Commitments And Contingencies

9 Months Ended

Sep. 30, 2012

Commitments And Contingencies

16. Commitments and Contingencies

We have agreed with the seller of 350 East Cermak Road to share a portion, not to exceed $135,000 per month, of rental revenue, adjusted for our costs to lease the premises, from the leases of the 192,000 square feet of space held for redevelopment. This revenue sharing agreement terminated in May 2012. We made payments of approximately $0.7 million and $1.2 million to the seller during the nine months ended September 30, 2012 and 2011, respectively.

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. As of September 30, 2012, 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 September 30, 2012. The maximum amount that could be earned by the seller is $50.0 million SGD (or approximately $40.7 million based on the exchange rate as of September 30, 2012). 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. If the tenant elects to take this option, we can elect one of two options. The first option is to construct and develop an additional shell building on the expansion space. Concurrent with this obligation, the tenant would execute an amendment to the existing lease to reflect the expansion of the space and include the additional shell building. The second option is to 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 noncontrolling interest in the entity that owns 2805 Lafayette Street from our joint venture partner, the partner could earn additional consideration if between May 4, 2012 and January 31, 2013, we enter into a qualifying lease for this property, as defined in the agreement. As of September 30, 2012, no leases were executed for this property that would cause an amount to become probable of payment and therefore, no amount is accrued as of September 30, 2012.

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 redeveloped, but not currently leased, as defined in the purchase agreement for the acquisition. As of September 30, 2012, construction is not complete and none of the leases executed subsequent to the purchase date would cause an amount to become probable of payment. The expected fair value of the contingent consideration as of September 30, 2012 that could be earned by the seller is £56.5 million (or approximately $91.3 million based on the exchange rate as of September 30, 2012) and is currently accrued in accounts payable and other accrued expenses in the condensed consolidated balance sheet. The earn-out contingency expires in July 2015.  This amount will be reassessed on a quarterly basis.

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 September 30, 2012, we had open commitments related to construction contracts of approximately $187.3 million.   

Digital Realty Trust, L.P. [Member]

Commitments And Contingencies

16. Commitments and Contingencies

We have agreed with the seller of 350 East Cermak Road to share a portion, not to exceed $135,000 per month, of rental revenue, adjusted for our costs to lease the premises, from the leases of the 192,000 square feet of space held for redevelopment. This revenue sharing agreement terminated in May 2012. We made payments of approximately $0.7 million and $1.2 million to the seller during the nine months ended September 30, 2012 and 2011, respectively.

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. As of September 30, 2012, 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 September 30, 2012. The maximum amount that could be earned by the seller is $50.0 million SGD (or approximately $40.7 million based on the exchange rate as of September 30, 2012). 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. If the tenant elects to take this option, we can elect one of two options. The first option is to construct and develop an additional shell building on the expansion space. Concurrent with this obligation, the tenant would execute an amendment to the existing lease to reflect the expansion of the space and include the additional shell building. The second option is to 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 noncontrolling interest in the entity that owns 2805 Lafayette Street from our joint venture partner, the partner could earn additional consideration if between May 4, 2012 and January 31, 2013, we enter into a qualifying lease for this property, as defined in the agreement. As of September 30, 2012, no leases were executed for this property that would cause an amount to become probable of payment and therefore, no amount is accrued as of September 30, 2012.

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 redeveloped, but not currently leased, as defined in the purchase agreement for the acquisition. As of September 30, 2012, construction is not complete and none of the leases executed subsequent to the purchase date would cause an amount to become probable of payment. The expected fair value of the contingent consideration as of September 30, 2012 that could be earned by the seller is £56.5 million (or approximately $91.3 million based on the exchange rate as of September 30, 2012) and is currently accrued in accounts payable and other accrued expenses in the condensed consolidated balance sheet. The earn-out contingency expires in July 2015.  This amount will be reassessed on a quarterly basis.

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 September 30, 2012, we had open commitments related to construction contracts of approximately $187.3 million.