total noncontrolling interests	$	492,242	$	728,639

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table shows the ownership interest noncontrolling interests hold in the Operating Partnership as well as the interest held by Digital Realty Trust, Inc. as of the respective dates shown below:


	September 30, 2021			December 31, 2020
	Number of	Percentage of		Number of	Percentage of
	units	total		units	total
Digital Realty Trust, Inc.	283,846,802	97.8	%	280,289,726	97.2	%
Noncontrolling interests consist of:
Common units held by third parties	4,977,994	1.7	%	6,212,369	2.2	%
Incentive units held by employees and directors (see Note 12)	1,516,071	0.5	%	1,833,898	0.6	%
	290,340,867	100.0	%	288,335,993	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 condensed consolidated balance sheet.

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $888.4 million and $1,078.9 million based on the closing market price of Digital Realty Trust, Inc. common stock on September 30, 2021 and December 31, 2020, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2021:


	Common Units	Incentive Units	Total
As of December 31, 2020	6,212,369	1,833,898	8,046,267
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(1,234,375)	—	(1,234,375)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(668,451)	(668,451)
Incentive units issued upon achievement of market performance condition	—	219,652	219,652
Grant of incentive units to employees and directors	—	132,848	132,848
Cancellation / forfeitures of incentive units held by employees and directors	—	(1,876)	(1,876)
As of September 30, 2021	4,977,994	1,516,071	6,494,065

(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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Dividends and Distributions

Digital Realty Trust, Inc. Dividends

Digital Realty Trust, Inc. declared and paid the following dividends on its common and preferred stock for the nine months ended September 30, 2021 (in thousands, except per share data):


		Series C			Series J		Series K		Series L
		Preferred			Preferred		Preferred		Preferred		Common
Date dividend declared	Dividend payment date	Stock			Stock		Stock		Stock		Stock
February 25, 2021	March 31, 2021	$	3,333		$	2,625	$	3,071	$	4,485	$	326,965
May 10, 2021	June 30, 2021		—	(1)		2,625		3,071		4,485		328,279
August 10, 2021	September 30, 2021		—			2,625		3,071		4,485		329,720
		$	3,333		$	7,875	$	9,213	$	13,455	$	984,964
Annual rate of dividend per share		$	1.65625		$	1.31250	$	1.46250	$	1.30000	$	4.64000

(1)	These shares were redeemed on May 17, 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 nine months ended September 30, 2021 (in thousands, except for per unit data):


		Series C			Series J		Series K		Series L
		Preferred			Preferred		Preferred		Preferred		Common
Date distribution declared	Distribution payment date	Units			Units		Units		Units		Units
February 25, 2021	March 31, 2021	$	3,333		$	2,625	$	3,071	$	4,485	$	336,041
May 10, 2021	June 30, 2021		—	(1)		2,625		3,071		4,485		336,543
August 10, 2021	September 30, 2021		—			2,625		3,071		4,485		337,447
		$	3,333		$	7,875	$	9,213	$	13,455	$	1,010,031

Annual rate of distribution per unit		$	1.65625		$	1.31250	$	1.46250	$	1.30000	$	4.64000

(1)	These units were redeemed on May 17, 2021.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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		(248,367)		753		—		(247,614)
Reclassification to interest expense from interest rate swaps		—		1,044		—		1,044
Balance as of September 30, 2021	$	(149,607)	$	(833)	$	38,880	$	(111,560)

Digital Realty Trust, L.P.



	Foreign currency				Foreign currency net		Accumulated other
	translation		Cash flow 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		(254,444)		772		—		(253,672)
Reclassification to interest expense from interest rate swaps		—		1,070		—		1,070
Balance as of September 30, 2021	$	(155,498)	$	(1,981)	$	39,677	$	(117,802)

Incentive Plans

2014 Incentive Award Plan

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

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Market Performance-Based Awards (“the 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 can be issued to officers and employees of the Company. The Awards utilize total shareholder return (“TSR”) over a 3-year measurement period as the market performance metric. Awards vest based on the Company’s TSR relative to the MSCI US REIT Index over a 3-year period, subject to continued services.

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

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


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

The grant date fair value of the Class D unit and market performance-based Restricted Stock Unit awards was approximately $25.0 million and $17.2 million for the nine months ended September 30, 2021 and 2020, respectively. This amount will be recognized as compensation expense on a straight-line basis over the expected service period of approximately four years.

Other Items**:** In addition to the LTIP Units, service-based Restricted Stock Units and Awards described above, one-time grants with time and/or performance-based vesting were issued associated with the Interxion Combination. The vesting of these awards is between two and three years.

As of September 30, 2021, approximately 5.5 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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

	Three Months Ended September 30,								September 30,		December 31,		compensation
Type of incentive award	2021		2020		2021		2020		2021		2020		(in years)
Long-term incentive units	$	2.8	$	3.3	$	—	$	0.1	$	21.2	$	15.1	2.1
Performance-based awards		6.4		6.8		0.2		0.1		41.9		34.4	2.2
Service-based restricted stock units		4.6		3.8		0.9		0.8		50.9		41.5	2.6
Interxion awards		3.1		4.8		—		—		10.5		27.2	1.7


	Nine Months Ended September 30,
	2021		2020		2021		2020
Long-term incentive units	$	8.7	$	9.6	$	0.1	$	0.2
Performance-based awards		21.3		18.2		0.7		0.6
Service-based restricted stock units		13.7		10.4		2.5		2.3
Interxion awards		17.7		14.9		—		—

Activity for LTIP Units and service-based Restricted Stock Units for the nine months ended September 30, 2021 is shown below.


		Weighted-Average
		Grant Date Fair
Unvested Long-term Incentive Units	Units	Value
Unvested, beginning of period	235,535	$	122.22
Granted	132,848		138.16
Vested	(126,826)		122.56
Cancelled or expired	(1,876)		128.38
Unvested, end of period	239,681	$	130.83


		Weighted-Average
		Grant Date Fair
Unvested Restricted Stock	Shares	Value
Unvested, beginning of period	783,219	$	123.04
Granted	258,414		136.75
Vested	(381,179)		122.12
Cancelled or expired	(49,817)		110.52
Unvested, end of period	610,637	$	130.44

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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Derivative Instruments

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

Summary of Outstanding Interest Rate Derivatives


								Fair Value at Significant Other
Notional Amount								Observable Inputs (Level 2)
As of		As of						As of		As of
September 30,		December 31,		Type of	Strike	Effective	Expiration	September 30,		December 31,
2021		2020		Derivative	Rate	Date	Date	2021		2020

	104,000		104,000	Swap	1.435	Jan 15, 2016	Jan 15, 2023		(1,727)		(2,773)
	—		77,352	Swap	0.779	Jan 15, 2016	Jan 15, 2021		—		(9)
$	104,000	$	181,352					$	(1,727)	$	(2,782)

As of September 30, 2021, we estimate that an additional $1.4 million will be reclassified as an increase to interest expense during the twelve months ended March 31, 2022, when the hedged forecasted transactions impact earnings.

Fair Value of Financial Instruments

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

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

A comparison of estimated fair value and carrying value of our debt is shown in the subsequent table (in thousands).


	Categorization	As of September 30, 2021				As of December 31, 2020
	under the fair value	Estimated Fair				Estimated Fair
	hierarchy	Value		Carrying Value		Value		Carrying Value
Global revolving credit facilities	Level 2	$	838,054	$	838,054	$	540,184	$	540,184
Unsecured term loans	Level 2		—		—		537,470		537,470
Unsecured senior notes (1)	Level 2		13,859,557		13,113,785		13,359,960		12,096,029
Secured debt (1)	Level 2		250,015		242,870		242,051		239,326
		$	14,947,626	$	14,194,709	$	14,679,665	$	13,413,009

(1)	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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Commitments and Contingencies

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements including ground up construction. From time to time in the normal course of our business, we enter into various construction contracts with third parties that may obligate us to make payments. At September 30, 2021, we had open commitments, including amounts reimbursable by customers of approximately $47.2 million, related to construction contracts of approximately $1.5 billion.

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

Supplemental Cash Flow Information

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


	Balance as of
(Amounts in thousands)	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	116,002	$	108,501
Restricted cash (included in other assets)		11,090		15,151
Total	$	127,092	$	123,652

We paid $240.9 million and $261.2 million for interest, net of amounts capitalized, for the nine months ended September 30, 2021 and 2020, respectively.

We paid $19.6 million and $15.3 million for income taxes, net of refunds, for the nine months ended September 30, 2021 and 2020, respectively.

Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS