Equity And Accumulated Other Comprehensive Loss, Net

3 Months Ended

Mar. 31, 2013

Equity And Accumulated Other Comprehensive Loss, Net [Abstract]

Equity And Accumulated Other Comprehensive Loss, Net

10. Equity and Accumulated Other Comprehensive Loss, Net

(a) Equity Distribution Agreements

On June 29, 2011, Digital Realty Trust, Inc. entered into new 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 could 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. For the three months ended March 31, 2012, Digital Realty Trust, Inc. generated net proceeds of approximately $62.7 million from the issuance of approximately 1.0 million common shares under the 2011 Equity Distribution Agreements at an average price of $66.19 per share after payment of approximately $0.6 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, 2013.

(b) Convertible Preferred Stock

5.500% Series D Cumulative Convertible Preferred Stock

On February 6, 2008, Digital Realty Trust, Inc. issued 13,800,000 shares of its 5.500% series D cumulative convertible preferred stock, or the series D preferred stock. Dividends were cumulative on the series D preferred stock from the date of original issuance in the amount of $1.375 per share each year, which is equivalent to 5.500% of the $25.00 liquidation preference per share. Dividends on the series D preferred stock were payable quarterly in arrears. The series D preferred stock does not have a stated maturity date and was not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the series D preferred stock ranked senior to Digital Realty Trust, Inc. common stock with respect to the payment of distributions and other amounts and ranked on parity with Digital Realty Trust, Inc. series E preferred stock and series F preferred stock. Digital Realty Trust, Inc. was not allowed to redeem the series D preferred stock, except in limited circumstances to preserve its status as a REIT. Holders of the series D preferred stock generally had no voting rights except for limited voting rights if Digital Realty Trust, Inc. failed to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances.

Effective February 26, 2013, Digital Realty Trust, Inc. converted all outstanding shares of its series D preferred stock, into shares of its common stock in accordance with the terms of the series D preferred stock. Each share of series D preferred stock was converted into 0.6360 shares of Digital Realty Trust, Inc. common stock.  Digital Realty Trust, Inc. converted 4,802,180 shares of its series D preferred stock into 3,054,186 shares of Digital Realty Trust, Inc.’s common stock.  In connection with this conversion, the Operating Partnership issued 3,054,186 common units to Digital Realty Trust, Inc. upon conversion of 4,802,180 series D cumulative convertible preferred units.

(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, 2013 and December 31, 2012:

	March 31, 2013			December 31, 2012
	Number of units	Percentage of total		Number of units	Percentage of total
Digital Realty Trust, Inc.	128,413,791	97.7	%	125,140,783	97.8	%
Noncontrolling interests consist of:
Common units held by third parties	1,509,814	1.2		1,515,814	1.2
Incentive units held by employees and    directors (see note 12)	1,486,900	1.1		1,335,586	1.0
	131,410,505	100.0	%	127,992,183	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 $170.6 million and $161.5 million based on the closing market price of Digital Realty Trust, Inc. common stock on March 31, 2013 and December 31, 2012, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the three months ended March 31, 2013:  

	Common Units	Incentive Units	Total
As of December 31, 2012	1,515,814	1,335,586	2,851,400
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(6,000)	-	(6,000)
Conversion of incentive units held by employees and directors    for shares of Digital Realty Trust, Inc. common stock (1)	-	(17,104)	(17,104)
Cancellation of incentive units held by employees and directors	-	(6,650)	(6,650)
Grant of incentive units to employees and directors	-	175,068	175,068
As of March 31, 2013	1,509,814	1,486,900	2,996,714

(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.

Under the terms of certain third parties’ (the eXchange parties) contribution agreements signed in the third quarter of 2004, we have agreed to indemnify each eXchange party against adverse tax consequences in the event the Operating Partnership directly or indirectly sells, exchanges or otherwise disposes of (whether by way of merger, sale of assets or otherwise) in a taxable transaction any interest in 200 Paul Avenue 1-4 or 1100 Space Park Drive until the earlier of November 3, 2013 and the date on which these contributors or certain transferees hold less than 25% of the Operating Partnership common units issued to them in the formation transactions consummated concurrently with the IPO. Under the eXchange parties’ amended contribution agreement, the Operating Partnership has agreed to make approximately $17.8 million of indebtedness available for guaranty by the eXchange parties until the earlier of November 3, 2013 and the date on which these contributors or certain transferees hold less than 25% of the Operating Partnership common units issued to them in the formation transactions consummated concurrently with the IPO, and we have agreed to indemnify each eXchange party against adverse tax consequences if the Operating Partnership does not provide such indebtedness to guarantee.

(d) Dividends

We have declared and paid the following dividends on our common and preferred stock for the three months ended March 31, 2013 (in thousands):

Date dividend declared	Dividend payable date	Series E Preferred Stock (1)	Series F Preferred Stock (2)	Common Stock (3)
February 12, 2013	March 29, 2013	$            5,031	$             3,023	$          100,165

(1)	$1.750 annual rate of dividend per share.
(2)	$1.656 annual rate of dividend per share.

(3) $3.120 annual rate of dividend per share.

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 distributions.

(e) Accumulated Other Comprehensive Loss, Net

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

	Foreign currency translation adjustments	Cash flow hedge adjustments	Accumulated other comprehensive loss, net
Balance as of December 31, 2012	$                 (2,576)	$                 (9,615)	$               (12,191)
Net current period change	(61,868)	(122)	(61,990)
Reclassification to interest expense from    interest rate swaps	-	1,708	1,708
Balance as of March 31, 2013	$               (64,444)	$                 (8,029)	$               (72,473)