Capital and Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2020

Digital Realty Trust, L.P.

Class of Stock [Line Items]

Capital and Accumulated Other Comprehensive Loss

14. Capital and Accumulated Other Comprehensive Loss

(a) Allocations of Net Income and Net Losses to Partners

Except for special allocations to holders of profits interest units described below in Note 15(a) under the heading “Incentive Plan—Long-Term Incentive Units,” the Operating Partnership’s net income will generally be allocated to Digital Realty Trust, Inc. (the General Partner) to the extent of the accrued preferred return on its preferred units, and then to the General Partner and the Operating Partnership’s limited partners in accordance with the respective percentage interests in the common units issued by the Operating Partnership. Net loss will generally be allocated to the General Partner and the Operating Partnership’s limited partners in accordance with the respective common percentage interests in the Operating Partnership until the limited partner’s capital is reduced to zero and any remaining net loss would be allocated to the General Partner. However, in some cases, losses may be disproportionately allocated to partners who have guaranteed our debt. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Code, and the associated Treasury Regulations.

(b) Equity Distribution Agreement

On May 11, 2020, Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into the 2020 Amendment to increase the number of shares of common stock Digital Realty Trust, Inc. could issue and sell 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. In accordance with the Sales Agreement, following the date of the 2020 Amendment, Digital Realty Trust, Inc. may offer and sell shares of its common stock having an aggregate offering price of up to $1.0 billion. Prior to the 2020 Amendment, Digital Realty Trust, Inc. had offered and sold shares of its common stock having an aggregate gross sales price of approximately $652.2 million. The sales of common stock made under the Sales Agreement will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. For the nine months ended September 30, 2020, Digital Realty Trust, Inc. generated net proceeds of approximately $893.0 million from the issuance of approximately 6.1 million common shares under the Sales Agreement at an average price of $146.89 per share after payment of approximately $9.0 million of commissions to the Agents. The proceeds from the issuances for the nine months ended September 30, 2020 were contributed to our Operating Partnership in exchange for the issuance of approximately 6.1 million common units to Digital Realty Trust, Inc. Subsequent to September 30, 2020,

Digital Realty Trust, Inc. generated net proceeds of approximately $0.8 million from the issuance of 5,220 common shares under the Sales Agreement at an average price of $159.09 per share after payment of approximately $8,000 of commissions to the Agents, and approximately $749.4 million remains available for future sales under the program. The proceeds from the issuances subsequent to September 30, 2020 were contributed to our Operating Partnership in exchange for the issuance of approximately 5,220 common units to Digital Realty Trust, Inc.

(c) 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. On September 17, 2019, Digital Realty Trust, Inc. amended the forward sale agreements to extend the maturity date of such forward sales agreements from September 27, 2019 to September 25, 2020. On September 24, 2020, Digital Realty Trust, Inc. physically settled the forward sale agreements in full by issuing an aggregate of 9,775,000 shares of its common stock to the forward purchasers in exchange for net proceeds of approximately $1.0 billion. Upon physical settlement of the forward sale agreements, the Operating Partnership issued 9,775,000 partnership units to Digital Realty Trust, Inc. in exchange for contribution of the net proceeds.

(d) Partnership Units

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 the General Partner’s common stock at the time of redemption. Alternatively, the General Partner may elect to acquire those common units in exchange for shares of the General Partner’s 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, the Operating Partnership 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 limited partners’ common units and the vested incentive units. Based on the results of this analysis, the Operating Partnership concluded that the common units and incentive units of the Operating Partnership met the criteria to be classified within capital, except for certain common units issued to certain former DFT Operating Partnership unitholders in the DFT Merger which are subject to certain restrictions and are not presented as permanent capital in the condensed consolidated balance sheet.

The redemption value of the limited partners’ common units and the vested incentive units was approximately $1,154.9 million and $997.6 million based on the closing market price of Digital Realty Trust, Inc.’s common stock on September 30, 2020 and December 31, 2019, respectively.

(e) Distributions

All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s Board of Directors. The Operating Partnership has declared and paid the following distributions on its common and preferred units for the nine months ended September 30, 2020 (in thousands, except for per unit data):

		Series C		Series G		Series I			Series J		Series K		Series L
		Preferred		Preferred		Preferred			Preferred		Preferred		Preferred		Common
Date distribution declared	Distribution payment date	Units		Units (1)		Units			Units		Units		Units		Units
February 27, 2020	March 31, 2020	$	3,333	$	3,672	$	3,969		$	2,625	$	3,071	$	4,485	$	305,267
May 12, 2020	June 30, 2020		3,333		3,672		3,969			2,625		3,071		4,485		310,421
August 11, 2020	September 30, 2020		3,333		3,672		—	(2)		2,625		3,071		4,485		312,262
		$	9,999	$	11,016	$	7,938		$	7,875	$	9,213	$	13,455	$	927,950
Annual rate of distribution per unit		$	1.65625	$	1.46875	$	1.58750		$	1.31250	$	1.46250	$	1.30000	$	4.48000

(1) On September 15, 2020, Digital Realty Trust, Inc. distributed a notice of redemption of all of the shares of its series G preferred stock on October 15, 2020. The shares of series G preferred stock were redeemed at a redemption price of $25.00 per share plus accrued and unpaid dividends from October 1, 2020 up to but not including the redemption date in the amount of $0.057118 per share. Digital Realty Trust, Inc. became obligated to redeem the series G preferred stock and pay the accrued dividends upon distribution of its notice of redemption in September 2020. Therefore, the Operating Partnership reclassified the series G preferred units balance from capital to a preferred unit redemption liability, included in accounts payable and other accrued liabilities in the condensed consolidated balance sheet, and recorded the balance at fair value. In connection with the redemption, the previously incurred offering costs of approximately $8.2 million were recorded as a reduction to net income available to common unitholders.

(2) Redeemed on September 8, 2020 for $25.29545 per unit, or a redemption price of $25.00 per unit, plus accrued and unpaid distributions up to but not including the redemption date. In connection with the redemption, the previously incurred offering costs of approximately $8.0 million were recorded as a reduction to net income available to common unitholders.

(f) Accumulated Other Comprehensive Loss

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

	Foreign currency				Foreign currency net		Accumulated other
	translation		Cash flow hedge		investment hedge		comprehensive
	adjustments		adjustments		adjustments		loss
Balance as of December 31, 2019	$	(117,869)	$	308	$	26,152	$	(91,409)
Net current period change		(48,321)		(12,711)		13,525		(47,507)
Reclassification to interest expense from interest rate swaps		—		7,899		—		7,899
Balance as of September 30, 2020	$	(166,190)	$	(4,504)	$	39,677	$	(131,017)