Cover and table of contents

141K 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 June 30, 2022

☐ 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 August 3, 2022
Common Stock, $.01 par value per share		287,407,842

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2022 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, all references to the “Parent” refer to Digital Realty Trust, Inc., and all references to “our Operating Partnership,” “the Operating Partnership” or “the OP” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.

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

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

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

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

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

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

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

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.

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

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

		Page Number
PART I.	FINANCIAL INFORMATION

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

	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 (unaudited)	4

	Condensed Consolidated Income Statements for the three and six months ended June 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statement of Equity for the three and six months ended June 30, 2022 and 2021 (unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	11

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

	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 (unaudited)	12

	Condensed Consolidated Income Statements for the three and six months ended June 30, 2022 and 2021 (unaudited)	13

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021 (unaudited)	14

	Condensed Consolidated Statement of Capital for the three and six months ended June 30, 2022 and 2021 (unaudited)	15

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	19

	Notes to Condensed Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (unaudited)	20

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	58

ITEM 4.	Controls and Procedures (Digital Realty Trust, Inc.)	59

	Controls and Procedures (Digital Realty Trust, L.P.)	60

PART II.	OTHER INFORMATION	61

ITEM 1.	Legal Proceedings	61

ITEM 1A.	Risk Factors	61

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62

ITEM 3.	Defaults Upon Senior Securities	62

ITEM 4.	Mine Safety Disclosures	62

ITEM 5.	Other Information	62

ITEM 6.	Exhibits	63

	Signatures	65

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share data)


	June 30,		December 31,
	2022		2021
ASSETS
Investments in real estate:
Investments in properties, net	$	20,800,389	$	20,762,241
Investments in unconsolidated entities		1,942,549		1,807,689
Net investments in real estate		22,742,938		22,569,930
Operating lease right-of-use assets, net		1,310,970		1,405,441
Cash and cash equivalents		99,226		142,698
Accounts and other receivables, net		797,208		671,721
Deferred rent, net		554,016		547,385
Goodwill		7,545,107		7,937,440
Customer relationship value, deferred leasing costs and intangibles, net		2,521,390		2,735,486
Other assets		385,202		359,459
Total assets	$	35,956,057	$	36,369,560
LIABILITIES AND EQUITY
Global revolving credit facilities, net	$	1,440,040	$	398,172
Unsecured senior notes, net of discount		12,695,568		12,903,370
Secured and other debt, including premiums		158,699		146,668
Operating lease liabilities		1,418,540		1,512,187
Accounts payable and other accrued liabilities		1,619,222		1,543,623
Deferred tax liabilities, net		611,582		666,451
Accrued dividends and distributions		—		338,729
Security deposits and prepaid rents		341,140		336,578
Total liabilities		18,284,791		17,845,778

Redeemable noncontrolling interests		41,047		46,995
Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 110,000 shares authorized; $755,000 liquidation preference ($25.00 per share), 30,200 shares issued and outstanding as of June 30, 2022 and December 31, 2021		731,690		731,690
Common Stock: $0.01 par value per share, 392,000 shares authorized; 284,734 and 284,415 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		2,824		2,824
Additional paid-in capital		21,091,364		21,075,863
Accumulated dividends in excess of earnings		(4,211,685)		(3,631,929)
Accumulated other comprehensive loss, net		(475,561)		(173,880)
Total stockholders’ equity		17,138,632		18,004,568
Noncontrolling interests		491,587		472,219
Total equity		17,630,219		18,476,787
Total liabilities and equity	$	35,956,057	$	36,369,560

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating Revenues:
Rental and other services	$	1,131,537	$	1,089,395	$	2,253,087	$	2,177,301
Fee income and other		7,785		3,793		13,557		6,278
Total operating revenues		1,139,322		1,093,188		2,266,644		2,183,579
Operating Expenses:
Rental property operating and maintenance		421,502		383,216		857,095		744,995
Property taxes and insurance		51,049		48,498		101,273		101,001
Depreciation and amortization		376,967		368,981		759,099		738,714
General and administrative		105,776		97,492		204,289		197,486
Transactions and integration		13,586		7,075		25,554		21,195
Other		70		2,298		7,727		2,041
Total operating expenses		968,950		907,560		1,955,037		1,805,432
Operating income		170,372		185,628		311,607		378,147
Other Income (Expenses):
Equity in (loss) earnings of unconsolidated entities		(34,088)		52,143		26,870		29,112
Gain on disposition of properties, net		—		499		2,770		334,420
Other income, net		13,008		10,124		16,059		2,938
Interest expense		(69,023)		(75,014)		(135,748)		(150,667)
Loss from early extinguishment of debt		—		—		(51,135)		(18,347)
Income tax expense		(16,406)		(47,582)		(29,650)		(55,129)
Net income		63,863		125,798		140,773		520,474
Net income attributable to noncontrolling interests		(436)		(4,544)		(4,065)		(13,300)
Net income attributable to Digital Realty Trust, Inc.		63,427		121,254		136,708		507,174
Preferred stock dividends		(10,181)		(11,885)		(20,362)		(25,399)
Gain on redemption of preferred stock		—		18,000		—		18,000
Net income available to common stockholders	$	53,246	$	127,369	$	116,346	$	499,775
Net income per share available to common stockholders:
Basic	$	0.19	$	0.45	$	0.41	$	1.78
Diluted	$	0.19	$	0.45	$	0.41	$	1.77
Weighted average common shares outstanding:
Basic		284,694		281,792		284,610		281,445
Diluted		285,110		282,434		284,980		282,076

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	63,863	$	125,798	$	140,773	$	520,474
Other comprehensive income (loss):
Foreign currency translation adjustments		(293,913)		111,678		(307,790)		(107,324)
Increase in fair value of interest rate swaps		356		226		(988)		563
Reclassification to interest expense from interest rate swaps		41		353		(62)		712
Other comprehensive (loss) income		(293,516)		112,257		(308,840)		(106,049)
Comprehensive (loss) income		(229,653)		238,055		(168,067)		414,425
Comprehensive loss (income) attributable to noncontrolling interests		6,362		(7,285)		3,093		(10,528)
Comprehensive (loss) income attributable to Digital Realty Trust, Inc.	$	(223,291)	$	230,770	$	(164,974)	$	403,897

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
	Redeemable				Number of			Additional		Dividends in		Other
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Three Months Ended June 30, 2022	Interests		Stock		Shares	Stock		Capital		Earnings		Loss, Net		Interests		Total Equity

Balance as of March 31, 2022	$	42,734	$	731,690	284,666,082		2,824	$	21,069,391	$	(3,916,854)	$	(188,844)	$	510,499	$	18,208,706
Conversion of common units to common stock		—		—	2,436		—		201		—		—		(201)		—
Vesting of restricted stock, net		—		—	65,404		—		—		—		—		—		—
Issuance of common stock, net of costs		—		—	—		—		211		—		—		—		211
Net share settlement to satisfy tax withholding upon vesting		—		—	—		—		(981)		—		—		—		(981)
Amortization of unearned compensation regarding share based awards		—		—	—		—		22,420		—		—		—		22,420
Reclassification of vested share based awards		—		—	—		—		(1,746)		—		—		1,746		—
Adjustment to redeemable noncontrolling interests		(1,868)		—	—		—		1,868		—		—		—		1,868
Dividends declared on preferred stock		—		—	—		—		—		(10,181)		—		—		(10,181)
Dividends and distributions on common stock and common and incentive units		(190)		—	—		—		—		(348,077)		—		(8,027)		(356,104)
Contributions from (distributions to) noncontrolling interests		336		—	—		—		—		—		—		(6,032)		(6,032)
Net income		35		—	—		—		—		63,427		—		401		63,828
Other comprehensive loss—foreign currency translation adjustments		—		—	—		—		—		—		(287,105)		(6,808)		(293,913)
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		347		9		356
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		41		—		41
Balance as of June 30, 2022	$	41,047	$	731,690	284,733,922	$	2,824	$	21,091,364	$	(4,211,685)	$	(475,561)	$	491,587	$	17,630,219

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
	Redeemable				Number of			Additional		Dividends in		Other
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Six Months Ended June 30, 2022	Interests		Stock		Shares	Stock		Capital		Earnings		Loss, Net		Interests		Total Equity

Balance as of December 31, 2021	$	46,995	$	731,690	284,415,013	$	2,824	$	21,075,863	$	(3,631,929)	$	(173,880)	$	472,219	$	18,476,787
Conversion of common units to common stock		—		—	17,297		—		1,459		—		—		(1,459)		—
Vesting of restricted stock, net		—		—	259,424		—		—		—		—		—		—
Issuance of common stock, net of costs		—		—	—		—		(3,813)		—		—		—		(3,813)
Shares issued under employee stock purchase plan		—		—	42,188		—		4,969		—		—		—		4,969
Net share settlement to satisfy tax withholding upon vesting		—		—	—		—		(7,143)		—		—		—		(7,143)
Amortization of unearned compensation regarding share based awards		—		—	—		—		40,965		—		—		—		40,965
Reclassification of vested share based awards		—		—	—		—		(28,277)		—		—		28,277		—
Adjustment to redeemable noncontrolling interests		(7,341)		—	—		—		7,341		—		—		—		7,341
Dividends declared on preferred stock		—		—	—		—		—		(20,362)		—		—		(20,362)
Dividends and distributions on common stock and common and incentive units		(380)		—	—		—		—		(696,102)		—		(15,813)		(711,915)
Contributions from noncontrolling interests		1,703		—	—		—		—		—		—		11,527		11,527
Net income		70		—	—		—		—		136,708		—		3,995		140,703
Other comprehensive loss—foreign currency translation adjustments		—		—	—		—		—		—		(300,656)		(7,134)		(307,790)
Other comprehensive loss—fair value of interest rate swaps		—		—	—		—		—		—		(965)		(23)		(988)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—		—	—		—		—		—		(60)		(2)		(62)
Balance as of June 30, 2022	$	41,047	$	731,690	284,733,922	$	2,824	$	21,091,364	$	(4,211,685)	$	(475,561)	$	491,587	$	17,630,219

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


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

Balance as of March 31, 2021	$	40,097	$	950,940	281,372,310	$	2,795	$	20,700,282	$	(3,952,497)	$	(77,783)	$	721,587	$	18,345,324
Conversion of common units to common stock		—		—	698,485		7		57,777		—		—		(57,784)		—
Issuance of common stock, net of costs		—		—	477,762		5		75,665		—		—		—		75,670
Amortization of share-based compensation		—		—	—		—		21,063		—		—		—		21,063
Vesting of restricted stock, net		—		—	54,595		—		—		—		—		—		—
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		(1)		(6,130)		—		—		—		(6,131)
Reclassification of vested share-based awards		—		—	—		—		(2,322)		—		—		2,322		—
Redemption of series C preferred stock		—		(219,250)	—		—		—		18,000		—		—		(201,250)
Adjustment to redeemable noncontrolling interests		1,501		—	—		—		(1,501)		—		—		—		(1,501)
Dividends declared on preferred stock		—		—	—		—		—		(11,885)		—		—		(11,885)
Dividends and distributions on common stock and common and incentive units		(181)		—	—		—		—		(328,279)		—		(7,801)		(336,080)
Contributions from noncontrolling interests		—		—	—		—		—		—		—		41,055		41,055
Net income		73		—	—		—		—		121,254		—		4,471		125,725
Other comprehensive income—foreign currency translation adjustments		—		—	—		—		—		—		108,951		2,727		111,678
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		221		5		226
Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense		—		—	—		—		—		—		344		9		353
Balance as of June 30, 2021	$	41,490	$	731,690	282,603,152	$	2,806	$	20,844,834	$	(4,153,407)	$	31,733	$	706,591	$	18,164,247

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
Six Months Ended June 30, 2021	Interests		Stock		Shares	Stock		Capital		Earnings		Income, Net		Interests		Total Equity

Balance as of December 31, 2020	$	42,011	$	950,940	280,289,726	$	2,788	$	20,626,897	$	(3,997,938)	$	135,010	$	728,639	$	18,446,336
Conversion of common units to common stock		—		—	1,340,675		13		111,384		—		—		(111,397)		—
Common stock issued in connection with acquisition		—		—	125,395		1		18,269		—		—		—		18,270
Issuance of common stock, net of costs		—		—	477,762		5		75,433		—		—		—		75,438
Shares issued under employee stock purchase plan		—		—	29,475		—		3,427		—		—		—		3,427
Amortization of share-based compensation		—		—	—		—		49,851		—		—		—		49,851
Vesting of restricted stock, net		—		—	340,119		—		—		—		—		—		—
Shares repurchased and retired to satisfy tax withholding upon vesting		—		—	—		(1)		(15,848)		—		—		—		(15,849)
Reclassification of vested share-based awards		—		—	—		—		(22,870)		—		—		22,870		—
Redemption of series C preferred stock		—		(219,250)	—		—		—		18,000		—		—		(201,250)
Adjustment to redeemable noncontrolling interests		1,709		—	—		—		(1,709)		—		—		—		(1,709)
Dividends declared on preferred stock		—		—	—		—		—		(25,399)		—		—		(25,399)
Dividends and distributions on common stock and common and incentive units		(362)		—	—		—		—		(655,244)		—		(16,502)		(671,746)
Contributions from (distributions to) noncontrolling interests		(2,150)		—	—		—		—		—		—		72,735		72,735
Net income		282		—	—		—		—		507,174		—		13,018		520,192
Other comprehensive loss—foreign currency translation adjustments		—		—	—		—		—		—		(104,520)		(2,804)		(107,324)
Other comprehensive income—fair value of interest rate swaps		—		—	—		—		—		—		549		14		563
Other comprehensive income— reclassification of accumulated other comprehensive loss to interest expense		—		—	—		—		—		—		694		18		712
Balance as of June 30, 2021	$	41,490	$	731,690	282,603,152	$	2,806	$	20,844,834	$	(4,153,407)	$	31,733	$	706,591	$	18,164,247

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	140,773	$	520,474
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(2,770)		(334,420)
Equity in (earnings) of unconsolidated entities		(26,870)		(29,112)
Distributions from unconsolidated entities		22,972		57,631
Depreciation and amortization		759,099		738,714
Amortization of share-based compensation		40,965		47,668
Loss from early extinguishment of debt		51,135		18,347
Straight-lined rents and amortization of above and below market leases		(16,885)		(14,908)
Amortization of deferred financing costs and debt discount / premium		9,359		9,571
Other items, net		17,024		30,586
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(248,310)		(126,688)
Increase (decrease) in accounts payable and other liabilities		37,086		(67,372)
Net cash provided by operating activities		783,578		850,491
Cash flows from investing activities:
Improvements to investments in real estate		(1,067,027)		(1,081,446)
Cash paid for assets acquired		(97,205)		(168,439)
(Investment in) proceeds from unconsolidated entities, net		(199,945)		6,131
Proceeds from sale of real estate		—		703,936
Other investing activities, net		(63,655)		(18,827)
Net cash (used in) investing activities		(1,427,832)		(558,645)
Cash flows from financing activities:
Net proceeds from credit facilities	$	1,077,719	$	508,169
Borrowings on secured / unsecured debt		1,125,451		1,218,650
Repayments on secured / unsecured debt		(450,737)		(886,963)
Premium paid for early extinguishment of debt		(49,662)		(16,482)
Capital contributions from noncontrolling interests, net		17,977		70,585
Proceeds from issuance of common stock, net		—		75,438
Redemption of preferred stock		—		(201,250)
Payments of dividends and distributions		(1,071,386)		(1,021,893)
Other financing activities, net		(16,271)		(21,602)
Net cash provided by (used in) financing activities		633,091		(275,348)
Net (decrease) increase in cash, cash equivalents and restricted cash		(11,163)		16,498
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(31,101)		(11,637)
Cash, cash equivalents and restricted cash at beginning of period		151,485		123,652
Cash, cash equivalents and restricted cash at end of period	$	109,221	$	128,513

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per unit data)


	June 30,		December 31,
	2022		2021
ASSETS
Investments in real estate:
Investments in properties, net	$	20,800,389	$	20,762,241
Investments in unconsolidated entities		1,942,549		1,807,689
Net investments in real estate		22,742,938		22,569,930
Operating lease right-of-use assets, net		1,310,970		1,405,441
Cash and cash equivalents		99,226		142,698
Accounts and other receivables, net		797,208		671,721
Deferred rent, net		554,016		547,385
Goodwill		7,545,107		7,937,440
Customer relationship value, deferred leasing costs and intangibles, net		2,521,390		2,735,486
Other assets		385,202		359,459
Total assets	$	35,956,057	$	36,369,560
LIABILITIES AND CAPITAL
Global revolving credit facilities, net	$	1,440,040	$	398,172
Unsecured senior notes, net		12,695,568		12,903,370
Secured and other debt, including premiums		158,699		146,668
Operating lease liabilities		1,418,540		1,512,187
Accounts payable and other accrued liabilities		1,619,222		1,543,623
Deferred tax liabilities, net		611,582		666,451
Accrued dividends and distributions		—		338,729
Security deposits and prepaid rents		341,140		336,578
Total liabilities		18,284,791		17,845,778

Redeemable noncontrolling interests		41,047		46,995
Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Preferred units, $755,000 liquidation preference ($25.00 per unit), and 30,200 units issued and outstanding as of June 30, 2022 and December 31, 2021		731,690		731,690
Common units, 284,734 and 284,415 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		16,882,503		17,446,758
Limited Partners, 6,299 and 5,932 units issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		446,937		432,902
Accumulated other comprehensive loss		(490,285)		(181,445)
Total partners’ capital		17,570,845		18,429,905
Noncontrolling interests in consolidated entities		59,374		46,882
Total capital		17,630,219		18,476,787
Total liabilities and capital	$	35,956,057	$	36,369,560

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except per unit data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating Revenues:
Rental and other services	$	1,131,537	$	1,089,395	$	2,253,087	$	2,177,301
Fee income and other		7,785		3,793		13,557		6,278
Total operating revenues		1,139,322		1,093,188		2,266,644		2,183,579
Operating Expenses:
Rental property operating and maintenance		421,502		383,216		857,095		744,995
Property taxes and insurance		51,049		48,498		101,273		101,001
Depreciation and amortization		376,967		368,981		759,099		738,714
General and administrative		105,776		97,492		204,289		197,486
Transactions and integration		13,586		7,075		25,554		21,195
Other		70		2,298		7,727		2,041
Total operating expenses		968,950		907,560		1,955,037		1,805,432
Operating income		170,372		185,628		311,607		378,147
Other Income (Expenses):
Equity in earnings (loss) of unconsolidated entities		(34,088)		52,143		26,870		29,112
Gain on disposition of properties, net		—		499		2,770		334,420
Other income (expense), net		13,008		10,124		16,059		2,938
Interest expense		(69,023)		(75,014)		(135,748)		(150,667)
Loss from early extinguishment of debt		—		—		(51,135)		(18,347)
Income tax expense		(16,406)		(47,582)		(29,650)		(55,129)
Net income		63,863		125,798		140,773		520,474
Net (income) loss attributable to noncontrolling interests		1,064		(1,344)		(965)		(300)
Net income attributable to Digital Realty Trust, L.P.		64,927		124,454		139,808		520,174
Preferred units distributions		(10,181)		(11,885)		(20,362)		(25,399)
Gain on redemption of preferred units		—		18,000		—		18,000
Net income available to common unitholders	$	54,746	$	130,569	$	119,446	$	512,775
Net income per unit available to common unitholders:
Basic	$	0.19	$	0.45	$	0.41	$	1.78
Diluted	$	0.19	$	0.45	$	0.41	$	1.77
Weighted average common units outstanding:
Basic		290,528		288,843		290,346		288,588
Diluted		290,944		289,485		290,716		289,219

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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	63,863	$	125,798	$	140,773	$	520,474
Other comprehensive income (loss):
Foreign currency translation adjustments		(293,913)		111,678		(307,790)		(107,324)
Increase in fair value of interest rate swaps		356		226		(988)		563
Reclassification to interest expense from interest rate swaps		41		353		(62)		712
Other comprehensive (loss) income		(293,516)		112,257		(308,840)		(106,049)
Comprehensive (loss) income attributable to Digital Realty Trust, L.P.	$	(229,653)	$	238,055	$	(168,067)	$	414,425
Comprehensive loss (income) attributable to noncontrolling interests		1,064		(1,344)		(965)		(300)
Comprehensive (loss) income attributable to Digital Realty Trust, L.P.	$	(228,589)	$	236,711	$	(169,032)	$	414,125

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Three Months Ended June 30, 2022	Common Units		Units	Amount		Units	Amount		Units	Amount		Loss, Net		Interests		Total Capital

Balance as of March 31, 2022	$	42,734	30,200,000	$	731,690	284,666,082	$	17,155,361	6,290,465	$	451,954	$	(196,769)	$	66,470	$	18,208,706
Conversion of limited partner common units to general partner common units		—	—		—	2,436		201	(2,436)		(201)		—		—		—
Vesting of restricted common units, net		—	—		—	65,404		—	—		—		—		—		—
Payment of common unit offering costs and other, net		—	—		—	—		211	—		—		—		—		211
Issuance of limited partner common units, net		—	—		—	—		—	11,449		—		—		—		—
Net unit settlement to satisfy tax withholding upon vesting		—	—		—	—		(981)	—		—		—		—		(981)
Amortization of share-based compensation		—	—		—	—		22,420	—		—		—		—		22,420
Reclassification of vested share-based awards		—	—		—	—		(1,746)	—		1,746		—		—		—
Adjustment to redeemable partnership units		(1,868)	—		—	—		1,868	—		—		—		—		1,868
Distributions		(190)	—		—	—		(358,258)	—		(8,027)		—		—		(366,285)
Contributions from (distributions to) noncontrolling interests in consolidated entities		336	—		—	—		—	—		—		—		(6,032)		(6,032)
Net income		35	—		—	—		63,427	—		1,465		—		(1,064)		63,828
Other comprehensive loss—foreign currency translation adjustments		—	—		—	—		—	—		—		(293,913)		—		(293,913)
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		356		—		356
Other comprehensive loss—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		41		—		41
Balance as of June 30, 2022	$	41,047	30,200,000	$	731,690	284,733,922	$	16,882,503	6,299,478	$	446,937	$	(490,285)	$	59,374	$	17,630,219

See accompanying notes to the condensed consolidated financial statements.

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
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Six Months Ended June 30, 2022	Interests		Units	Amount		Units	Amount		Units	Amount		Loss, Net		Interests		Total Capital

Balance as of December 31, 2021	$	46,995	30,200,000	$	731,690	284,415,013	$	17,446,758	5,931,771	$	432,902	$	(181,445)	$	46,882	$	18,476,787
Conversion of limited partner common units to general partner common units		—	—		—	17,297		1,459	(17,297)		(1,459)		—		—		—
Vesting of restricted common units, net		—	—		—	259,424		—	—		—		—		—		—
Payment of common unit offering costs and other, net		—	—		—	—		(3,813)	—		—		—		—		(3,813)
Issuance of limited partner common units, net		—	—		—	—		—	385,004		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	42,188		4,969	—		—		—		—		4,969
Net unit settlement to satisfy tax withholding upon vesting		—	—		—	—		(7,143)	—		—		—		—		(7,143)
Amortization of share-based compensation		—	—		—	—		40,965	—		—		—		—		40,965
Reclassification of vested share-based awards		—	—		—	—		(28,277)	—		28,277		—		—		—
Adjustment to redeemable partnership units		(7,341)	—		—	—		7,341	—		—		—		—		7,341
Distributions		(380)	—		—	—		(716,464)	—		(15,813)		—		—		(732,277)
Contributions from noncontrolling interests in consolidated entities		1,703	—		—	—		—	—		—		—		11,527		11,527
Net income		70	—		—	—		136,708	—		3,030		—		965		140,703
Other comprehensive loss—foreign currency translation adjustments		—	—		—	—		—	—		—		(307,790)		—		(307,790)
Other comprehensive loss—fair value of interest rate swaps		—	—		—	—		—	—		—		(988)		—		(988)
Other comprehensive income—reclassification of accumulated other comprehensive income to interest expense		—	—		—	—		—	—		—		(62)		—		(62)
Balance as of June 30, 2022	$	41,047	30,200,000	$	731,690	284,733,922	$	16,882,503	6,299,478	$	446,937	$	(490,285)	$	59,374	$	17,630,219

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


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

Balance as of March 31, 2021	$	40,097	38,250,000	$	950,940	281,372,310	$	16,750,580	7,741,271	$	577,015	$	(83,506)	$	150,295	$	18,345,324
Conversion of limited partner common units to general partner common units		—	—		—	698,485		57,784	(698,485)		(57,784)		—		—		—
Payment of common unit offering costs and other, net		—	—		—	477,762		75,670	—		—		—		—		75,670
Issuance of limited partner common units, net		—	—		—	—		—	12,623		—		—		—		—
Amortization of share-based compensation		—	—		—	—		21,063	—		—		—		—		21,063
Vesting of restricted common units, net		—	—		—	54,595		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(2,322)	—		2,322		—		—		—
Redemption of series C preferred units		—	(8,050,000)		(219,250)	—		18,000	—		—		—		—		(201,250)
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(6,131)	—		—		—		—		(6,131)
Adjustment to redeemable partnership units		1,501	—		—	—		(1,501)	—		—		—		—		(1,501)
Distributions		(181)	—		(11,885)	—		(328,279)	—		(7,801)		—		—		(347,965)
Contributions from noncontrolling interests in consolidated entities		—	—		—	—		—	—		—		—		41,055		41,055
Net income		73	—		11,885	—		109,369	—		3,127		—		1,344		125,725
Other comprehensive income—foreign currency translation adjustments		—	—		—	—		—	—		—		111,678		—		111,678
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		226		—		226
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—	—		—	—		—	—		—		353		—		353
Balance as of June 30, 2021	$	41,490	30,200,000	$	731,690	282,603,152	$	16,694,233	7,055,409	$	516,879	$	28,751	$	192,694	$	18,164,247

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
	Noncontrolling		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Six Months Ended June 30, 2021	Interests		Units	Amount		Units	Amount		Units	Amount		Income, Net		Interests		Total Capital

Balance as of December 31, 2020	$	42,011	38,250,000	$	950,940	280,289,726	$	16,631,747	8,046,267	$	609,190	$	134,800	$	119,659	$	18,446,336
Conversion of limited partner common units to general partner common units		—	—		—	1,340,675		111,397	(1,340,675)		(111,397)		—		—		—
Common units issued in connection with acquisition		—	—		—	125,395		18,270	—		—		—		—		18,270
Issuance of common units, net of offering costs		—	—		—	477,762		75,438	—		—		—		—		75,438
Issuance of limited partner common units, net		—	—		—	—		—	349,817		—		—		—		—
Units issued in connection with employee stock purchase plan		—	—		—	29,475		3,427	—		—		—		—		3,427
Units repurchased and retired to satisfy tax withholding upon vesting		—	—		—	—		(15,849)	—		—		—		—		(15,849)
Amortization of share-based compensation		—	—		—	—		49,851	—		—		—		—		49,851
Vesting of restricted common units, net		—	—		—	340,119		—	—		—		—		—		—
Reclassification of vested share-based awards		—	—		—	—		(22,870)	—		22,870		—		—		—
Redemption of series C preferred units		—	(8,050,000)		(219,250)	—		18,000	—		—		—		—		(201,250)
Adjustment to redeemable partnership units		1,709	—		—	—		(1,709)	—		—		—		—		(1,709)
Distributions		(362)	—		(25,399)	—		(655,244)	—		(16,502)		—		—		(697,145)
Contributions from (distributions to) noncontrolling interests in consolidated entities		(2,150)	—		—	—		—	—		—		—		72,735		72,735
Net income		282	—		25,399	—		481,775	—		12,718		—		300		520,192
Other comprehensive loss—foreign currency translation adjustments		—	—		—	—		—	—		—		(107,324)		—		(107,324)
Other comprehensive income—fair value of interest rate swaps		—	—		—	—		—	—		—		563		—		563
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—	—		—	—		—	—		—		712		—		712
Balance as of June 30, 2021	$	41,490	30,200,000	$	731,690	282,603,152	$	16,694,233	7,055,409	$	516,879	$	28,751	$	192,694	$	18,164,247

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	140,773	$	520,474
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(2,770)		(334,420)
Equity in (earnings) of unconsolidated entities		(26,870)		(29,112)
Distributions from unconsolidated entities		22,972		57,631
Depreciation and amortization		759,099		738,714
Amortization of share-based compensation		40,965		47,668
Loss from early extinguishment of debt		51,135		18,347
Straight-lined rents and amortization of above and below market leases		(16,885)		(14,908)
Amortization of deferred financing costs and debt discount / premium		9,359		9,571
Other items, net		17,024		30,586
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(248,310)		(126,688)
Increase (decrease) in accounts payable and other liabilities		37,086		(67,372)
Net cash provided by operating activities		783,578		850,491
Cash flows from investing activities:
Improvements to investments in real estate		(1,067,027)		(1,081,446)
Cash paid for assets acquired		(97,205)		(168,439)
(Investment in) proceeds from unconsolidated entities, net		(199,945)		6,131
Proceeds from sale of real estate		—		703,936
Other investing activities, net		(63,655)		(18,827)
Net cash (used in) investing activities		(1,427,832)		(558,645)
Cash flows from financing activities:
Net proceeds from credit facilities	$	1,077,719	$	508,169
Borrowings on secured / unsecured debt		1,125,451		1,218,650
Repayments on secured / unsecured debt		(450,737)		(886,963)
Premium paid for early extinguishment of debt		(49,662)		(16,482)
Capital contributions from noncontrolling interests, net		17,977		70,585
General partner contributions		—		75,438
General partner distributions		—		(201,250)
Payments of dividends and distributions		(1,071,386)		(1,021,893)
Other financing activities, net		(16,271)		(21,602)
Net cash provided by (used in) financing activities		633,091		(275,348)
Net (decrease) increase in cash, cash equivalents and restricted cash		(11,163)		16,498
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(31,101)		(11,637)
Cash, cash equivalents and restricted cash at beginning of period		151,485		123,652
Cash, cash equivalents and restricted cash at end of period	$	109,221	$	128,513

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

General

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

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

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

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

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

New Accounting Pronouncements. Recently issued accounting pronouncements that have yet to be adopted by the Company are not expected to have a material impact 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)

Investments in Properties

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


Property Type	As of June 30, 2022		As of December 31, 2021
Land	$	1,033,770	$	1,019,723
Acquired ground lease		6,051		6,721
Buildings and improvements		22,319,146		21,914,091
Tenant improvements		706,966		684,915
		24,065,933		23,625,450
Accumulated depreciation and amortization		(6,665,118)		(6,210,281)
Investments in operating properties, net		17,400,815		17,415,169
Construction in progress and space held for development		3,362,114		3,213,389
Land held for future development		37,460		133,683
Investments in properties, net	$	20,800,389	$	20,762,241

Leases

Lessor Accounting

We generate most of our revenue by leasing 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, most 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 June 30, 2022, certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of June 30, 2022, the termination dates of these ground leases generally range from 2049 to 2108. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 2022 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 $35.6 million and $37.4 million for the three months ended June 30, 2022 and 2021, respectively, and approximately $73.0 million for each of the six months ended June 30, 2022 and 2021.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Receivables

Accounts and Other Receivables, Net

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


	Balance as of		Balance as of
(Amounts in thousands):	June 30, 2022		December 31, 2021
Accounts receivable – trade, net	$	493,754	$	399,029
Allowance for doubtful accounts		(37,799)		(28,574)
Accounts receivable, net		455,955		370,455

Accounts receivable – customer recoveries		160,577		131,538
Value-added tax receivables		81,849		104,036
Accounts receivable – installation fees		50,482		43,626
Other receivables		48,345		22,066
Accounts and other receivables, net	$	797,208	$	671,721

Deferred Rent

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


	Balance as of		Balance as of
(Amounts in thousands):	June 30, 2022		December 31, 2021
Deferred rent receivables	$	577,723	$	556,251
Allowance for deferred rent receivables		(23,707)		(8,866)
Deferred rent receivables, net	$	554,016	$	547,385

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 of Properties	% Ownership			June 30, 2022		December 31, 2021
Digital Core REIT (DCRU)	2021	U.S. / Canada	35	%	$	342,464	$	343,317
Ownership interest in DCRU operating properties	2021	U.S. / Canada	10	%		140,499		144,050
Ascenty	2019	Brazil / Chile / Mexico	51	%		645,184		553,031
Mapletree	2019	Northern Virginia	20	%		166,507		172,465
Mitsubishi	Various	Osaka / Tokyo	50	%		399,786		401,509
Lumen	2012	Hong Kong	50	%		69,144		68,854
Other	Various	U.S. / India / Nigeria	Various			178,965		124,463
Total					$	1,942,549	$	1,807,689

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

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

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

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

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 June 30, 2022 as compared to December 31, 2021 were driven by changes in exchange rates associated with goodwill balances denominated in foreign currencies – primarily the devaluation of the Euro as compared to the U.S. dollar.

Acquired Intangible Assets and Liabilities

The following table summarizes our acquired intangible assets and liabilities:



	Balance as of
	June 30, 2022						December 31, 2021
(Amounts in thousands)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationship value	$	2,735,560	$	(789,285)	$	1,946,275	$	2,838,842	$	(721,983)	$	2,116,859
Acquired in-place lease value		1,267,777		(1,016,192)		251,585		1,278,012		(995,883)		282,129
Other		94,121		(20,059)		74,062		101,869		(14,688)		87,181
Acquired above-market leases		265,367		(250,626)		14,741		268,724		(247,135)		21,589
Acquired below-market leases		(347,781)		252,627		(95,154)		(351,052)		247,877		(103,175)

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

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase in rental and other services revenue of $0.3 million and a decrease of $(1.1) million for the three months ended June 30, 2022 and 2021, respectively and $0.6 million and $(2.6) million for the six months ended June 30, 2022 and 2021, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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



(Amounts in thousands)		Customer relationship value		Acquired in-place lease value		Other (1)		Acquired above-market leases		Acquired below-market leases
Remainder of 2022	$	81,641	$	24,499	$	4,560	$	4,363	$	(6,683)
2023		162,614		43,327		3,021		4,758		(12,507)
2024		162,034		37,709		1,677		2,584		(11,214)
2025		161,532		34,679		1,638		1,452		(10,225)
2026		161,097		30,619		1,442		684		(8,663)
Thereafter		1,217,357		80,752		19,941		900		(45,862)
Total	$	1,946,275	$	251,585	$	32,279	$	14,741	$	(95,154)

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

Debt of the Operating Partnership

All debt is currently held by the OP or its consolidated subsidiaries, and the Parent is the guarantor or co-guarantor of the global revolving credit facilities and unsecured senior notes. A summary of outstanding indebtedness is as follows (in thousands):


	June 30, 2022				December 31, 2021
	Weighted-				Weighted-
	average		Amount		average		Amount
	interest rate		Outstanding		interest rate		Outstanding
Global revolving credit facilities	1.95	%	$	1,458,730	0.96	%	$	415,116
Unsecured senior notes	2.12	%		12,792,422	2.26	%		13,000,042
Secured and other debt	3.64	%		159,024	3.47	%		147,082
Total	2.12	%	$	14,410,176	2.23	%	$	13,562,240

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

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


	June 30, 2022				December 31, 2021
	Amount				Amount
Denomination of Draw	Outstanding		% of Total		Outstanding		% of Total
U.S. dollar ($)	$	3,590,903	24.9	%	$	3,141,951	23.2	%
British pound sterling (£)		1,887,590	13.1	%		2,117,758	15.6	%
Euro (€)		7,789,612	54.1	%		7,532,057	55.5	%
Other		1,142,071	7.9	%		770,474	5.7	%
Total	$	14,410,176			$	13,562,240

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	Global Revolving		Unsecured		Secured and
	Credit Facilities (1)		Senior Notes		Other Debt		Total Debt
2022	$	—	$	629,040	$	—	$	629,040
2023		—		104,725		3,081		107,806
2024		—		933,490		—		933,490
2025		—		1,168,580		—		1,168,580
2026		—		1,415,023		—		1,415,023
Thereafter		1,458,730		8,541,564		155,943		10,156,237
Subtotal	$	1,458,730	$	12,792,422	$	159,024	$	14,410,176
Unamortized net discounts		—		(36,026)		—		(36,026)
Unamortized deferred financing costs		(18,690)		(60,828)		(325)		(79,843)
Total	$	1,440,040	$	12,695,568	$	158,699	$	14,294,307

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

Unsecured Senior Notes

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


	Aggregate Principal Amount at Issuance					Balance as of
	Borrowing Currency		USD		Maturity Date	June 30, 2022		December 31, 2021
Floating rate notes due 2022	€	300,000	$	349,800	Sep 23, 2022	$	314,520	$	341,100
0.125% notes due 2022	€	300,000		332,760	Oct 15, 2022		314,520		341,100
0.600% notes due 2023	CHF	100,000		108,310	Oct 02, 2023		104,725		-
2.625% notes due 2024	€	600,000		677,040	Apr 15, 2024		629,040		682,200
2.750% notes due 2024	£	250,000		324,925	Jul 19, 2024		304,450		338,300
4.250% notes due 2025	£	400,000		634,480	Jan 17, 2025		487,120		541,280
0.625% notes due 2025	€	650,000		720,980	Jul 15, 2025		681,460		739,050
4.750% notes due 2025	$	450,000		450,000	Oct 01, 2025		-		450,000
2.500% notes due 2026	€	1,075,000		1,224,640	Jan 16, 2026		1,127,030		1,222,275
0.200% notes due 2026	CHF	275,000		298,404	Dec 15, 2026		287,993		301,419
1.700% notes due 2027	CHF	150,000		162,465	Mar 30, 2027		157,087		-
3.700% notes due 2027	$	1,000,000		1,000,000	Aug 15, 2027		1,000,000		1,000,000
1.125% notes due 2028	€	500,000		548,550	Apr 09, 2028		524,200		568,500
4.450% notes due 2028	$	650,000		650,000	Jul 15, 2028		650,000		650,000
0.550% notes due 2029	CHF	270,000		292,478	Apr 16, 2029		282,757		295,938
3.600% notes due 2029	$	900,000		900,000	Jul 01, 2029		900,000		900,000
3.300% notes due 2029	£	350,000		454,895	Jul 19, 2029		426,230		473,620
1.500% notes due 2030	€	750,000		831,900	Mar 15, 2030		786,300		852,750
3.750% notes due 2030	£	550,000		719,825	Oct 17, 2030		669,790		744,260
1.250% notes due 2031	€	500,000		560,950	Feb 01, 2031		524,200		568,500
0.625% notes due 2031	€	1,000,000		1,220,700	Jul 15, 2031		1,048,400		1,137,000
1.000% notes due 2032	€	750,000		874,500	Jan 15, 2032		786,300		852,750
1.375% notes due 2032	€	750,000		849,375	Jul 18, 2032		786,300		-
						$	12,792,422	$	13,000,042
Unamortized discounts, net of premiums							(36,026)		(33,612)
Deferred financing costs, net							(60,828)		(63,060)
Total unsecured senior notes, net of discount and deferred financing costs						$	12,695,568	$	12,903,370

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restrictive Covenants in Unsecured Senior Notes

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

Early Extinguishment of Unsecured Senior Notes

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

	●	During the six months ended June 30, 2022: $51.1 million primarily due to redemption of the 4.750% Notes due 2025 in February 2022.

	●	During the six months ended June 30, 2021: $18.3 million primarily due to redemption of the 2.750% Notes due 2023 in February 2021.

Global Revolving Credit Facility Amendment

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

9. Earnings per Common Share or Unit

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

Digital Realty Trust, Inc. Earnings per Common Share


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income available to common stockholders	$	53,246	$	127,369	$	116,346	$	499,775
Weighted average shares outstanding—basic		284,694		281,792		284,610		281,445
Potentially dilutive common shares:
Unvested incentive units		178		177		183		168
Unvested restricted stock		49		165		62		143
Market performance-based awards		189		300		125		320
Weighted average shares outstanding—diluted		285,110		282,434		284,980		282,076
Income per share:
Basic	$	0.19	$	0.45	$	0.41	$	1.78
Diluted	$	0.19	$	0.45	$	0.41	$	1.77

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Digital Realty Trust, L.P. Earnings per Unit


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income available to common unitholders	$	54,746	$	130,569	$	119,446	$	512,775
Weighted average units outstanding—basic		290,528		288,843		290,346		288,588
Potentially dilutive common units:
Unvested incentive units		178		177		183		168
Unvested restricted units		49		165		62		143
Market performance-based awards		189		300		125		320
Weighted average units outstanding—diluted		290,944		289,485		290,716		289,219
Income per unit:
Basic	$	0.19	$	0.45	$	0.41	$	1.78
Diluted	$	0.19	$	0.45	$	0.41	$	1.77

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


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Shares subject to Forward Equity Offering	6,250	—	6,250	—
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.	5,834	7,051	5,735	7,143
Potentially dilutive Series C Cumulative Redeemable Perpetual Preferred Stock	—	689	—	1,082
Potentially dilutive Series J Cumulative Redeemable Preferred Stock	1,536	1,317	1,494	1,390
Potentially dilutive Series K Cumulative Redeemable Preferred Stock	1,615	1,385	1,571	1,461
Potentially dilutive Series L Cumulative Redeemable Preferred Stock	2,649	2,272	2,577	2,397
Total	17,884	12,714	17,627	13,473

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. were parties to an at-the-market (ATM) equity offering sales agreement dated January 4, 2019, as amended in 2020 (the “2020 Sales Agreement”). Pursuant to the 2020 Sales Agreement, Digital Realty Trust, Inc. was able to issue and sell common stock having an aggregate offering price of up to $1.0 billion through various named agents from time to time. The 2020 Sales Agreement was terminated on April 1, 2022 when Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into a new ATM equity offering sales agreement dated April 1, 2022 (the “2022 Sales Agreement”). At the time of the termination, $577.6 million remained unsold under the 2020 Sales Agreement. Pursuant to the 2022 Sales Agreement , Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $1.5 billion through various named agents from time to time. For the six months ended June 30, 2022, we had no sales under the 2022 Sales Agreement and $1.5 billion is still available.

Forward Equity Sale

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

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

We account for our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives. As of June 30, 2022, 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 could be classified as equity contracts based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the proportion of entities consolidated by the Company that are owned by third parties. The following table shows the ownership interest in the Operating Partnership as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022			December 31, 2021
	Number of	Percentage of		Number of	Percentage of
	units	total		units	total
Digital Realty Trust, Inc.	284,734	97.8	%	284,415	98.0	%
Noncontrolling interests consist of:
Common units held by third parties	4,387	1.5	%	4,389	1.5	%
Incentive units held by employees and directors (see Note 12. "Incentive Plan")	1,912	0.7	%	1,543	0.5	%
	291,033	100.0	%	290,347	100.0	%

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

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $765.8 million and $1,074.7 million based on the closing market price of Digital Realty Trust, Inc. common stock on June 30, 2022 and December 31, 2021, respectively.

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


	Common Units	Incentive Units	Total
As of December 31, 2021	4,389	1,542	5,931
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(2)	—	(2)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—	(15)	(15)
Incentive units issued upon achievement of market performance condition	—	221	221
Grant of incentive units to employees and directors	—	167	167
Cancellation / forfeitures of incentive units held by employees and directors	—	(3)	(3)
As of June 30, 2022	4,387	1,912	6,299

(1)	These redemptions and conversions were recorded as a reduction to noncontrolling interests in the Operating Partnership and an increase to common stock and additional paid-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

We have declared and paid the following dividends on our common and preferred stock for the six months ended June 30, 2022 (in thousands, except per share data):


		Series J		Series K		Series L
		Preferred		Preferred		Preferred		Common
Date dividend declared	Dividend payment date	Stock		Stock		Stock		Stock
March 3, 2022	March 31, 2022	$	2,625	$	3,071	$	4,485	$	348,025
May 24, 2022	June 30, 2022		2,625		3,071		4,485		348,077
		$	5,250	$	6,142	$	8,970	$	696,102
Annual rate of dividend per share		$	1.31250	$	1.46250	$	1.30000	$	4.88000

Digital Realty Trust, L.P. Distributions

All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s Board of Directors. The table below shows the distributions declared and paid by the Operating Partnership on its common and preferred units for the six months ended June 30, 2022 (in thousands, except for per unit data):


		Series J		Series K		Series L
		Preferred		Preferred		Preferred		Common
Date distribution declared	Distribution payment date	Units		Units		Units		Units
March 3, 2022	March 31, 2022	$	2,625	$	3,071	$	4,485	$	355,812
May 24, 2022	June 30, 2022		2,625		3,071		4,485		355,885
		$	5,250	$	6,142	$	8,970	$	711,697
Annual rate of distribution per unit		$	1.31250	$	1.46250	$	1.30000	$	4.88000

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, 2021	$	(212,653)	$	(107)	$	38,880	$	(173,880)
Net current period change		(300,656)		(965)		—		(301,621)
Reclassification to interest expense from interest rate swaps		—		(60)		—		(60)
Balance as of June 30, 2022	$	(513,309)	$	(1,132)	$	38,880	$	(475,561)

Digital Realty Trust, L.P.


	Foreign currency		Cash flow		Foreign currency net		Accumulated other
	translation		hedge		investment hedge		comprehensive
	adjustments		adjustments		adjustments		income (loss)
Balance as of December 31, 2021	$	(219,882)	$	(1,240)	$	39,677	$	(181,445)
Net current period change		(307,790)		(988)		—		(308,778)
Reclassification to interest expense from interest rate swaps		—		(62)		—		(62)
Balance as of June 30, 2022	$	(527,672)	$	(2,290)	$	39,677	$	(490,285)

Incentive Plans

2014 Incentive Award Plan

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

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

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Market-Based Performance Awards.

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

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


		Market
	2021-2022	Performance
	RMS Relative	Vesting
Level	Market Performance	Percentage
Below Threshold Level	≤ -500 basis points	0	%
Threshold Level	-500 basis points	25	%
Target Level	0 basis points	50	%
High Level	≥ 500 basis points	100	%

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

2019 Awards

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

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

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

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Financial-Based Performance Awards.

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

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

As of June 30, 2022, approximately 5.0 million shares of common stock, including awards that can be converted to or exchanged for shares of common stock, remained available for future issuance under the Incentive Plan.

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

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


													Expected
													period to
	Deferred Compensation								Unearned Compensation				recognize
	Expensed				Capitalized				As of		As of		unearned

	Three Months Ended June 30,								June 30,		December 31,		compensation
Type of incentive award	2022		2021		2022		2021		2022		2021		(in years)
Long-term incentive units	$	6.4	$	2.8	$	0.0	$	—	$	33.9	$	19.8	2.3
Performance-based awards		5.6		6.4		0.1		0.1		46.9		39.2	2.3
Service-based restricted stock units		6.8		5.3		1.4		0.9		68.8		44.5	2.8
Interxion awards		1.1		4.1		—		—		4.6		8.5	1.1

	Six Months Ended June 30,
	2022		2021		2022		2021
Long-term incentive units	$	11.6	$	6.0	$	0.1	$	0.1
Performance-based awards		10.6		14.9		0.3		0.5
Service-based restricted stock units		12.1		9.2		2.4		1.6
Interxion awards		2.0		14.6		—		—

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


		Weighted-Average
		Grant Date Fair
Unvested LTIP Units	Units	Value
Unvested, beginning of period	250,468	$	132.66
Granted	167,326		154.09
Vested	(127,117)		130.32
Cancelled or expired	—		—
Unvested, end of period	290,677	$	146.02

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


		Weighted-Average
		Grant Date Fair
Unvested Restricted Stock Units	Shares	Value
Unvested, beginning of period	509,369	$	129.52
Granted	312,244		138.35
Vested	(169,630)		124.32
Cancelled or expired	(44,828)		133.37
Unvested, end of period	607,155	$	135.23

Derivative Instruments

We had no material outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of June 30, 2022.

Amounts reported in accumulated other comprehensive loss related to interest rate swaps are reclassified to interest expense as interest payments are made on our debt. As of June 30, 2022, we had no material interest rate swap agreements outstanding.

The derivative instruments the Company enters into typically contain provisions that would declare the Company as being in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to any default on the indebtedness. As of June 30, 2022, we did not have any material derivatives outstanding.

Fair Value of Financial Instruments

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

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	Categorization	As of June 30, 2022				As of December 31, 2021
	under the fair value	Estimated Fair				Estimated Fair
	hierarchy	Value		Carrying Value		Value		Carrying Value
Global revolving credit facilities	Level 2	$	1,458,730	$	1,458,730	$	415,116	$	415,116
Unsecured senior notes (1)	Level 2		11,262,417		12,792,422		13,580,262		13,000,042
Secured and other debt (1)	Level 2		153,543		159,024		152,511		147,082
		$	12,874,690	$	14,410,176	$	14,147,889	$	13,562,240

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

15. Commitments and Contingencies

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

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

Supplemental Cash Flow Information

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


	Balance as of
(Amounts in thousands)	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	99,226	$	142,698
Restricted cash (included in other assets)		9,995		8,787
Total	$	109,221	$	151,485

We paid $144.1 million and $151.7 million for interest, net of amounts capitalized, for the six months ended June 30, 2022 and 2021, respectively.

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

17. Segment and Geographic Information

Most of the Company’s largest customers are global entities that transact with the Company across multiple geographies worldwide. The Company manages critical decisions around development, operations, and leasing globally based on customer demand considerations to best address the needs of its global customers. In this regard, the Company manages customer relationships on a global basis in order to achieve consistent sales and delivery experience of our products for our customers. In order to best accommodate the needs of our current and potential global customers, the Company manages its operations as a single global business – with one operating segment and, therefore, one reporting segment. A breakout of the Company’s Operating Revenues, Investments in Properties, net, and Operating lease right-of-use assets, net by geography is shown below.


	Operating Revenues
	Three Months Ended June 30,						Six Months Ended June 30,
(Amounts in millions)	2022			2021			2022			2021
Inside the United States	$	679.7		$	686.4		$	1,344.8		$	1,377.3
Outside the United States		459.7			406.8			921.8			806.3
Revenue Outside of U.S. %		40.3	%		37.2	%		40.7	%		36.9	%

	Investments in Properties, net						Operating lease right-of-use assets, net
	As of June 30,			As of December 31,			As of June 30,			As of December 31,
(Amounts in millions)	2022			2021			2022			2021
Inside the United States	$	11,197.9		$	11,167.9		$	692.6		$	719.1
Outside the United States		9,602.5			9,594.3			618.4			686.4

Net Assets in Foreign Operations	$	2,990.5		$	3,865.4

Subsequent Events

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

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