DLR 6.30.2015 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2015
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¨ | 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)
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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) |
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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.
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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).
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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.:
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Large accelerated filer | x | | Accelerated filer | ¨ |
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Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | | Smaller reporting company | ¨ |
Digital Realty Trust, L.P.:
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Large accelerated filer | ¨ | | Accelerated filer | ¨ |
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Non-accelerated filer | x (Do not check if a smaller reporting company) | | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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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.:
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Class | | Outstanding at July 31, 2015 |
Common Stock, $.01 par value per share | | 135,833,978 |
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2015 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 June 30, 2015, Digital Realty Trust, Inc. owned an approximate 97.9% common general partnership interest in Digital Realty Trust, L.P. The remaining approximate 2.1% common limited partnership interests are owned by non-affiliated investors and certain directors and officers of Digital Realty Trust, Inc. As of June 30, 2015, 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:
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• | 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; |
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• | 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 |
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• | 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. generally does not conduct business itself, other than acting as the sole general partner of Digital Realty Trust, L.P., issuing public securities 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 has not issued 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 primarily 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:
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• | Condensed consolidated financial statements; |
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• | the following notes to the condensed consolidated financial statements: |
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• | "Debt of the Company" and "Debt of the Operating Partnership"; |
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• | "Income per Share" and "Income per Unit"; and |
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• | "Equity and Accumulated Other Comprehensive Income, Net" and "Capital and Accumulated Other Comprehensive Income"; |
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• | Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources"; and |
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• | Part II, Item 2. "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 during the period covered by this report 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 JUNE 30, 2015
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION |
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ITEM 1. | Condensed Consolidated Financial Statements of Digital Realty Trust, Inc.: |
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| Condensed Consolidated Financial Statements of Digital Realty Trust, L.P.: |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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PART II. | | |
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ITEM 1. | | |
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ITEM 1A. | | |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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ITEM 5. | | |
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ITEM 6. | | |
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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
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| June 30,
2015 | | December 31,
2014 |
| (unaudited) | | |
ASSETS | | | |
Investments in real estate: | | | |
Properties: | | | |
Land | $ | 645,918 |
| | $ | 671,602 |
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Acquired ground leases | 13,225 |
| | 12,196 |
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Buildings and improvements | 8,938,019 |
| | 8,823,814 |
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Tenant improvements | 543,964 |
| | 475,000 |
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Total investments in properties | 10,141,126 |
| | 9,982,612 |
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Accumulated depreciation and amortization | (2,033,289 | ) | | (1,874,054 | ) |
Net investments in properties | 8,107,837 |
| | 8,108,558 |
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Investment in unconsolidated joint ventures | 103,410 |
| | 94,729 |
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Net investments in real estate | 8,211,247 |
| | 8,203,287 |
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Cash and cash equivalents | 59,152 |
| | 41,321 |
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Accounts and other receivables, net of allowance for doubtful accounts of $6,263 and $6,302
as of June 30, 2015 and December 31, 2014, respectively | 126,734 |
| | 135,931 |
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Deferred rent | 467,262 |
| | 447,643 |
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Acquired above-market leases, net | 33,936 |
| | 38,605 |
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Acquired in-place lease value and deferred leasing costs, net | 424,229 |
| | 456,962 |
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Deferred financing costs, net | 30,203 |
| | 30,821 |
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Restricted cash | 9,394 |
| | 11,555 |
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Assets held for sale | 171,990 |
| | 120,471 |
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Other assets | 51,862 |
| | 40,188 |
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Total assets | $ | 9,586,009 |
| | $ | 9,526,784 |
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LIABILITIES AND EQUITY | | | |
Global revolving credit facility | $ | 777,013 |
| | $ | 525,951 |
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Unsecured term loan | 961,098 |
| | 976,600 |
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Unsecured senior notes, net of discount | 2,856,408 |
| | 2,791,758 |
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Mortgage loans, including premiums | 374,307 |
| | 378,818 |
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Accounts payable and other accrued liabilities | 516,232 |
| | 605,923 |
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Accrued dividends and distributions | — |
| | 115,019 |
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Acquired below-market leases, net | 94,312 |
| | 104,235 |
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Security deposits and prepaid rents | 109,005 |
| | 108,478 |
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Obligations associated with assets held for sale | 7,441 |
| | 5,764 |
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Total liabilities | 5,695,816 |
| | 5,612,546 |
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Commitments and contingencies |
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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 June 30, 2015 and December 31, 2014, respectively | 277,172 |
| | 277,172 |
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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 June 30, 2015 and December 31, 2014, respectively | 176,191 |
| | 176,191 |
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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 June 30, 2015 and December 31, 2014, respectively | 241,468 |
| | 241,468 |
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Series H Cumulative Redeemable Preferred Stock, 7.375%, $365,000 and $365,000
liquidation preference, respectively ($25.00 per share), 14,600,000 and 14,600,000 shares
issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | 353,290 |
| | 353,290 |
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Common Stock: $0.01 par value, 215,000,000 shares authorized, 135,832,492 and
135,626,255 shares issued and outstanding as of June 30, 2015 and
December 31, 2014, respectively | 1,351 |
| | 1,349 |
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Additional paid-in capital | 3,974,398 |
| | 3,970,439 |
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Accumulated dividends in excess of earnings | (1,108,701 | ) | | (1,096,607 | ) |
Accumulated other comprehensive loss, net | (67,324 | ) | | (45,046 | ) |
Total stockholders’ equity | 3,847,845 |
| | 3,878,256 |
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Noncontrolling Interests: | | | |
Noncontrolling interests in operating partnership | 35,577 |
| | 29,191 |
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Noncontrolling interests in consolidated joint ventures | 6,771 |
| | 6,791 |
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Total noncontrolling interests | 42,348 |
| | 35,982 |
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Total equity | 3,890,193 |
| | 3,914,238 |
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Total liabilities and equity | $ | 9,586,009 |
| | $ | 9,526,784 |
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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)
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Operating Revenues: | | | | | | | |
Rental | $ | 330,676 |
| | $ | 313,420 |
| | $ | 649,842 |
| | $ | 619,206 |
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Tenant reimbursements | 87,572 |
| | 85,687 |
| | 173,401 |
| | 169,308 |
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Fee income | 1,549 |
| | 1,466 |
| | 3,163 |
| | 2,649 |
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Other | 498 |
| | 873 |
| | 498 |
| | 873 |
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Total operating revenues | 420,295 |
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| 401,446 |
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| 826,904 |
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| 792,036 |
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Operating Expenses: | | | | |
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Rental property operating and maintenance | 129,539 |
| | 126,796 |
| | 254,102 |
| | 244,692 |
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Property taxes | 20,900 |
| | 20,595 |
| | 44,163 |
| | 42,720 |
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Insurance | 2,154 |
| | 1,896 |
| | 4,309 |
| | 4,318 |
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Change in fair value of contingent consideration | 352 |
| | 766 |
| | (42,682 | ) | | (2,637 | ) |
Depreciation and amortization | 131,524 |
| | 137,092 |
| | 260,597 |
| | 267,712 |
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General and administrative | 25,613 |
| | 20,321 |
| | 46,807 |
| | 50,999 |
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Transactions | 3,166 |
| | 755 |
| | 3,259 |
| | 836 |
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Other | (6 | ) | | 772 |
| | (22 | ) | | 936 |
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Total operating expenses | 313,242 |
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| 308,993 |
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| 570,533 |
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| 609,576 |
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Operating income | 107,053 |
| | 92,453 |
| | 256,371 |
| | 182,460 |
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Other Income (Expenses): | | | | | | | |
Equity in earnings of unconsolidated joint ventures | 3,383 |
| | 3,477 |
| | 8,001 |
| | 6,058 |
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Gain on sale of property | 76,669 |
| | 15,945 |
| | 94,489 |
| | 15,945 |
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Gain on contribution of property to unconsolidated joint venture | — |
| | — |
| | — |
| | 1,906 |
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Interest and other income (expense) | (231 | ) | | (83 | ) | | (2,521 | ) | | 1,644 |
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Interest expense | (46,114 | ) | | (49,146 | ) | | (91,580 | ) | | (96,520 | ) |
Tax expense | (2,615 | ) | | (1,021 | ) | | (4,290 | ) | | (2,859 | ) |
Loss from early extinguishment of debt | (148 | ) | | (293 | ) | | (148 | ) | | (585 | ) |
Net income | 137,997 |
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| 61,332 |
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| 260,322 |
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| 108,049 |
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Net income attributable to noncontrolling interests | (2,486 | ) | | (993 | ) | | (4,628 | ) | | (1,798 | ) |
Net income attributable to Digital Realty Trust, Inc. | 135,511 |
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| 60,339 |
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| 255,694 |
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| 106,251 |
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Preferred stock dividends | (18,456 | ) | | (18,829 | ) | | (36,911 | ) | | (30,555 | ) |
Net income available to common stockholders | $ | 117,055 |
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| $ | 41,510 |
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| $ | 218,783 |
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| $ | 75,696 |
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Net income per share available to common stockholders: | | | | | | | |
Basic | $ | 0.86 |
| | $ | 0.31 |
| | $ | 1.61 |
| | $ | 0.58 |
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Diluted | $ | 0.86 |
| | $ | 0.31 |
| | $ | 1.61 |
| | $ | 0.58 |
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Weighted average common shares outstanding: | | | | | | | |
Basic | 135,810,060 |
| | 133,802,622 |
| | 135,757,584 |
| | 131,183,857 |
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Diluted | 136,499,004 |
| | 133,977,885 |
| | 136,260,995 |
| | 131,320,547 |
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See accompanying notes to the condensed consolidated financial statements.
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Net income | $ | 137,997 |
| | $ | 61,332 |
| | $ | 260,322 |
| | $ | 108,049 |
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Other comprehensive income: | | | | | | | |
Foreign currency translation adjustments | 23,468 |
| | 4,921 |
| | (22,375 | ) | | 8,740 |
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Increase (decrease) in fair value of interest rate swaps | 577 |
| | (4,739 | ) | | (1,840 | ) | | (6,082 | ) |
Reclassification to interest expense from interest rate swaps | 685 |
| | 854 |
| | 1,503 |
| | 1,700 |
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Comprehensive income | 162,727 |
| | 62,368 |
| | 237,610 |
| | 112,407 |
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Comprehensive income attributable to noncontrolling interests | (2,978 | ) | | (1,014 | ) | | (4,194 | ) | | (1,885 | ) |
Comprehensive income attributable to Digital Realty Trust, Inc. | $ | 159,749 |
| | $ | 61,354 |
| | $ | 233,416 |
| | $ | 110,522 |
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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)
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| Preferred Stock | | Number of Common Shares | | Common Stock | | Additional Paid-in Capital | | Accumulated Dividends in Excess of Earnings | | Accumulated Other Comprehensive Loss, 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, 2014 | $ | 1,048,121 |
| | 135,626,255 |
| | $ | 1,349 |
| | $ | 3,970,439 |
| | $ | (1,096,607 | ) | | $ | (45,046 | ) | | $ | 3,878,256 |
| | $ | 29,191 |
| | $ | 6,791 |
| | $ | 35,982 |
| | $ | 3,914,238 |
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Conversion of units to common stock | — |
| | 114,587 |
| | 2 |
| | 1,310 |
| | — |
| | — |
| | 1,312 |
| | (1,312 | ) | | — |
| | (1,312 | ) | | — |
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Issuance of unvested restricted stock, net of forfeitures | — |
| | 79,689 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
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Common stock offering costs | — |
| | — |
| | — |
| | (273 | ) | | — |
| | — |
| | (273 | ) | | — |
| | — |
| | — |
| | (273 | ) |
Exercise of stock options | — |
| | 11,961 |
| | — |
| | 493 |
| | — |
| | — |
| | 493 |
| | — |
| | — |
| | — |
| | 493 |
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Amortization of unearned compensation on share-based awards | — |
| | — |
| | — |
| | 11,031 |
| | — |
| | — |
| | 11,031 |
| | — |
| | — |
| | — |
| | 11,031 |
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Reclassification of vested share-based awards | — |
| | — |
| | — |
| | (8,602 | ) | | — |
| | — |
| | (8,602 | ) | | 8,602 |
| | — |
| | 8,602 |
| | — |
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Dividends declared and paid on preferred stock | — |
| | — |
| | — |
| | — |
| | (36,911 | ) | | — |
| | (36,911 | ) | | — |
| | — |
| | — |
| | (36,911 | ) |
Dividends and distributions on common stock and common and incentive units | — |
| | — |
| | — |
| | — |
| | (230,877 | ) | | — |
| | (230,877 | ) | | (4,873 | ) | | — |
| | (4,873 | ) | | (235,750 | ) |
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (245 | ) | | (245 | ) | | (245 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 255,694 |
| | — |
| | 255,694 |
| | 4,403 |
| | 225 |
| | 4,628 |
| | 260,322 |
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Other comprehensive income—foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | — |
| | (21,947 | ) | | (21,947 | ) | | (428 | ) | | — |
| | (428 | ) | | (22,375 | ) |
Other comprehensive loss—fair value of interest rate swaps | — |
| | — |
| | — |
| | — |
| | — |
| | (1,804 | ) | | (1,804 | ) | | (36 | ) | | — |
| | (36 | ) | | (1,840 | ) |
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense | — |
| | — |
| | — |
| | — |
| | — |
| | 1,473 |
| | 1,473 |
| | 30 |
| | — |
| | 30 |
| | 1,503 |
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Balance as of June 30, 2015 | $ | 1,048,121 |
| | 135,832,492 |
| | $ | 1,351 |
| | $ | 3,974,398 |
| | $ | (1,108,701 | ) | | $ | (67,324 | ) | | $ | 3,847,845 |
| | $ | 35,577 |
| | $ | 6,771 |
| | $ | 42,348 |
| | $ | 3,890,193 |
|
See accompanying notes to the condensed consolidated financial statements.
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2015 | | 2014 |
Cash flows from operating activities: | | | |
Net income | $ | 260,322 |
| | $ | 108,049 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Gain on sale of properties | (94,489 | ) | | (15,945 | ) |
Gain on contribution of investment property to unconsolidated joint venture | — |
| | (1,906 | ) |
Equity in earnings of unconsolidated joint ventures | (8,001 | ) | | (6,058 | ) |
Change in fair value of accrued contingent consideration | (42,682 | ) | | (2,637 | ) |
Distributions from unconsolidated joint ventures | 6,898 |
| | 4,603 |
|
Write-off of net assets due to early lease terminations | (59 | ) | | 651 |
|
Depreciation and amortization of buildings and improvements, tenant improvements
and acquired ground leases | 226,767 |
| | 225,025 |
|
Amortization of share-based unearned compensation | 7,483 |
| | 12,640 |
|
Allowance for doubtful accounts | (39 | ) | | 954 |
|
Amortization of deferred financing costs | 4,285 |
| | 4,487 |
|
Loss on early extinguishment of debt | 148 |
| | 585 |
|
Amortization of debt discount/premium | 915 |
| | 864 |
|
Amortization of acquired in-place lease value and deferred leasing costs | 33,830 |
| | 42,687 |
|
Amortization of acquired above-market leases and acquired below-market leases, net | (4,683 | ) | | (5,340 | ) |
Changes in assets and liabilities: | | | |
Restricted cash | 566 |
| | 1,922 |
|
Accounts and other receivables | 4,826 |
| | 20,583 |
|
Deferred rent | (27,868 | ) | | (41,283 | ) |
Deferred leasing costs | (4,675 | ) | | (7,663 | ) |
Other assets | (15,429 | ) | | (13,328 | ) |
Accounts payable and other accrued liabilities | 4,344 |
| | 3,718 |
|
Security deposits and prepaid rents | 2,692 |
| | (17,344 | ) |
Net cash provided by operating activities | 355,151 |
| | 315,264 |
|
Cash flows from investing activities: | | | |
Acquisitions of real estate | (48,424 | ) | | — |
|
Proceeds from sale of properties, net | 185,565 |
| | 37,945 |
|
Proceeds from contribution of investment properties to unconsolidated joint ventures | — |
| | 11,408 |
|
Investment in unconsolidated joint ventures | (7,547 | ) | | (20,627 | ) |
Investment in equity securities | — |
| | (3 | ) |
Receipt of value added tax refund | 13,422 |
| | 4,956 |
|
Refundable value added tax paid | (2,771 | ) | | (3,816 | ) |
Change in restricted cash | 1,484 |
| | (1,340 | ) |
Improvements to and advances for investments in real estate | (380,148 | ) | | (431,217 | ) |
Improvement advances to tenants | (17,881 | ) | | (7,091 | ) |
Collection of advances from tenants for improvements | 14,441 |
| | 5,969 |
|
Net cash used in investing activities | (241,859 | ) | | (403,816 | ) |
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)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2015 | | 2014 |
Cash flows from financing activities: | | | |
Borrowings on revolving credit facility | $ | 1,291,832 |
| | $ | 677,264 |
|
Repayments on revolving credit facility | (1,032,798 | ) | | (1,033,838 | ) |
Principal payments on unsecured notes | (374,927 | ) | | — |
|
Repayments on other unsecured loans | (67,000 | ) | | — |
|
Borrowings on 3.950% unsecured senior notes due 2022 | 496,190 |
|
| — |
|
Borrowings on 4.750% unsecured senior notes due 2023 | — |
|
| 495,872 |
|
Principal payments on mortgage loans | (4,440 | ) | | (6,349 | ) |
Principal repayments on exchangeable senior debentures | — |
| | (5,234 | ) |
Earnout payments related to acquisitions | (12,985 | ) |
| (5,706 | ) |
Change in restricted cash | 113 |
|
| 51 |
|
Payment of loan fees and costs | (3,741 | ) | | (5,311 | ) |
Capital distributions paid to noncontrolling interests in consolidated joint ventures, net | (245 | ) |
| (274 | ) |
Gross proceeds from the issuance of preferred stock | — |
|
| 365,000 |
|
Common stock offering costs paid | (273 | ) |
| (93 | ) |
Preferred stock offering costs paid | — |
|
| (11,622 | ) |
Proceeds from exercise of stock options | 493 |
|
| 237 |
|
Payment of dividends to preferred stockholders | (36,911 | ) |
| (30,555 | ) |
Payment of dividends to common stockholders and distributions to
noncontrolling interests in operating partnership | (350,769 | ) |
| (326,772 | ) |
Net cash (used in) provided by financing activities | (95,461 | ) | | 112,670 |
|
Net increase in cash and cash equivalents | 17,831 |
| | 24,118 |
|
Cash and cash equivalents at beginning of period | 41,321 |
| | 56,808 |
|
Cash and cash equivalents at end of period | $ | 59,152 |
| | $ | 80,926 |
|
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)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2015 | | 2014 |
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest | $ | 101,036 |
| | $ | 98,240 |
|
Cash paid for income taxes | 1,785 |
| | 2,800 |
|
Supplementary disclosure of noncash investing and financing activities: | | | |
Change in net assets related to foreign currency translation adjustments | $ | (22,375 | ) | | $ | 8,740 |
|
(Decrease) increase in accounts payable and other accrued liabilities related to change in
fair value of interest rate swaps | (1,840 | ) | | (6,082 | ) |
Noncontrolling interests in operating partnership redeemed for or converted to
shares of common stock | 1,312 |
| | 191 |
|
Accrual for additions to investments in real estate and tenant improvement advances
included in accounts payable and accrued expenses | 134,625 |
| | 191,148 |
|
Accrual for potential earnout contingency | 12,443 |
| | — |
|
Issuance of common units associated with exchange of exchangeable senior debentures | — |
| | 261,166 |
|
Note receivable related to sale of property | 9,000 |
| | — |
|
Allocation of purchase price of real estate/investment in partnership to: | | | |
Investments in real estate | 48,424 |
| | — |
|
Cash paid for acquisition of real estate | $ | 48,424 |
| | $ | — |
|
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)
|
| | | | | | | |
| June 30,
2015 | | December 31,
2014 |
| (unaudited) | | |
ASSETS | | | |
Investments in real estate: | | | |
Properties: | | | |
Land | $ | 645,918 |
| | $ | 671,602 |
|
Acquired ground leases | 13,225 |
| | 12,196 |
|
Buildings and improvements | 8,938,019 |
| | 8,823,814 |
|
Tenant improvements | 543,964 |
| | 475,000 |
|
Total investments in properties | 10,141,126 |
| | 9,982,612 |
|
Accumulated depreciation and amortization | (2,033,289 | ) | | (1,874,054 | ) |
Net investments in properties | 8,107,837 |
| | 8,108,558 |
|
Investment in unconsolidated joint ventures | 103,410 |
| | 94,729 |
|
Net investments in real estate | 8,211,247 |
| | 8,203,287 |
|
Cash and cash equivalents | 59,152 |
| | 41,321 |
|
Accounts and other receivables, net of allowance for doubtful accounts of $6,263 and $6,302
as of June 30, 2015 and December 31, 2014, respectively | 126,734 |
| | 135,931 |
|
Deferred rent | 467,262 |
| | 447,643 |
|
Acquired above-market leases, net | 33,936 |
| | 38,605 |
|
Acquired in-place lease value and deferred leasing costs, net | 424,229 |
| | 456,962 |
|
Deferred financing costs, net | 30,203 |
| | 30,821 |
|
Restricted cash | 9,394 |
| | 11,555 |
|
Assets held for sale | 171,990 |
| | 120,471 |
|
Other assets | 51,862 |
| | 40,188 |
|
Total assets | $ | 9,586,009 |
| | $ | 9,526,784 |
|
LIABILITIES AND CAPITAL |
| |
|
Global revolving credit facility | $ | 777,013 |
| | $ | 525,951 |
|
Unsecured term loan | 961,098 |
| | 976,600 |
|
Unsecured senior notes, net of discount | 2,856,408 |
| | 2,791,758 |
|
Mortgage loans, including premiums | 374,307 |
| | 378,818 |
|
Accounts payable and other accrued liabilities | 516,232 |
| | 605,923 |
|
Accrued dividends and distributions | — |
| | 115,019 |
|
Acquired below-market leases, net | 94,312 |
| | 104,235 |
|
Security deposits and prepaid rents | 109,005 |
| | 108,478 |
|
Obligations associated with assets held for sale | 7,441 |
| | 5,764 |
|
Total liabilities | 5,695,816 |
| | 5,612,546 |
|
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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014, 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 June 30, 2015 and December 31, 2014, respectively | 241,468 |
| | 241,468 |
|
Series H Cumulative Redeemable Preferred Units, 7.375%, $365,000 and $365,000 liquidation preference, respectively ($25.00 per unit), 14,600,000 and 14,600,000 units issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | 353,290 |
| | 353,290 |
|
Common units: |
|
| |
|
|
135,832,492 and 135,626,255 units issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | 2,867,048 |
| | 2,875,181 |
|
Limited partners, 1,425,314 and 1,463,814 common units, 1,126,429 and 1,170,610 profits interest units and 379,237 and 379,237
class C units outstanding as of June 30, 2015 and December 31, 2014, respectively | 39,398 |
| | 32,578 |
|
Accumulated other comprehensive loss | (71,145 | ) | | (48,433 | ) |
Total partners’ capital | 3,883,422 |
| | 3,907,447 |
|
Noncontrolling interests in consolidated joint ventures | 6,771 |
| | 6,791 |
|
Total capital | 3,890,193 |
| | 3,914,238 |
|
Total liabilities and capital | $ | 9,586,009 |
| | $ | 9,526,784 |
|
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 June 30, | | Six Months Ended June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Operating Revenues: | | | | | | | |
Rental | $ | 330,676 |
| | $ | 313,420 |
| | $ | 649,842 |
| | $ | 619,206 |
|
Tenant reimbursements | 87,572 |
| | 85,687 |
| | 173,401 |
| | 169,308 |
|
Fee income | 1,549 |
| | 1,466 |
| | 3,163 |
| | 2,649 |
|
Other | 498 |
| | 873 |
| | 498 |
| | 873 |
|
Total operating revenues | 420,295 |
| | 401,446 |
| | 826,904 |
| | 792,036 |
|
Operating Expenses: | | | | | | | |
Rental property operating and maintenance | 129,539 |
| | 126,796 |
| | 254,102 |
| | 244,692 |
|
Property taxes | 20,900 |
| | 20,595 |
| | 44,163 |
| | 42,720 |
|
Insurance | 2,154 |
| | 1,896 |
| | 4,309 |
| | 4,318 |
|
Change in fair value of contingent consideration | 352 |
| | 766 |
| | (42,682 | ) | | (2,637 | ) |
Depreciation and amortization | 131,524 |
| | 137,092 |
| | 260,597 |
| | 267,712 |
|
General and administrative | 25,613 |
| | 20,321 |
| | 46,807 |
| | 50,999 |
|
Transactions | 3,166 |
| | 755 |
| | 3,259 |
| | 836 |
|
Other | (6 | ) | | 772 |
| | (22 | ) | | 936 |
|
Total operating expenses | 313,242 |
| | 308,993 |
| | 570,533 |
| | 609,576 |
|
Operating income | 107,053 |
| | 92,453 |
| | 256,371 |
| | 182,460 |
|
Other Income (Expenses): | | | | | | | |
Equity in earnings of unconsolidated joint ventures | 3,383 |
| | 3,477 |
| | 8,001 |
| | 6,058 |
|
Gain on sale of properties | 76,669 |
| | 15,945 |
| | 94,489 |
| | 15,945 |
|
Gain on contribution of property to unconsolidated joint venture | — |
| | — |
| | — |
| | 1,906 |
|
Interest and other income (expense) | (231 | ) | | (83 | ) | | (2,521 | ) | | 1,644 |
|
Interest expense | (46,114 | ) | | (49,146 | ) | | (91,580 | ) | | (96,520 | ) |
Tax expense | (2,615 | ) | | (1,021 | ) | | (4,290 | ) | | (2,859 | ) |
Loss from early extinguishment of debt | (148 | ) | | (293 | ) | | (148 | ) | | (585 | ) |
Net income | 137,997 |
| | 61,332 |
| | 260,322 |
| | 108,049 |
|
Net income attributable to noncontrolling interests in consolidated joint ventures | (109 | ) | | (120 | ) | | (225 | ) | | (232 | ) |
Net income attributable to Digital Realty Trust, L.P. | 137,888 |
| | 61,212 |
| | 260,097 |
| | 107,817 |
|
Preferred units distributions | (18,456 | ) | | (18,829 | ) | | (36,911 | ) | | (30,555 | ) |
Net income available to common unitholders | $ | 119,432 |
| | $ | 42,383 |
| | $ | 223,186 |
| | $ | 77,262 |
|
Net income per unit available to common unitholders: | | | | | | | |
Basic | $ | 0.86 |
| | $ | 0.31 |
| | $ | 1.61 |
| | $ | 0.58 |
|
Diluted | $ | 0.86 |
| | $ | 0.31 |
| | $ | 1.61 |
| | $ | 0.58 |
|
Weighted average common units outstanding: | | | | | | | |
Basic | 138,567,526 |
| | 136,615,338 |
| | 138,487,704 |
| | 133,894,119 |
|
Diluted | 139,256,470 |
| | 136,790,601 |
| | 138,991,115 |
| | 134,030,809 |
|
See accompanying notes to the condensed consolidated financial statements.
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Net income | $ | 137,997 |
| | $ | 61,332 |
| | $ | 260,322 |
| | $ | 108,049 |
|
Other comprehensive income: | | | | | | | |
Foreign currency translation adjustments | 23,468 |
| | 4,921 |
| | (22,375 | ) | | 8,740 |
|
Decrease in fair value of interest rate swaps | 577 |
| | (4,739 | ) | | (1,840 | ) | | (6,082 | ) |
Reclassification to interest expense from interest rate swaps | 685 |
| | 854 |
| | 1,503 |
| | 1,700 |
|
Comprehensive income | $ | 162,727 |
|
| $ | 62,368 |
|
| $ | 237,610 |
|
| $ | 112,407 |
|
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 Loss | | 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, 2014 | 43,400,000 |
| | $ | 1,048,121 |
| | 135,626,255 |
| | $ | 2,875,181 |
| | 3,013,661 |
| | $ | 32,578 |
| | $ | (48,433 | ) | | $ | 6,791 |
| | $ | 3,914,238 |
|
Conversion of limited partner common units to general partner common units | — |
| | — |
| | 114,587 |
| | 1,312 |
| | (114,587 | ) | | (1,312 | ) | | — |
| | — |
| | — |
|
Issuance of unvested restricted common units, net of forfeitures | — |
| | — |
| | 79,689 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Common stock offering costs | — |
| | — |
| | — |
| | (273 | ) | | — |
| | — |
| | — |
| | — |
| | (273 | ) |
Issuance of common units in connection with the exercise of stock options | — |
| | — |
| | 11,961 |
| | 493 |
| | — |
| | — |
| | — |
| | — |
| | 493 |
|
Issuance of common units, net of forfeitures | — |
| | — |
| | — |
| | — |
| | 31,906 |
| | — |
| | — |
| | — |
| | — |
|
Amortization of unearned compensation on share-based awards | — |
| | — |
| | — |
| | 11,031 |
| | — |
| | — |
| | — |
| | — |
| | 11,031 |
|
Reclassification of vested share-based awards | — |
| | — |
| | — |
| | (8,602 | ) | | — |
| | 8,602 |
| | — |
| | — |
| | — |
|
Distributions | — |
| | (36,911 | ) | | — |
| | (230,877 | ) | | — |
| | (4,873 | ) | | — |
| | — |
| | (272,661 | ) |
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (245 | ) | | (245 | ) |
Net income | — |
| | 36,911 |
| | — |
| | 218,783 |
| | — |
| | 4,403 |
| | — |
| | 225 |
| | 260,322 |
|
Other comprehensive income—foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (22,375 | ) | | — |
| | (22,375 | ) |
Other comprehensive loss—fair value of interest rate swaps | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1,840 | ) | | — |
| | (1,840 | ) |
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,503 |
| | — |
| | 1,503 |
|
Balance as of June 30, 2015 | 43,400,000 |
| | $ | 1,048,121 |
| | 135,832,492 |
| | $ | 2,867,048 |
| | 2,930,980 |
| | $ | 39,398 |
| | $ | (71,145 | ) | | $ | 6,771 |
| | $ | 3,890,193 |
|
See accompanying notes to the condensed consolidated financial statements.
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2015 | | 2014 |
Cash flows from operating activities: | | | |
Net income | $ | 260,322 |
| | $ | 108,049 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
| |
|
Gain on sale of property | (94,489 | ) | | (15,945 | ) |
Gain on contribution of investment property to unconsolidated joint venture | — |
| | (1,906 | ) |
Equity in earnings of unconsolidated joint ventures | (8,001 | ) | | (6,058 | ) |
Change in fair value of accrued contingent consideration | (42,682 | ) | | (2,637 | ) |
Distributions from unconsolidated joint ventures | 6,898 |
| | 4,603 |
|
Write-off of net assets due to early lease terminations | (59 | ) | | 651 |
|
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases | 226,767 |
| | 225,025 |
|
Amortization of share-based unearned compensation | 7,483 |
| | 12,640 |
|
Allowance for doubtful accounts | (39 | ) | | 954 |
|
Amortization of deferred financing costs | 4,285 |
| | 4,487 |
|
Loss on early extinguishment of debt | 148 |
| | 585 |
|
Amortization of debt discount/premium | 915 |
| | 864 |
|
Amortization of acquired in-place lease value and deferred leasing costs | 33,830 |
| | 42,687 |
|
Amortization of acquired above-market leases and acquired below-market leases, net | (4,683 | ) | | (5,340 | ) |
Changes in assets and liabilities: |
| |
|
Restricted cash | 566 |
| | 1,922 |
|
Accounts and other receivables | 4,826 |
| | 20,583 |
|
Deferred rent | (27,868 | ) | | (41,283 | ) |
Deferred leasing costs | (4,675 | ) | | (7,663 | ) |
Other assets | (15,429 | ) | | (13,328 | ) |
Accounts payable and other accrued liabilities | 4,344 |
| | 3,718 |
|
Security deposits and prepaid rents | 2,692 |
| | (17,344 | ) |
Net cash provided by operating activities | 355,151 |
| | 315,264 |
|
Cash flows from investing activities: | | | |
Acquisitions of real estate | (48,424 | ) | | — |
|
Proceeds from sale of properties, net | 185,565 |
| | 37,945 |
|
Proceeds from contribution of investment properties to unconsolidated joint ventures | — |
| | 11,408 |
|
Investment in unconsolidated joint ventures | (7,547 | ) | | (20,627 | ) |
Investment in equity securities | — |
| | (3 | ) |
Receipt of value added tax refund | 13,422 |
| | 4,956 |
|
Refundable value added tax paid | (2,771 | ) | | (3,816 | ) |
Change in restricted cash | 1,484 |
| | (1,340 | ) |
Improvements to and advances for investments in real estate | (380,148 | ) | | (431,217 | ) |
Improvement advances to tenants | (17,881 | ) | | (7,091 | ) |
Collection of advances from tenants for improvements | 14,441 |
| | 5,969 |
|
Net cash used in investing activities | (241,859 | ) | | (403,816 | ) |
See accompanying notes to the condensed consolidated financial statements.
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited, in thousands)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2015 | | 2014 |
Cash flows from financing activities: | | | |
Borrowings on revolving credit facility | $ | 1,291,832 |
| | $ | 677,264 |
|
Repayments on revolving credit facility | (1,032,798 | ) | | (1,033,838 | ) |
Principal payments on unsecured notes | (374,927 | ) | | — |
|
Repayments on other unsecured loans | (67,000 | ) | | — |
|
Borrowings on 3.950% unsecured senior notes due 2022 | 496,190 |
| | — |
|
Borrowings on 4.750% unsecured senior notes due 2023 | — |
| | 495,872 |
|
Principal payments on mortgage loans | (4,440 | ) | | (6,349 | ) |
Principal repayments on exchangeable senior debentures | — |
| | (5,234 | ) |
Earnout payments related to acquisitions | (12,985 | ) | | (5,706 | ) |
Change in restricted cash | 113 |
| | 51 |
|
Payment of loan fees and costs | (3,741 | ) | | (5,311 | ) |
Capital distributions paid to noncontrolling interests in consolidated joint ventures, net | (245 | ) | | (274 | ) |
General partner contributions, net | 220 |
| | 353,522 |
|
Payment of distributions to preferred unitholders | (36,911 | ) | | (30,555 | ) |
Payment of distributions to common unitholders | (350,769 | ) | | (326,772 | ) |
Net cash (used in) provided by financing activities | (95,461 | ) | | 112,670 |
|
Net increase in cash and cash equivalents | 17,831 |
| | 24,118 |
|
Cash and cash equivalents at beginning of period | 41,321 |
| | 56,808 |
|
Cash and cash equivalents at end of period | $ | 59,152 |
| | $ | 80,926 |
|
See accompanying notes to the condensed consolidated financial statements.
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited, in thousands)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2015 | | 2014 |
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest | $ | 101,036 |
| | $ | 98,240 |
|
Cash paid for income taxes | 1,785 |
| | 2,800 |
|
Supplementary disclosure of noncash investing and financing activities: | | | |
Change in net assets related to foreign currency translation adjustments | (22,375 | ) | | 8,740 |
|
(Decrease) increase in accounts payable and other accrued liabilities related to change in
fair value of interest rate swaps | (1,840 | ) | | (6,082 | ) |
Accrual for additions to investments in real estate and tenant improvement advances
included in accounts payable and accrued expenses | 134,625 |
| | 191,148 |
|
Accrual for potential earnout contingency | 12,443 |
| | — |
|
Issuance of common units associated with exchange of exchangeable senior debentures | — |
| | 261,166 |
|
Note receivable related to sale of property | 9,000 |
| | — |
|
Allocation of purchase price of real estate/investment in partnership to: | | | |
Investments in real estate | 48,424 |
| | — |
|
Cash paid for acquisition of real estate | $ | 48,424 |
| | $ | — |
|
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
June 30, 2015 and 2014
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 data center and colocation solutions for domestic and international tenants across a variety of industry verticals ranging from financial services, cloud and information technology services, to manufacturing, energy, healthcare, and consumer products. As of June 30, 2015, our portfolio consisted of 132 properties, including eight properties held for sale, 14 properties held as investments in unconsolidated joint ventures and developable land, of which 103 are located throughout North America, 23 are located in Europe, three are located in Australia and three are located in Asia. We are diversified in major metropolitan areas where corporate data center 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, the Amsterdam, Dublin, London and Paris metropolitan areas in Europe and the Singapore, Sydney, Melbourne, Hong Kong and Osaka metropolitan areas in the Asia Pacific region. The portfolio consists of Internet gateway and corporate data center properties, technology manufacturing properties and regional or national offices 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 June 30, 2015, Digital Realty Trust, Inc. owns a 97.9% common interest and a 100.0% 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 for the year ended December 31, 2014.
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. generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2015 and 2014
public securities from time to time and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries. Digital Realty Trust, Inc. itself has not issued any indebtedness but guarantees the unsecured debt of the Operating Partnership and certain of its subsidiaries, as disclosed in these notes.
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 primarily 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 Income, Net" and "Capital and Accumulated Other Comprehensive Income". |
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 June 30, 2015, 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.
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2015 and 2014
(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.
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. If and when development of a property is suspended pursuant to a formal change in the planned use of the property, we will evaluate whether the accumulated costs exceed the estimated value of the project and write off the amount of any such excess accumulated costs. For a development project that is suspended for reasons other than a formal change in the planned use of such property, the accumulated project costs are evaluated for impairment consistent with our impairment policies for long-lived assets. Capitalized costs are allocated to the specific components of a project that are benefited.
During the three months ended June 30, 2015 and 2014, we capitalized interest of approximately $3.2 million and $4.9 million, respectively, and $7.5 million and $10.2 million during the six months ended June 30, 2015 and 2014, respectively. During the three months ended June 30, 2015 and 2014, we capitalized amounts relating to compensation and other overhead expense of employees direct and incremental to construction and successful leasing activities of approximately $14.0 million and $14.1 million, respectively, and $28.3 million and $27.9 million during the six months ended June 30, 2015 and 2014, respectively. Capitalized leasing costs of approximately $26.4 million and $21.8 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 six months ended June 30, 2015 and 2014, 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 "Incentive Plan") 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 Monte Carlo simulation method 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 subsidiaries are 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 June 30, 2015 and December 31, 2014, 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 and six months ended June 30, 2015 and 2014, we had no such interest or penalties. The tax year 2011 and thereafter remain open to examination by the major taxing jurisdictions with which the Company files tax returns.
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2015 and 2014
See Note 10 "Income Taxes" for further discussion on income taxes.
(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.
(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 lowest level input that is significant would be used to determine 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.
(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 significant transactions.
(k) Gains on Sale of Properties
Gains on sale of properties are recognized using the full accrual or partial sale methods, as applicable, in accordance with U.S. GAAP, provided various criteria relating to the terms of sale and any subsequent involvement with the real estate sold are satisfied.
(l) 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,
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2015 and 2014
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.
(m) 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 $322.4 million and $305.5 million and outside the United States were $97.9 million and $95.9 million for the three months ended June 30, 2015 and 2014, respectively. Operating revenues from properties in the United States were $637.1 million and $600.7 million and outside the United States were $189.8 million and $191.3 million for the six months ended June 30, 2015 and 2014, respectively. We had long-lived assets located in the United States of $5.4 billion and $5.4 billion and outside the United States of $2.7 billion and $2.7 billion as of June 30, 2015 and December 31, 2014, respectively.
Operating revenues from properties located in the United Kingdom were $54.8 million and $54.5 million, or 13.0% and 13.6% of total operating revenues, for the three months ended June 30, 2015 and 2014, respectively. Operating revenues from properties located in the United Kingdom were $104.9 million and $109.4 million, or 12.7% and 13.8% of total operating revenues, for the six months ended June 30, 2015 and 2014, 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 $1.8 billion and $1.7 billion, or 21.7% and 21.3% of total long-lived assets, as of June 30, 2015 and December 31, 2014, respectively. No other foreign country comprised more than 10% of total long-lived assets as of June 30, 2015 and December 31, 2014.
(n) Reclassifications
Certain reclassifications of prior year amounts have been made to conform to the current year presentation. During the three and six months ended June 30, 2014, $0.1 million and $0.3 million, respectively, were reclassified from rental property operating and maintenance expense to other expense.
(o) Recent Accounting Pronouncements
In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In accordance with the guidance, all legal entities are subject to reevaluation under the revised consolidation model. The guidance is effective in the first quarter of 2016, and early adoption is permitted. We are currently evaluating the potential impact of the adoption of ASU 2015-02 on our consolidated financial statements.
On April 1, 2015, the FASB voted to defer the effective date of ASU No. 2014-09, which outlines a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers and notes that lease contracts with customers are a scope exception. Public business entities may elect to adopt the amendments as of the original effective date; however, if the proposed deferral is approved, adoption is required for annual reporting periods beginning after December 15, 2017. We are currently assessing the impact of the guidance on our consolidated financial statements.
On April 17, 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. Currently, debt issuance costs are recorded as an asset and amortization of these deferred financing costs is recorded in interest expense. Under the new standard, debt issuance costs will continue to be amortized over the life of the debt instrument and amortization will continue to be recorded in interest expense. The new standard is effective for the Company on January 1, 2016 and will be applied on a retrospective basis. The Company is currently evaluating ASU 2015-03, and anticipates a change in our presentation only since the standard does not alter the accounting for debt issuance costs.
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2015 and 2014
3. Investments in Real Estate
We acquired the following real estate properties during the six months ended June 30, 2015:
|
| | | | | | | | |
Location | | Metropolitan Area | | Date Acquired | | Amount
(in millions) (1) |
Deer Park 3 (2) | | Melbourne | | April 15, 2015 | | $ | 1.6 |
|
3 Loyang Way (3)(4) | | Singapore | | June 25, 2015 | | 45.0 |
|
| | | | | | $ | 46.6 |
|
| |
(1) | Purchase price in U.S. dollars and excludes capitalized closing costs on land acquisitions. Purchase prices for acquisitions outside the United States are based on the exchange rate at the date of acquisition. |
| |
(2) | Represents currently vacant land which is not included in our operating property count. |
| |
(3) | Represents a development property with an existing shell, which is included in our operating property count. This acquisition lacked key inputs to qualify as a business combination under purchase accounting guidance, and has therefore been accounted for as an asset acquisition, not a business combination. |
| |
(4) | Property is subject to a ground lease, which expires in February 2024, with a renewal provision of an additional 28 years upon satisfaction of certain requirements. |
Dispositions
We sold the following real estate properties during the six months ended June 30, 2015:
|
| | | | | | | | | | | | |
Location | | Metropolitan Area | | Date Sold | | Gross Proceeds (in millions) | | Gain on Sale (in millions) |
100 Quannapowitt Parkway | | Boston | | February 5, 2015 | | $ | 31.1 |
| | $ | 10.2 |
|
3300 East Birch Street | | Los Angeles | | March 31, 2015 | | 14.2 |
| | 7.6 |
|
833 Chestnut Street | | Philadelphia | | April 30, 2015 | | 160.8 |
| (1) | 76.7 |
|
| | | | | | $ | 206.1 |
| | $ | 94.5 |
|
| |
(1) | Gross proceeds includes a $9.0 million note receivable, which is expected to be collected by year-end. |
We have identified certain non-core investment properties we intend to sell as part of our capital recycling strategy. Our capital recycling program is designed to identify non-strategic and underperforming assets that can be sold to generate proceeds that will support the funding of our core investment activity. We expect our capital recycling initiative will likewise have a meaningfully positive impact on overall return on invested capital. In addition, our capital recycling program does not represent a strategic shift, as we are not entirely exiting regions or property types. During this process, we are evaluating the carrying value of certain investment properties identified for potential sale to ensure the carrying value is recoverable in light of a potentially shorter holding period. As a result of our evaluation, during the year ended December 31, 2014, we recognized approximately $126.5 million of impairment losses on five properties located in the Midwest, Northeast and West regions. The fair value of the five properties were primarily based on discounted cash flow analysis, and in certain cases, we supplemented the analysis by obtaining broker opinions of value. As of June 30, 2015, three of these properties met the criteria to be classified as held for sale.
As of June 30, 2015, the Company had taken the necessary actions to conclude that five properties (in addition to the 3 properties referenced above) to be disposed of as part of our capital recycling strategy met the criteria to be classified as held for sale. As of June 30, 2015, these eight properties had an aggregate carrying value of $172.0 million within total assets and $7.4 million within total liabilities and are shown as assets held for sale and obligations associated with assets held for sale on the condensed consolidated balance sheet. The eight properties are not representative of a significant component of our portfolio, nor do the potential sales 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)
June 30, 2015 and 2014
4. Investment in Unconsolidated Joint Ventures
As of June 30, 2015, our investment in unconsolidated joint ventures consists of effective 50% interests in three joint ventures that own data center properties at 2001 Sixth Avenue in Seattle, Washington, 2020 Fifth Avenue in Seattle, Washington and 33 Chun Choi Street in Hong Kong, and effective 20% interests in two joint ventures, one of which owns 10 data center properties with an investment fund managed by Prudential Real Estate Investors (PREI®) and the other which owns one data center property with an affiliate of Griffin Capital Essential Asset REIT, Inc. (GCEAR). The following tables present summarized financial information for the joint ventures as of June 30, 2015 and December 31, 2014 and for the six months ended June 30, 2015 and 2014 (unaudited, in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2015 | | Six Months Ended June 30, 2015 |
2015 | Net Investment in Properties | | Total Assets | | Debt | | Total Liabilities | | Equity | | Revenues | | Property Operating Expense | | Net Operating Income | | Net Income |
Total Unconsolidated Joint Ventures | $ | 768,673 |
| | $ | 943,900 |
| |