Equity and Accumulated Other Comprehensive Loss, Net

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Equity and Accumulated Other Comprehensive Loss, Net

Equity and Accumulated Other Comprehensive Loss, 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 March 31, 2017, Digital Realty Trust, Inc. has generated net proceeds of approximately $342.7 million from the issuance of approximately 5.7 million common shares under the 2011 Equity Distribution Agreements at an average price of $60.35 per share after payment of approximately $3.5 million of commissions to the sales agents and before offering expenses. No sales were made under the program during the three months ended March 31, 2017 and 2016. As of March 31, 2017, 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 F Preferred Stock

On April 5, 2017, Digital Realty Trust, Inc. redeemed all 7,300,000 outstanding shares of its 6.625% series F cumulative redeemable preferred stock, or the series F preferred stock, for $25.01840 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 global revolving credit facility, which the Operating Partnership distributed to Digital Realty Trust, Inc. in connection with the Operating Partnership’s redemption of all 7,300,000 of its outstanding series F preferred units held by Digital Realty Trust, Inc. The excess of the redemption price over the carrying value of the series F preferred stock of approximately $6.3 million relates to the original issuance costs and will be reflected as a reduction to net income available to common stockholders.

(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 March 31, 2017 and December 31, 2016:

	March 31, 2017			December 31, 2016
	Number of units	Percentage of total		Number of units	Percentage of total
Digital Realty Trust, Inc.	159,539,892	98.4	%	159,019,118	98.5	%
Noncontrolling interests consist of:
Common units held by third parties	1,011,814	0.6	%	1,141,814	0.7	%
Incentive units held by employees and directors (see Note 13)	1,534,357	1.0	%	1,333,849	0.8	%
	162,086,063	100.0	%	161,494,781	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 $255.9 million and $226.3 million based on the closing market price of Digital Realty Trust, Inc. common stock on March 31, 2017 and December 31, 2016, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the three months ended March 31, 2017:

	Common Units		Incentive Units		Total
As of December 31, 2016	1,141,814		1,333,849		2,475,663
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)	(130,000	)	—		(130,000	)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)	—		(86,964	)	(86,964	)
Incentive units issued upon achievement of market performance condition	—		232,148		232,148
Grant of incentive units to employees and directors	—		55,324		55,324
As of March 31, 2017	1,011,814		1,534,357		2,546,171

(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 three months ended March 31, 2017 (in thousands, except per share data):

Date dividend declared	Dividend payment date	Series F Preferred Stock (1)		Series G Preferred Stock		Series H Preferred Stock		Series I Preferred Stock		Common Stock
March 1, 2017	March 31, 2017	$	3,023	$	3,672	$	6,730	$	3,969	$	148,358
Annual rate of dividend per share		$	1.656	$	1.469	$	1.844	$	1.588	$	3.720

(1) Redeemed on April 5, 2017 for $25.01840 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 $0.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $6.3 million will be 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 global revolving credit facility to fund all or a portion of distributions.

(f) Accumulated Other Comprehensive Loss, Net

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

	Foreign currency translation adjustments			Cash flow hedge adjustments			Accumulated other comprehensive income (loss), net
Balance as of December 31, 2016	$	(175,642	)	$	40,037		$	(135,605	)
Net current period change	16,354			(4,305		)	12,049
Reclassification to interest expense from interest rate swaps	—			1,016			1,016
Balance as of March 31, 2017	$	(159,288	)	$	36,748		$	(122,540	)