Edgar Filing: Digital Realty Trust, Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2014

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

Four Embarcadero Center, Suite 3200 San Francisco, CA		94111
(Address of principal executive offices)		(Zip Code)

(415) 738-6500

(Registrant’s telephone number, including area code)

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 x No ¨
Digital Realty Trust, L.P.		Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).


Digital Realty Trust, Inc.		Yes x No ¨
Digital Realty Trust, L.P.		Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 x
Digital Realty Trust, L.P.		Yes ¨ No x

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 May 6, 2014
Common Stock, $.01 par value per share		135,344,816

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2014 of Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, of which Digital Realty Trust, Inc. is the sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “our company” or “the company” refer to Digital Realty Trust, Inc. together with its consolidated subsidiaries, including Digital Realty Trust, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.

Digital Realty Trust, Inc. is a real estate investment trust, or REIT, and the sole general partner of Digital Realty Trust, L.P. As of March 31, 2014, Digital Realty Trust, Inc. owned an approximate 97.6% common general partnership interest in Digital Realty Trust, L.P. The remaining approximate 2.4% common limited partnership interests are owned by non-affiliated investors and certain directors and officers of Digital Realty Trust, Inc. As of March 31, 2014, Digital Realty Trust, Inc. 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., Digital Realty Trust, Inc. has the full, exclusive and complete responsibility for the operating partnership’s day-to-day management and control.

We believe combining the quarterly reports on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. into this single report results in the following benefits:

•

enhancing investors’ understanding of our company and our operating partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both our company and our operating partnership; and

•

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

There are a few differences between our company and our operating partnership, which are reflected in the disclosure in this report. We believe it is important to understand the differences between our company and our operating partnership in the context of how we operate as an interrelated consolidated company. Digital Realty Trust, Inc. is a REIT, whose only material asset is its ownership of partnership interests of Digital Realty Trust, L.P. As a result, Digital Realty Trust, Inc. does not conduct business itself, other than acting as the sole general partner of Digital Realty Trust, L.P., issuing public equity from time to time and guaranteeing certain unsecured debt of Digital Realty Trust, L.P. and certain of its subsidiaries. Digital Realty Trust, Inc. itself does not issue any indebtedness but guarantees the unsecured debt of Digital Realty Trust, L.P. and certain of its subsidiaries, as disclosed in this report. Digital Realty Trust, L.P. holds substantially all the assets of the company and holds the ownership interests in the company’s joint ventures. Digital Realty Trust, L.P. conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by Digital Realty Trust, Inc., which are generally contributed to Digital Realty Trust, L.P. in exchange for partnership units, Digital Realty Trust, L.P. generates the capital required by the company’s business through Digital Realty Trust, L.P.’s operations, by Digital Realty Trust, L.P.’s direct or indirect incurrence of indebtedness or through the issuance of partnership units.

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

To help investors understand the significant differences between the company and the operating partnership, this report presents the following separate sections for each of the company and the operating partnership:

•

Condensed consolidated financial statements;

•

the following notes to the condensed consolidated financial statements:

•

Debt of the company and Debt of the operating partnership;

•

Income per Share and Income per Unit; and

•

Equity and Accumulated Other Comprehensive Income (Loss), Net of the company and Capital and Accumulated Other Comprehensive Income (Loss) of the operating partnership;

•

Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

•

Unregistered Sales of Equity Securities and Use of Proceeds.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the company and the operating partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the company and the operating partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the company and the operating partnership, the separate sections in this report for the company and the operating partnership specifically refer to the company and the operating partnership. In the sections that combine disclosure of the company and the operating partnership, this report refers to actions or holdings as being actions or holdings of the company. Although the operating partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the company is appropriate because the business is one enterprise and the company operates the business through the operating partnership.

As general partner with control of the operating partnership, Digital Realty Trust, Inc. consolidates the operating partnership for financial reporting purposes, and it does not have significant assets other than its investment in the operating partnership. Therefore, the assets and liabilities of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. are the same on their respective condensed consolidated financial statements. The separate discussions of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. 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 MARCH 31, 2014

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 March 31, 2014 (unaudited) and December 31, 2013		5

	Condensed Consolidated Income Statements for the three months ended March 31, 2014 and 2013 (unaudited)		6

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2014 and 2013 (unaudited)		7

	Condensed Consolidated Statement of Equity for the three months ended March 31, 2014 (unaudited)		8

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited)		9

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

	Condensed Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013		12

	Condensed Consolidated Income Statements for the three months ended March 31, 2014 and 2013 (unaudited)		13

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2014 and 2013 (unaudited)		14

	Condensed Consolidated Statement of Capital for the three months ended March 31, 2014 (unaudited)		15

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited)		16

	Notes to Condensed Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P.		19

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		57

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		85

ITEM 4.	Controls and Procedures (Digital Realty Trust, Inc.)		87

	Controls and Procedures (Digital Realty Trust, L.P.)		87

PART II.	OTHER INFORMATION		88

ITEM 1.	Legal Proceedings		88

ITEM 1A.	Risk Factors		88

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		88

ITEM 3.	Defaults Upon Senior Securities		88

ITEM 4.	Mine Safety Disclosures		88

ITEM 5.	Other Information		88

ITEM 6.	Exhibits		89

	Signatures		90

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	March 31, 2014			December 31, 2013
	(unaudited)
ASSETS
Investments in real estate:
Properties:
Land	$	685,640		$	693,791
Acquired ground leases		14,680			14,618
Buildings and improvements		8,834,693			8,680,677
Tenant improvements		490,697			490,492

Total investments in properties		10,025,710			9,879,578
Accumulated depreciation and amortization		(1,665,421	)		(1,565,996	)

Net investments in properties		8,360,289			8,313,582
Investment in unconsolidated joint ventures		81,411			70,504

Net investments in real estate		8,441,700			8,384,086
Cash and cash equivalents		70,242			56,808
Accounts and other receivables, net of allowance for doubtful accounts of $7,156 and $5,576 as of March 31, 2014 and December 31, 2013, respectively		181,433			181,163
Deferred rent		415,515			393,504
Acquired above-market leases, net		49,521			52,264
Acquired in-place lease value and deferred leasing costs, net		479,940			489,456
Deferred financing costs, net		34,295			36,475
Restricted cash		42,842			40,362
Assets held for sale		25,070			—
Other assets		64,836			51,627

Total assets	$	9,805,394		$	9,685,745

LIABILITIES AND EQUITY
Global revolving credit facility	$	790,500		$	724,668
Unsecured term loan		1,026,891			1,020,984
Unsecured senior notes, net of discount		2,368,848			2,364,232
Exchangeable senior debentures		266,400			266,400
Mortgage loans, net of premiums		554,742			585,608
Accounts payable and other accrued liabilities		614,645			662,687
Accrued dividends and distributions		—			102,509
Acquired below-market leases, net		123,152			130,269
Security deposits and prepaid rents		180,886			181,876
Liabilities associated with assets held for sale		3,610			—

Total liabilities		5,929,674			6,039,233

Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 70,000,000 shares authorized:
Series E Cumulative Redeemable Preferred Stock, 7.000%, $287,500 and $287,500 liquidation preference, respectively ($25.00 per share), 11,500,000 and 11,500,000 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		277,172			277,172
Series F Cumulative Redeemable Preferred Stock, 6.625%, $182,500 and $182,500 liquidation preference, respectively ($25.00 per share), 7,300,000 and 7,300,000 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		176,191			176,191
Series G Cumulative Redeemable Preferred Stock, 5.875%, $250,000 and $250,000 liquidation preference, respectively ($25.00 per share), 10,000,000 and 10,000,000 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		241,468			241,468
Series H Cumulative Redeemable Preferred Stock, 7.375%, $300,000 and $0 liquidation preference, respectively ($25.00 per share), 12,000,000 and 0 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		289,857			—
Common Stock: $0.01 par value, 215,000,000 shares authorized, 128,606,462 and 128,455,350 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		1,279			1,279
Additional paid-in capital		3,689,098			3,688,937
Accumulated dividends in excess of earnings		(857,779	)		(785,222	)
Accumulated other comprehensive income, net		13,947			10,691

Total stockholders’ equity		3,831,233			3,610,516

Noncontrolling Interests:
Noncontrolling interests in operating partnership		37,406			29,027
Noncontrolling interests in consolidated joint ventures		7,081			6,969

Total noncontrolling interests		44,487			35,996

Total equity		3,875,720			3,646,512

Total liabilities and equity	$	9,805,394		$	9,685,745

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

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


	Three Months Ended March 31,
	2014			2013
Operating Revenues:
Rental	$	305,786		$	281,399
Tenant reimbursements		83,621			75,917
Fee income		1,183			806
Other		—			248

Total operating revenues		390,590			358,370

Operating Expenses:
Rental property operating		117,896			105,480
Property taxes		22,125			21,042
Insurance		2,422			2,205
Construction management		164			384
Change in fair value of contingent consideration		(3,403	)		1,300
Depreciation and amortization		130,620			111,623
General and administrative		30,678			15,951
Transactions		81			1,763
Other		—			36

Total operating expenses		300,583			259,784

Operating income		90,007			98,586

Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures		2,581			2,335
Gain on contribution of property to unconsolidated joint venture		1,906			—
Interest and other income		1,727			41
Interest expense		(47,374	)		(48,078	)
Tax expense		(1,838	)		(1,203	)
Loss from early extinguishment of debt		(292	)		—

Net income		46,717			51,681
Net income attributable to noncontrolling interests		(805	)		(970	)

Net income attributable to Digital Realty Trust, Inc.		45,912			50,711
Preferred stock dividends		(11,726	)		(8,054	)

Net income available to common stockholders	$	34,186		$	42,657

Net income per share available to common stockholders:
Basic	$	0.27		$	0.34
Diluted	$	0.26		$	0.34

Weighted average common shares outstanding
Basic		128,535,995			126,445,285
Diluted		129,136,961			126,738,339

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 March 31,
	2014			2013
Net income	$	46,717		$	51,681

Other comprehensive income (loss):
Foreign currency translation adjustments		3,819			(63,063	)
Decrease in fair value of interest rate swaps		(1,343	)		(124	)
Reclassification to interest expense from interest rate swaps		846			1,741


Comprehensive income (loss)		50,039			(9,765	)

Comprehensive (income) loss attributable to noncontrolling interests		(871	)		194

Comprehensive income (loss) attributable to Digital Realty Trust, Inc.	$	49,168		$	(9,571	)

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)


	Preferred Stock		Number of Common Shares		Common Stock		Additional Paid-in Capital			Accumulated Dividends in Excess of Earnings			Accumulated Other Comprehensive Income, net			Total Stockholders’ Equity			Noncontrolling Interests in Operating Partnership			Noncontrolling Interests in Consolidated Joint Ventures		Total Noncontrolling Interests			Total Equity
Balance as of December 31, 2013	$	694,831		128,455,350	$	1,279	$	3,688,937		$	(785,222)		$	10,691		$	3,610,516		$	29,027		$	6,969	$	35,996		$	3,646,512
Conversion of units to common stock		—		4,438		—		51			—			—			51			(51	)		—		(51	)		—
Issuance of unvested restricted stock, net of forfeitures		—		145,757		—		—			—			—			—			—			—		—			—
Common stock offering costs		—		—		—		(100	)		—			—			(100	)		—			—		—			(100	)
Exercise of stock options		—		917		—		38			—			—			38			—			—		—			38
Issuance of series H preferred stock, net of offering costs		289,857		—		—		—			—			—			289,857			—			—		—			289,857
Amortization of unearned compensation regarding share-based awards		—		—		—		10,478			—			—			10,478			—			—		—			10,478
Reclassification of vested share-based awards		—		—		—		(10,306	)		—			—			(10,306	)		10,306			—		10,306			—
Dividends declared on preferred stock		—		—		—		—			(11,726	)		—			(11,726	)		—			—		—			(11,726	)
Dividends and distributions on common stock and common and incentive units		—		—		—		—			(106,743	)		—			(106,743	)		(2,635	)		—		(2,635	)		(109,378	)
Net income		—		—		—		—			45,912			—			45,912			693			112		805			46,717
Other comprehensive income—foreign currency translation adjustments		—		—		—		—			—			3,743			3,743			76			—		76			3,819
Other comprehensive income—fair value of interest rate swaps		—		—		—		—			—			(1,316	)		(1,316	)		(27	)		—		(27	)		(1,343	)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—		—		—		—			—			829			829			17			—		17			846

Balance as of March 31, 2014	$	984,688		128,606,462	$	1,279	$	3,689,098		$	(857,779	)	$	13,947		$	3,831,233		$	37,406		$	7,081	$	44,487		$	3,875,720

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:

Net income	$	46,717		$	51,681
Adjustments to reconcile net income to net cash provided by operating activities:

Gain on contribution of investment property to unconsolidated joint venture		(1,906	)		—
Equity in earnings of unconsolidated joint ventures		(2,581	)		(2,335	)
Change in fair value of accrued contingent consideration		(3,403	)		1,300
Distributions from unconsolidated joint ventures		2,214			1,625
Write-off of net assets due to early lease terminations		—			(36	)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases		111,142			93,286
Amortization of share-based unearned compensation		8,985			2,887
Allowance for doubtful accounts		1,580			1,100
Amortization of deferred financing costs		2,085			2,431
Loss on early extinguishment of debt		292			—
Amortization of debt discount/premium		385			160
Amortization of acquired in-place lease value and deferred leasing costs		19,478			18,338
Amortization of acquired above-market leases and acquired below-market leases		(2,788	)		(3,045	)
Changes in assets and liabilities:
Restricted cash		(1,589	)		(62	)
Accounts and other receivables		2,129			(15,584	)
Deferred rent		(21,335	)		(21,249	)
Deferred leasing costs		(6,798	)		(4,922	)
Other assets		(14,227	)		(10,858	)
Accounts payable and other accrued liabilities		(26,051	)		(28,858	)
Security deposits and prepaid rents		2,082			3,182

Net cash provided by operating activities		116,411			89,041

Cash flows from investing activities:

Acquisitions of real estate		—			(77,935	)
Proceeds from contribution of investment property to unconsolidated joint venture		11,408			—
Investment in unconsolidated joint ventures		(10,564	)		(5,647	)
Investment in equity securities		(5	)		(12,549	)
Deposits paid for acquisitions of real estate		—			(250	)
Receipt of value added tax refund		425			1,990
Refundable value added tax paid		(2,289	)		(1,914	)
Change in restricted cash		(814	)		(359	)
Improvements to and advances for investments in real estate		(224,118	)		(258,731	)
Improvement advances to tenants		(2,499	)		(1,010	)
Collection of advances from tenants for improvements		912			767

Net cash used in investing activities		(227,544	)		(355,638	)

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)


	Three Months Ended March 31,
	2014			2013
Cash flows from financing activities:

Borrowings on revolving credit facility	$	433,297		$	492,643
Repayments on revolving credit facility		(371,351	)		(657,095	)
Borrowings on 4.250% unsecured senior notes due 2025		—			630,026
Principal payments on mortgage loans		(3,343	)		(3,896	)
Change in restricted cash		(68	)		76
Payment of loan fees and costs		(150	)		(5,272	)
Capital contributions received from noncontrolling interests in consolidated joint ventures		—			45
Gross proceeds from the issuance of preferred stock		300,000			—
Common stock offering costs paid		(100	)		(95	)
Preferred stock offering costs paid		(10,143	)		—
Proceeds from exercise of stock options		38			8
Payment of dividends to preferred stockholders		(11,726	)		(8,054	)
Payment of dividends to common stockholders and distributions to noncontrolling interests in operating partnership		(211,887	)		(195,940	)

Net cash provided by financing activities		124,567			252,446

Net increase (decrease) in cash and cash equivalents		13,434			(14,151	)
Cash and cash equivalents at beginning of period		56,808			56,281

Cash and cash equivalents at end of period	$	70,242		$	42,130

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)


	Three Months Ended March 31,
	2014			2013
Supplemental disclosure of cash flow information:

Cash paid for interest, including amounts capitalized	$	67,824		$	56,163
Cash paid for income taxes		863			60

Supplementary disclosure of noncash investing and financing activities:

Change in net assets related to foreign currency translation adjustments	$	3,819		$	(63,063	)
Increase in accounts payable and other accrued liabilities related to change in fair value of interest rate swaps		(1,343	)		(124	)
Noncontrolling interests in operating partnership redeemed for or converted to shares of common stock		51			234
Preferred stock converted to shares of common stock		—			119,348
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		197,376			244,284
Additional accrual of contingent purchase price for investments in real estate		—			7,130
Allocation of purchase price of real estate/investment in partnership to:
Investments in real estate		—			69,149
Acquired above-market leases		—			12
Acquired below-market leases		—			(2,087	)
Acquired in-place lease value and deferred leasing costs		—			10,861

Cash paid for acquisition of real estate	$	—		$	77,935

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except unit and per unit data)


	March 31, 2014			December 31, 2013
	(unaudited)
ASSETS
Investments in real estate:
Properties:
Land	$	685,640		$	693,791
Acquired ground leases		14,680			14,618
Buildings and improvements		8,834,693			8,680,677
Tenant improvements		490,697			490,492

Total investments in properties		10,025,710			9,879,578
Accumulated depreciation and amortization		(1,665,421	)		(1,565,996	)

Net investments in properties		8,360,289			8,313,582
Investment in unconsolidated joint ventures		81,411			70,504

Net investments in real estate		8,441,700			8,384,086
Cash and cash equivalents		70,242			56,808
Accounts and other receivables, net of allowance for doubtful accounts of $7,156 and $5,576 as of March 31, 2014 and December 31, 2013, respectively		181,433			181,163
Deferred rent		415,515			393,504
Acquired above-market leases, net		49,521			52,264
Acquired in-place lease value and deferred leasing costs, net		479,940			489,456
Deferred financing costs, net		34,295			36,475
Restricted cash		42,842			40,362
Assets held for sale		25,070			—
Other assets		64,836			51,627

Total assets	$	9,805,394		$	9,685,745

LIABILITIES AND CAPITAL
Global revolving credit facility	$	790,500		$	724,668
Unsecured term loan		1,026,891			1,020,984
Unsecured senior notes, net of discount		2,368,848			2,364,232
Exchangeable senior debentures		266,400			266,400
Mortgage loans, net of premiums		554,742			585,608
Accounts payable and other accrued liabilities		614,645			662,687
Accrued dividends and distributions		—			102,509
Acquired below-market leases, net		123,152			130,269
Security deposits and prepaid rents		180,886			181,876
Liabilities associated with assets held for sale		3,610			—

Total liabilities		5,929,674			6,039,233

Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Series E Cumulative Redeemable Preferred Units, 7.000%, $287,500 and $287,500 liquidation preference, respectively ($25.00 per unit), 11,500,000 and 11,500,000 units issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		277,172			277,172
Series F Cumulative Redeemable Preferred Units, 6.625%, $182,500 and $182,500 liquidation preference, respectively ($25.00 per unit), 7,300,000 and 7,300,000 units issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		176,191			176,191
Series G Cumulative Redeemable Preferred Units, 5.875%, $250,000 and $250,000 liquidation preference, respectively ($25.00 per unit), 10,000,000 and 10,000,000 units issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		241,468			241,468
Series H Cumulative Redeemable Preferred Units, 7.375%, $300,000 and $0 liquidation preference, respectively ($25.00 per unit), 12,000,000 and 0 units issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		289,857			—
Common units:		—			—
128,606,462 and 128,455,350 units issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		2,832,598			2,904,994
Limited partners, 1,491,814 and 1,491,814 common units, 1,236,428 and 1,077,838 profits interest units and 397,369 and 397,369 class C units outstanding as of March 31, 2014 and December 31, 2013, respectively		39,574			31,261
Accumulated other comprehensive income		11,779			8,457

Total partners’ capital		3,868,639			3,639,543
Noncontrolling interests in consolidated joint ventures		7,081			6,969

Total capital		3,875,720			3,646,512

Total liabilities and capital	$	9,805,394		$	9,685,745

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

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


	Three Months Ended March 31,
	2014			2013
Operating Revenues:
Rental	$	305,786		$	281,399
Tenant reimbursements		83,621			75,917
Fee income		1,183			806
Other		—			248

Total operating revenues		390,590			358,370

Operating Expenses:
Rental property operating		117,896			105,480
Property taxes		22,125			21,042
Insurance		2,422			2,205
Construction management		164			384
Change in fair value of contingent consideration		(3,403	)		1,300
Depreciation and amortization		130,620			111,623
General and administrative		30,678			15,951
Transactions		81			1,763
Other		—			36

Total operating expenses		300,583			259,784

Operating income		90,007			98,586

Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures		2,581			2,335
Gain on contribution of property to unconsolidated joint venture		1,906			—
Interest and other income		1,727			41
Interest expense		(47,374	)		(48,078	)
Tax expense		(1,838	)		(1,203	)
Loss from early extinguishment of debt		(292	)		—

Net income		46,717			51,681
Net (income) loss attributable to noncontrolling interests in consolidated joint ventures		(112	)		(146	)

Net income attributable to Digital Realty Trust, L.P.		46,605			51,535
Preferred units distributions		(11,726	)		(8,054	)

Net income available to common unitholders	$	34,879		$	43,481

Net income per unit available to common unitholders:
Basic	$	0.27		$	0.34
Diluted	$	0.26		$	0.34

Weighted average common units outstanding:
Basic		131,142,664			128,888,041
Diluted		131,743,630			129,181,095

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 March 31,
	2014			2013
Net income	$	46,717		$	51,681
Other comprehensive income (loss):
Foreign currency translation adjustments		3,819			(63,063	)
Decrease in fair value of interest rate swaps		(1,343	)		(124	)
Reclassification to interest expense from interest rate swaps		846			1,741


Comprehensive income (loss)	$	50,039		$	(9,765	)

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


	General Partner										Limited Partners						Accumulated Other Comprehensive Income			Noncontrolling Interests in Consolidated Joint Ventures		Total Capital
	Preferred Units					Common Units					Common Units
	Units		Amount			Units		Amount			Units			Amount
Balance as of December 31, 2013		28,800,000	$	694,831			128,455,350	$	2,904,994			2,967,021		$	31,261		$	8,457		$	6,969	$	3,646,512
Conversion of limited partner common units to general partner common units		—		—			4,438		51			(4,438	)		(51	)		—			—		—
Issuance of unvested restricted common units, net of forfeitures		—		—			145,757		—			—			—			—			—		—
Common stock offering costs		—		—			—		(100	)		—			—			—			—		(100	)
Issuance of common units in connection with the exercise of stock options		—		—			917		38			—			—			—			—		38
Issuance of common units, net of forfeitures		—		—			—		—			163,028			—			—			—		—
Net proceeds from issuance of series H preferred units		12,000,000		289,857			—		—			—			—			—			—		289,857
Amortization of unearned compensation regarding share-based awards		—		—			—		10,478			—			—			—			—		10,478
Reclassification of vested share-based awards		—		—			—		(10,306	)		—			10,306			—			—		—
Distributions		—		(11,726	)		—		(106,743	)		—			(2,635	)		—			—		(121,104	)
Net income		—		11,726			—		34,186			—			693			—			112		46,717
Other comprehensive loss—foreign currency translation adjustments		—		—			—		—			—			—			3,819			—		3,819
Other comprehensive loss—fair value of interest rate swaps		—		—			—		—			—			—			(1,343	)		—		(1,343	)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—		—			—		—			—			—			846			—		846

Balance as of March 31, 2014		40,800,000	$	984,688			128,606,462	$	2,832,598			3,125,611		$	39,574		$	11,779		$	7,081	$	3,875,720

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)


	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:

Net income	$	46,717		$	51,681
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on contribution of investment property to unconsolidated joint venture		(1,906	)		—

Equity in earnings of unconsolidated joint ventures		(2,581	)		(2,335	)
Change in fair value of accrued contingent consideration		(3,403	)		1,300
Distributions from unconsolidated joint ventures		2,214			1,625
Write-off of net assets due to early lease terminations		—			(36	)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases		111,142			93,286
Amortization of share-based unearned compensation		8,985			2,887
Allowance for doubtful accounts		1,580			1,100
Amortization of deferred financing costs		2,085			2,431
Loss on early extinguishment of debt		292			—
Amortization of debt discount/premium		385			160
Amortization of acquired in-place lease value and deferred leasing costs		19,478			18,338
Amortization of acquired above-market leases and acquired below-market leases		(2,788	)		(3,045	)
Changes in assets and liabilities:
Restricted cash		(1,589	)		(62	)
Accounts and other receivables		2,129			(15,584	)
Deferred rent		(21,335	)		(21,249	)
Deferred leasing costs		(6,798	)		(4,922	)
Other assets		(14,227	)		(10,858	)
Accounts payable and other accrued liabilities		(26,051	)		(28,858	)
Security deposits and prepaid rents		2,082			3,182

Net cash provided by operating activities		116,411			89,041

Cash flows from investing activities:

Acquisitions of real estate		—			(77,935	)
Proceeds from contribution of investment property to unconsolidated joint venture		11,408			—
Investment in unconsolidated joint ventures		(10,564	)		(5,647	)
Investment in equity securities		(5	)		(12,549	)
Deposits paid for acquisitions of real estate		—			(250	)
Receipt of value added tax refund		425			1,990
Refundable value added tax paid		(2,289	)		(1,914	)
Change in restricted cash		(814	)		(359	)
Improvements to and advances for investments in real estate		(224,118	)		(258,731	)
Improvement advances to tenants		(2,499	)		(1,010	)
Collection of advances from tenants for improvements		912			767

Net cash used in investing activities		(227,544	)		(355,638	)

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)


	Three Months Ended March 31,
	2014			2013
Cash flows from financing activities:
Borrowings on revolving credit facility	$	433,297		$	492,643
Repayments on revolving credit facility		(371,351	)		(657,095	)
Borrowings on 4.250% unsecured senior notes due 2025		—			630,026
Principal payments on mortgage loans		(3,343	)		(3,896	)
Change in restricted cash		(68	)		76
Payment of loan fees and costs		(150	)		(5,272	)
Capital contributions received from noncontrolling interests in consolidated joint ventures		—			45
General partner contributions		289,795			(87	)
Payment of distributions to preferred unitholders		(11,726	)		(8,054	)
Payment of distributions to common unitholders		(211,887	)		(195,940	)

Net cash provided by financing activities		124,567			252,446

Net increase (decrease) in cash and cash equivalents		13,434			(14,151	)
Cash and cash equivalents at beginning of period		56,808			56,281

Cash and cash equivalents at end of period	$	70,242		$	42,130

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)


	Three Months Ended March 31,
	2014			2013
Supplemental disclosure of cash flow information:

Cash paid for interest, including amounts capitalized	$	67,824		$	56,163
Cash paid for income taxes		863			60

Supplementary disclosure of noncash investing and financing activities:

Change in net assets related to foreign currency translation adjustments		3,819			(63,063	)
Increase in accounts payable and other accrued liabilities related to change in fair value of interest rate swaps		(1,343	)		(124	)
Preferred units converted to common units		—			119,348
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		197,376			244,284
Additional accrual of contingent purchase price for investments in real estate		—			7,130

Allocation of purchase price of real estate/investment in partnership to:
Investments in real estate		—			69,149
Acquired above-market leases		—			12
Acquired below-market leases		—			(2,087	)
Acquired in-place lease value and deferred leasing costs		—			10,861

Cash paid for acquisition of real estate	$	—		$	77,935

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

March 31, 2014 and 2013

1. Organization and Description of Business

Digital Realty Trust, Inc. through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership) and the subsidiaries of the Operating Partnership (collectively, we, our, us or the Company) is engaged in the business of owning, acquiring, developing and managing technology-related real estate. The Company is focused on providing customer driven datacenter solutions for domestic and international tenants across a variety of industry verticals ranging from financial services, cloud and information technology services, to manufacturing, energy, health care and consumer products. As of March 31, 2014, our portfolio consisted of 131 properties, including 13 properties held as investments in unconsolidated joint ventures and developable land, of which 104 are located throughout North America, 22 are located in Europe, three are located in Australia and two are located in Asia. We are diversified in major markets where corporate datacenter and technology tenants are concentrated, including the Boston, Chicago, Dallas, Los Angeles, New York Metro, Northern Virginia, Phoenix, San Francisco and Silicon Valley metropolitan areas in the United States, Amsterdam, Dublin, London and Paris markets in Europe and Singapore, Sydney, Melbourne, Hong Kong and Osaka markets in the Asia Pacific region. The portfolio consists of Internet gateway and corporate datacenter properties, technology manufacturing properties and regional or national headquarters of technology companies.

The Operating Partnership was formed on July 21, 2004 in anticipation of Digital Realty Trust, Inc.’s initial public offering (IPO) on November 3, 2004 and commenced operations on that date. As of March 31, 2014, Digital Realty Trust, Inc. owns a 97.6% common interest and a 100% preferred interest in the Operating Partnership. As sole general partner of the Operating Partnership, Digital Realty Trust, Inc. has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control. The limited partners of the Operating Partnership do not have rights to replace Digital Realty Trust, Inc. as the general partner nor do they have participating rights, although they do have certain protective rights.

2. Summary of Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

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

The accompanying interim condensed consolidated financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in compliance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation have been included. All such adjustments are considered to be of a normal recurring nature, except as otherwise indicated. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K, as amended, for the year ended December 31, 2013.

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

•

enhancing investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

•

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

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

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

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

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

•

condensed consolidated face financial statements; and

•

the following notes to the condensed consolidated financial statements:

•

Debt of the Company and Debt of the Operating Partnership;

•

Income per Share and Income per Unit; and

•

Equity and Accumulated Other Comprehensive Loss, Net of the Company and Capital and Accumulated Other Comprehensive Income (Loss) of the Operating Partnership.

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

(b) Cash Equivalents

For the purpose of the condensed consolidated statements of cash flows, we consider short-term investments with original maturities of 90 days or less to be cash equivalents. As of March 31, 2014, cash equivalents consist of investments in money market instruments.

(c) Investment in Unconsolidated Joint Ventures

The Company’s investment in unconsolidated joint ventures is accounted for using the equity method, whereby the investment is increased for capital contributed and our share of the joint ventures’ net income and decreased by distributions we receive and our share of any losses of the joint ventures.

We amortize the difference between the cost of our investments in unconsolidated joint ventures and the book value of the underlying equity into equity in earnings from unconsolidated affiliates on a straight-line basis consistent with the lives of the underlying assets.

(d) Capitalization of Costs

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

Capitalization of costs begins when the activities necessary to get the development project ready for its intended use begins, which include costs incurred before the beginning of construction. Capitalization of costs ceases when the development project is substantially complete and ready for its intended use. Determining when a development project commences, and when it is substantially complete and ready for its intended use involves a degree of judgment. We generally consider a development project to be substantially complete and ready for its intended use upon receipt of a certificate of occupancy. We cease cost capitalization if activities necessary for the development of the property have been suspended. Capitalized costs are allocated to the specific components of a project that are benefited.

During the three months ended March 31, 2014 and 2013, we capitalized interest of approximately $5.3 million and $5.3 million, respectively. During the three months ended March 31, 2014 and 2013, we capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $12.4 million and $10.1 million, respectively. Cash flows from capitalized leasing costs of $9.6 million and $10.8 million are included in improvements to and advances for investments in real estate in cash flows from investing activities in the condensed consolidated statements of cash flows for the three months ended March 31, 2014 and 2013, respectively.

(e) Share-Based Compensation

The Company measures all share-based compensation awards at fair value on the date they are granted to employees and directors, and recognizes compensation cost, net of forfeitures, over the requisite service period for awards with only a service condition. The estimated fair value of the long-term incentive units and Class D Units (discussed in note 13) granted by us is being amortized on a straight-line basis over the expected service period.

The fair value of share-based compensation awards that contain a market condition is measured using a lattice model and not adjusted based on actual achievement of the performance goals.

(f) Income Taxes

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

The Company is subject to foreign, state and local income taxes in the jurisdictions in which it conducts business. The Company’s U.S. consolidated taxable REIT subsidiary is subject to both federal and state income taxes to the extent there is taxable income. Accordingly, the Company recognizes current and deferred income taxes for its taxable REIT subsidiaries, certain states and non-U.S. jurisdictions, as appropriate.

We assess our significant tax positions in accordance with U.S. GAAP for all open tax years and determine whether we have any material unrecognized liabilities from uncertain tax benefits. If a tax position is not considered “more-likely-than-not” to be sustained solely on its technical merits, no benefits of the tax position are to be recognized (for financial statement purposes). As of March 31, 2014 and December 31, 2013, we have no assets or liabilities for uncertain tax positions. We classify interest and penalties from significant uncertain tax positions as interest expense and operating expense, respectively, in our condensed consolidated income statements. For the three months ended March 31, 2014 and 2013, we had no such interest or penalties. The tax year 2010 and thereafter remain open to examination by the major taxing jurisdictions with which the Company files tax returns.

See Note 10 for further discussion on income taxes.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(g) Presentation of Transactional-based Taxes

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

(h) Fee Income

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

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

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

Contractor type revenue for long-term contracts is recognized under the percentage-of-completion method of accounting. Revenues are determined by measuring the percentage of total costs incurred to date to estimated total costs for each construction management contract based on current estimates of costs to complete. Contract costs include all labor and benefits, materials, subcontracts, and an allocation of indirect costs related to contract performance. Indirect costs are allocated to projects based upon labor hours charged. Third party costs are included in construction management expense and their reimbursements are included in construction management revenue to the extent that the Company is the primary obligor for the third party costs. Otherwise, construction management revenue and expense is reflected net of third party costs. As long-term design-build projects extend over one or more years, revisions in cost and estimated earnings during the course of the work are reflected in the accounting period in which the facts which require the revision become known. At the time a loss on a design-build project becomes known, the entire amount of the estimated loss is recognized in the condensed consolidated financial statements. Change orders are recognized when they are approved by the client.

Costs and estimated earnings in excess of billings on uncompleted construction management projects are included in other assets in the condensed consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted construction management projects are included in accounts payable and other accrued liabilities in the condensed consolidated balance sheets. Customers are billed on a monthly basis at the end of each month, which can be in advance of work performed.

(i) Assets and Liabilities Measured at Fair Value

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

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the level in the fair-value hierarchy within which the entire fair-value measurement falls is based on the lowest level input that is significant to the fair-value measurement in its entirety. Our assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(j) Transactions Expense

Transactions expense includes acquisition-related expenses and other business development expenses, which are expensed as incurred. Acquisition-related expenses include closing costs, broker commissions and other professional fees, including legal and accounting fees related to acquisitions and potential acquisitions.

(k) Management’s Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates made. On an on-going basis, we evaluate our estimates, including those related to the valuation of our real estate properties, contingent consideration, accounts receivable and deferred rent receivable, performance-based equity compensation plans, the completeness of accrued liabilities and Digital Realty Trust, Inc.’s qualification as a REIT. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could vary under different assumptions or conditions.

(l) Segment and Geographic Information

All of our properties generate similar revenues and expenses related to tenant rent and reimbursements and operating expenses. The delivery of our products is consistent across all properties and although services are provided to a wide range of customers, the types of real estate services provided to them are standardized throughout the portfolio. As such, the properties in our portfolio have similar economic characteristics and the nature of the products and services provided to our customers and the method to distribute such services are consistent throughout the portfolio. Consequently, our properties qualify for aggregation into one reporting segment.

Operating revenues from properties in the United States were $295.2 million and $274.0 million and outside the United States were $95.4 million and $84.4 million for the three months ended March 31, 2014 and 2013, respectively. We had long-lived assets located in the United States of $5.7 billion and $5.6 billion and outside the United States of $2.7 billion and $2.7 billion as of March 31, 2014 and December 31, 2013, respectively.

Operating revenues from properties located in the United Kingdom were $54.9 million and $47.3 million, or 14.1% and 13.2% of total operating revenues, for the three months ended March 31, 2014 and 2013, respectively. No other foreign country comprised more than 10% of total operating revenues for each of these periods. We had long-lived assets located in the United Kingdom of $1.7 billion and $1.8 billion, or 20.8% and 21.1% of total long-lived assets, as of March 31, 2014 and December 31, 2013, respectively. No other foreign country comprised more than 10% of total long-lived assets as of March 31, 2014 and December 31, 2013.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(m) Reclassifications

Certain reclassifications to prior year amounts have been made to conform to the current year presentation. During the three months ended March 31, 2013, $1.3 million was reclassified from rental property operating and maintenance expense to change in fair value of contingent consideration.

(n) Recent Accounting Pronouncements

In April 2014, Accounting Standards Update (ASU) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, was issued which amends the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, this ASU requires additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. As permitted by the standard, the Company has elected to early adopt the provisions of ASU 2014-08 as of January 1, 2014 and will apply the provisions prospectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

3. Investments in Real Estate

We acquired no real estate properties during the three months ended March 31, 2014.

On April 7, 2014, a wholly-owned subsidiary of the Operating Partnership sold 6 Braham Street to the tenant for £25.0 million (or approximately $41.5 million based on the exchange rate as of April 7, 2014). The transaction after costs and various tenant prepayments resulted in net proceeds of approximately £22.6 million (or approximately $37.5 million based on the exchange rate as of April 7, 2014) and a net gain of approximately £9.5 million (or approximately $15.8 million based on the exchange rate as of April 7, 2014), which will be recognized in the three month period ended June 30, 2014. The transaction includes substantially all of the assets of 6 Braham Street and we expect no further cash flows following the sale date.

The property was identified as held for sale on March 21, 2014 when we entered into a Heads of Terms agreement with the buyer. 6 Braham Street was not a significant component of our United Kingdom portfolio nor does the sale of 6 Braham represent a significant shift in our strategy.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

4. Investment in Unconsolidated Joint Ventures

As of March 31, 2014, our investment in unconsolidated joint ventures consists of effective 50% interests in joint ventures that own a data center property at 2001 Sixth Avenue in Seattle, Washington, a data center property at 2020 Fifth Avenue in Seattle, Washington and a development property at 33 Chun Choi Street in Hong Kong, and a 20% interest in a joint venture with an investment fund managed by Prudential Real Estate Investors (PREI^®). The following tables present summarized financial information for the joint ventures as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013 (unaudited, in thousands):


	As of March 31, 2014										Three Months Ended March 31, 2014
2014	Net Investment in Properties		Total Assets		Mortgage Loans		Total Liabilities		Equity / (Deficit)		Revenues		Property Operating Expense			Net Operating Income		Net Income (Loss)
Total unconsolidated joint ventures	$	625,075	$	728,716	$	360,581	$	458,986	$	269,730	$	21,919	$	(5,009	)	$	16,910	$	5,894

Our investment in and share of equity in earnings of unconsolidated joint ventures									$	81,411								$	2,581


	As of December 31, 2013										Three Months Ended March 31, 2013
2013	Net Investment in Properties		Total Assets		Mortgage Loans		Total Liabilities		Equity / (Deficit)		Revenues		Property Operating Expense			Net Operating Income		Net Income (Loss)
Total unconsolidated joint ventures	$	584,837	$	676,015	$	337,953	$	444,062	$	231,953	$	11,099	$	(2,687	)	$	8,412	$	4,931

Our investment in and share of equity in earnings of unconsolidated joint ventures									$	70,504								$	2,335

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

PREI ^® Joint Venture

On March 5, 2014, we contributed the 636 Pierce Street property, which was acquired in December 2013, to the PREI^® Joint Venture that was initially formed in September 2013. The property was valued at approximately $40.4 million and subject to $26.1 million in debt, which the joint venture assumed. PREI^® contributed approximately $11.4 million in cash for their 80% share of the net asset value of $14.3 million. Subsequent to the closing, the joint venture refinanced the existing debt with $23.0 million drawn from the joint venture’s bank facility. Including the refinance costs, PREI^® contributed $17.5 million for the 636 Pierce Street property, bringing their contributed capital in the joint venture to $164.8 million.

The transaction produced a $1.9 million gain for the Company representing the difference between the $11.4 million of cash proceeds received by the Company for their 80% share of the net asset less the Company’s book value.

Differences between the Company’s investment in the joint venture and the amount of the underlying equity in net assets of the joint venture are due to basis differences resulting from the Company’s equity investment recorded at its historical basis versus the fair value of the Company’s contributed interest in the joint venture. Our proportionate share of the earnings or losses related to this unconsolidated joint venture is reflected as equity in earnings of unconsolidated joint ventures on the accompanying consolidated income statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

5. Acquired Intangible Assets and Liabilities

The following summarizes our acquired intangible assets (acquired in-place lease value and acquired above-market lease value) and intangible liabilities (acquired below-market lease value) as of March 31, 2014 and December 31, 2013.


	Balance as of
(Amounts in thousands)	March 31, 2014			December 31, 2013
Acquired in-place lease value:
Gross amount	$	721,961		$	725,458
Accumulated amortization		(438,789	)		(423,549	)

Net	$	283,172		$	301,909

Acquired above-market leases:
Gross amount	$	133,064		$	132,750
Accumulated amortization		(83,543	)		(80,486	)

Net	$	49,521		$	52,264

Acquired below-market leases:
Gross amount	$	290,365		$	291,638
Accumulated amortization		(167,213	)		(161,369	)

Net	$	123,152		$	130,269

Amortization of acquired below-market lease value, net of acquired above-market lease value, resulted in an increase to rental revenues of $2.8 million and $3.0 million for the three months ended March 31, 2014 and 2013, respectively. The expected average remaining lives for acquired below-market leases and acquired above-market leases is 6.5 years and 4.3 years, respectively, as of March 31, 2014. Estimated annual amortization of acquired below-market lease value, net of acquired above-market lease value, for each of the five succeeding years and thereafter, commencing April 1, 2014 is as follows:


(Amounts in thousands)
Remainder of 2014	$	7,171
2015		8,862
2016		7,540
2017		6,038
2018		4,419
Thereafter		39,601

Total	$	73,631

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

Amortization of acquired in-place lease value (a component of depreciation and amortization expense) was $15.1 million and $14.9 million for the three months ended March 31, 2014 and 2013, respectively. The expected average amortization period for acquired in-place lease value is 6.4 years as of March 31, 2014. The weighted average remaining contractual life for acquired leases excluding renewals or extensions is 5.0 years as of March 31, 2014. Estimated annual amortization of acquired in-place lease value for each of the five succeeding years and thereafter, commencing April 1, 2014 is as follows:


(Amounts in thousands)
Remainder of 2014	$	39,761
2015		44,295
2016		41,180
2017		28,363
2018		25,997
Thereafter		103,576

Total	$	283,172

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

6. Debt of the Company

In this Note 6, the “Company” refers only to Digital Realty Trust, Inc. and not to any of its subsidiaries.

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

Guarantee of Debt

The Company guarantees the Operating Partnership’s obligations with respect to its 5.50% exchangeable senior debentures due 2029 (2029 Debentures), 4.50% notes due 2015 (2015 Notes), 5.875% notes due 2020 (2020 Notes), 5.250% notes due 2021 (2021 Notes), 3.625% notes due 2022 (2022 Notes) and its unsecured senior notes sold to Prudential Investment Management, Inc. and certain of its affiliates pursuant to the Amended and Restated Note Purchase and Private Shelf Agreement, as amended, which we refer to as the Prudential shelf facility. The Company and the Operating Partnership guarantee the obligations of Digital Stout Holding, LLC, a wholly owned subsidiary of the Operating Partnership, with respect to its 4.250% notes due 2025 (2025 Notes). The Company is also the guarantor of the Operating Partnership’s and its subsidiary borrowers’ obligations under the global revolving credit facility and unsecured term loan.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

7. Debt of the Operating Partnership

A summary of outstanding indebtedness of the Operating Partnership as of March 31, 2014 and December 31, 2013 is as follows (in thousands):


Indebtedness	Interest Rate at March 31, 2014	Maturity Date	Principal Outstanding March 31, 2014			Principal Outstanding December 31, 2013
Global revolving credit facility	Various (1)	Nov. 3, 2017	$	790,500	(2)	$	724,668	(2)

Unsecured term loan	Various (3)(8)	Apr. 16, 2017	$	1,026,891	(4)	$	1,020,984	(4)

Unsecured senior notes:
Prudential Shelf Facility:
Series C	9.680%	Jan. 6, 2016		25,000			25,000
Series D	4.570%	Jan. 20, 2015		50,000			50,000
Series E	5.730%	Jan. 20, 2017		50,000			50,000
Series F	4.500%	Feb. 3, 2015		17,000			17,000

Total Prudential Shelf Facility				142,000			142,000
Senior Notes:
4.50% notes due 2015	4.500%	Jul. 15, 2015		375,000			375,000
5.875% notes due 2020	5.875%	Feb. 1, 2020		500,000			500,000
5.25% notes due 2021	5.250%	Mar. 15, 2021		400,000			400,000
3.625% notes due 2022	3.625%	Oct. 1, 2022		300,000			300,000
4.25% notes due 2025	4.250%	Jan. 17, 2025		666,480	(9)		662,280	(9)
Unamortized discounts				(14,632	)		(15,048	)

Total senior notes, net of discount				2,226,848			2,222,232

Total unsecured senior notes, net of discount				2,368,848			2,364,232

Exchangeable senior debentures:
5.50% exchangeable senior debentures due 2029	5.500%	Apr. 15, 2029(5)		266,400			266,400

Total exchangeable senior debentures				266,400			266,400

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013


Indebtedness	Interest Rate at March 31, 2014	Maturity Date	Principal Outstanding March 31, 2014			Principal Outstanding December 31, 2013

Mortgage loans:
Secured Term Debt (6)(7)	5.65%	Nov. 11, 2014	$	132,157		$	132,966
200 Paul Avenue 1-4 (7)	5.74%	Oct. 8, 2015		70,198			70,713
2045 & 2055 LaFayette Street (7)	5.93%	Feb. 6, 2017		63,351			63,623
34551 Ardenwood Boulevard 1-4 (7)	5.95%	Nov. 11, 2016		51,942			52,152
1100 Space Park Drive (7)	5.89%	Dec. 11, 2016		51,904			52,115
600 West Seventh Street	5.80%	Mar. 15, 2016		49,127			49,548
150 South First Street (7)	6.30%	Feb. 6, 2017		49,896			50,097
2334 Lundy Place (7)	5.96%	Nov. 11, 2016		37,778			37,930
Cressex 1 (10)	5.68%	Oct. 16, 2014		28,636	(9)		28,583	(9)
636 Pierce Street	5.27%	Apr. 15, 2023		—	(11)		26,327
8025 North Interstate 35	4.09%	Mar. 6, 2016		6,251			6,314
Manchester Technopark (10)	5.68%	Oct. 16, 2014		8,712	(9)		8,695	(9)
731 East Trade Street	8.22%	Jul. 1, 2020		4,101			4,186
Unamortized net premiums				689			2,359

Total mortgage loans, net of premiums				554,742			585,608

Total indebtedness			$	5,007,381		$	4,961,892

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(1)

The interest rate for borrowings under the global revolving credit facility equals the applicable index plus a margin of 110 basis points, which is based on the credit rating of our long-term debt. An annual facility fee of 20 basis points, which is based on the credit rating of our long-term debt, is due and payable quarterly on the total commitment amount of the facility. Two six-month extensions are available, which we may exercise if certain conditions are met.

(2)	Balances as of March 31, 2014 and December 31, 2013 are as follows (balances, in thousands):


Denomination of Draw	Balance as of March 31, 2014			Weighted-average interest rate			Balance as of December 31, 2013			Weighted-average interest rate
*Floating Rate Borrowing (a)*
U.S. dollar ($)	$	397,000			1.25	%	$	466,000			1.27	%
British pound sterling (£)		126,631	(c)		1.60	%		—			—
Euro (€)		74,353	(c)		1.33	%		78,335	(d)		1.33	%
Australian dollar (AUD)		73,185	(c)		3.73	%		67,212	(d)		3.70	%
Hong Kong dollar (HKD)		66,677	(c)		1.31	%		57,390	(d)		1.31	%
Japanese yen (JPY)		13,174	(c)		1.20	%		12,858	(d)		1.21	%
Canadian dollar (CAD)		34,480	(c)		2.32	%		14,873	(d)		2.32	%


Total	$	785,500			1.60	%	$	696,668			1.53	%


*Base Rate Borrowing (b)*

U.S. dollar ($)	$	5,000			3.35	%	$	28,000			3.35	%

Total borrowings	$	790,500			1.61	%	$	724,668			1.60	%

(a)

The interest rates for floating rate borrowings under the global revolving credit facility equal the applicable index plus a margin of 110 basis points, which is based on the credit rating of our long-term debt.

(b)

The interest rates for base rate borrowings under the global revolving credit facility equal the U.S. Prime Rate plus a margin of 10 basis points, which is based on the credit rating of our long-term debt.

(c)

Based on exchange rates of $1.67 to £1.00, $1.38 to €1.00, $0.93 to 1.00 AUD, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY and $0.90 to 1.00 CAD, respectively, as of March 31, 2014.

(d)

Based on exchange rates of $1.37 to €1.00, $0.89 to 1.00 AUD, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY and $0.94 to 1.00 CAD, respectively, as of December 31, 2013.

(3)	Interest rates are based on our senior unsecured debt ratings and are 120 basis points over the applicable index for floating rate advances. Two six-month extensions are available, which we may exercise if certain conditions are met.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(4)	Balances as of March 31, 2014 and December 31, 2013 are as follows (balances, in thousands):


Denomination of Draw	Balance as of March 31, 2014			Weighted-average interest rate			Balance as of December 31, 2013			Weighted-average interest rate
U.S. dollar ($)	$	410,905			1.36	% (b)	$	410,905			1.37	% (d)
Singapore dollar (SGD)		181,710	(a)		1.42	% (b)		180,918	(c)		1.40	% (d)
British pound sterling (£)		201,485	(a)		1.72	%		200,216	(c)		1.72	%
Euro (€)		137,001	(a)		1.43	%		136,743	(c)		1.43	%
Australian dollar (AUD)		95,790	(a)		3.82	%		92,202	(c)		3.78	%

Total	$	1,026,891			1.68	% (b)	$	1,020,984			1.67	% (d)

(a)

Based on exchange rates of $0.80 to 1.00 SGD, $1.67 to £1.00, $1.38 to €1.00 and $0.93 to 1.00 AUD, respectively, as of March 31, 2014.

(b)

As of March 31, 2014, the weighted-average interest rate reflecting interest rate swaps was 1.92% (U.S. dollar), 2.00% (Singapore dollar) and 2.01% (Total). See Note 14 for further discussion on interest rate swaps.

(c)

Based on exchange rates of $0.79 to 1.00 SGD, $1.66 to £1.00, $1.37 to €1.00 and $0.89 to 1.00 AUD, respectively, as of December 31, 2013.

(d)

As of December 31, 2013, the weighted-average interest rate reflecting interest rate swaps was 1.92% (U.S. dollar), 2.00% (Singapore dollar) and 2.00% (Total). See Note 14 for further discussion on interest rate swaps.

(5)	The 2029 Debentures were redeemed in April 2014.

(6)	This amount represents six mortgage loans secured by our interests in 36 NE 2nd Street, 3300 East Birch Street, 100 & 200 Quannapowitt Parkway, 300 Boulevard East, 4849 Alpha Road, and 11830 Webb Chapel Road. Each of these loans is cross-collateralized by the six properties.

(7)	The respective borrower’s assets and credit are not available to satisfy the debts and other obligations of affiliates or any other person.

(8)	We have entered into interest rate swap agreements as a cash flow hedge for interest generated by the U.S. dollar and Singapore dollar tranches of the unsecured term loan. See note 14 for further information.

(9)	Based on exchange rate of $1.67 to £1.00 as of March 31, 2014 and $1.66 to £1.00 as of December 31, 2013.

(10)	These loans are also secured by a £7.8 million letter of credit. These loans are cross-collateralized by the two properties.

(11)

On March 5, 2014, we contributed this property to our joint venture with an investment fund managed by Prudential Real Estate Investors which was formed in September 2013. Also on March 5, 2014, the joint venture assumed the debt and repaid in full the outstanding balance of $26.1 million on the mortgage loan.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

Global Revolving Credit Facility

On August 15, 2013, the Operating Partnership refinanced its revolving credit facility, which we refer to as the global revolving credit facility, increasing its total borrowing capacity to $2.0 billion from $1.8 billion. The global revolving credit facility has an accordion feature that would enable us to increase the borrowing capacity of the credit facility to $2.55 billion, subject to the receipt of lender commitments and other conditions precedent. The refinanced facility matures on November 3, 2017, with two six-month extension options. The interest rate for borrowings under the expanded facility equals the applicable index plus a margin which is based on the credit rating of our long-term debt and is currently 110 basis points. An annual facility fee on the total commitment amount of the facility, based on the credit rating of our long-term debt, is currently 20 basis points, and payable quarterly. Funds may be drawn in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as Euro, British pound sterling, Swiss franc, Japanese yen and Mexican peso denominations. As of March 31, 2014, borrowings under the global revolving credit facility bore interest at an overall blended rate of 1.61% comprised of 1.25% (U.S. dollars), 1.60% (British pound sterling), 1.33% (Euros), 3.73% (Australian dollars), 1.31% (Hong Kong dollars), 1.20% (Japanese yen) and 2.32% (Canadian dollars). The interest rates are based on 1-month LIBOR, 1-month GBP LIBOR, 1-month EURIBOR, 1-month BBR, 1-month HIBOR, 1-month JPY LIBOR and 1-month CDOR, respectively, plus a margin of 1.10%. The facility also bore a base borrowing rate of 3.35% (USD) which is based on U.S. Prime Rate plus a margin of 0.10%. We have used and intend to use available borrowings under the global revolving credit facility to acquire additional properties, fund development opportunities and to provide for working capital and other corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities. As of March 31, 2014, we have capitalized approximately $18.0 million of financing costs related to the global revolving credit facility. As of March 31, 2014, approximately $790.5 million was drawn under this facility and $23.1 million of letters of credit were issued.

The global revolving credit facility contains various restrictive covenants, including limitations on our ability to incur additional indebtedness, make certain investments or merge with another company, and requirements to maintain financial coverage ratios, including with respect to unencumbered assets. In addition, the global revolving credit facility restricts Digital Realty Trust, Inc. from making distributions to its stockholders, or redeeming or otherwise repurchasing shares of its capital stock, after the occurrence and during the continuance of an event of default, except in limited circumstances including as necessary to enable Digital Realty Trust, Inc. to maintain its qualification as a REIT and to minimize the payment of income or excise tax. As of March 31, 2014, we were in compliance with all of such covenants.

Unsecured Term Loan

On August 15, 2013, we refinanced the senior unsecured multi-currency term loan facility, increasing its total borrowing capacity to $1.0 billion from $750.0 million, and pursuant to the accordion feature total commitments can be increased up to $1.1 billion, subject to the receipt of lender commitments and other conditions precedent. The facility matures on April 16, 2017, with two six-month extension options. Interest rates are based on our senior unsecured debt ratings and are currently 120 basis points over the applicable index for floating rate advances. Funds may be drawn in U.S, Singapore and Australian dollars, as well as Euro and British pound sterling denominations with the option to add Hong Kong dollars and Japanese yen upon an accordion exercise. Based on exchange rates in effect at March 31, 2014, the balance outstanding is approximately $1,026.9 million. We have used borrowings under the term loan for acquisitions, repayment of indebtedness, development, working capital and general corporate purposes. The covenants under this loan are consistent with our global revolving credit facility and, as of March 31, 2014, we were in compliance with all of such covenants. As of March 31, 2014, we have capitalized approximately $8.4 million of financing costs related to the unsecured term loan.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

Exchangeable Senior Debentures

5.50% Exchangeable Senior Debentures due 2029

On April 20, 2009, the Operating Partnership issued $266.4 million of its 5.50% exchangeable senior debentures due April 15, 2029 (the 2029 Debentures). Costs incurred to issue the 2029 Debentures were approximately $7.8 million. These costs were amortized over a period of five years, which represented the estimated term of the 2029 Debentures, and are included in deferred financing costs, net in the condensed consolidated balance sheet. The 2029 Debentures were general unsecured senior obligations of the Operating Partnership, ranked equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and were fully and unconditionally guaranteed by Digital Realty Trust, Inc.

Interest was payable on October 15 and April 15 of each year beginning October 15, 2009 until the maturity date of April 15, 2029. The 2029 Debentures bore interest at 5.50% per annum and were exchangeable for shares of Digital Realty Trust, Inc. common stock at an exchange rate that was initially 23.2558 shares per $1,000 principal amount of 2029 Debentures. The exchange rate on the 2029 Debentures was subject to adjustment for certain events, including, but not limited to, certain dividends on Digital Realty Trust, Inc. common stock in excess of $0.33 per share per quarter (the “reference dividend”). Effective December 11, 2013, the exchange rate had been adjusted to 25.5490 shares per $1,000 principal amount of 2029 Debentures as a result of the aggregate dividends in excess of the reference dividend that Digital Realty Trust, Inc. declared and paid on its common stock beginning with the quarter ended September 30, 2013 and through the quarter ended December 31, 2013. Due to the fact that the exchange feature for the 2029 Debentures had to be settled in the common stock of Digital Realty Trust, Inc., accounting guidance on convertible debt instruments that requires the principal amount to be settled in cash upon conversion did not apply.

On March 17, 2014, we commenced an offer to repurchase, at the option of each holder, any and all of the outstanding 2029 Debentures at a price equal to 100% of the principal amount, as required by the terms of the indenture governing the 2029 Debentures. The repurchase offer expired on April 11, 2014. No 2029 Debentures were repurchased pursuant to this offer. On March 17, 2014, we also distributed a Notice of Redemption to the holders of the 2029 Debentures that the Operating Partnership intended to redeem all of the outstanding 2029 Debentures, pursuant to its option under the indenture governing the 2029 Debentures, on April 18, 2014, at a price equal to 100% of the principal amount, plus accrued and unpaid interest thereon up to the redemption date. In connection with the redemption, holders of the 2029 Debentures had the right to exchange their 2029 Debentures on or prior to April 16, 2014. The 2029 Debentures not surrendered pursuant to the repurchase offer on or prior to April 11, 2014, or for exchange on or prior to April 16, 2014, were redeemed on April 18, 2014.

In connection with the redemption, at the request of the holders that exercised their exchange right pursuant to the terms of the 2029 Debentures, we issued 6,734,938 restricted shares of Digital Realty Trust, Inc. common stock in exchange for approximately $261.2 million in aggregate principal amount of the 2029 Debentures. On April 18, 2014, the Operating Partnership redeemed for cash approximately $5.2 million in aggregate principal amount of the 2029 Debentures pursuant to its option under the indenture governing the 2029 Debentures at a price equal to 100% of the principal amount plus accrued and unpaid interest thereon up to the redemption date.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

The table below summarizes our debt maturities and principal payments as of March 31, 2014 (in thousands):


	Global Revolving Credit Facility ⁽¹⁾		Unsecured Term Loan ⁽¹⁾		Prudential Shelf Facility		Senior Notes			Exchangeable Senior Debentures⁽²⁾		Mortgage Loans ⁽³⁾		Total Debt
Remainder of 2014	$	—	$	—	$	—	$	—		$	266,400	$	175,817	$	442,217
2015		—		—		67,000		375,000			—		75,493		517,493
2016		—		—		25,000		—			—		191,979		216,979
2017		790,500		1,026,891		50,000		—			—		108,395		1,975,786
2018		—		—		—		—			—		593		593
Thereafter		—		—		—		1,866,480			—		1,776		1,868,256

Subtotal	$	790,500	$	1,026,891	$	142,000	$	2,241,480		$	266,400	$	554,053	$	5,021,324
Unamortized discount		—		—		—		(14,632	)		—		—		(14,632	)
Unamortized premium		—		—		—		—			—		689		689

Total	$	790,500	$	1,026,891	$	142,000	$	2,226,848		$	266,400	$	554,742	$	5,007,381

(1)

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

(2)	The 2029 Debentures were redeemed in April 2014.

(3)

Our mortgage loans are generally non-recourse to us, subject to carve-outs for specified actions by us or specified undisclosed environmental liabilities. As of March 31, 2014, we provided partial letter of credit support with respect to approximately $37.3 million of the outstanding mortgage indebtedness (based on exchange rates as of March 31, 2014).

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

8. Income per Share

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


	Three Months Ended March 31,
	2014		2013
Net income available to common stockholders	$	34,186	$	42,657

Weighted average shares outstanding—basic		128,535,995		126,445,285
Potentially dilutive common shares:
Stock options		51,909		70,877
Series H Cumulative Redeemable Preferred Stock		388,340		—
Unvested incentive units		160,717		222,177

Weighted average shares outstanding—diluted		129,136,961		126,738,339

Income per share:
Basic	$	0.27	$	0.34

Diluted	$	0.26	$	0.34

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


	Three Months Ended March 31,
	2014		2013
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.		2,606,669		2,442,756
Potentially dilutive 2029 Debentures		6,806,254		6,590,470
Potentially dilutive Series D Cumulative Convertible Preferred Stock		—		1,909,146
Potentially dilutive Series E Cumulative Redeemable Preferred Stock		5,674,269		4,381,703
Potentially dilutive Series F Cumulative Redeemable Preferred Stock		3,598,608		2,778,866
Potentially dilutive Series G Cumulative Redeemable Preferred Stock		4,920,508		—

		23,606,308		18,102,941

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

9. Income per Unit

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


	Three Months Ended March 31,
	2014		2013
Net income available to common unitholders	$	34,879	$	43,481

Weighted average units outstanding—basic		131,142,664		128,888,041
Potentially dilutive common units:
Stock options		51,909		70,877
Series H Cumulative Redeemable Preferred Units		388,340		—
Unvested incentive units		160,717		222,177

Weighted average units outstanding—diluted		131,743,630		129,181,095

Income per unit:
Basic	$	0.27	$	0.34

Diluted	$	0.26	$	0.34

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


	Three Months Ended March 31,
	2014		2013
Potentially dilutive 2029 Debentures		6,806,254		6,590,470
Potentially dilutive Series D Cumulative Convertible Preferred Units		—		1,909,146
Potentially dilutive Series E Cumulative Redeemable Preferred Units		5,674,269		4,381,703
Potentially dilutive Series F Cumulative Redeemable Preferred Units		3,598,608		2,778,866
Potentially dilutive Series G Cumulative Redeemable Preferred Units		4,920,508		—

		20,999,639		15,660,185

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

10. Income Taxes

Digital Realty Trust, Inc. has elected to be treated and believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT for federal income tax purposes. As a REIT, Digital Realty Trust, Inc. is generally not subject to corporate level federal income taxes on earnings distributed currently to its stockholders. Since inception, Digital Realty Trust, Inc. has distributed at least 100% of its taxable income annually and intends to do so for the tax year ending December 31, 2014. As such, no provision for federal income taxes has been included in the accompanying consolidated financial statements for the three months ended March 31, 2014 and 2013.

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

We have elected taxable REIT subsidiary (“TRS”) status for some of our consolidated subsidiaries. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that REITs cannot hold directly. Income taxes for TRS entities were accrued, as necessary, for the three months ended March 31, 2014 and 2013.

For our TRS entities and foreign subsidiaries that are subject to U.S. federal, state and foreign income taxes, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if we believe it is more likely than not that the deferred tax asset may not be realized, based on available evidence at the time the determination is made. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in income. Deferred tax assets (net of valuation allowance) and liabilities for our TRS entities and foreign subsidiaries were accrued, as necessary, for the three months ended March 31, 2014 and 2013. As of March 31, 2014, we had a net deferred tax liability of approximately $148.4 million primarily related to our foreign properties. The majority of our net deferred tax liability relates to differences between tax basis and book basis of the assets acquired in the Sentrum Portfolio acquisition during 2012.

11. Equity and Accumulated Other Comprehensive Income (Loss), Net

(a) Equity Distribution Agreements

On June 29, 2011, Digital Realty Trust, Inc. entered into equity distribution agreements, which we refer to as the 2011 Equity Distribution Agreements, with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC, or the Agents, under which it can issue and sell shares of its common stock having an aggregate offering price of up to $400.0 million from time to time through, at its discretion, any of the Agents as its sales agents. The sales of common stock made under the 2011 Equity Distribution Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. To date, Digital Realty Trust, Inc. has generated net proceeds of approximately $342.7 million from the issuance of approximately 5.7 million common shares under the 2011 Equity Distribution Agreements at an average price of $60.35 per share after payment of approximately $3.5 million of commissions to the sales agents and before offering expenses. No sales were made under the program during the three months ended March 31, 2014 and 2013. As of March 31, 2014, shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

(b) Redeemable Preferred Stock

7.375% Series H Cumulative Redeemable Preferred Stock

On March 26, 2014, Digital Realty Trust, Inc. issued 12,000,000 shares of its 7.375% series H cumulative redeemable preferred stock, or the series H preferred stock, for net proceeds of approximately $289.9 million. In addition, on April 7, 2014, Digital Realty Trust, Inc. issued an additional 600,000 shares of series H preferred stock pursuant to a partial exercise of the underwriters’ over-allotment

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

option. Also, on April 7, 2014, Digital Realty Trust, Inc. re-opened and issued an additional 2,000,000 shares of series H preferred stock. Combined with the earlier issuances, Digital Realty Trust, Inc. issued 14,600,000 shares of its series H preferred stock, for net proceeds of approximately $353.2 million. Dividends are cumulative on the series H preferred stock from the date of original issuance in the amount of $1.84375 per share each year, which is equivalent to 7.375% of the $25.00 liquidation preference per share. Dividends on the series H preferred stock are payable quarterly in arrears. The first dividend payable on the series H preferred stock on June 30, 2014 will be a pro rata dividend from and including the original issue date to and including June 30, 2014 in the amount of $0.48655 per share. The series H preferred stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the series H preferred stock will rank senior to Digital Realty Trust, Inc. common stock and rank on parity with Digital Realty Trust, Inc.’s series E cumulative redeemable preferred stock, series F cumulative redeemable preferred stock and series G cumulative redeemable preferred stock with respect to the payment of distributions and other amounts. Digital Realty Trust, Inc. is not allowed to redeem the series H preferred stock before March 26, 2019, except in limited circumstances to preserve its status as a REIT. On or after March 26, 2019, Digital Realty Trust, Inc. may, at its option, redeem the series H preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such series H preferred stock up to but excluding the redemption date. Holders of the series H preferred stock generally have no voting rights except for limited voting rights if Digital Realty Trust, Inc. fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. Upon the occurrence of specified changes of control, as a result of which neither Digital Realty Trust, Inc.’s common stock nor the common securities of the acquiring or surviving entity (or American Depositary Receipts representing such securities) is listed on the New York Stock Exchange, the NYSE MKT, LLC or the NASDAQ Stock Market or listed or quoted on a successor exchange or quotation system, each holder of series H preferred stock will have the right (unless, prior to the change of control conversion date specified in the Articles Supplementary governing the series H preferred stock, Digital Realty Trust, Inc. has provided or provides notice of its election to redeem the series H preferred stock) to convert some or all of the series H preferred stock held by it into a number of shares of Digital Realty Trust, Inc.’s common stock per share of series H preferred stock to be converted equal to the lesser of:

•

the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends to, but not including, the change of control conversion date (unless the change of control conversion date is after a record date for a series H preferred stock dividend payment and prior to the corresponding series H preferred stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the common stock price specified in the Articles Supplementary governing the series H preferred stock; and

•

0.9632, or the share cap, subject to certain adjustments;

subject, in each case, to provisions for the receipt of alternative consideration as described in the Articles Supplementary governing the series H preferred stock. Except in connection with specified change of control transactions, the series H preferred stock is not convertible into or exchangeable for any other property or securities of Digital Realty Trust, Inc.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(c) Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the interests that are not owned by Digital Realty Trust, Inc. The following table shows the ownership interest in the Operating Partnership as of March 31, 2014 and December 31, 2013:


	March 31, 2014					December 31, 2013
	Number of units		Percentage of total			Number of units		Percentage of total
Digital Realty Trust, Inc.		128,606,462		97.6	%		128,455,350		97.7	%
Noncontrolling interests consist of:
Common units held by third parties		1,491,814		1.1			1,491,814		1.2
Incentive units held by employees and directors (see note 13)		1,633,797		1.3			1,475,207		1.1

		131,732,073		100.0	%		131,422,371		100.0	%

Limited partners have the right to require the Operating Partnership to redeem part or all of their common units for cash based on the fair market value of an equivalent number of shares of 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 Digital Realty Trust, Inc. common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. Pursuant to authoritative accounting guidance, Digital Realty Trust, Inc. evaluated whether it controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement of the noncontrolling Operating Partnership common and incentive units. Based on the results of this analysis, we concluded that the common and incentive Operating Partnership units met the criteria to be classified within equity.

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $149.2 million and $124.1 million based on the closing market price of Digital Realty Trust, Inc. common stock on March 31, 2014 and December 31, 2013, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the three months ended March 31, 2014:


	Common Units		Incentive Units			Total
As of December 31, 2013		1,491,814		1,475,207			2,967,021

Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)		—		(4,438	)		(4,438	)
Cancellation of incentive units held by employees and directors		—		(18,773	)		(18,773	)
Grant of incentive units to employees and directors		—		181,801			181,801

As of March 31, 2014		1,491,814		1,633,797			3,125,611

(1)	This redemption was 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 condensed consolidated balance sheet of Digital Realty Trust, Inc.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(d) Dividends

We have declared and paid the following dividends on our common and preferred stock for the three months ended March 31, 2014 (in thousands):


Date dividend declared	Dividend payable date	Series E Preferred Stock ⁽¹⁾		Series F Preferred Stock ⁽²⁾		Series G Preferred Stock ⁽³⁾		Common Stock ⁽⁴⁾
February 11, 2014	March 31, 2014	$	5,031	$	3,023	$	3,672	$	106,743

		$	5,031	$	3,023	$	3,672	$	106,743

(1)	$1.750 annual rate of dividend per share.

(2)	$1.656 annual rate of dividend per share.

(3)	$1.469 annual rate of dividend per share.

(4)	$3.320 annual rate of dividend per share.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

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

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

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


	Foreign currency translation adjustments		Cash flow hedge adjustments			Accumulated other comprehensive income, net
Balance as of December 31, 2013	$	11,745	$	(1,054	)	$	10,691
Net current period change		3,743		(1,316	)		2,427
Reclassification to interest expense from interest rate swaps		—		829			829

Balance as of March 31, 2014	$	15,488	$	(1,541	)	$	13,947

12. Capital and Accumulated Other Comprehensive Income (Loss)

(a) Redeemable Preferred Units

7.375% Series H Cumulative Redeemable Preferred Units

On March 26, 2014 and April 7, 2014, the Operating Partnership issued in the aggregate a total of 14,600,000 of its 7.375% series H cumulative redeemable preferred units, or series H preferred units, to Digital Realty Trust, Inc. (the General Partner) in conjunction with the General Partner’s issuance of an equivalent number of shares of its 7.375% series H cumulative redeemable preferred stock, or the series H preferred stock. Distributions are cumulative on the series H preferred units from the date of original issuance in the amount of $1.84375 per unit each year, which is equivalent to 7.375% of the $25.00 liquidation preference per unit. Distributions on the series H preferred units are payable quarterly in arrears. The first distribution payable on the series H preferred units on June 30, 2014 will be a pro rata distribution from and including the original issue date to and including June 30, 2014 in the amount of $0.48655 per unit. The series H preferred units do not have a stated maturity date and are not subject to any sinking fund. The Operating Partnership is required to redeem the series H preferred units in the event that the General Partner redeems the series H preferred stock. The General Partner is not allowed to redeem the series H preferred stock prior to March 26, 2019 except in limited circumstances to preserve the General Partner’s status as a REIT. On or after March 26, 2019, the General Partner may, at its option, redeem the series H preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such series H preferred stock up to but excluding the redemption date. Upon liquidation, dissolution or winding up, the series H preferred units will rank senior to the Operating Partnership’s common units with respect to the payment of distributions and other amounts and rank on parity with the Operating Partnership’s series E cumulative redeemable preferred units, series F cumulative redeemable preferred units and series G cumulative redeemable preferred units. Except in connection with specified change of control transactions of the General Partner, the series H preferred units are not convertible into or exchangeable for any other property or securities of the Operating Partnership.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

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

Except for special allocations to holders of profits interest units described below in note 13(a) under the heading “Incentive Plan-Long-Term Incentive Units,” the Operating Partnership’s net income will generally be allocated to the General Partner to the extent of the accrued preferred return on its preferred units, and then to the General Partner and the Operating Partnership’s limited partners in accordance with the respective percentage interests in the common units issued by the Operating Partnership. Net loss will generally be allocated to the General Partner and the Operating Partnership’s limited partners in accordance with the respective common percentage interests in the Operating Partnership until the limited partner’s capital is reduced to zero and any remaining net loss would be allocated to the General Partner. However, in some cases, losses may be disproportionately allocated to partners who have guaranteed our debt. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Code, and the associated Treasury Regulations.

(c) Partnership Units

Limited partners have the right to require the Operating Partnership to redeem part or all of their common units for cash based on the fair market value of an equivalent number of shares of the General Partner’s common stock at the time of redemption. Alternatively, the General Partner may elect to acquire those common units in exchange for shares of the General Partner’s common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. Pursuant to authoritative accounting guidance, the Operating Partnership evaluated whether it controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement of the limited partners’ common units and the vested incentive units. Based on the results of this analysis, the Operating Partnership concluded that the common and vested incentive Operating Partnership units met the criteria to be classified within capital.

The redemption value of the limited partners’ common units and the vested incentive units was approximately $149.2 million and $124.1 million based on the closing market price of Digital Realty Trust, Inc.’s common stock on March 31, 2014 and December 31, 2013, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(d) Distributions

All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s board of directors. The Operating Partnership has declared and paid the following distributions on its common and preferred units for the three months ended March 31, 2014 (in thousands):


Date distribution declared	Distribution payable date	Series E Preferred Units ⁽¹⁾		Series F Preferred Units ⁽²⁾		Series G Preferred Units ⁽³⁾		Common Units ⁽⁴⁾
February 11, 2014	March 31, 2014	$	5,031	$	3,023	$	3,672	$	109,378

		$	5,031	$	3,023	$	3,672	$	109,378

(1)	$1.750 annual rate of distribution per unit.

(2)	$1.656 annual rate of distribution per unit.

(3)	$1.469 annual rate of distribution per unit.

(4)	$3.320 annual rate of distribution per unit.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(e) Accumulated Other Comprehensive Income

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


	Foreign currency translation adjustments		Cash flow hedge adjustments			Accumulated other comprehensive income
Balance as of December 31, 2013	$	10,235	$	(1,778	)	$	8,457
Net current period change		3,819		(1,343	)		2,476
Reclassification to interest expense from interest rate swaps		—		846			846

Balance as of March 31, 2014	$	14,054	$	(2,275	)	$	11,779

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

13. Incentive Plan

Our Amended and Restated 2004 Incentive Award Plan (as defined below) provided for the grant of incentive awards to employees, directors and consultants. Awards issuable under the Amended and Restated 2004 Incentive Award Plan included stock options, restricted stock, dividend equivalents, stock appreciation rights, long-term incentive units, cash performance bonuses and other incentive awards. Only employees were eligible to receive incentive stock options under the Amended and Restated 2004 Incentive Award Plan. Initially, we had reserved a total of 4,474,102 shares of common stock for issuance pursuant to the 2004 Incentive Award Plan, subject to certain adjustments set forth in the 2004 Incentive Award Plan. On May 2, 2007, Digital Realty Trust, Inc.’s stockholders approved the First Amended and Restated Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan (as amended, the Amended and Restated 2004 Incentive Award Plan). The Amended and Restated 2004 Incentive Award Plan increased the aggregate number of shares of stock which could have been issued or transferred under the plan by 5,000,000 shares to a total of 9,474,102 shares, and provided that the maximum number of shares of stock with respect to awards granted to any one participant during a calendar year was 1,500,000 shares and the maximum amount that could have been paid in cash during any calendar year with respect to any performance-based award not denominated in stock or otherwise for which the foregoing limitation would not be an effective limitation for purposes of Section 162(m) of the Code was $10.0 million.

As of March 31, 2014, 2,007,813 shares of common stock or awards convertible into or exchangeable for common stock remained available for future issuance under the Amended and Restated 2004 Incentive Award Plan. Each long-term incentive unit, Class C Unit and Class D Unit issued under the Amended and Restated 2004 Incentive Award Plan counted as one share of common stock for purposes of calculating the limit on shares that could be issued under the Amended and Restated 2004 Incentive Award Plan and the individual award limit discussed above.

On April 28, 2014, Digital Realty Trust, Inc. held its 2014 Annual Meeting of Stockholders, or 2014 Annual Meeting, at which the Company’s stockholders approved the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan, or the 2014 Incentive Award Plan, which had been previously recommended for approval by the Company’s Board of Directors. The 2014 Incentive Award Plan became effective as of the date of such stockholder approval. The material features of the 2014 Incentive Award Plan are described in our definitive Proxy Statement filed on March 19, 2014 in connection with the 2014 Annual Meeting, which description is incorporated herein by reference.

(a) Long-Term Incentive Units

Long-term incentive units, which are also referred to as profits interest units, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. Long-term incentive units, whether vested or not, will receive the same quarterly per unit distributions as Operating Partnership common units, which equal per share distributions on Digital Realty Trust, Inc. common stock. Initially, long-term incentive units do not have full parity with common units with respect to liquidating distributions. If such parity is reached, vested long-term incentive units may be converted into an equal number of common units of the Operating Partnership at any time, and thereafter enjoy all the rights of common units of the Operating Partnership, including redemption rights. For a discussion of how long-term incentive units reach parity with common units, see note 13(a) to our consolidated financial statements for the fiscal year ended December 31, 2013, included in our Annual Report on 10-K, as amended, for the year ended December 31, 2013.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

Below is a summary of our long-term incentive unit activity for the three months ended March 31, 2014.


Unvested Units	Units			Weighted-Average Grant Date Fair Value
Unvested, beginning of period		440,951		$	62.42
Granted		181,801			52.15
Vested		(289,564	)		59.13
Cancelled or expired		(18,773	)		65.21

Unvested, end of period		314,415			59.34

During the three months ended March 31, 2013, certain employees were granted an aggregate of 95,316 long-term incentive units, which, in addition to a service condition, were subject to a performance condition that impacted the number of units which ultimately vested. The performance condition was based upon our achievement of the 2013 Core Funds From Operations, or CFFO, per share targets. Based on our 2013 CFFO per diluted share and unit, 75,105 of the 2013 long-term incentive units, net of forfeitures satisfied the performance condition. The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock, are being expensed on a straight-line basis for service awards over four years, the current vesting period of the long-term incentive units. We expense the fair value of awards that contain a performance condition using an accelerated method with each vesting tranche valued as a separate award.

The expense recorded for the three months ended March 31, 2014 and 2013 related to long-term incentive units was approximately $7.8 million and $2.2 million, respectively. We capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $0.5 million and $0.4 million for the three months ended March 31, 2014 and 2013, respectively. Unearned compensation representing the unvested portion of the long-term incentive units totaled $14.3 million and $12.9 million as of March 31, 2014 and December 31, 2013, respectively. We expect to recognize this unearned compensation over the next 2.6 years on a weighted average basis.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(b) 2014 Performance-Based Awards

On February 11, 2014, the Compensation Committee of the Board of Directors of the Company approved the grant of performance-based Class D Units of the Operating Partnership and performance-based restricted stock units, or RSUs, covering shares of the Company’s common stock (collectively, the “awards”), under the Amended and Restated 2004 Incentive Award Plan to officers and employees of the Company.

The awards, which were determined to contain a market condition, utilize total shareholder return, or TSR, over a three-year measurement period as the performance metric. Awards will vest based on the Company’s TSR relative to the MSCI US REIT Index, or RMS, over a three-year performance period commencing in January 2014 (or, if earlier, ending on the date on which a change in control of the Company occurs), or the Performance Period, subject to continued services. Performance vesting is measured based on the difference between the Company’s TSR percentage and the TSR percentage of the RMS, or the RMS Relative Performance. In the event that the RMS Relative Performance during the Performance Period is achieved at the “threshold,” “target” or “high” level as set forth below, the awards will become performance-vested with respect to the percentage of Class D Units, or RSUs, as applicable, set forth below:


Level	RMS Relative Performance	Performance Vesting Percentage
	< 0 basis points		0	%
Threshold Level	0 points		25	%
Target Level	325 basis points		50	%
High Level	> 650 basis points		100	%

If the RMS Relative Performance falls between the levels specified above, the percentage of the awards that will performance vest will be determined using straight-line linear interpolation between such levels.

Following the completion of the Performance Period, performance-vested awards, if any, will vest 50% on February 27, 2017 and 50% on February 27, 2018, subject to continued employment through each applicable vesting date.

Vesting will be accelerated, in full or on a pro rata basis, in the event of a change in control, termination of employment by the Company without cause, termination of employment by the award recipient for good reason, death, disability or retirement.

The fair value of the 2014 grant of awards was measured using a Monte Carlo simulation to estimate the probability of the performance vesting conditions being satisfied. The Company’s achievement of the performance vesting conditions is contingent on its TSR over a three-year performance period, relative to the total shareholder return of the RMS. The Monte Carlo simulation is a probabilistic technique based on the underlying theory of the Black-Scholes formula, which was run for 100,000 trials to determine the fair value of the awards. For each trial, the payoff to an award is calculated at the settlement date and is then discounted to the grant date at a risk-free interest rate. The total expected value of the awards on the grant date was determined by multiplying the average value per award over all trials by the number of awards granted. Assumptions used in the valuation include expected stock price volatility of 33 percent and a risk-free interest rate of 0.67 percent. The valuation was performed in a risk-neutral framework, so no assumption was made with respect to an equity risk premium.

As of March 31, 2014, 645,484 performance-based Class D Units and 247,158 performance-based RSUs had been awarded to our executive officers and other employees. The fair value of these awards of approximately $17.1 million will be recognized as compensation expense on a straight-line basis over the expected service period of approximately four years. The unearned compensation as of March 31, 2014 was $13.6 million, net of cancellations. As of March 31, 2014, none of the above awards had vested. We recognized compensation expense related to these awards of $0.4 million in the three months ended March 31, 2014. We capitalized amounts relating to compensation expense of employees directly engaged in construction and leasing activities of $0.2 million for the three months ended March 31, 2014. If the market condition is not met, the unamortized amount will be recognized as an expense at that time.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(c) Stock Options

The following table summarizes the Amended and Restated 2004 Incentive Award Plan’s stock option activity for the period ended March 31, 2014:


	Period Ended March 31, 2014
	Shares			Weighted average exercise price
Options outstanding, beginning of period		123,690		$	30.13
Exercised		(917	)		41.73
Cancelled / Forfeited		—			—

Options outstanding, end of period		122,773		$	30.04

Exercisable, end of period		122,773		$	30.04

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2014:


Options outstanding and exercisable
Exercise price	Number outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Aggregate intrinsic value
$12.00-13.02		34,870		0.58	$	12.00	$	1,432,460
$20.37-28.09		17,000		1.64		21.28		540,630
$33.18-41.73		70,903		3.05		41.02		855,416

		122,773		2.15	$	30.04	$	2,828,506

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

(d) Restricted Stock

Below is a summary of our restricted stock activity for the three months ended March 31, 2014.


Unvested Shares	Shares			Weighted-Average Grant Date Fair Value
Unvested, beginning of period		255,081		$	63.35
Granted		158,780			52.11
Vested		(70,485	)		60.50
Cancelled or expired		(13,023	)		65.21

Unvested, end of period		330,353			58.48

The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock, are being expensed on a straight-line basis for service awards over the vesting period of the restricted stock, which ranges from three to four years. We expense the fair value of awards that contain a performance condition using an accelerated method with each vesting tranche valued as a separate award.

During the three months ended March 31, 2013, certain employees were granted an aggregate of 69,995 shares of restricted stock, which, in addition to a service condition, were subject to a performance condition that impacted the number of shares which ultimately vested. The performance condition was based upon our achievement of the 2013 CFFO per share targets. Upon evaluating the results of the performance condition, the final number of shares was determined and such shares vest based on satisfaction of the service conditions. Based on our 2013 CFFO per diluted share and unit, 50,805 shares of the 2013 restricted stock awards (net of forfeitures) satisfied the performance condition.

The expense recorded for the three months ended March 31, 2014 and 2013 related to grants of restricted stock was approximately $0.8 million and $0.7 million, respectively. We capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $0.8 million and $0.6 million for the three months ended March 31, 2014 and 2013, respectively. Unearned compensation representing the unvested portion of the restricted stock totaled $15.1 million and $8.7 million as of March 31, 2014 and December 31, 2013, respectively. We expect to recognize this unearned compensation over the next 3.0 years on a weighted average basis.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

14. Derivative Instruments

As of March 31, 2014 and December 31, 2013, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands):


Notional Amount											Fair Value at Significant Other Observable Inputs (Level 2)
As of March 31, 2014			As of December 31, 2013			Type of Derivative	Strike Rate		Effective Date	Expiration Date	As of March 31, 2014			As of December 31, 2013

	*Currently-paying contracts*
	$410,905	⁽¹⁾	$	410,905	⁽¹⁾	Swap		0.717	Various	Various	$	(234	)	$	(76	)
	150,696	⁽²⁾		150,040	⁽²⁾	Swap		0.925	Jul. 17, 2012	Apr. 18, 2017		474			131

	561,601			560,945								240			55


	*Forward-starting contracts*
	150,000	⁽³⁾		—		Forward- starting Swap		2.091	Jul. 15, 2014	Jul. 15, 2019		(681	)		—


	*Total*
	$711,601		$	560,945							$	(441	)	$	55

(1)	Represents the U.S. dollar tranche of the unsecured term loan.

(2)	Represents a portion of the Singapore dollar tranche of the unsecured term loan. Translation to U.S. dollars is based on exchange rate of $0.80 to 1.00 SGD as of March 31, 2014 and $0.79 to 1.00 SGD as of December 31, 2013.

(3)	In January 2014, we entered into a new forward-starting swap agreement with a notional amount of $150.0 million requiring fixed rate interest payments of 2.091% for a five-year period that commences in July 2014.

As of March 31, 2014, we estimate that an additional $5.1 million will be reclassified as an increase to interest expense during the twelve months ending March 31, 2015, when the hedged forecasted transactions impact earnings.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

15. Fair Value of Instruments

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

The Company’s disclosures of estimated fair value of financial instruments at March 31, 2014 and December 31, 2013 were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

The carrying amounts for cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and other accrued liabilities, accrued dividends and distributions, security deposits and prepaid rents approximate fair value because of the short-term nature of these instruments. As described in note 14, the interest rate swaps are recorded at fair value.

We calculate the fair value of our mortgage loans, unsecured term loan, unsecured senior notes and exchangeable senior debentures based on currently available market rates assuming the loans are outstanding through maturity and considering the collateral and other loan terms. In determining the current market rate for fixed rate debt, a market spread is added to the quoted yields on federal government treasury securities with similar maturity dates to our debt. The carrying value of our global revolving credit facility approximates fair value, due to the variability of interest rates.

As of March 31, 2014 and December 31, 2013, the aggregate estimated fair value and carrying value of our global revolving credit facility, unsecured term loan, unsecured senior notes, exchangeable senior debentures and mortgage loans were as follows (in thousands):


	Categorization under the fair value hierarchy		As of March 31, 2014				As of December 31, 2013
	Categorization under the fair value hierarchy		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value
Global revolving credit facility ⁽¹⁾		Level 2	$	790,500	$	790,500	$	724,668	$	724,668
Unsecured term loan ⁽²⁾		Level 2		1,026,891		1,026,891		1,020,984		1,020,984
Unsecured senior notes ⁽³⁾⁽⁴⁾		Level 2		2,422,322		2,368,848		2,379,999		2,364,232
Exchangeable senior debentures ⁽³⁾		Level 2		363,846		266,400		336,847		266,400
Mortgage loans ⁽³⁾		Level 2		589,378		554,742		622,580		585,608

			$	5,192,937	$	5,007,381	$	5,085,078	$	4,961,892

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

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

(3)	Valuations for our unsecured senior notes and mortgage loans are determined based on the expected future payments discounted at risk-adjusted rates. The 2015 Notes, 2020 Notes, 2021 Notes, 2022 Notes and 2025 Notes and exchangeable senior debentures are valued based on quoted market prices.

(4)	The carrying value of the 2015 Notes, 2020 Notes, 2021 Notes, 2022 Notes and 2025 Notes are net of discount of $14,632 and $15,047 in the aggregate as of March 31, 2014 and December 31, 2013, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

16. Commitments and Contingencies

(a) Contingent liabilities

As part of the acquisition of 29A International Business Park, the seller could earn additional consideration based on future net operating income growth in excess of certain performance targets, as defined in the agreements for the acquisition. As of March 31, 2014, construction is not complete and none of the leases executed subsequent to purchase would cause an amount to become probable of payment and therefore no amount is accrued as of March 31, 2014. The maximum amount that could be earned by the seller is $50.0 million SGD (or approximately $39.8 million based on the exchange rate as of March 31, 2014). The earnout contingency expires in November 2020.

One of the tenants at our Convergence Business Park property has an option to expand as part of their lease agreement, which expires in April 2017. As part of this option, development activities are not permitted on specifically identified expansion space within the property until April 2014. From April 2014 through April 2017, the tenant has the right of first refusal on any third party’s bona fide offer to buy the adjacent land. If the tenant exercises their option, we may (a) construct and lease an additional shell building on the expansion space to the tenant at a stipulated rate of return on cost or (b) sell the existing building and the expansion space to the tenant for a price of approximately $24.0 million and $225,000 per square acre, respectively, plus additional adjustments as provided in the lease.

As part of the acquisition of the Sentrum Portfolio, the seller could earn additional consideration based on future net returns on vacant space to be developed, but not currently leased, as defined in the purchase agreement for the acquisition. The initial estimate of fair value of contingent consideration was approximately £56.5 million (or approximately $87.6 million based on the exchange rate as of July 11, 2012, the acquisition date). We have adjusted the contingent consideration to fair value at each reporting date with changes in fair value recognized in operating income. At March 31, 2014, the fair value of the contingent consideration for Sentrum was £37.2 million (or approximately $62.0 million based on the exchange rate as of March 31, 2014) and is currently accrued in accounts payable and other accrued expenses in the condensed consolidated balance sheet. During the year ended December 31, 2013, we made earnout payments of approximately £16.9 million (or approximately $25.8 million based on the exchange rates as of the date of each payment). No payments were made during the three months ended March 31, 2014. Change in fair value of contingent consideration for Sentrum was an increase to operating income of approximately $3.4 million for the three months ended March 31, 2014 and a reduction to operating income of approximately $1.3 million for the three months ended March 31, 2013. The earn-out contingency expires in July 2015. This amount will be reassessed on a quarterly basis, with any changes being recognized in earnings. Increases or decreases in the fair value of the contingent consideration can result from changes in discount periods, discount rates and probabilities that contingencies will be met.

(b) Construction Commitments

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements and from time to time in the normal course of our business, we enter into various construction contracts with third parties that may obligate us to make payments. At March 31, 2014, we had open commitments related to construction contracts of approximately $281.4 million.

(c) Legal Proceedings

Although the Company is involved in legal proceedings arising in the ordinary course of business, as of March 31, 2014, the Company is not currently a party to any legal proceedings nor, to its knowledge, is any legal proceeding threatened against it that it believes would have a material adverse effect on its financial position, results of operations or liquidity.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2014 and 2013

17. Subsequent Events

On April 1, 2014, Digital Stout Holding, LLC, a wholly-owned subsidiary of Digital Realty Trust, L.P, issued £300.0 million (or approximately $498.9 million based on the April 1, 2014 exchange rate of £1.00 to $1.66) aggregate principal amount of its 4.750% Guaranteed Notes due 2023, or the 2023 notes. The 2023 notes are senior unsecured obligations of Digital Stout Holding, LLC and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and Digital Realty Trust, L.P. Interest on the 2023 notes is payable semiannually in arrears at a rate of 4.750% per annum. The 2023 notes will mature on October 13, 2023. We intend to use the net proceeds from the offering of the 2023 notes to temporarily repay borrowings under our global revolving credit facility, to acquire additional properties, to fund development opportunities, for general working capital purposes or a combination of the foregoing.

On April 29, 2014, we declared the following dividends per share and the Operating Partnership declared an equivalent distribution per unit:


Share / Unit Class	Series E Preferred Stock and Unit		Series F Preferred Stock and Unit		Series G Preferred Stock and Unit		Series H Preferred Stock and Unit	Common stock and common unit
Dividend and distribution amount	$	0.437500	$	0.414063	$	0.367188