Equity and Accumulated Other Comprehensive Income, Net

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

Equity and Accumulated Other Comprehensive Income, Net

Equity and Accumulated Other Comprehensive Income, Net

(a) Equity Distribution Agreements

Digital Realty Trust, Inc. entered into equity distribution agreements in June 2011, which we refer to as the 2011 Equity Distribution Agreements, with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC, or the Agents, under which it can issue and sell shares of its common stock having an aggregate offering price of up to $400.0 million from time to time through, at its discretion, any of the Agents as its sales agents. The sales of common stock made under the 2011 Equity Distribution Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. Cumulatively through September 30, 2016, Digital Realty Trust, Inc. has generated net proceeds of approximately $342.7 million from the issuance of approximately 5.7 million common shares under the 2011 Equity Distribution Agreements at an average price of $60.35 per share after payment of approximately $3.5 million of commissions to the sales agents and before offering expenses. No sales were made under the program during the nine months ended September 30, 2016 and 2015. As of September 30, 2016, shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

(b) Forward Equity Sale

On May 20, 2016, Digital Realty Trust, Inc. completed an underwritten public offering of 12,500,000 shares of its common stock, all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. On June 2, 2016, the underwriters exercised their option in full to purchase an additional 1,875,000 shares of Digital Realty Trust, Inc.’s common stock from the forward purchasers. The forward purchasers borrowed and sold an aggregate of 14,375,000 shares of Digital Realty Trust, Inc.’s common stock in the public offering. Digital Realty Trust, Inc. did not receive any proceeds from the sale of our common stock by the forward purchasers in the public offering. On September 27, 2016, we physically settled a portion of the forward sale agreements by issuing an aggregate of 12,000,000 shares of our common stock to the forward purchasers in exchange for net proceeds of approximately $1.1 billion. Following such settlement, 2,375,000 shares of our common stock remain subject to the forward sale agreements, which are anticipated to be settled no later than May 19, 2017.

(c) Redemption of Series E Preferred Stock

On September 15, 2016, Digital Realty Trust, Inc. redeemed all 11,500,000 outstanding shares of its 7.00% series E cumulative redeemable preferred stock, or the series E preferred stock, at a redemption price of $25.35972 per share. The redemption price was equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date. Digital Realty Trust, Inc. funded the redemption with borrowings under the 2016 global revolving credit facility, which the Operating Partnership distributed to Digital Realty Trust, Inc. in connection with the Operating Partnership’s redemption of all 11,500,000 of its outstanding series E preferred units held by Digital Realty Trust, Inc. The excess of the redemption price over the carrying value of the series E preferred stock of approximately $10.3 million relates to the original issuance costs and has been reflected as reduction to net income available to common stockholders in the accompanying condensed consolidated income statements for the three and nine months ended September 30, 2016.

(d) 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 interests in the Operating Partnership as of September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
	Number of units	Percentage of total		Number of units	Percentage of total
Digital Realty Trust, Inc.	158,926,811	98.4	%	146,384,247	98.1	%
Noncontrolling interests consist of:
Common units held by third parties	1,218,814	0.8		1,421,314	1.0
Incentive units held by employees and directors (see Note 13)	1,302,177	0.8		1,412,012	0.9
	161,447,802	100.0	%	149,217,573	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 $231.2 million and $192.7 million based on the closing market price of Digital Realty Trust, Inc. common stock on September 30, 2016 and December 31, 2015, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2016:

	Common Units		Incentive Units		Total
As of December 31, 2015	1,421,314		1,412,012		2,833,326
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(202,500	)	—		(202,500	)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—		(136,646	)	(136,646	)
Cancellation of incentive units held by employees and directors	—		(1,416	)	(1,416	)
Grant of incentive units to employees and directors	—		28,227		28,227
As of September 30, 2016	1,218,814		1,302,177		2,520,991

(1) Redemption of common units and conversion of incentive units were recorded as a reduction to noncontrolling interests in the Operating Partnership and an increase to common stock and additional paid in capital based on the book value per unit in the accompanying condensed consolidated balance sheet of Digital Realty Trust, Inc.

(e) Dividends

We have declared and paid the following dividends on our common and preferred stock for the nine months ended September 30, 2016 (in thousands, except per share data):

Date dividend declared	Dividend payment date	Series E Preferred Stock				Series F Preferred Stock		Series G Preferred Stock		Series H Preferred Stock		Series I Preferred Stock		Common Stock
February 17, 2016	March 31, 2016	$	5,031			$	3,023	$	3,672	$	6,730	$	3,969	$	129,064
May 11, 2016	June 30, 2016	5,031				3,023		3,672		6,730		3,969		129,188
August 10, 2016	September 30, 2016	—		(1	)	3,023		3,672		6,730		3,969		129,285
		$	10,062			$	9,069	$	11,016	$	20,190	$	11,907	$	387,537
Annual rate of dividend per share		$	1.750			$	1.656	$	1.469	$	1.844	$	1.588	$	3.520

(1) Redeemed on September 15, 2016 for $25.35972 per share, or a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date of approximately $4.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $10.3 million were deducted in the computation of net income available to common stockholders.

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 2016 global revolving credit facility to fund all or a portion of distributions.

(f) Accumulated Other Comprehensive Income, Net

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

	Foreign currency translation adjustments			Cash flow hedge adjustments			Accumulated other comprehensive income (loss), net
Balance as of December 31, 2015	$	(90,342	)	$	(6,248	)	$	(96,590	)
Net current period change	(36,789		)	(2,071		)	(38,860		)
Reclassification to interest expense from interest rate swaps	—			3,511			3,511
Balance as of September 30, 2016	$	(127,131	)	$	(4,808	)	$	(131,939	)