Equity and Accumulated Other Comprehensive Loss, Net

(a) Equity Distribution Agreements

On January 4, 2019, Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into equity distribution agreements, which we refer to as the 2019 Equity Distribution Agreements, with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., BTIG, LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Mizuho Securities USA LLC, Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., PNC Capital Markets LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc., SMBC Nikko Securities America, Inc., SunTrust Robinson Humphrey, Inc., TD Securities (USA) LLC, and Wells Fargo Securities, LLC, or the Agents, under which it can issue and sell shares of its common stock having an aggregate offering price of up to $1.0 billion from time to time through, at its discretion, any of the Agents as its sales agents or as principals. Sales may also be made on a forward basis pursuant to separate forward sale agreements. The sales of common stock made under the 2019 Equity Distribution Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. No sales were made under the program during the three months ended March 31, 2019.

(b) Forward Equity Sale

On September 27, 2018, Digital Realty Trust, Inc. completed an underwritten public offering of 9,775,000 shares of its common stock (including 1,275,000 shares from the exercise in full of the underwriters' option to purchase additional shares), all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. The forward purchasers borrowed and sold an aggregate of 9,775,000 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. The Company expects to receive net proceeds of approximately $1.1 billion (net of fees and estimated expenses) upon full physical settlement of the forward sale agreements, which is anticipated to be no later than September 27, 2019.

On March 13, 2019, Digital Realty Trust, Inc. issued 8,000,000 shares of its 5.850% series K cumulative redeemable preferred stock, or the series K preferred stock, for net proceeds of approximately $193.7 million. In addition, on March 15, 2019, Digital Realty Trust, Inc. issued an additional 400,000 shares of series K preferred stock pursuant to a partial exercise of the underwriters’ over-allotment option for net proceeds of approximately $9.7 million. Dividends are cumulative on the series K preferred stock from the date of original issuance in the amount of $1.46250 per share each year, which is equivalent to 5.850% of the $25.00 liquidation preference per share. Dividends on the series K preferred stock are payable quarterly in arrears. The first dividend payable on the series K preferred stock on June 28, 2019 will be a pro rata dividend from and including the original issue date to and including June 30, 2019 in the amount of $0.43875 per share. The series K preferred stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the series K preferred stock will rank senior to Digital Realty Trust, Inc. common stock and rank on parity with Digital Realty Trust, Inc.’s series C cumulative redeemable perpetual preferred stock, series G cumulative redeemable preferred stock, series H cumulative redeemable preferred stock, series I cumulative redeemable preferred stock and series J cumulative redeemable preferred stock with respect to the payment of distributions and other amounts. Digital Realty Trust, Inc. is not allowed to redeem the series K preferred stock before March 13, 2024, except in limited circumstances to preserve its status as a REIT. On or after March 13, 2024, Digital Realty Trust, Inc. may, at its option, redeem the series K preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such series K preferred stock up to but excluding the redemption date. Holders of the series K preferred stock generally have no voting rights except for limited voting rights if Digital Realty Trust, Inc. fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. Upon the occurrence of specified changes of control, as a result of which neither Digital Realty Trust, Inc.’s common stock nor the common securities of the acquiring or surviving entity (or American Depositary Receipts representing such securities) is listed on the New York Stock Exchange, the NYSE MKT, LLC or the NASDAQ Stock Market or listed or quoted on a successor exchange or quotation system, each holder of series K preferred stock will have the right (unless, prior to the change of control conversion date specified in the Articles Supplementary governing the series K preferred stock, Digital Realty Trust, Inc. has provided or provides notice of its election to redeem the series K preferred stock) to convert some or all of the series K preferred stock held by it into a number of shares of Digital Realty Trust, Inc.’s common stock per share of series K preferred stock to be converted equal to the lesser of:

•

the quotient obtained by dividing (i) the sum of (x) the $25.00 liquidation preference plus (y) the amount of any accrued and unpaid dividends to, but not including, the change of control conversion date (unless the change of control conversion date is after a record date for a Series K Preferred Stock dividend payment and prior to the corresponding Series K Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the common stock price specified in the Articles Supplementary governing the series K preferred stock; and


•	0.43611 (i.e., the share cap), subject to certain adjustments;

subject, in each case, to provisions for the receipt of alternative consideration as described in the Articles Supplementary governing the series K preferred stock. Except in connection with specified change of control transactions, the series K preferred stock is not convertible into or exchangeable for any other property or securities of Digital Realty Trust, Inc.

(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, 2019 and December 31, 2018:



	March 31, 2019			December 31, 2018
	Number of units	Percentage of total		Number of units	Percentage of total
Digital Realty Trust, Inc.	208,214,139	95.6	%	206,425,656	95.1	%
Noncontrolling interests consist of:
Common units held by third parties	4,858,794	2.2	%	6,297,272	2.9	%
Issuance of units in connection with Ascenty Acquisition	2,338,874	1.1	%	2,338,874	1.1	%
Incentive units held by employees and directors (see Note 13)	2,275,791	1.1	%	1,944,738	0.9	%
	217,687,598	100.0	%	217,006,540	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 units and incentive units of the Operating Partnership met the criteria to be classified within equity, except for certain common units issued to certain former DFT Operating Partnership unitholders in the DFT Merger, which are subject to certain restrictions and, accordingly, are not presented as permanent equity in the condensed consolidated balance sheet.

In connection with the initial public offering of DFT in 2007, DFT, the DFT Operating Partnership and certain DFT Operating Partnership unitholders entered into a tax protection agreement to assist such unitholders in deferring certain U.S. federal income tax liabilities that may have otherwise resulted from the contribution transactions undertaken in connection with the initial public offering and the ownership of interests in the DFT Operating Partnership and to set forth certain agreements with respect to other tax matters. In connection with the DFT Merger, certain DFT Operating Partnership unitholders entered into a new tax protection agreement with Digital Realty Trust, Inc. and the Operating Partnership that replaced and superseded the DFT tax protection agreement, effective as of the closing of the merger. Pursuant to the new tax protection agreement, such DFT Operating Partnership unitholders entered into a guarantee of certain debt of a subsidiary of the Operating Partnership. The Operating Partnership must offer such DFT Operating Partnership unitholders a new guarantee opportunity in the event any guaranteed debt is repaid prior to March 1, 2023. If the Operating Partnership fails to offer the guarantee opportunity or to allocate guaranteed debt to any such DFT Operating Partnership unitholder as required under the new tax

protection agreement, the Operating Partnership generally would be required to indemnify each such DFT Operating Partnership unitholder for the tax liability resulting from such failure, as determined under the new tax protection agreement.

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $1,070.7 million and $1,076.9 million based on the closing market price of Digital Realty Trust, Inc. common stock on March 31, 2019 and December 31, 2018, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the three months ended March 31, 2019:



	Common Units		Incentive Units		Total
As of December 31, 2018	8,636,146		1,944,738		10,580,884
Redemption of common units for shares of Digital Realty Trust, Inc. common stock ⁽¹⁾	(1,438,478	)	—		(1,438,478	)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock ⁽¹⁾	—		(79,398	)	(79,398	)
Incentive units issued upon achievement of market performance condition	—		308,308		308,308
Grant of incentive units to employees and directors	—		105,843		105,843
Cancellation / forfeitures of incentive units held by employees and directors	—		(3,700	)	(3,700	)
As of March 31, 2019	7,197,668		2,275,791		9,473,459


(1)	Redemption / conversion of common units 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.

(e) Dividends

We have declared and paid the following dividends on our common and preferred stock for the three months ended March 31, 2019 (in thousands, except per share data):



Date dividend declared	Dividend payment date	Series C Preferred Stock		Series G Preferred Stock		Series H Preferred Stock		Series I Preferred Stock		Series J Preferred Stock		Common Stock
February 21, 2019	March 29, 2019	$	3,333	$	3,672	$	6,730	$	3,969	$	2,625	$	224,802

Annual rate of dividend per share		$	1.65625	$	1.46875	$	1.84375	$	1.58750	$	1.31250	$	4.32000

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 (loss), net are as follows (in thousands):



	Foreign currency translation adjustments			Cash flow hedge adjustments			Foreign currency net investment hedge adjustments		Accumulated other comprehensive income (loss), net
Balance as of December 31, 2018	$	(158,649	)	$	17,264		$	25,738	$	(115,647	)
Net current period change	7,880			(3,614		)	—		4,266
Reclassification of foreign currency translation adjustment due to deconsolidation of Ascenty	21,687			—			—		21,687
Reclassification to interest expense from interest rate swaps	—			(2,005		)	—		(2,005		)
Balance as of March 31, 2019	$	(129,082	)	$	11,645		$	25,738	$	(91,699	)