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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

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

For the Transition Period From to .

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

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

DIGITAL REALTY TRUST, INC.

DIGITAL REALTY TRUST, L.P.

(Exact name of registrant as specified in its charter)



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

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

(737) 281-0101

(Registrant’s telephone number, including area code)

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

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

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


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

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


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

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

Digital Realty Trust, Inc.:


Large accelerated filer ⌧		Accelerated filer ◻

Non-accelerated filer ◻		Smaller reporting company ☐

		Emerging growth company ☐

Digital Realty Trust, L.P.:


Large accelerated filer ◻		Accelerated filer ◻

Non-accelerated filer ⌧		Smaller reporting company ☐

		Emerging growth company ☐

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


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

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


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

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

Digital Realty Trust, Inc.:



Class		Outstanding at November 3, 2023
Common Stock, $.01 par value per share		302,852,090

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2023 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. In statements regarding qualification as a REIT, such terms refer solely to Digital Realty Trust, Inc. Unless otherwise indicated or unless the context requires otherwise, all references to the “Parent” refer to Digital Realty Trust, Inc., and all references to “our Operating Partnership,” “the Operating Partnership” or “the OP” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.

The Parent is a real estate investment trust, or REIT, and the sole general partner of the OP. As of September 30, 2023, the Parent owned an approximate 97.9% common general partnership interest in Digital Realty Trust, L.P. The remaining approximate 2.1% 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 September 30, 2023, 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 SEPTEMBER 30, 2023

TABLE OF CONTENTS

		Page Number
PART I.	FINANCIAL INFORMATION

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

	Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (unaudited)	4

	Condensed Consolidated Income Statements for the three and nine months ended September 30, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022 (unaudited)	6

	Condensed Consolidated Statement of Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited)	11

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

	Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (unaudited)	12

	Condensed Consolidated Income Statements for the three and nine months ended September 30, 2023 and 2022 (unaudited)	13

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022 (unaudited)	14

	Condensed Consolidated Statement of Capital for the three and nine months ended September 30, 2023 and 2022 (unaudited)	16

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (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	44

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	64

ITEM 4.	Controls and Procedures (Digital Realty Trust, Inc.)	65

	Controls and Procedures (Digital Realty Trust, L.P.)	66

PART II.	OTHER INFORMATION	67

ITEM 1.	Legal Proceedings	67

ITEM 1A.	Risk Factors	67

ITEM 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	68

ITEM 3.	Defaults Upon Senior Securities	68

ITEM 4.	Mine Safety Disclosures	68

ITEM 5.	Other Information	68

ITEM 6.	Exhibits	70

	Signatures	71

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share data)


	September 30,		December 31,
	2023		2022
ASSETS
Investments in real estate:
Investments in properties, net	$	23,598,260	$	23,774,662
Investments in unconsolidated entities		2,180,313		1,991,426
Net investments in real estate		25,778,573		25,766,088
Operating lease right-of-use assets, net		1,274,410		1,351,329
Cash and cash equivalents		1,062,050		141,773
Accounts and other receivables, net		1,325,725		969,292
Deferred rent, net		586,418		601,590
Goodwill		8,998,074		9,208,497
Customer relationship value, deferred leasing costs and intangibles, net		2,506,198		3,092,627
Other assets		401,069		353,802
Total assets	$	41,932,517	$	41,484,998
LIABILITIES AND EQUITY
Global revolving credit facilities, net	$	1,698,780	$	2,150,451
Unsecured term loans, net		1,524,663		797,449
Unsecured senior notes, net of discount		13,072,102		13,120,033
Secured and other debt, including premiums		574,231		528,870
Operating lease liabilities		1,404,510		1,471,044
Accounts payable and other accrued liabilities		2,147,104		1,868,885
Deferred tax liabilities, net		1,088,724		1,192,752
Accrued dividends and distributions		—		363,716
Security deposits and prepaid rents		385,521		369,654
Total liabilities		21,895,635		21,862,854

Redeemable noncontrolling interests		1,360,308		1,514,679
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 September 30, 2023 and December 31, 2022		731,690		731,690
Common Stock: $0.01 par value per share, 392,000 shares authorized; 302,846 and 291,148 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		3,002		2,887
Additional paid-in capital		23,239,088		22,142,868
Accumulated dividends in excess of earnings		(4,900,758)		(4,698,313)
Accumulated other comprehensive loss, net		(882,996)		(595,798)
Total stockholders’ equity		18,190,026		17,583,334
Noncontrolling interests		486,548		524,131
Total equity		18,676,574		18,107,465
Total liabilities and equity	$	41,932,517	$	41,484,998

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating Revenues:
Rental and other services	$	1,394,613	$	1,184,165	$	4,075,008	$	3,437,252
Fee income and other		7,819		7,918		32,414		21,475
Total operating revenues		1,402,432		1,192,083		4,107,422		3,458,727
Operating Expenses:
Rental property operating and maintenance		607,544		477,731		1,778,465		1,334,826
Property taxes and insurance		76,568		43,862		172,450		145,135
Depreciation and amortization		420,613		388,704		1,274,384		1,147,803
General and administrative		110,721		97,447		332,257		301,736
Transactions and integration		14,465		25,862		44,496		51,416
Provision for impairment		113,000		—		113,000		—
Other		1,295		1,096		1,950		8,823
Total operating expenses		1,344,206		1,034,702		3,717,002		2,989,739
Operating income		58,226		157,381		390,420		468,988
Other Income (Expenses):
Equity in (loss) earnings of unconsolidated entities		(19,793)		(12,254)		163		14,616
Gain on disposition of properties, net		810,688		173,990		900,634		176,760
Other income, net		24,812		15,752		18,162		31,811
Interest expense		(110,767)		(76,502)		(324,103)		(212,250)
Income tax expense		(17,228)		(19,576)		(54,855)		(49,226)
Net income		745,938		238,791		930,421		379,564
Net (income) attributable to noncontrolling interests		(12,320)		(1,716)		(9,893)		(5,781)
Net income attributable to Digital Realty Trust, Inc.		733,618		237,075		920,528		373,783
Preferred stock dividends		(10,181)		(10,181)		(30,543)		(30,543)
Net income available to common stockholders	$	723,437	$	226,894	$	889,985	$	343,240
Net income per share available to common stockholders:
Basic	$	2.40	$	0.79	$	3.00	$	1.20
Diluted	$	2.33	$	0.75	$	2.93	$	1.15
Weighted average common shares outstanding:
Basic		301,827		286,693		296,184		285,312
Diluted		311,341		296,415		306,735		294,257

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	745,938	$	238,791	$	930,421	$	379,564
Other comprehensive income (loss):
Foreign currency translation adjustments		(190,425)		(535,246)		(478,792)		(843,036)
Increase in fair value of derivatives		48,580		7,154		61,730		6,166
Reclassification to interest expense from derivatives		(9,349)		(1,092)		(23,387)		(1,154)
Other comprehensive loss		(151,194)		(529,184)		(440,449)		(838,024)
Comprehensive income (loss)		594,744		(290,393)		489,972		(458,460)
Comprehensive (income) loss attributable to noncontrolling interests		(2,354)		140,225		142,605		143,319
Comprehensive income (loss) attributable to Digital Realty Trust, Inc.	$	592,390	$	(150,168)	$	632,577	$	(315,141)

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


										Accumulated		Accumulated
	Redeemable				Number of			Additional		Dividends in		Other
	Noncontrolling		Preferred		Common	Common		Paid-in		Excess of		Comprehensive		Noncontrolling
Three Months Ended September 30, 2023	Interests		Stock		Shares	Stock		Capital		Earnings		Loss, Net		Interests		Total Equity

Balance as of June 30, 2023	$	1,367,422	$	731,690	299,240,366		2,967	$	22,882,200	$	(5,253,917)	$	(741,484)	$	483,702	$	18,105,158
Conversion of common units to common stock		—		—	15,435		1		1,150		—		—		(1,151)		—
Vesting of restricted stock, net		—		—	66,419		—		—		—		—		—		—
Issuance of common stock, net of costs		—		—	3,454,148		34		335,279		—		—		—		335,313
Shares issued under equity plans, net of share settlement to satisfy tax withholding upon vesting		—		—	69,658		—		3,551		—		—		—		3,551
Amortization of unearned compensation regarding share-based awards		—		—	—		—		19,230		—		—		—		19,230
Reclassification of vested share-based awards		—		—	—		—		(1,490)		—		—		1,490		—
Adjustment to redeemable noncontrolling interests		1,116		—	—		—		(1,116)		—		—		—		(1,116)
Dividends declared on preferred stock		—		—	—		—		—		(10,181)		—		—		(10,181)
Dividends and distributions on common stock and common and incentive units		(190)		—	—		—		—		(370,278)		—		(7,823)		(378,101)
Contributions from (distributions to) noncontrolling interests		—		—	—		—		—		—		—		(64)		(64)
Net income		(2,657)		—	—		—		—		733,618		—		14,977		748,595
Other comprehensive income (loss)		(5,383)		—	—		—		284		—		(141,512)		(4,583)		(145,811)
Balance as of September 30, 2023	$	1,360,308	$	731,690	302,846,026	$	3,002	$	23,239,088	$	(4,900,758)	$	(882,996)	$	486,548	$	18,676,574

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
Nine Months Ended September 30, 2023	Interests		Stock		Shares	Stock		Capital		Earnings		Loss, Net		Interests		Total Equity

Balance as of December 31, 2022	$	1,514,679	$	731,690	291,148,222	$	2,887	$	22,142,868	$	(4,698,313)	$	(595,798)	$	524,131	$	18,107,465
Conversion of common units to common stock		—		—	77,432		2		5,590		—		—		(5,592)		—
Vesting of restricted stock, net		—		—	221,907		—		—		—		—		—		—
Issuance of common stock, net of costs		—		—	11,274,926		112		1,077,426		—		—		—		1,077,538
Shares issued under equity plans, net of share settlement to satisfy tax withholding upon vesting		—		—	123,539		1		(23)		—		—		—		(22)
Amortization of unearned compensation regarding share-based awards		—		—	—		—		54,785		—		—		—		54,785
Reclassification of vested share-based awards		—		—	—		—		(37,567)		—		—		37,567		—
Adjustment to redeemable noncontrolling interests		3,238		—	—		—		(3,238)		—		—		—		(3,238)
Dividends declared on preferred stock		—		—	—		—		—		(30,543)		—		—		(30,543)
Dividends and distributions on common stock and common and incentive units		(570)		—	—		—		—		(1,092,430)		—		(23,204)		(1,115,634)
Contributions from (distributions to) noncontrolling interests		129		—	—		—		—		—		—		4,441		4,441
Deconsolidation of noncontrolling interests in consolidated entities		—		—	—		—		—		—		—		(65,358)		(65,358)
Net income		(9,386)		—	—		—		—		920,528		—		19,279		939,807
Other comprehensive income (loss)		(147,782)		—	—		—		(753)		—		(287,198)		(4,716)		(292,667)
Balance as of September 30, 2023	$	1,360,308	$	731,690	302,846,026	$	3,002	$	23,239,088	$	(4,900,758)	$	(882,996)	$	486,548	$	18,676,574

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


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

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
Conversion of common units to common stock		—		—	6,253		—		503		—		—		(503)		—
Vesting of restricted stock, net		—		—	45,630		—		—		—		—		—		—
Partial settlement of forward sale agreements, net of costs					2,658,539		27		399,695						—		399,722
Shares issued under equity plans, net of share settlement to satisfy tax withholding upon vesting		—		—	63,863		—		11,684		—		—		—		11,684
Amortization of unearned compensation regarding share-based awards		—		—	—		—		21,288		—		—		—		21,288
Reclassification of vested share-based awards		—		—	—		—		(933)		—		—		933		—
Adjustment to redeemable noncontrolling interests		(4,783)		—	—		—		4,783		—		—		—		4,783
Dividends declared on preferred stock		—		—	—		—		—		(10,181)		—		—		(10,181)
Dividends and distributions on common stock and common and incentive units		(190)		—	—		—		—		(351,410)		—		(7,314)		(358,724)
Redeemable noncontrolling interests associated with acquisition of Teraco		1,530,090		—	—		—		—		—		—		—		—
Contributions from (distributions to) noncontrolling interests		—		—	—		—		—		—		—		10,379		10,379
Net income/(loss)		(3,423)		—	—		—		—		237,075		—		5,139		242,214
Other comprehensive income (loss)		(132,821)		—	—		—		—		—		(387,243)		(9,120)		(396,363)
Balance as of September 30, 2022	$	1,429,920	$	731,690	287,508,207	$	2,851	$	21,528,384	$	(4,336,201)	$	(862,804)	$	491,101	$	17,555,021

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
Nine Months Ended September 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		—		—	23,550		—		1,962		—		—		(1,962)		—
Vesting of restricted stock, net		—		—	305,054		—		—		—		—		—		—
Partial settlement of forward sale agreements, net of costs		—		—	2,700,727		27		400,851		—		—		—		400,878
Shares issued under equity plans, net of share settlement to satisfy tax withholding upon vesting		—		—	63,863		—		4,541		—		—		—		4,541
Amortization of unearned compensation regarding share-based awards		—		—	—		—		62,253		—		—		—		62,253
Reclassification of vested share-based awards		—		—	—		—		(29,210)		—		—		29,210		—
Adjustment to redeemable noncontrolling interests		(12,124)		—	—		—		12,124		—		—		—		12,124
Dividends declared on preferred stock		—		—	—		—		—		(30,543)		—		—		(30,543)
Dividends and distributions on common stock and common and incentive units		(570)		—	—		—		—		(1,047,512)		—		(23,127)		(1,070,639)
Redeemable noncontrolling interests associated with acquisition of Teraco		1,530,090		—	—		—		—		—		—		—		—
Contributions from (distributions to) noncontrolling interests		1,703		—	—		—		—		—		—		21,906		21,906
Net income		(3,353)		—	—		—		—		373,783		—		9,134		382,917
Other comprehensive income (loss)		(132,821)		—	—		—		—		—		(688,924)		(16,279)		(705,203)
Balance as of September 30, 2022	$	1,429,920	$	731,690	287,508,207	$	2,851	$	21,528,384	$	(4,336,201)	$	(862,804)	$	491,101	$	17,555,021

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	930,421	$	379,564
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(900,634)		(176,760)
Provision for impairment		113,000		—
Equity in loss of unconsolidated entities		(163)		(14,616)
Distributions from unconsolidated entities		51,068		34,587
Depreciation and amortization		1,274,384		1,147,803
Amortization of share-based compensation		54,785		62,253
Loss from early extinguishment of debt		—		51,135
Straight-lined rents and amortization of above and below market leases		(18,597)		(38,190)
Amortization of deferred financing costs and debt discount / premium		19,705		13,764
Other items, net		(20,345)		14,511
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(343,767)		(276,953)
Increase in accounts payable and other liabilities		12,618		5,866
Net cash provided by operating activities		1,172,475		1,202,964
Cash flows from investing activities:
Improvements to investments in real estate		(2,466,462)		(1,753,520)
Cash paid for business combination / asset acquisitions, net of cash acquired		(45,856)		(1,877,092)
Investment in unconsolidated entities, net		(12,421)		(240,541)
Proceeds from sale of assets		2,470,684		203,995
Other investing activities, net		(44,651)		(60,776)
Net cash used in investing activities		(98,706)		(3,727,934)
Cash flows from financing activities:
Net (payments on) proceeds from credit facilities		(443,337)		1,968,149
Borrowings on secured / unsecured debt		827,759		2,426,865
Repayments on secured / unsecured debt		(3,081)		(741,347)
Premium paid for early extinguishment of debt		—		(49,662)
Capital contributions from noncontrolling interests, net		4,570		17,977
Proceeds from issuance of common stock, net		1,077,538		400,878
Payments of dividends and distributions		(1,510,463)		(1,440,481)
Other financing activities, net		(61,261)		(14,851)
Net cash (used in) provided by financing activities		(108,275)		2,567,528
Net increase in cash, cash equivalents and restricted cash		965,494		42,558
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(43,745)		(8,098)
Cash, cash equivalents and restricted cash at beginning of period		150,696		151,485
Cash, cash equivalents and restricted cash at end of period	$	1,072,445	$	185,944

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)


	September 30,		December 31,
	2023		2022
ASSETS
Investments in real estate:
Investments in properties, net	$	23,598,260	$	23,774,662
Investments in unconsolidated entities		2,180,313		1,991,426
Net investments in real estate		25,778,573		25,766,088
Operating lease right-of-use assets, net		1,274,410		1,351,329
Cash and cash equivalents		1,062,050		141,773
Accounts and other receivables, net		1,325,725		969,292
Deferred rent, net		586,418		601,590
Goodwill		8,998,074		9,208,497
Customer relationship value, deferred leasing costs and intangibles, net		2,506,198		3,092,627
Other assets		401,069		353,802
Total assets	$	41,932,517	$	41,484,998
LIABILITIES AND CAPITAL
Global revolving credit facilities, net	$	1,698,780	$	2,150,451
Unsecured term loans, net		1,524,663		797,449
Unsecured senior notes, net		13,072,102		13,120,033
Secured and other debt, including premiums		574,231		528,870
Operating lease liabilities		1,404,510		1,471,044
Accounts payable and other accrued liabilities		2,147,104		1,868,885
Deferred tax liabilities, net		1,088,724		1,192,752
Accrued dividends and distributions		—		363,716
Security deposits and prepaid rents		385,521		369,654
Total liabilities		21,895,635		21,862,854

Redeemable noncontrolling interests		1,360,308		1,514,679
Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Preferred units, $755,000 liquidation preference ($25.00 per unit), 30,200 units issued and outstanding as of September 30, 2023 and December 31, 2022		731,690		731,690
Common units, 302,846 and 291,148 units issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		18,341,332		17,447,442
Limited Partners, 6,479 and 6,289 units issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		465,548		436,942
Accumulated other comprehensive loss		(907,178)		(613,423)
Total partners’ capital		18,631,392		18,002,651
Noncontrolling interests in consolidated entities		45,182		104,814
Total capital		18,676,574		18,107,465
Total liabilities and capital	$	41,932,517	$	41,484,998

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating Revenues:
Rental and other services	$	1,394,613	$	1,184,165	$	4,075,008	$	3,437,252
Fee income and other		7,819		7,918		32,414		21,475
Total operating revenues		1,402,432		1,192,083		4,107,422		3,458,727
Operating Expenses:
Rental property operating and maintenance		607,544		477,731		1,778,465		1,334,826
Property taxes and insurance		76,568		43,862		172,450		145,135
Depreciation and amortization		420,613		388,704		1,274,384		1,147,803
General and administrative		110,721		97,447		332,257		301,736
Transactions and integration		14,465		25,862		44,496		51,416
Provision for impairment		113,000		—		113,000		—
Other		1,295		1,096		1,950		8,823
Total operating expenses		1,344,206		1,034,702		3,717,002		2,989,739
Operating income		58,226		157,381		390,420		468,988
Other Income (Expenses):
Equity in (loss) earnings of unconsolidated entities		(19,793)		(12,254)		163		14,616
Gain on disposition of properties, net		810,688		173,990		900,634		176,760
Other income, net		24,812		15,752		18,162		31,811
Interest expense		(110,767)		(76,502)		(324,103)		(212,250)
Income tax expense		(17,228)		(19,576)		(54,855)		(49,226)
Net income		745,938		238,791		930,421		379,564
Net loss attributable to noncontrolling interests		3,980		3,684		10,407		2,719
Net income attributable to Digital Realty Trust, L.P.		749,918		242,475		940,828		382,283
Preferred units distributions		(10,181)		(10,181)		(30,543)		(30,543)
Net income available to common unitholders	$	739,737	$	232,294	$	910,285	$	351,740
Net income per unit available to common unitholders:
Basic	$	2.40	$	0.79	$	3.00	$	1.20
Diluted	$	2.33	$	0.75	$	2.93	$	1.15
Weighted average common units outstanding:
Basic		308,024		292,536		302,316		291,084
Diluted		317,538		302,258		312,867		300,028

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	745,938	$	238,791	$	930,421	$	379,564
Other comprehensive income (loss):
Foreign currency translation adjustments		(190,425)		(535,246)		(478,792)		(843,036)
Increase in fair value of derivatives		48,580		7,154		61,730		6,166
Reclassification to interest expense from derivatives		(9,349)		(1,092)		(23,387)		(1,154)
Other comprehensive loss		(151,194)		(529,184)		(440,449)		(838,024)
Comprehensive income (loss) attributable to Digital Realty Trust, L.P.	$	594,744	$	(290,393)	$	489,972	$	(458,460)
Comprehensive loss attributable to noncontrolling interests		10,772		136,505		156,348		135,540
Comprehensive income (loss) attributable to Digital Realty Trust, L.P.	$	605,516	$	(153,888)	$	646,320	$	(322,920)

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Three Months Ended September 30, 2023	Common Units		Units	Amount		Units	Amount		Units	Amount		Loss, Net		Interests		Total Capital

Balance as of June 30, 2023	$	1,367,422	30,200,000	$	731,690	299,240,366	$	17,631,250	6,483,064	$	457,107	$	(762,492)	$	47,603	$	18,105,158
Conversion of limited partner common units to general partner common units		—	—		—	15,435		1,151	(15,435)		(1,151)		—		—		—
Vesting of restricted common units, net		—	—		—	66,419		—	—		—		—		—		—
Issuance of common units, net of costs		—	—		—	3,454,148		335,313	—		—		—		—		335,313
Issuance of limited partner common units, net		—	—		—	—		—	11,765		—		—		—		—
Units issued under equity plans, net of unit settlement to satisfy tax withholding upon vesting		—	—		—	69,658		3,551	—		—		—		—		3,551
Amortization of share-based compensation		—	—		—	—		19,230	—		—		—		—		19,230
Reclassification of vested share-based awards		—	—		—	—		(1,490)	—		1,490		—		—		—
Adjustment to redeemable partnership units		1,116	—		—	—		(1,116)	—		—		—		—		(1,116)
Distributions		(190)	—		(10,181)	—		(370,278)	—		(7,823)		—		—		(388,282)
Contributions from noncontrolling interests in consolidated entities		—	—		—	—		—	—		—		—		(64)		(64)
Deconsolidation of noncontrolling interest in consolidated entities		—	—		—	—		—	—		—		—		—		—
Net income		(2,657)	—		10,181	—		723,437	—		15,925		—		(948)		748,595
Other comprehensive income (loss)		(5,383)	—		—	—		284	—		—		(144,686)		(1,409)		(145,811)
Balance as of September 30, 2023	$	1,360,308	30,200,000	$	731,690	302,846,026	$	18,341,332	6,479,394	$	465,548	$	(907,178)	$	45,182	$	18,676,574

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Nine Months Ended September 30, 2023	Common Units		Units	Amount		Units	Amount		Units	Amount		Loss, Net		Interests		Total Capital

Balance as of December 31, 2022	$	1,514,679	30,200,000	$	731,690	291,148,222	$	17,447,442	6,288,669	$	436,942	$	(613,423)	$	104,814	$	18,107,465
Conversion of limited partner common units to general partner common units		—	—		—	77,432		5,592	(77,432)		(5,592)		—		—		—
Vesting of restricted common units, net		—	—		—	221,907		—	—		—		—		—		—
Issuance of common units, net of costs		—	—		—	11,274,926		1,077,539	—		—		—		—		1,077,539
Issuance of limited partner common units, net		—	—		—	—		—	268,157		—		—		—		—
Units issued under equity plans, net of unit settlement to satisfy tax withholding upon vesting		—	—		—	123,539		(23)	—		—		—		—		(23)
Amortization of share-based compensation		—	—		—	—		54,785	—		—		—		—		54,785
Reclassification of vested share-based awards		—	—		—	—		(37,567)	—		37,567		—		—		—
Adjustment to redeemable partnership units		3,238	—		—	—		(3,238)	—		—		—		—		(3,238)
Distributions		(570)	—		(30,543)	—		(1,092,430)	—		(23,204)		—		—		(1,146,177)
Contributions from noncontrolling interests in consolidated entities		129	—		—	—		—	—		—		—		4,441		4,441
Deconsolidation of noncontrolling interest in consolidated entities		—	—		—	—		—	—		—		—		(65,358)		(65,358)
Net income		(9,386)	—		30,543	—		889,985	—		19,835		—		(556)		939,807
Other comprehensive income (loss)		(147,782)	—		—	—		(753)	—		—		(293,755)		1,841		(292,667)
Balance as of September 30, 2023	$	1,360,308	30,200,000	$	731,690	302,846,026	$	18,341,332	6,479,394	$	465,548	$	(907,178)	$	45,182	$	18,676,574

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


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

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
Conversion of limited partner common units to general partner common units		—	—		—	6,253		503	—		(503)		—		—		—
Vesting of restricted common units, net		—	—		—	45,630		—	—		—		—		—		—
Partial settlement of forward sale agreements, net of costs		—	—		—	2,658,539		399,722	—		—		—		—		399,722
Issuance of limited partner common units, net		—	—		—	—		—	(4,810)		—		—		—		—
Units issued under equity plans, net of unit settlement to satisfy tax withholding upon vesting		—	—		—	63,863		11,684	—		—		—		—		11,684
Amortization of share-based compensation		—	—		—	—		21,288	—		—		—		—		21,288
Reclassification of vested share-based awards		—	—		—	—		(933)	—		933		—		—		—
Adjustment to redeemable partnership units		(4,783)	—		—	—		4,783	—		—		—		—		4,783
Distributions		(190)	—		—	—		(361,591)	—		(7,314)		—		—		(368,905)
Redeemable noncontrolling interests associated with acquisition of Teraco		1,530,090	—		—	—		—	—		—		—		—		—
Contributions from noncontrolling interests in consolidated entities		—	—		—	—		—	—		—		—		10,379		10,379
Net income/(loss)		(3,423)	—		—	—		237,075	—		5,275		—		(136)		242,214
Other comprehensive income (loss)		(132,821)	—		—	—		—	—				(396,363)		—		(396,363)
Balance as of September 30, 2022	$	1,429,920	30,200,000	$	731,690	287,508,207	$	17,195,034	6,294,668	$	445,328	$	(886,648)	$	69,617	$	17,555,021

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


												Accumulated
	Redeemable		General Partner						Limited Partners			Other
	Limited Partner		Preferred Units			Common Units			Common Units			Comprehensive		Noncontrolling
Nine Months Ended September 30, 2022	Common Units		Units	Amount		Units	Amount		Units	Amount		Income (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		—	—		—	23,550		1,962	(17,297)		(1,962)		—		—		—
Vesting of restricted common units, net		—	—		—	305,054		—	—		—		—		—		—
Payment of common unit offering costs and other, net		—	—		—	2,658,539		395,909	—		—		—		—		395,909
Issuance of limited partner common units, net		—	—		—	—		—	380,194		—		—		—		—
Units issued under equity plans, net of unit settlement to satisfy tax withholding upon vesting		—	—		—	106,051		9,510	—		—		—		—		9,510
Amortization of share-based compensation		—	—		—	—		62,253	—		—		—		—		62,253
Reclassification of vested share-based awards		—	—		—	—		(29,210)	—		29,210		—		—		—
Adjustment to redeemable partnership units		(12,124)	—		—	—		12,124	—		—		—		—		12,124
Distributions		(570)	—		—	—		(1,078,055)	—		(23,127)		—		—		(1,101,182)
Redeemable noncontrolling interests associated with acquisition of Teraco		1,530,090	—		—	—		—	—		—		—		—		—
Contributions from noncontrolling interests in consolidated entities		1,703	—		—	—		136,708	—		3,030		—		21,906		161,644
Net income		(3,353)	—		—	—		237,075	—		5,275		—		829		243,179
Other comprehensive income (loss)		(132,821)	—		—	—		—	—		—		(705,203)		—		(705,203)
Balance as of September 30, 2022	$	1,429,920	30,200,000	$	731,690	287,508,207	$	17,195,034	6,294,668	$	445,328	$	(886,648)	$	69,617	$	17,555,021

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	930,421	$	379,564
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net		(900,634)		(176,760)
Provision for impairment		113,000		—
Equity in loss of unconsolidated entities		(163)		(14,616)
Distributions from unconsolidated entities		51,068		34,587
Depreciation and amortization		1,274,384		1,147,803
Amortization of share-based compensation		54,785		62,253
Loss from early extinguishment of debt		—		51,135
Straight-lined rents and amortization of above and below market leases		(18,597)		(38,190)
Amortization of deferred financing costs and debt discount / premium		19,705		13,764
Other items, net		(20,345)		14,511
Changes in assets and liabilities:
Increase in accounts receivable and other assets		(343,767)		(276,953)
Increase in accounts payable and other liabilities		12,618		5,866
Net cash provided by operating activities		1,172,475		1,202,964
Cash flows from investing activities:
Improvements to investments in real estate		(2,466,462)		(1,753,520)
Cash paid for business combination / asset acquisitions, net of cash acquired		(45,856)		(1,877,092)
Investment in unconsolidated entities, net		(12,421)		(240,541)
Proceeds from sale of assets		2,470,684		203,995
Other investing activities, net		(44,651)		(60,776)
Net cash used in investing activities		(98,706)		(3,727,934)
Cash flows from financing activities:
Net (payments on) proceeds from credit facilities		(443,337)		1,968,149
Borrowings on secured / unsecured debt		827,759		2,426,865
Repayments on secured / unsecured debt		(3,081)		(741,347)
Premium paid for early extinguishment of debt		—		(49,662)
Capital contributions from noncontrolling interests, net		4,570		17,977
General partner contributions		1,077,538		400,878
Payments of dividends and distributions		(1,510,463)		(1,440,481)
Other financing activities, net		(61,261)		(14,851)
Net cash (used in) provided by financing activities		(108,275)		2,567,528
Net increase in cash, cash equivalents and restricted cash		965,494		42,558
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(43,745)		(8,098)
Cash, cash equivalents and restricted cash at beginning of period		150,696		151,485
Cash, cash equivalents and restricted cash at end of period	$	1,072,445	$	185,944

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 U.S. federal income tax purposes.

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

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

Accounting Principles and Basis of Presentation. The accompanying 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, 2022 (“2022 Form 10-K”), as filed with the U.S. Securities and Exchange Commission (“SEC”), our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, as filed with the SEC, and other filings with the SEC.

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

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 September 30, 2023		As of December 31, 2022
Land	$	1,064,058	$	1,061,408
Acquired ground lease		87		6,006
Buildings and improvements		23,998,641		24,287,103
Tenant improvements		824,244		781,540
		25,887,030		26,136,057
Accumulated depreciation and amortization		(7,489,193)		(7,268,981)
Investments in operating properties, net		18,397,837		18,867,076
Construction in progress and space held for development		5,020,464		4,789,134
Land held for future development		179,959		118,452
Investments in properties, net	$	23,598,260	$	23,774,662

Asset Dispositions

On July 13, 2023, we formed a joint venture with GI Partners, and GI Partners acquired a 65% interest in two stabilized hyperscale data center buildings in the Chicago metro area that we contributed. We received approximately $0.7 billion of gross proceeds from the contribution of our data centers to the joint venture and the associated financing, and retained a 35% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a gain on disposition of approximately $238 million. We have also granted GI Partners an option to purchase an interest in the third facility on the same hyperscale data center campus in Chicago. In addition, GI Partners has a call option to increase their ownership interest in the joint venture from 65% to 80%. The call option must be delivered by written notice to the Company no later than January 9, 2024. We continue to manage the day-to-day operations of the assets.

On July 25, 2023, we formed a joint venture with TPG Real Estate, and TPG Real Estate acquired an 80% interest in three stabilized hyperscale data center buildings in Northern Virginia that we contributed. We received approximately $1.3 billion of gross proceeds from the contribution of our data centers to the joint venture and the associated financing, and retained a 20% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a gain on disposition of approximately $577 million. We will continue to manage the day‐to‐day operations of the assets.

Business Combinations

On August 1, 2022, we completed the acquisition of a 61.1% indirect controlling interest in Teraco, a leading carrier-neutral data center and interconnection services provider in South Africa (the “Teraco Acquisition”). The total purchase price was $1.7 billion cash, funded by our global revolving credit facility and partial settlement of our forward equity sale agreements described under Note 11. “Equity and Capital—Forward Equity Sale.” Teraco controls (and consolidates) the Teraco Connect Trust (the “Trust”) that was created as part of the Broad Based Black Economic Empowerment Program in South Africa. The Trust owns a 12% interest in Teraco’s primary operating company, however, because Teraco (and the Company) controls the Trust, the Trust is consolidated by Teraco (and the Company). If the Trust was not consolidated by Teraco, the Company’s ownership interest in Teraco would be approximately 55%.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

Since the Rollover Shareholders can redeem the put right at their discretion and such redemption, which could be in cash, is outside the Company’s control, the Company recorded the noncontrolling interest as Redeemable NCI and classified it in temporary equity within its condensed consolidated balance sheets. The Redeemable NCI was initially recorded at its acquisition-date fair value and will be adjusted each reporting period for income (or loss) attributable to the noncontrolling interest (a $3.0 million and $9.9 million net loss for the three and nine months ended September 30, 2023, respectively). If the contractual redemption value of the Redeemable NCI is greater than its carrying value, an adjustment is made to reflect Redeemable NCI at the higher of its contractual redemption value or its carrying value each reporting period. Changes to the redemption value are recognized immediately in the period the change occurs. If the redemption value of the Redeemable NCI is equal to or less than the fair market value of the Remaining Teraco Interest, the change in the redemption value will be adjusted through Additional Paid in Capital. If the redemption value is greater than the fair market value of the Remaining Teraco Interest, the change in redemption value will be adjusted through Retained Earnings. These adjustments are not reflected on the Company’s income statement, but are instead reflected as adjustments to the net income component of the Company’s earnings per share calculations. When calculating earnings per share attributable to Digital Realty Trust, Inc., the Company adjusts net income attributable to Digital Realty Trust, Inc. to the extent the redemption value exceeds the fair value of the Redeemable NCI on a cumulative basis. For the nine months ended September 30, 2023, no such adjustment was required.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Leases

Lessor Accounting

We generate 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, some 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 2073. As of September 30, 2023, certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of September 30, 2023, the termination dates of these ground leases generally range from 2024 to 2049. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 2023 to 2041. The leases generally require us to make fixed rental payments that increase at defined intervals during the term of the lease plus pay our share of common area, real estate and utility expenses as incurred. The leases neither contain residual value guarantees nor impose material restrictions or covenants on us. Further, the leases have been classified and accounted for as either operating or finance leases. Rent expense related to operating leases included in rental property operating and maintenance expense in the condensed consolidated income statements amounted to approximately $37.4 million and $36.0 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $114.1 million and $109.0 million for the nine months ended September 30, 2023 and 2022, respectively.

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 (net of an allowance for estimated uncollectible amounts) are shown in the subsequent table as Accounts receivable – trade, net. Other receivables shown separately from Accounts receivable – trade, net 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):	September 30, 2023		December 31, 2022
Accounts receivable – trade	$	666,069	$	551,393
Allowance for doubtful accounts		(46,643)		(33,048)
Accounts receivable – trade, net		619,426		518,345

Accounts receivable – customer recoveries		254,279		170,012
Value-added tax receivables		270,724		167,459
Accounts receivable – installation fees		80,697		60,663
Other receivables		100,599		52,813
Accounts and other receivables, net	$	1,325,725	$	969,292

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Deferred rent, net

Deferred rent, net represents rental income that has been recognized as revenue under ASC 842, but which is not yet due from customers under their existing rental agreements. The Company recognizes an allowance against deferred rent receivables to the extent it becomes no longer probable that a customer or group of customers will be able to make substantially all of their required cash rental payments over the entirety of their respective lease terms. As of September 30, 2023, allowance for deferred rent receivables increased primarily due to a customer bankruptcy.


	Balance as of		Balance as of
(Amounts in thousands):	September 30, 2023		December 31, 2022
Deferred rent receivables	$	619,092	$	612,439
Allowance for deferred rent receivables		(32,674)		(10,849)
Deferred rent, net	$	586,418	$	601,590

Investments in Unconsolidated Entities

A summary of the Company’s investments in unconsolidated entities accounted for under the equity method of accounting is shown below (in thousands):


			Balance as of		Balance as of
	% Ownership			September 30, 2023		December 31, 2022
Americas (1)	Various	%	$	1,257,262	$	912,842
APAC (2)(5)	50	%		525,104		543,524
EMEA (3)	Various	%		59,402		62,570
Global (4)	42	%		338,545		472,490
Total			$	2,180,313	$	1,991,426

(1)	Includes Ascenty, Clise, Colovore, GI Partners, Mapletree, Menlo, TPG Real Estate, and Walsh.

(2)	Includes BAM Digital Realty, Lumen, and MCDR.

(3)	Includes Medallion and Mivne.

(4)	Includes Digital Core REIT.

(5)

During the nine months ended September 30, 2023, we derecognized all assets, liabilities and 50% noncontrolling interests related to a joint venture that was previously consolidated and recognized an equity method investment of approximately $61.9 million based on the value of our 50% noncontrolling interest in the joint venture. We had concluded that we would consolidate the joint venture during the development phase of the buildings because we had the power to direct activities that most significantly impacted the joint venture’s economic performance, however, upon the building’s completion and commencing the operational phase, we no longer have the power to direct the activities that most significantly impact the joint venture’s economic performance and deconsolidated the joint venture and recognized the investment under the equity method as we still retained significant influence.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

GI Partners Joint Venture – On July 13, 2023, we formed a joint venture with GI Partners. We contributed two stabilized hyperscale data center buildings in the Chicago metro area, at a purchase price of $900 million, to the new joint venture. We received approximately $0.7 billion of gross proceeds from the contribution of our data centers to the joint venture and the associated financing and retained a 35% interest in the joint venture. GI Partners contributed such cash to the joint venture in exchange for a 65% interest in the joint venture. We have also granted GI Partners an option to purchase an interest in the third facility on the same hyperscale data center campus in Chicago. In addition, GI Partners has a call option to increase their ownership interest in the joint venture from 65% to 80%. The call option must be delivered by written notice to the Company no later than January 9, 2024. We perform the day-to-day accounting and property management functions for the joint venture and, as such, will earn a management fee. DLR is to serve as the managing member responsible for operations in the ordinary course of business. However, certain approval rights are granted through the terms of the LLC agreement and require unanimous consent of both members with respect to any major decisions. Major decisions are defined to include the annual plan which sets out joint venture and property level budgets, including lease revenues, operating expenses, and capital expenditures. As such, we concluded we do not own a controlling interest and accounted for our interest in the joint venture under the equity method of accounting.

As of the date of the joint venture formation, we used a discounted cash flow model to calculate the fair value of our retained equity interest. The fair value of the retained interest was $157 million, and is classified as a Level 3 investment in the fair value hierarchy. The primary inputs to the valuation included volatility, hold period, and dividend yield.

TPG Real Estate Joint Venture – On July 25, 2023, we formed a joint venture with TPG Real Estate. We contributed three stabilized hyperscale data center buildings in Northern Virginia, at a purchase price of $1.5 billion, to the new joint venture. We received approximately $1.3 billion of gross proceeds from the contribution of our data centers to the joint venture and the associated financing and retained a 20% interest in the joint venture. TPG Real Estate contributed such cash to the joint venture in exchange for an 80% interest in the joint venture. We perform the day-to-day accounting and property management functions for the joint venture and, as such, will earn a management fee. DLR is to serve as the managing member responsible for operations in the ordinary course of business. However, certain approval rights are granted through the terms of the LLC agreement and require unanimous consent of both members with respect to any major decisions. Major decisions are defined to include the annual plan which sets out joint venture and property level budgets, including lease revenues, operating expenses, and capital expenditures. As such, we concluded we do not own a controlling interest and accounted for our interest in the joint venture under the equity method of accounting.

As of the date of the joint venture formation, we used a discounted cash flow model to calculate the fair value of our retained equity interest. The fair value of the retained interest was $121 million, and is classified as a Level 3 investment in the fair value hierarchy. The primary inputs to the valuation included volatility, hold period, and dividend yield.

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

As of September 30, 2023, the Company held 36% of the outstanding DCRU units and separately owned a 10% direct retained interest in the underlying North American operating properties and a 75% direct retained interest in the underlying German operating property.

The Company’s 36% interest in DCRU consisted of 406 million units and 396 million units as of September 30, 2023 and December 31, 2022, respectively. Based on the closing price per unit of $0.53 and $0.55 as of September 30, 2023 and December 31, 2022, respectively, the fair value of the units the Company owned in DCRU was approximately $215 million and $218 million as of September 30, 2023 and December 31, 2022, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Pursuant to contractual agreements with DCRU and its operating properties, the Company will earn fees for asset and property management services as well as fees for aiding in future acquisition, disposition and development activities. Certain of these fees are payable to the Company in the form of additional units in DCRU or in cash. The Company earned fees pursuant to these contractual agreements of approximately $2.4 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively, and $7.3 million and $6.9 million for the nine months ended September 30, 2023 and 2022, respectively, which is recorded as fee income and other on the condensed consolidated income statement.

In preparing our financial statements for the period ended September 30, 2023, we concluded that the decline in fair value of our equity investment in DCRU as of September 30, 2023 was other than temporary due to the length of time and extent to which the fair value of our investment has been less than the carrying value. As a result, we recorded an impairment charge of $95 million for the three months ended September 30, 2023, which was recorded to provision for impairment in our condensed consolidated income statements. The charge reflects the difference between the fair value of our equity investment in DCRU using DCRU’s share price as of September 30, 2023 and the carrying value of our equity investment in DCRU at September 30, 2023.

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 $12 million and $18 million as of September 30, 2023 and December 31, 2022, 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.

Debt – 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.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Changes in the value of goodwill at September 30, 2023 as compared to December 31, 2022 were primarily driven by changes in exchange rates associated with goodwill balances denominated in foreign currencies.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Acquired Intangible Assets and Liabilities

The following table summarizes our acquired intangible assets and liabilities:


	Balance as of
	September 30, 2023						December 31, 2022
(Amounts in thousands)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationship value	$	2,861,384	$	(898,951)	$	1,962,433	$	3,327,765	$	(888,105)	$	2,439,660
Acquired in-place lease value		1,089,444		(847,985)		241,459		1,369,526		(1,041,631)		327,895
Other		99,927		(31,037)		68,890		94,829		(26,788)		68,041
Acquired above-market leases		151,924		(148,697)		3,227		264,071	$	(253,693)		10,378
Acquired below-market leases		(272,832)		224,148		(48,684)		(344,256)		255,821		(88,435)

Amortization of customer relationship value, acquired in-place lease value and other intangibles (a component of depreciation and amortization expense) was approximately $59.8 million and $65.7 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $194.4 million and $184.6 million for the nine months ended September 30, 2023 and 2022, respectively.

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase in rental and other services revenue of $1.6 million and $1.0 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $5.1 million and $1.5 million for the nine months ended September 30, 2023 and 2022, respectively.

Estimated annual amortization for each of the five succeeding years and thereafter, commencing October 1, 2023 is as follows:


(Amounts in thousands)		Customer relationship value		Acquired in-place lease value		Other (1)		Acquired above-market leases		Acquired below-market leases
2023	$	43,576	$	12,995	$	1,122	$	366	$	(1,715)
2024		173,725		50,760		4,487		1,327		(6,656)
2025		173,183		49,246		4,447		1,070		(6,503)
2026		172,550		47,447		4,249		357		(5,773)
2027		172,158		38,180		4,235		48		(5,180)
Thereafter		1,227,241		42,831		3,832		59		(22,857)
Total	$	1,962,433	$	241,459	$	22,372	$	3,227	$	(48,684)

(1)	Excludes power grid rights in the amount of approximately $46.5 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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 Facility and the Yen Revolving Credit Facility (together, referred to as the “Global Revolving Credit Facilities”), the unsecured term loans and the unsecured senior notes. A summary of outstanding indebtedness is as follows (in thousands):


	September 30, 2023				December 31, 2022
	Weighted-				Weighted-
	average		Amount		average		Amount
	interest rate		Outstanding		interest rate		Outstanding
Global revolving credit facilities	4.50	%	$	1,713,024	3.04	%	$	2,167,889
Unsecured term loans	4.78	%		1,532,975	2.49	%		802,875
Unsecured senior notes	2.24	%		13,161,305	2.44	%		13,220,961
Secured and other debt	7.84	%		580,370	7.12	%		532,130
Total	2.89	%	$	16,987,674	2.68	%	$	16,723,855

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, along with cross-currency interest rate swaps, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt in order to hedge the currency exposure associated with our net investment in foreign subsidiaries.

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):


	September 30, 2023				December 31, 2022
	Amount				Amount
Denomination of Draw	Outstanding		% of Total		Outstanding		% of Total
U.S. dollar ($)	$	2,783,736	16.4	%	$	3,855,903	23.1	%
British pound sterling (£)		1,890,845	11.1	%		1,929,051	11.5	%
Euro (€)		10,491,484	61.8	%		9,325,126	55.8	%
Other		1,821,609	10.7	%		1,613,775	9.6	%
Total	$	16,987,674			$	16,723,855

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The table below summarizes debt maturities and principal payments as of September 30, 2023 (in thousands):


	Global Revolving		Unsecured		Unsecured		Secured and
	Credit Facilities (1)(2)		Term Loans(3)		Senior Notes		Other Debt		Total Debt
2023	$	—	$	—	$	109,272	$	56	$	109,328
2024		—		—		939,355		4,539		943,894
2025		—		792,975		1,175,205		567		1,968,747
2026		1,713,024		740,000		1,437,096		98,666		3,988,786
2027		—		—		1,163,908		207,353		1,371,261
Thereafter		—		—		8,336,469		269,189		8,605,658
Subtotal	$	1,713,024	$	1,532,975	$	13,161,305	$	580,370	$	16,987,674
Unamortized net discounts		—		—		(33,067)		—		(33,067)
Unamortized deferred financing costs		(14,244)		(8,312)		(56,136)		(6,139)		(84,831)
Total	$	1,698,780	$	1,524,663	$	13,072,102	$	574,231	$	16,869,776

(1)	Includes amounts outstanding for the Global Revolving Credit Facilities.

(2)	The Global Revolving Credit Facilities are subject to two six-month extension options exercisable by us; provided that the Operating Partnership must pay a 0.0625% extension fee based on each lender’s revolving commitments then outstanding (whether funded or unfunded).

(3)

A €375.0 million senior unsecured term loan facility is subject to two maturity extension options of one year each, provided that the Operating Partnership must pay a 0.125% extension fee based on the then-outstanding principal amount of such facility commitments then outstanding. Our U.S. term loan facility of $740 million is subject to one twelve-month extension, provided that the Operating Partnership must pay a 0.1875% extension fee based on the then-outstanding principal amount of the term loans.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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	September 30, 2023		December 31, 2022
0.600% notes due 2023(1)	CHF	100,000	$	108,310	Oct 02, 2023	$	109,272	$	108,121
2.625% notes due 2024	€	600,000		677,040	Apr 15, 2024		634,380		642,300
2.750% notes due 2024	£	250,000		324,925	Jul 19, 2024		304,975		302,075
4.250% notes due 2025	£	400,000		634,480	Jan 17, 2025		487,960		483,320
0.625% notes due 2025	€	650,000		720,980	Jul 15, 2025		687,245		695,825
2.500% notes due 2026	€	1,075,000		1,224,640	Jan 16, 2026		1,136,598		1,150,788
0.200% notes due 2026	CHF	275,000		298,404	Dec 15, 2026		300,498		297,331
1.700% notes due 2027	CHF	150,000		162,465	Mar 30, 2027		163,908		162,181
3.700% notes due 2027(2)	$	1,000,000		1,000,000	Aug 15, 2027		1,000,000		1,000,000
5.550% notes due 2028(2)	$	900,000		900,000	Jan 15, 2028		900,000		900,000
1.125% notes due 2028	€	500,000		548,550	Apr 09, 2028		528,650		535,250
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		295,034		291,925
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		426,965		422,905
1.500% notes due 2030	€	750,000		831,900	Mar 15, 2030		792,975		802,875
3.750% notes due 2030	£	550,000		719,825	Oct 17, 2030		670,945		664,565
1.250% notes due 2031	€	500,000		560,950	Feb 01, 2031		528,650		535,250
0.625% notes due 2031	€	1,000,000		1,220,700	Jul 15, 2031		1,057,300		1,070,500
1.000% notes due 2032	€	750,000		874,500	Jan 15, 2032		792,975		802,875
1.375% notes due 2032	€	750,000		849,375	Jul 18, 2032		792,975		802,875
						$	13,161,305	$	13,220,961
Unamortized discounts, net of premiums							(33,067)		(37,280)
Deferred financing costs, net							(56,136)		(63,648)
Total unsecured senior notes, net of discount and deferred financing costs						$	13,072,102	$	13,120,033

(1)	Paid in full at maturity on October 2, 2023.

(2)	Subject to cross-currency swaps.

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 September 30, 2023, we were in compliance with each of these financial covenants.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Euro Term Loan Agreement

On August 11, 2022, the Company, the Operating Partnership, and certain of the Operating Partnership’s subsidiaries entered into a term loan agreement (the “Euro Term Loan Agreement”) which governs (i) a €375,000,000 three-year senior unsecured term loan facility (the “2025 Term Facility”), the entire amount of which was funded on such date, and (ii) a €375,000,000 five-year senior unsecured term loan facility (the “2025-27 Term Facility” and, together with the 2025 Term Facility, collectively, the “Euro Term Loan Facilities”), comprised of €125,000,000 of initial term loans, the entire amount of which was funded on such date, and €250,000,000 of delayed draw term loan commitments that were funded on September 9, 2023. The Euro Term Loan Facilities provide for borrowings in Euros. The 2025 Term Facility matures on August 11, 2025. The 2025-27 Term Facility matures on August 11, 2025, subject to two maturity extension options of one year each; provided that the Operating Partnership must pay a 0.125% extension fee based on the then-outstanding principal amount of the 2025-27 Term Facility commitments then outstanding.

USD Term Loan Agreement

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net income available to common stockholders	$	723,437	$	226,894	$	889,985	$	343,240
Plus: Loss attributable to redeemable noncontrolling interest (1)		(3,032)		(3,548)		(9,851)		(3,548)
Net income available to common stockholders - diluted EPS		726,469		223,346		899,836		339,692

Denominator:
Weighted average shares outstanding—basic		301,827		286,693		296,184		285,312
Potentially dilutive common shares:
Unvested incentive units		97		195		78		213
Unvested restricted stock		43		13		3		53
Forward equity offering		209		—		253		—
Market performance-based awards		166		86		90		112
Redeemable noncontrolling interest shares (1)		8,999		9,428		10,127		8,568
Weighted average shares outstanding—diluted		311,341		296,415		306,735		294,257
Income per share:
Basic	$	2.40	$	0.79	$	3.00	$	1.20
Diluted	$	2.33	$	0.75	$	2.93	$	1.15

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net income available to common unitholders	$	739,737	$	232,294	$	910,285	$	351,740
Plus: Loss attributable to redeemable noncontrolling interest (1)		(3,032)		(3,548)		(9,851)		(3,548)
Net income available to common unitholders - diluted EPS		742,769		228,746		920,136		348,192

Denominator:
Weighted average units outstanding—basic		308,024		292,536		302,316		291,084
Potentially dilutive common units:
Unvested incentive units		97		195		78		213
Unvested restricted units		43		13		3		53
Forward equity offering		209		—		253		—
Market performance-based awards		166		86		90		112
Redeemable noncontrolling interest shares (1)		8,999		9,428		10,127		8,568
Weighted average units outstanding—diluted		317,538		302,258		312,867		300,028
Income per unit:
Basic	$	2.40	$	0.79	$	3.00	$	1.20
Diluted	$	2.33	$	0.75	$	2.93	$	1.15

(1)

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

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 September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Shares subject to Forward Equity Offering	3,454	3,591	3,454	5,364
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.	6,197	5,843	6,132	5,771
Potentially dilutive Series J Cumulative Redeemable Preferred Stock	1,647	1,932	1,891	1,640
Potentially dilutive Series K Cumulative Redeemable Preferred Stock	1,732	2,032	1,988	1,725
Potentially dilutive Series L Cumulative Redeemable Preferred Stock	2,841	3,333	3,261	2,829
Total	15,871	16,731	16,726	17,329

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 ATM Equity OfferingSM Sales Agreement dated April 1, 2022, as amended in 2023 (the “2022 Sales Agreement”). Pursuant to the 2022 Sales Agreement, Digital Realty Trust, Inc. could 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 nine months ended September 30, 2023, Digital Realty Trust, Inc. generated net proceeds of approximately $1.1 billion from the issuance of approximately 11.3 million common shares under the 2022 Sales Agreement at an average price of $96.35 per share after payment of approximately $7.5 million of commissions to the agents. The 2022 Sales Agreement was terminated on August 4, 2023, and Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into a new ATM Equity OfferingSM Sales Agreement dated August 4, 2023 (the “2023 Sales Agreement”). At the time of the termination, $408.7 million remained unsold under the 2022 Sales Agreement. Pursuant to the 2023 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. As of September 30, 2023, $1.5 billion remained available for future sales under the 2023 Sales Agreement. For the nine months ended September 30, 2022, we had no sales under the 2022 Sales Agreement.

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 September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023			December 31, 2022
	Number of	Percentage of		Number of	Percentage of
	units	total		units	total
Digital Realty Trust, Inc.	302,846	97.9	%	291,148	97.9	%
Noncontrolling interests consist of:
Common units held by third parties	4,343	1.4	%	4,375	1.5	%
Incentive units held by employees and directors (see Note 13. "Incentive Plan")	2,136	0.7	%	1,914	0.6	%
	309,325	100.0	%	297,437	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 $750.9 million and $591.2 million based on the closing market price of Digital Realty Trust, Inc. common stock on September 30, 2023 and December 31, 2022, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table shows activity for noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2023 (in thousands):


	Common Units	Incentive Units	Total
As of December 31, 2022	4,375	1,914	6,289
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	(32)	(45)	(77)
Incentive units issued upon achievement of market performance condition	—	141	141
Grant of incentive units to employees and directors	—	166	166
Cancellation / forfeitures of incentive units held by employees and directors	—	(40)	(40)
As of September 30, 2023	4,343	2,136	6,479

(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.

Dividends and Distributions

Digital Realty Trust, Inc. Dividends

We have declared and paid the following dividends on our common and preferred stock for the nine months ended September 30, 2023 (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
February 22, 2023	March 31, 2023	$	2,625	$	3,071	$	4,485	$	356,214
May 24, 2023	June 30, 2023		2,625		3,071		4,485		365,937
August 9, 2023	September 29, 2023		2,625		3,071		4,485		370,278
		$	7,875	$	9,213	$	13,455	$	1,092,429
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 nine months ended September 30, 2023 (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
February 22, 2023	March 31, 2023	$	2,625	$	3,071	$	4,485	$	364,204
May 24, 2023	June 30, 2023		2,625		3,071		4,485		373,833
August 9, 2023	September 29, 2023		2,625		3,071		4,485		378,352
		$	7,875	$	9,213	$	13,455	$	1,116,389
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		Increase (decrease) in		Accumulated other
	translation		fair value of derivatives,		comprehensive
	adjustments		net of reclassification		income (loss), net
Balance as of December 31, 2022	$	(536,019)	$	(59,779)	$	(595,798)
Net current period change		(324,705)		60,369		(264,336)
Reclassification to interest expense from derivatives		—		(22,862)		(22,862)
Balance as of September 30, 2023	$	(860,724)	$	(22,272)	$	(882,996)

Digital Realty Trust, L.P.


	Foreign currency		Increase (decrease) in		Accumulated other
	translation		fair value of derivatives,		comprehensive
	adjustments		net of reclassification		income (loss)
Balance as of December 31, 2022	$	(551,013)	$	(62,410)	$	(613,423)
Net current period change		(332,098)		61,730		(270,368)
Reclassification to interest expense from derivatives		—		(23,387)		(23,387)
Balance as of September 30, 2023	$	(883,111)	$	(24,067)	$	(907,178)

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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Market-Based Performance Awards.

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

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


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

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.

2020 Awards

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

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

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

The grant date fair value of the Market-Based Performance Awards was approximately $8.2 million and $12.3 million for the nine months ended September 30, 2023 and 2022, 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 April 8, 2023, the Company granted Financial-Based Performance Awards, which vest based on growth in same-store cash net operating income during the three-year period commencing on January 1, 2023. 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 was $8.1 million, based on Digital Realty Trust, Inc.’s closing stock price at the grant date.

On March 4, 2022, the Company granted Financial-Based Performance Awards, which vest based on the 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 was $12.3 million, based on Digital Realty Trust, Inc.’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 continued service and/or the attainment of performance metrics related to successful integration of the Interxion business.

As of September 30, 2023, approximately 4.2 million shares of common stock, including awards that can be converted to or exchanged for shares of common stock, remained available for future issuance under the Incentive Plan.

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Below is a summary of 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 September 30,								September 30,		December 31,		compensation
Type of incentive award	2023		2022		2023		2022		2023		2022		(in years)
Long-term incentive units	$	3.7	$	5.1	$	0.1	$	—	$	21.1	$	20.7	2.3
Performance-based awards		3.1		5.5		0.1		0.2		25.0		30.3	2.3
Service-based restricted stock units		8.2		6.7		1.8		0.9		74.2		55.4	2.7
Interxion awards		0.3		1.6		—		—		0.2		1.9	0.3

	Nine Months Ended September 30,
	2023		2022		2023		2022
Long-term incentive units	$	10.1	$	16.7	$	0.1	$	0.1
Performance-based awards		8.6		16.1		0.2		0.4
Service-based restricted stock units		24.1		18.9		4.4		3.7
Interxion awards		1.6		3.7		0.1		—

Activity for LTIP Units and service-based Restricted Stock Units for the nine months ended September 30, 2023 is shown below.


		Weighted-Average
		Grant Date Fair
Unvested LTIP Units	Units	Value
Unvested, beginning of period	279,258	$	146.37
Granted	179,979		104.78
Vested	(163,717)		135.79
Cancelled or expired	(39,332)		136.30
Unvested, end of period	256,188	$	125.46


		Weighted-Average
		Grant Date Fair
Unvested Restricted Stock Units	Shares	Value
Unvested, beginning of period	507,837	$	131.57
Granted	546,128		115.76
Vested	(295,575)		117.77
Cancelled or expired	(67,800)		117.32
Unvested, end of period	690,590	$	126.38

Derivative Instruments

Derivatives Designated as Hedging Instruments

Net Investment Hedges

In September 2022, we entered into cross-currency interest rate swaps, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt in order to hedge the currency exposure associated with our net investment in foreign subsidiaries. As of September 30, 2023, we had cross-currency interest rate swaps outstanding with notional amounts of $1.55 billion and maturity dates ranging through 2028.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The effect of these net investment hedges on accumulated other comprehensive income and the condensed consolidated income statements for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Cross-currency interest rate swaps (included component) (1)		$	(52,698)	$	(26,141)	$	(53,853)	$	(26,141)
Cross-currency interest rate swaps (excluded component) (2)			14,006		28,848		28,423		28,848
Total		$	(38,692)	$	2,707	$	(25,430)	$	2,707

	Location of	Three Months Ended September 30,				Nine Months Ended September 30,
	gain or (loss)	2023		2022		2023		2022
Cross-currency interest rate swaps (excluded component) (2)	Interest expense	$	5,505	$	650	$	16,699	$	650

(1)	Included component represents foreign exchange spot rates.

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

Cash Flow Hedges

As of September 30, 2023, we had derivatives designated as cash flow hedges on 50% of the Euro Term Loan Facilities (€750 million notional amount) and 68% of the USD term loan ($740 million notional amount). 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 September 30, 2023, we estimate that an additional $11.7 million will be reclassified as a decrease to interest expense during the nine months ended September 30, 2023, when the hedged forecasted transactions impact earnings.

The effect of these cash flow hedges on accumulated other comprehensive income and the condensed consolidated income statements for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest rate swaps	$	(538)	$	5,692	$	(12,912)	$	5,012


	Location of	Three Months Ended September 30,				Nine Months Ended September 30,
	gain or (loss)	2023		2022		2023		2022
Interest rate swaps	Interest expense	$	3,845	$	478	$	6,688	$	539

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value of Derivative Instruments

The subsequent table presents the fair value of derivative instruments recognized in our condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023				December 31, 2022
	Assets (1)		Liabilities (2)		Assets (1)		Liabilities (2)
Cross-currency interest rate swaps	$	1,698	$	84,890	$	—	$	108,621
Interest rate swaps		30,784		—		17,120		252
	$	32,482	$	84,890	$	17,120	$	108,873

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

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

Fair Value of Financial Instruments

There have been no significant changes in our policy for fair value measurements from what was disclosed in our 2022 Form 10-K.

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, Euro Term Loan Facilities and USD Term Loan Facility 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 September 30, 2023 and December 31, 2022 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, Euro Term Loan Facilities and USD Term Loan Facility, unsecured senior notes and secured and other debt as of the respective periods is shown below (in thousands):


	Categorization	As of September 30, 2023				As of December 31, 2022
	under the fair value	Estimated Fair				Estimated Fair
	hierarchy	Value		Carrying Value		Value		Carrying Value
Global revolving credit facilities (1)	Level 2	$	1,713,024	$	1,713,024	$	2,167,889	$	2,167,889
Unsecured term loans (1)	Level 2		1,532,975		1,532,975		802,875		802,875
Unsecured senior notes (2)	Level 2		11,462,950		13,161,305		11,331,989		13,220,961
Secured and other debt (2)	Level 2		564,923		580,370		517,226		532,130
		$	15,273,872	$	16,987,674	$	14,819,979	$	16,723,855

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

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

16. Commitments and Contingencies

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements including ground up construction. From time to time in the normal course of our business, we enter into various construction contracts with third parties that may obligate us to make payments. At September 30, 2023, we had open commitments, including amounts reimbursable by customers of approximately $25.9 million, related to construction contracts of approximately $2.6 billion.

In the ordinary course of our business, we may become subject to various legal proceedings. As of September 30, 2023, we were not a party to any legal proceedings which we believe would have a material adverse effect on our operations or financial position.

The Division of Enforcement of the Securities and Exchange Commission is conducting an investigation into the adequacy of our disclosures of cybersecurity risks. We are cooperating with the SEC and are not aware of any cybersecurity issue or event that caused the Staff to open this matter. Responding to an investigation of this type can be costly and time-consuming. While we are unable to estimate the likelihood of the outcome of this matter, our potential cost or exposure or the duration of the process, based on the information we currently possess, we do not expect the total potential cost to be material to our financial condition. If the SEC believes that violations occurred, it could seek remedies including an order prohibiting future violations and a civil money penalty.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental Cash Flow Information

Cash, cash equivalents, and restricted cash balances as of September 30, 2023, and December 31, 2022:


	Balance as of
(Amounts in thousands)	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	1,062,050	$	141,773
Restricted cash (included in other assets)		10,395		8,923
Total	$	1,072,445	$	150,696

We paid $345.8 million and $252.5 million for interest, net of amounts capitalized, for the nine months ended September 30, 2023 and 2022, respectively.

We paid $60.1 million and $29.9 million for income taxes, net of refunds, for the nine months ended September 30, 2023 and 2022, respectively.

Accrued construction related costs totaled $607.6 million and $441.9 million as of September 30, 2023 and 2022, respectively.

18. Segment and Geographic Information

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


	Operating Revenues
	Three Months Ended September 30,						Nine Months Ended September 30,
(Amounts in millions)	2023			2022			2023			2022
Inside the United States	$	727.4		$	707.3		$	2,144.0		$	2,052.1
Outside the United States		675.0			484.8			1,963.4			1,406.6
Revenue Outside of U.S. %		48.1	%		40.7	%		47.8	%		40.7	%


	Investments in Properties, net				Operating lease right-of-use assets, net
	As of September 30,		As of December 31,		As of September 30,		As of December 31,
(Amounts in millions)	2023		2022		2023		2022
Inside the United States	$	10,739.9	$	11,517.3	$	608.7	$	647.0
Outside the United States		12,858.4		12,257.4		665.7		704.3

Net Assets in Foreign Operations	$	6,479.4	$	6,330.2

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