Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2024
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From to .
Commission file number 001-32336 (Digital Realty Trust, Inc.)
000-54023 (Digital Realty Trust, L.P.)
DIGITAL REALTY TRUST, INC.
DIGITAL REALTY TRUST, L.P.
(Exact name of registrant as specified in its charter)
Maryland (Digital Realty Trust, Inc.)
26-0081711
Maryland (Digital Realty Trust, L.P.)
20-2402955
(State or other jurisdiction of
(IRS employer
incorporation or organization)
identification number)
5707 Southwest Parkway, Building 1, Suite 275
Austin, Texas 78735
(Address of principal executive offices)
(737) 281-0101
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock
DLR
New York Stock Exchange
Series J Cumulative Redeemable Preferred Stock
DLR Pr J
Series K Cumulative Redeemable Preferred Stock
DLR Pr K
Series L Cumulative Redeemable Preferred Stock
DLR Pr L
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Digital Realty Trust, Inc.
Yes ⌧ No ◻
Digital Realty Trust, L.P.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Digital Realty Trust, Inc.:
Large accelerated filer ⌧
Accelerated filer ◻
Non-accelerated filer ◻
Smaller reporting company ☐
Emerging growth company ☐
Digital Realty Trust, L.P.:
Large accelerated filer ◻
Non-accelerated filer ⌧
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ⌧
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at October 28, 2024
Common Stock, $.01 par value per share
331,712,606
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2024 of Digital Realty Trust, Inc., a Maryland corporation, and Digital Realty Trust, L.P., a Maryland limited partnership, of which Digital Realty Trust, Inc. is the sole general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “our Company”, or “the Company” refer to Digital Realty Trust, Inc. together with its consolidated subsidiaries, including Digital Realty Trust, L.P. In statements regarding qualification as a REIT, such terms refer solely to Digital Realty Trust, Inc. Unless otherwise indicated or unless the context requires otherwise, all references to the “Parent” refer to Digital Realty Trust, Inc., and all references to “our Operating Partnership,” “the Operating Partnership” or “the OP” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.
The Parent is a real estate investment trust, or REIT, and the sole general partner of the OP. As of September 30, 2024, the Parent owned an approximate 98.1% common general partnership interest in Digital Realty Trust, L.P. The remaining approximate 1.9% of the common limited partnership interests of Digital Realty Trust, L.P. are owned by non-affiliated third parties and certain directors and officers of the Parent. As of September 30, 2024, the Parent owned all of the preferred limited partnership interests of Digital Realty Trust, L.P. As the sole general partner of Digital Realty Trust, L.P., the Parent has the full, exclusive and complete responsibility for the OP’s day-to-day management and control.
We believe combining the quarterly reports on Form 10-Q of the Parent and the OP into this single report results in the following benefits:
It is important to understand the few differences between the Parent and the OP in the context of how we operate the Company. The Parent does not conduct business itself, other than acting as the sole general partner of the OP and issuing public equity from time to time and guaranteeing certain unsecured debt of the OP and certain of its subsidiaries and affiliates. The OP holds substantially all the assets of the business, directly or indirectly. The OP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent, which are generally contributed to the OP in exchange for partnership units, the OP generates the capital required by the business through the OP’s operations, incurrence of indebtedness and issuance of partnership units to third parties.
The presentation of noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Parent and those of the OP. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity and capital issuances in the Parent and in the OP.
To highlight the differences between the Parent and the OP, separate sections in this report, as applicable, individually discuss the Parent and the OP, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the Parent and the OP, this report refers to actions or holdings as being actions or holdings of the Company.
As general partner with control of the OP, the Parent consolidates the OP for financial reporting purposes, and it does not have significant assets other than its investment in the OP. Therefore, the assets and liabilities of the Parent and the OP are the same on their respective condensed consolidated financial statements. The separate discussions of the Parent and the OP in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
2
In this report, “properties” and “buildings” refer to all or any of the buildings in our portfolio, including data centers and non-data centers, and “data centers” refers only to the properties or buildings in our portfolio that contain data center space. In this report, “Global Revolving Credit Facility” refers to our Operating Partnership’s $4.2 billion equivalent senior unsecured revolving credit facility and global senior credit agreement; “Yen Revolving Credit Facility” refers to our Operating Partnership’s ¥42,511,000,000 (approximately $296 million based on exchange rates at September 30, 2024) senior unsecured revolving credit facility and Yen credit agreement; and “Global Revolving Credit Facilities” refer to our Global Revolving Credit Facility and our Yen Revolving Credit Facility, collectively.
In this report, the “Euro Term Loan Agreement” refers to a term loan agreement which governs (i) a €375,000,000 three-year senior unsecured term loan facility (the “2025 Term Facility”), the entire amount of which was funded on such date, and (ii) a €375,000,000 five-year senior unsecured term loan facility (the “2025-27 Term Facility” and, together with the 2025 Term Facility, collectively, the “Euro Term Loan Facilities”), comprised of €125,000,000 of initial term loans, the entire amount of which was funded on such date, and €250,000,000 of delayed draw term loan commitments that were funded on September 9, 2023.
In this report, the “USD Term Loan Agreement” refers to a term loan agreement for a $740 million senior unsecured term loan facility (the “USD Term Loan Facility”).
3
DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, L.P.
FOR THE QUARTER ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
PageNumber
PART I.
FINANCIAL INFORMATION
ITEM 1.
Condensed Consolidated Financial Statements of Digital Realty Trust, Inc.:
Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 (unaudited)
5
Condensed Consolidated Income Statements for the three and nine months ended September 30, 2024 and 2023 (unaudited)
6
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023 (unaudited)
7
Condensed Consolidated Statement of Equity for the three and nine months ended September 30, 2024 and 2023 (unaudited)
8
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (unaudited)
12
Condensed Consolidated Financial Statements of Digital Realty Trust, L.P.:
13
14
15
Condensed Consolidated Statement of Capital for the three and nine months ended September 30, 2024 and 2023 (unaudited)
16
20
Notes to Condensed Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (unaudited)
21
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
43
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
66
ITEM 4.
Controls and Procedures (Digital Realty Trust, Inc.)
67
Controls and Procedures (Digital Realty Trust, L.P.)
68
PART II.
OTHER INFORMATION
69
Legal Proceedings
ITEM 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
ITEM 5.
Other Information
ITEM 6.
Exhibits
70
Signatures
71
4
DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)
September 30,
December 31,
2024
2023
ASSETS
Investments in real estate:
Investments in properties, net
$
25,230,214
24,236,088
Investments in unconsolidated entities
2,456,448
2,295,889
Net investments in real estate
27,686,662
26,531,977
Operating lease right-of-use assets, net
1,228,507
1,414,256
Cash and cash equivalents
2,175,605
1,625,495
Accounts and other receivables, net
1,274,460
1,278,110
Deferred rent, net
641,778
624,427
Goodwill
9,395,233
9,239,871
Customer relationship value, deferred leasing costs and other intangibles, net
2,367,467
2,500,237
Assets held for sale
—
478,503
Other assets
525,679
420,382
Total assets
45,295,391
44,113,258
LIABILITIES AND EQUITY
Global revolving credit facilities, net
1,786,921
1,812,287
Unsecured term loans, net
913,733
1,560,305
Unsecured senior notes, net of discount
13,528,061
13,422,342
Secured and other debt, net of discount
757,831
630,973
Operating lease liabilities
1,343,903
1,542,094
Accounts payable and other accrued liabilities
2,140,763
2,168,984
Deferred tax liabilities, net
1,223,771
1,151,096
Accrued dividends and distributions
387,988
Security deposits and prepaid rents
423,797
401,867
Obligations associated with assets held for sale
39,001
Total liabilities
22,118,780
23,116,937
Redeemable noncontrolling interests
1,465,636
1,394,814
Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 110,000 shares authorized; $755,000 liquidation preference ($25.00 per share), 30,200 shares issued and outstanding as of September 30, 2024 and December 31, 2023
731,690
Common Stock: $0.01 par value per share, 392,000 shares authorized; 331,347 and 311,608 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
3,285
3,088
Additional paid-in capital
27,229,143
24,396,797
Accumulated dividends in excess of earnings
(6,060,642)
(5,262,648)
Accumulated other comprehensive loss, net
(657,365)
(751,393)
Total stockholders’ equity
21,246,111
19,117,534
Noncontrolling interests
464,864
483,973
Total equity
21,710,975
19,601,507
Total liabilities and equity
See accompanying notes to the condensed consolidated financial statements.
CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended September 30,
Nine Months Ended September 30,
Operating Revenues:
Rental and other services
1,413,727
1,394,613
4,069,966
4,075,008
Fee income and other
17,487
7,819
49,140
32,414
Total operating revenues
1,431,214
1,402,432
4,119,106
4,107,422
Operating Expenses:
Rental property operating and maintenance
605,859
607,544
1,707,699
1,778,465
Property taxes and insurance
50,502
76,568
148,727
172,450
Depreciation and amortization
459,997
420,613
1,316,442
1,274,384
General and administrative
117,602
110,721
353,207
332,257
Transactions and integration
24,194
14,465
82,105
44,496
Provision for impairment
113,000
168,303
Other
4,774
1,295
15,081
1,950
Total operating expenses
1,262,928
1,344,206
3,791,564
3,717,002
Operating income
168,286
58,226
327,542
390,420
Other Income (Expenses):
Equity in (loss) earnings of unconsolidated entities
(26,486)
(19,793)
(83,937)
163
(Loss) gain on disposition of properties, net
(556)
810,688
450,940
900,634
Other income, net
37,756
24,812
109,726
18,162
Interest expense
(123,803)
(110,767)
(348,094)
(324,103)
Loss on debt extinguishment and modifications
(2,636)
(3,706)
Income tax expense
(12,427)
(17,228)
(49,832)
(54,855)
Net income
40,134
745,938
402,639
930,421
Net loss (income) attributable to noncontrolling interests
11,059
(12,320)
10,282
(9,893)
Net income attributable to Digital Realty Trust, Inc.
51,193
733,618
412,921
920,528
Preferred stock dividends
(10,181)
(30,543)
Net income available to common stockholders
41,012
723,437
382,378
889,985
Net income per share available to common stockholders:
Basic
0.13
2.40
1.20
3.00
Diluted
0.09
2.31
1.10
2.87
Weighted average common shares outstanding:
327,977
301,827
319,965
296,184
336,249
311,341
328,641
306,735
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
Other comprehensive income (loss):
Foreign currency translation adjustments
405,845
(190,425)
182,448
(478,792)
(Decrease) increase in fair value of derivatives
(81,458)
48,580
28,802
61,730
Reclassification to interest expense from derivatives
(9,236)
(9,349)
(29,661)
(23,387)
Other comprehensive income (loss)
315,151
(151,194)
181,589
(440,449)
Comprehensive income
355,285
594,744
584,228
489,972
Comprehensive (income) loss attributable to noncontrolling interests
(72,895)
(2,354)
(75,186)
142,605
Comprehensive income attributable to Digital Realty Trust, Inc.
282,390
592,390
509,042
632,577
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(unaudited, in thousands, except share data)
Accumulated
Redeemable
Number of
Additional
Dividends in
Noncontrolling
Preferred
Common
Paid-in
Excess of
Comprehensive
Three Months Ended September 30, 2024
Interests
Stock
Shares
Capital
Earnings
Loss, Net
Total Equity
Balance as of June 30, 2024
1,399,889
325,885,279
3,231
26,388,393
(5,701,096)
(884,715)
470,313
21,007,816
Conversion of common units to common stock
79,944
5,791
(5,791)
Vesting of restricted stock, net
60,004
Issuance of common stock, net of costs
5,213,737
54
806,047
806,101
Shares issued under equity plans, net of share settlement to satisfy tax withholding upon vesting
108,000
4,787
Reclassification of vested share-based awards
(1,631)
1,631
Amortization of unearned compensation regarding share-based awards
23,435
Adjustment to redeemable noncontrolling interests
1,526
(1,526)
Dividends declared on preferred stock
Dividends and distributions on common stock and common and incentive units
(190)
(400,659)
(7,728)
(408,387)
Contributions from (distributions to) noncontrolling interests
(2,045)
Net income (loss)
(9,898)
(1,161)
50,032
74,309
3,847
227,350
9,645
240,842
Balance as of September 30, 2024
331,346,964
Nine Months Ended September 30, 2024
Balance as of December 31, 2023
311,607,580
290,795
21,044
(21,044)
165,675
19,126,996
197
2,729,880
2,730,077
155,918
5,621
(26,551)
26,551
64,551
4,252
(4,252)
(570)
(1,180,473)
(23,488)
(1,203,961)
Sale of noncontrolling interest in property to DCRU
39,960
12,115
52,075
(21,289)
(22,232)
11,950
424,871
89,372
2,093
94,028
(3,904)
92,217
9
Three Months Ended September 30, 2023
Balance as of June 30, 2023
1,367,422
299,240,366
2,967
22,882,200
(5,253,917)
(741,484)
483,702
18,105,158
15,435
1
1,150
(1,151)
66,419
3,454,148
34
335,279
335,313
69,658
3,551
19,230
(1,490)
1,490
1,116
(1,116)
(370,278)
(7,823)
(378,101)
(64)
(2,657)
14,977
748,595
(5,383)
284
(141,512)
(4,583)
(145,811)
Balance as of September 30, 2023
1,360,308
302,846,026
3,002
23,239,088
(4,900,758)
(882,996)
486,548
18,676,574
10
Nine Months Ended September 30, 2023
Balance as of December 31, 2022
1,514,679
291,148,222
2,887
22,142,868
(4,698,313)
(595,798)
524,131
18,107,465
77,432
5,590
(5,592)
221,907
11,274,926
112
1,077,426
1,077,538
123,539
(23)
(22)
54,785
(37,567)
37,567
3,238
(3,238)
(1,092,430)
(23,204)
(1,115,634)
129
4,441
Deconsolidation of noncontrolling interests in consolidated entities
(65,358)
(9,386)
19,279
939,807
(147,782)
(753)
(287,198)
(4,716)
(292,667)
11
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of properties, net
(450,940)
(900,634)
Equity in loss (earnings) of unconsolidated entities
83,937
(163)
Distributions from unconsolidated entities
67,325
51,068
Amortization of share-based compensation
60,675
3,706
Straight-lined rents and amortization of above and below market leases
(19,950)
(18,597)
Amortization of deferred financing costs and debt discount / premium
24,373
19,705
Other operating activities, net
349
(20,345)
Changes in assets and liabilities:
Increase in accounts receivable and other assets
(228,896)
(343,767)
Increase in accounts payable and other liabilities
64,039
12,618
Net cash provided by operating activities
1,492,002
1,172,475
Cash flows from investing activities:
Improvements to investments in real estate
(2,096,330)
(2,466,462)
Cash paid for business combination / asset acquisitions, net of cash acquired
(317,297)
(45,856)
Investments in and advances to unconsolidated entities
(234,362)
(12,421)
Return of investment from unconsolidated entities
99,864
Proceeds from sale of assets
1,246,351
2,470,684
Other investing activities, net
(92,393)
(44,651)
Net cash used in investing activities
(1,394,167)
(98,706)
Cash flows from financing activities:
Proceeds from credit facilities
1,162,180
2,256,973
Payments on credit facilities
(1,192,606)
(2,700,310)
Borrowings on secured / unsecured debt
1,027,507
827,759
Repayments on secured / unsecured debt
(1,616,353)
(3,081)
Capital (distribution to) contributions from noncontrolling interests, net
4,570
Proceeds from issuance of common stock, net
2,730,178
Payments of dividends and distributions
(1,623,062)
(1,510,463)
Other financing activities, net
55,379
(61,261)
Net cash provided by (used in) financing activities
521,934
(108,275)
Net increase in cash, cash equivalents and restricted cash
619,769
965,494
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(74,131)
(43,745)
Cash, cash equivalents and restricted cash at beginning of period
1,636,470
150,696
Cash, cash equivalents and restricted cash at end of period
2,182,108
1,072,445
DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES
(unaudited, in thousands, except per unit data)
LIABILITIES AND CAPITAL
Capital:
Partners’ capital:
General Partner:
Preferred units, $755,000 liquidation preference ($25.00 per unit), 30,200 units issued and outstanding as of September 30, 2024 and December 31, 2023
Common units, 331,347 and 311,608 units issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
21,171,786
19,137,237
Limited Partners, 6,397 and 6,449 units issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
447,573
459,356
Accumulated other comprehensive loss
(677,007)
(772,668)
Total partners’ capital
21,674,042
19,555,615
Noncontrolling interests in consolidated entities
36,933
45,892
Total capital
Total liabilities and capital
Net loss attributable to noncontrolling interests
12,059
3,980
18,982
10,407
Net income attributable to Digital Realty Trust, L.P.
52,193
749,918
421,621
940,828
Preferred units distributions
Net income available to common unitholders
42,012
739,737
391,078
910,285
Net income per unit available to common unitholders:
3.01
2.32
2.88
Weighted average common units outstanding:
334,103
308,024
326,154
302,316
342,375
317,538
334,830
312,867
(67,309)
10,772
(67,155)
156,348
Comprehensive income attributable to Digital Realty Trust, L.P.
287,976
605,516
517,073
646,320
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL
(unaudited, in thousands, except unit data)
General Partner
Limited Partners
Limited Partner
Preferred Units
Common Units
Units
Amount
Total Capital
30,200,000
20,690,528
6,460,947
458,481
(908,943)
36,060
Conversion of limited partner common units to general partner common units
(79,944)
Vesting of restricted common units, net
Issuance of common units, net of costs
806,202
Issuance of limited partner common units, net
15,529
Units issued under equity plans, net of unit settlement to satisfy tax withholding upon vesting
Adjustment to redeemable partnership units
Distributions
(418,568)
Contributions from (distributions to) noncontrolling interests in consolidated entities
10,181
980
(2,141)
231,936
5,059
6,396,532
6,448,987
(290,795)
238,340
(1,234,504)
30,543
8,500
3,450
(2,302)
95,661
(3,235)
17
17,631,250
6,483,064
457,107
(762,492)
47,603
1,151
(15,435)
11,765
(388,282)
Contributions from noncontrolling interests in consolidated entities
15,925
(948)
(144,686)
(1,409)
18,341,332
6,479,394
465,548
(907,178)
45,182
18
17,447,442
6,288,669
436,942
(613,423)
104,814
5,592
(77,432)
1,077,539
268,157
(1,146,177)
Deconsolidation of noncontrolling interest in consolidated entities
19,835
(293,755)
1,841
19
General partner contributions
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Organization and Description of Business. Digital Realty Trust, Inc. (the Parent), through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership or the OP) and the subsidiaries of the OP (collectively, we, our, us or the Company), is a leading global provider of data center (including colocation and interconnection) solutions for customers across a variety of industry verticals ranging from cloud and information technology services, social networking and communications to financial services, manufacturing, energy, healthcare, and consumer products. The OP, a Maryland limited partnership, is the entity through which the Parent, a Maryland corporation, conducts its business of owning, acquiring, developing and operating data centers. The Parent operates as a REIT for U.S. federal income tax purposes.
The Parent’s only material asset is its ownership of partnership interests of the OP. The Parent generally does not conduct business itself, other than acting as the sole general partner of the OP, issuing public securities from time to time and guaranteeing certain unsecured debt of the OP and certain of its subsidiaries and affiliates. The Parent has not issued any debt but guarantees the unsecured debt of the OP and certain of its subsidiaries and affiliates.
The OP holds substantially all the assets of the Company. The OP conducts the operations of the business and has no publicly traded equity. Except for net proceeds from public equity issuances by the Parent, which are generally contributed to the OP in exchange for partnership units, the OP generally generates the capital required by the Company’s business primarily through the OP’s operations, by the OP’s or its affiliates’ direct or indirect incurrence of indebtedness or through the issuance of partnership units.
Accounting Principles and Basis of Presentation. The accompanying unaudited interim condensed consolidated financial statements and accompanying notes (the “Financial Statements”) are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and are presented in our reporting currency, the U.S. dollar. All of the accounts of the Parent, the OP, and the subsidiaries of the OP are included in the accompanying Financial Statements. All material intercompany transactions with consolidated entities have been eliminated. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Interim results are not always indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), as filed with the U.S. Securities and Exchange Commission (“SEC”), our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024, and June 30, 2024, as filed with the SEC, and other filings with the SEC.
Management Estimates and Assumptions. U.S. GAAP requires us to make estimates and assumptions that affect reported amounts of revenue and expenses during the reporting period, reported amounts for assets and liabilities as of the date of the financial statements, and disclosures of contingent assets and liabilities as of the date of the financial statements. Although we believe the estimates and assumptions we made are reasonable and appropriate, as discussed in the applicable sections throughout the consolidated financial statements, different assumptions and estimates could materially impact our reported results. Actual results and outcomes may differ from our assumptions.
New Accounting Pronouncements. Recently issued accounting pronouncements that have yet to be adopted by the Company are not expected to have a material impact to the condensed consolidated financial statements.
2. Investments in Properties
A summary of our investments in properties is below (in thousands):
Property Type
As of September 30, 2024
As of December 31, 2023
Land
1,175,270
1,087,278
Acquired ground lease
92
91
Buildings and improvements
26,725,546
25,388,788
Tenant improvements
907,862
830,211
28,808,770
27,306,368
Accumulated depreciation and amortization
(8,777,002)
(7,823,685)
Investments in operating properties, net
20,031,768
19,482,683
Construction in progress and space held for development
5,175,054
4,635,215
Land held for future development
23,392
118,190
Acquisitions
In January 2024, we acquired a 16-acre site in Paris for $80 million. Prior to the acquisition, we leased the land, which consisted of two completed data centers and two data centers under construction. As a result of the land acquisition, we derecognized the right-of-use assets and lease liabilities of $145 million and $150 million, respectively.
In July 2024, the Company acquired two data centers located in the Slough Trading Estate for $200 million. The newly acquired campus features two individual data centers with a combined capacity of 15 megawatts (MW).
Dispositions
On January 11, 2024, we formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses across Frankfurt, Paris and Northern Virginia. The campuses are planned to support the construction of 10 data centers with approximately 500 megawatts of potential IT load capacity. The first phase of the joint venture closed on hyperscale data center campuses in Paris and Northern Virginia, while the second phase is scheduled to close in the fourth quarter of 2024, subject to obtaining the required approvals. We received approximately $231 million of net proceeds from the contribution of our data centers to the first phase of the joint venture and retained a 20% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a loss on disposition of approximately $0.3 million.
In January 2024, we closed on the sale of our interest in four data centers to Brookfield Infrastructure Partners L.P., or Brookfield, for approximately $271 million. Two of the data centers were consolidated by us; while two of the data centers were owned by Digital Core REIT (see Note 5. “Investments in Unconsolidated Entities”). The sale was completed subsequent to Brookfield’s November 2023 acquisition of one of our customers, Cyxtera Technologies. The acquisition was part of Cyxtera’s plan of reorganization under its Chapter 11 bankruptcy proceedings. In conjunction with the sale, we bought out Cyxtera’s leases in three data centers located in Singapore and Frankfurt for approximately $57 million. In addition, Brookfield assumed the leases on three facilities previously leased to Cyxtera and amended the leases on three additional data centers in North America, accelerating the expiration date to September 2024. As a result of the sale, we recognized a total gain on disposition of approximately $203.1 million, of which $194.2 million is included within Gain on disposition of properties, net and $8.9 million is included within Equity in (loss) earnings of unconsolidated entities on our condensed consolidated income statements.
22
On March 1, 2024, we formed a joint venture with Mitsubishi Corporation, or Mitsubishi, to support the development of two data centers in the Dallas metro area. The facilities were 100% pre-leased prior to construction. We contributed the two data center buildings at a contribution value of approximately $261 million. We received approximately $153 million of gross proceeds from the contribution of our data centers to the joint venture and retained a 35% interest in the joint venture. Mitsubishi paid such cash in exchange for a 65% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a gain on disposition of approximately $7.1 million.
On April 16, 2024, we expanded our existing joint venture with GI Partners with the sale to GI Partners of a 75% interest in a third facility on the same hyperscale data center campus in Chicago. We contributed the data center at a value of approximately $453 million. We received approximately $386 million of net proceeds from the contribution of our data center to the joint venture and the associated financing and retained a 25% interest in the joint venture. As a result of transferring control, we derecognized the data center and recognized a gain on disposition of approximately $172 million.
During our second quarter 2024 impairment review, we determined that certain non-core properties in secondary U.S. markets had carrying amounts that may not be fully recoverable as we determined that we no longer intend to hold these properties long-term. Accordingly, the recorded amounts were reduced to reflect management’s estimate of fair value based on sales of similar properties and ongoing negotiations with third parties. During the nine months ended September 30, 2024, we recorded a provision for impairment on real estate investments of $168.3 million.
3. Leases
Lessor Accounting
We generate most of our revenue by leasing operating properties to customers under operating lease agreements. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term if we determine that it is probable that substantially all of the lease payments will be collected over the lease term. Otherwise, rental revenue is recognized based on the amount contractually due. Generally, under the terms of our leases, some of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers. We record amounts reimbursed by customers in the period the applicable expenses are incurred, which is generally ratably throughout the term of the lease. Reimbursements are recognized in rental and other services revenue in the condensed consolidated income statements as we are the primary obligor with respect to purchasing and selecting goods and services from third-party vendors and bearing the associated credit risk. Our largest customer’s total revenue approximates 11% of our total revenue base. No other individual customer makes up more than 6% of our total revenue.
Lessee Accounting
We lease space at certain of our data centers from third parties and certain equipment under noncancelable lease agreements. Leases for our data centers expire at various dates through 2069. As of September 30, 2024, certain of our data centers, primarily in Europe and Singapore, are subject to ground leases. As of September 30, 2024, the termination dates of these ground leases generally range from 2038 to 2073. In addition, our corporate headquarters along with several regional office locations are subject to leases with termination dates ranging from 2024 to 2036.
23
The leases generally require us to make fixed rental payments that increase at defined intervals during the term of the lease plus pay our share of common area, real estate and utility expenses as incurred. The leases neither contain residual value guarantees nor impose material restrictions or covenants on us. Further, the leases have been classified and accounted for as either operating or finance leases. Rent expense related to operating leases included in rental property operating and maintenance expense in the condensed consolidated income statements amounted to approximately $39.2 million and $37.4 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $112.6 million and $114.1 million for the nine months ended September 30, 2024 and 2023, respectively.
4. Receivables
Accounts and Other Receivables, Net
Accounts and Other Receivables, net is primarily comprised of contractual rents and other lease-related obligations currently due from customers. These amounts (net of an allowance for estimated uncollectible amounts) are shown in the subsequent table as Accounts receivable – trade, net. Other receivables shown separately from Accounts receivable – trade, net consist primarily of amounts that have not yet been billed to customers, such as for utility reimbursements and installation fees.
Balance as of
(Amounts in thousands):
September 30, 2024
December 31, 2023
Accounts receivable – trade
686,058
694,252
Allowance for doubtful accounts
(56,353)
(41,204)
Accounts receivable – trade, net
629,705
653,048
Accounts receivable – customer recoveries
204,014
233,499
Value-added tax receivables
187,929
257,911
Accounts receivable – installation fees
127,355
65,203
Other receivables
125,457
68,449
Deferred Rent, Net
Deferred rent, net represents rental income that has been recognized as revenue under ASC 842, but which is not yet due from customers under their existing rental agreements. The Company recognizes an allowance against deferred rent receivables to the extent it becomes no longer probable that a customer or group of customers will be able to make substantially all of their required cash rental payments over the entirety of their respective lease terms.
Deferred rent receivables
648,930
657,009
Allowance for deferred rent receivables
(7,152)
(32,582)
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5. Investments in Unconsolidated Entities
A summary of the Company’s investments in unconsolidated entities accounted for under the equity method of accounting is shown below (in thousands):
Americas (1)(5)
1,425,199
1,363,226
APAC (2)
613,748
569,996
EMEA (3)
113,975
28,334
Global (4)
303,526
334,333
Total
Includes the following unconsolidated entities along with our ownership percentage:
Generally, we serve as the managing member responsible for operations in the ordinary course of business of the joint ventures. We perform the day-to-day accounting and property management functions for the joint ventures and, as such, will earn management fees. However, certain approval rights are granted through the terms of the joint venture agreements and require unanimous consent of both members with respect to any major decisions. Generally, major decisions are defined to include the annual plan which sets out joint venture and property level budgets, including lease revenues, operating expenses, and capital expenditures. As such, we concluded we do not own a controlling interest and accounted for our interest in the joint ventures under the equity method of accounting.
GI Partners Joint Venture – On July 13, 2023, we formed a joint venture with GI Partners, and GI Partners acquired a 65% interest in two stabilized hyperscale data center buildings in the Chicago metro area that we contributed. We retained a 35% interest in the joint venture. As a result of transferring control, we derecognized the data centers. In addition, GI Partners had a call option to increase their ownership interest in the joint venture from 65% to 80%. The call option top-up election notice was delivered to the Company on December 21, 2023. On January 12, 2024, GI Partners made an additional cash capital contribution, pursuant to the exercise of such call option, in the amount of $68 million, resulting in such additional 15% ownership in the joint venture. Currently, GI Partners has an 80% interest in the joint venture, and we have retained a 20% interest. We also granted GI Partners an option to purchase an interest in the third facility on the same hyperscale data center campus in Chicago. On April 16, 2024, we expanded our existing joint venture with GI Partners with the sale to GI Partners of a 75% interest in this third facility, see Note 2. “Investments in Properties”.
TPG Real Estate Joint Venture – On July 25, 2023, we formed a joint venture with TPG Real Estate, and TPG Real Estate acquired an 80% interest in three stabilized hyperscale data center buildings in Northern Virginia that we contributed. We retained a 20% interest in the joint venture. As a result of transferring control, we derecognized the data centers.
25
Realty Income Joint Venture – On November 10, 2023, we formed a joint venture with Realty Income to support the development of two data centers in Northern Virginia. We retained a 20% interest in the joint venture. Realty Income contributed such cash to the joint venture in exchange for an 80% interest in the joint venture. Each partner funded its pro rata share of the remaining estimated development cost for the first phase of the project, which was completed in mid-2024.
Blackstone Joint Venture - On January 11, 2024, we formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses across Frankfurt, Paris and Northern Virginia. The campuses are planned to support the construction of 10 data centers with approximately 500 megawatts of potential IT load capacity. The first phase of the joint venture closed on hyperscale data center campuses in Paris and Northern Virginia, while the second phase is scheduled to close in the fourth quarter of 2024, subject to obtaining the required approvals. We retained a 20% interest in the joint venture. Each partner funded its pro rata share of the remaining $3.0 billion estimated development cost for the first phase of the joint venture, which is slated for completion in various stages, contingent on customer demand, which began in the first quarter of 2024.
Mitsubishi Joint Venture - On March 1, 2024, we formed a joint venture with Mitsubishi Corporation, or Mitsubishi, to support the development of two data centers in the Dallas metro area. We retained a 35% interest in the joint venture. Each partner funded its pro rata share of the remaining $140 million estimated development cost for the first phase of the project, of which one project has been completed in June 2024 and another is slated for completion in late 2024.
DCREIT – Digital Core REIT is a standalone real estate investment trust formed under Singapore law, which is publicly traded on the Singapore Exchange under the ticker symbol “DCRU”. Digital Core REIT owns 10 operating data center properties. The Company’s ownership interest in the units of DCRU, as well as its ownership interest in the operating properties of DCRU are collectively referred to as the Company’s investment in DCREIT.
As of September 30, 2024, the Company held 32% of the outstanding DCRU units and separately owned a 10% direct retained interest in the underlying North American operating properties. DCREIT has a 49.9% interest in a consolidated asset in Frankfurt which we account for as noncontrolling interest.
The Company’s 32% interest in DCRU consisted of 414 million units and 406 million units as of September 30, 2024 and December 31, 2023, respectively. Based on the closing price per unit of $0.62 and $0.65 as of September 30, 2024 and December 31, 2023, respectively, the fair value of the units the Company owned in DCRU was approximately $257 million and $264 million as of September 30, 2024 and December 31, 2023, respectively.
Pursuant to contractual agreements with DCRU and its operating properties, the Company will earn fees for asset and property management services as well as fees for aiding in future acquisition, disposition and development activities. Certain of these fees are payable to the Company in the form of additional units in DCRU or in cash. The Company earned fees pursuant to these contractual agreements of approximately $0.8 million and $2.4 million for the three months ended September 30, 2024 and 2023, respectively, and $6.8 million and $7.3 million for the nine months ended September 30, 2024 and 2023, respectively, which is recorded as fee income and other on the condensed consolidated income statement.
26
On April 19, 2024, we completed the sale of an additional 24.9% interest in a data center facility in Frankfurt, Germany to DCREIT for total consideration of approximately $126 million, and DCREIT now has a 49.9% interest in the Frankfurt data center. Because the Company still controls this asset, no gain or loss was recorded on this 49.9% interest. In connection with this transaction, DCREIT loaned the consolidated subsidiary that owns the data center approximately $80 million. As of September 30, 2024, DCREIT has loaned $160.4 million, which is secured by the Frankfurt data center and is recorded in our condensed consolidated balance sheets within Accounts payable and other accrued liabilities.
Ascenty – The Company’s ownership interest in Ascenty includes an approximate 2% interest held by one of the Company’s noncontrolling interest holders. This 2% interest had a carrying value of approximately $12 million and $18 million as of September 30, 2024 and December 31, 2023, respectively. Ascenty is a variable interest entity (“VIE”) and the Company’s maximum exposure to loss related to this VIE is limited to our equity investment in the entity.
Debt – The debt of our unconsolidated entities generally is non-recourse to us, except for customary exceptions pertaining to matters such as intentional misuse of funds, environmental conditions, and material misrepresentations.
6. Goodwill
Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Changes in the value of goodwill at September 30, 2024 as compared to December 31, 2023 were primarily driven by changes in exchange rates associated with goodwill balances denominated in foreign currencies.
7. Acquired Intangible Assets and Liabilities
The following table summarizes our acquired intangible assets and liabilities:
(Amounts in thousands)
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Customer relationship value
2,926,388
(1,068,137)
1,858,251
2,926,808
(952,943)
1,973,865
Acquired in-place lease value
1,080,649
(871,818)
208,831
1,089,743
(859,167)
230,576
126,624
(37,654)
88,970
108,744
(33,483)
75,261
Acquired above-market leases
136,757
(131,780)
4,977
153,205
(150,344)
2,861
Acquired below-market leases
(266,513)
225,398
(41,115)
(273,951)
226,840
(47,111)
Amortization of customer relationship value, acquired in-place lease value and other intangibles (a component of depreciation and amortization expense) was approximately $61.5 million and $59.8 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $178.0 million and $194.4 million for the nine months ended September 30, 2024 and 2023, respectively.
Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase in rental and other services revenue of $1.2 million and $1.6 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $4.0 million and $5.1 million for the nine months ended September 30, 2024 and 2023, respectively.
27
Estimated annual amortization for each of the five succeeding years and thereafter, commencing October 1, 2024 is as follows:
Other (1)
45,679
15,486
743
310
(1,568)
2025
178,648
56,363
2,970
1,242
(6,242)
2026
178,011
55,202
1,124
(5,441)
2027
177,619
45,304
988
(4,796)
2028
155,174
24,631
2,989
986
(4,591)
Thereafter
1,123,120
11,845
7,330
327
(18,477)
19,972
8. Debt of the Operating Partnership
All debt is currently held by the OP or its consolidated subsidiaries, and the Parent is the guarantor or co-guarantor of the Global Revolving Credit Facility and the Yen Revolving Credit Facility (together, referred to as the “Global Revolving Credit Facilities”), the unsecured term loans and the unsecured senior notes. A summary of outstanding indebtedness is as follows (in thousands):
Weighted-
average
interest rate
Outstanding
Global Revolving Credit Facilities
3.76
%
1,814,927
4.33
1,825,228
Unsecured term loans
4.29
917,563
4.76
1,567,925
Unsecured senior notes
2.33
13,610,252
2.24
13,507,427
Secured and other debt
8.48
766,304
8.07
637,072
2.86
17,109,046
2.89
17,537,652
The weighted-average interest rates shown represent interest rates at the end of the periods for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rates on certain variable rate debt, along with cross-currency interest rate swaps, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt in order to hedge the currency exposure associated with our net investment in foreign subsidiaries.
28
We primarily borrow in the functional currencies of the countries where we invest. Included in the outstanding balances were borrowings denominated in the following currencies (in thousands, U.S. dollars):
Denomination of Draw
% of Total
U.S. dollar ($)
2,550,614
14.9
2,784,875
15.9
British pound sterling (£)
1,738,750
10.2
1,973,305
11.2
Euro (€)
10,748,658
62.8
10,835,878
61.8
2,071,024
12.1
1,943,594
11.1
The table below summarizes debt maturities and principal payments as of September 30, 2024 (in thousands):
Global Revolving
Unsecured
Secured and
Credit Facilities (1)(2)
Term Loans(3)(4)(5)
Senior Notes
Other Debt
Total Debt
140
1,258,775
853
2,177,191
1,522,211
127,129
1,649,340
1,177,381
242,371
1,419,752
2,106,750
378,106
2,484,856
7,545,135
17,705
9,377,767
Subtotal
Unamortized net discounts
(30,652)
(3,992)
(34,644)
Unamortized deferred financing costs
(28,006)
(3,830)
(51,539)
(4,481)
(87,856)
16,986,546
On September 24, 2024, we refinanced our Global Revolving Credit Facilities. Below are key terms for our Global Revolving Credit Facility and Yen Revolving Credit Facility.
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Global Revolving Credit Facility
We have a Global Revolving Credit Facility under which we may draw up to $4.2 billion equivalent on a revolving basis (subject to currency fluctuations). The Global Revolving Credit Facility can be drawn in Australian dollars, British pounds sterling, Canadian dollars, Euros, Hong Kong dollars, Indonesian rupiah, Japanese yen, Korean won, Singapore dollars, Swiss francs and U.S. dollars (with the ability to add other currencies in the future).
We have the ability to increase the size of the Global Revolving Credit Facility by up to $1.8 billion, subject to the receipt of lender commitments and the satisfaction of certain customary conditions precedent. Other key terms of the Global Revolving Credit Facility are as follows:
Yen Revolving Credit Facility
In addition to the Global Revolving Credit Facility, we have a revolving credit facility that provides for borrowings in Japanese Yen of up to ¥42.5 billion (approximately $296.8 million based on the exchange rate on September 24, 2024), hereafter referred to as the “Yen Revolving Credit Facility”). We have the ability from time to time to increase the size of the Yen Revolving Credit Facility to up to ¥102.5 billion, subject to receipt of lender commitments and other conditions precedent. Other key terms of the Yen Revolving Credit Facility are as follows:
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Unsecured Senior Notes
The following table provides details of our unsecured senior notes (balances in thousands):
Aggregate Principal Amount at Issuance
Borrowing Currency
USD
Maturity Date
2.625% notes due 2024(1)
€
600,000
677,040
Apr 15, 2024
662,340
2.750% notes due 2024(2)
£
250,000
324,925
Jul 19, 2024
318,275
4.250% notes due 2025
400,000
634,480
Jan 17, 2025
535,000
509,240
0.625% notes due 2025
650,000
720,980
Jul 15, 2025
723,775
717,535
2.500% notes due 2026
1,075,000
1,224,640
Jan 16, 2026
1,197,013
1,186,693
0.200% notes due 2026
CHF
275,000
298,404
Dec 15, 2026
325,198
326,826
1.700% notes due 2027
150,000
162,465
Mar 30, 2027
177,381
178,269
3.700% notes due 2027(3)
1,000,000
Aug 15, 2027
5.550% notes due 2028(3)
900,000
Jan 15, 2028
1.125% notes due 2028
500,000
548,550
Apr 09, 2028
556,750
551,950
4.450% notes due 2028
Jul 15, 2028
0.550% notes due 2029
270,000
292,478
Apr 16, 2029
319,285
320,884
3.600% notes due 2029
Jul 01, 2029
3.300% notes due 2029
350,000
454,895
Jul 19, 2029
468,125
445,585
1.500% notes due 2030
750,000
831,900
Mar 15, 2030
835,125
827,925
3.750% notes due 2030
550,000
719,825
Oct 17, 2030
735,625
700,205
1.250% notes due 2031
560,950
Feb 01, 2031
0.625% notes due 2031
1,220,700
Jul 15, 2031
1,113,500
1,103,900
1.000% notes due 2032
874,500
Jan 15, 2032
1.375% notes due 2032
849,375
Jul 18, 2032
3.875% notes due 2033
850,000
941,375
Sep 13, 2033
946,475
Unamortized discounts, net of premiums
(33,324)
Deferred financing costs, net
(51,761)
Total unsecured senior notes, net of discount and deferred financing costs
Restrictive Covenants in Unsecured Senior Notes
The indentures governing our senior notes contain certain covenants, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 40% and (3) an interest coverage ratio of greater than 1.50. The covenants also require us to maintain total unencumbered assets of not less than 150% of the aggregate principal amount of unsecured debt. At September 30, 2024, we were in compliance with each of these financial covenants.
Issuance of Unsecured Senior Notes
On September 13, 2024, Digital Dutch Finco B.V., an indirect wholly owned finance subsidiary of the Operating Partnership, issued and sold €850 million aggregate principal amount of 3.875% Guaranteed Notes due 2033 (the “2033 Notes”). Net proceeds from the offering were approximately €843 million (approximately $933 million based on the exchange rate on September 13, 2024) after deducting managers’ discounts and estimated offering expenses.
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9. Earnings per Common Share or Unit
The following is a summary of basic and diluted income per share/unit (in thousands, except per share/unit amounts):
Digital Realty Trust, Inc. Earnings per Common Share
Numerator:
Loss attributable to redeemable noncontrolling interest (1)
(9,918)
(3,032)
(22,432)
(9,851)
Net income available to common stockholders - diluted EPS
31,094
720,405
359,946
880,134
Denominator:
Weighted average shares outstanding—basic
Potentially dilutive common shares:
Unvested incentive units
77
97
78
Unvested restricted stock
39
Forward equity offering
209
253
Market performance-based awards
228
166
285
90
Redeemable noncontrolling interest shares (1)
7,898
8,999
8,285
10,127
Weighted average shares outstanding—diluted
Income per share:
32
Digital Realty Trust, L.P. Earnings per Unit
Net income available to common unitholders - diluted EPS
32,094
736,705
368,646
900,434
Weighted average units outstanding—basic
Potentially dilutive common units:
Unvested restricted units
Weighted average units outstanding—diluted
Income per unit:
The below table shows the securities that would be antidilutive or not dilutive to the calculation of earnings per share and unit. Common units of the Operating Partnership not owned by Digital Realty Trust, Inc. were excluded only from the calculation of earnings per share as they are not applicable to the calculation of earnings per unit. All other securities shown below were excluded from the calculation of both earnings per share and earnings per unit (in thousands).
Shares subject to Forward Equity Offering
3,454
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.
6,125
6,197
6,189
6,132
Potentially dilutive Series J Cumulative Redeemable Preferred Stock
1,264
1,647
1,355
1,891
Potentially dilutive Series K Cumulative Redeemable Preferred Stock
1,329
1,732
1,425
1,988
Potentially dilutive Series L Cumulative Redeemable Preferred Stock
2,180
2,841
2,337
3,261
10,898
15,871
11,306
16,726
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10. Equity and Capital
Equity Distribution Agreement
Digital Realty Trust, Inc. and Digital Realty Trust, L.P. were parties to an ATM Equity OfferingSM Sales Agreement dated August 4, 2023 (the “2023 Sales Agreement”). Pursuant to the 2023 Sales Agreement, Digital Realty Trust, Inc. could issue and sell common stock having an aggregate offering price of up to $1.5 billion through various named agents from time to time. From January 1, 2024 through February 23, 2024, Digital Realty Trust, Inc. generated net proceeds of approximately $99 million from the issuance of approximately 0.6 million common shares under the 2023 Sales Agreement at an average price of $133.43 per share after payment of approximately $0.6 million of commissions to the agents.
The 2023 Sales Agreement was amended on February 23, 2024 (the “2024 Sales Agreement Amendment”). At the time of the amendment, $258.3 million remained unsold under the 2023 Sales Agreement. Pursuant to the 2024 Sales Agreement Amendment, Digital Realty Trust, Inc. can issue and sell common stock having an aggregate offering price of up to $2.0 billion through various named agents from time to time. During the nine months ended September 30, 2024, Digital Realty Trust, Inc. generated net proceeds of approximately $983 million from the issuance of approximately 6.4 million common shares under the 2024 Sales Agreement Amendment at an average price of $154.84 per share before payment of approximately $9.9 million of commissions to the agents. Subsequent to September 30, 2024, Digital Realty Trust, Inc. generated net proceeds of approximately $62 million from the issuance of approximately 0.4 million common shares under the 2024 Sales Agreement Amendment at an average price of $160.81 per share after payment of approximately $0.6 million of commissions to the agents. As of October 30, 2024, approximately $0.9 billion remains available for future sales under the 2024 Sales Agreement Amendment.
Equity Offering
On May 7, 2024, Digital Realty Trust, Inc. and Digital Realty Trust, L.P. entered into an underwriting agreement with BofA Securities, Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several underwriters relating to the sale of up to approximately 12.1 million shares of common stock (including approximately 1.6 million shares that the underwriters had the option to purchase, and which option was exercised in full on May 8, 2024), at a purchase price to the underwriters of $136.66 per share. The offering closed on May 10, 2024, and we received net proceeds of approximately $1.7 billion.
Noncontrolling Interests in Operating Partnership
Noncontrolling interests in the Operating Partnership relate to the proportion of entities consolidated by the Company that are owned by third parties. The following table shows the ownership interest in the Operating Partnership as of September 30, 2024 and December 31, 2023 (in thousands):
Percentage of
(Units in thousands)
units
total
331,347
98.1
311,608
98.0
Noncontrolling interests consist of:
Common units held by third parties
4,254
1.3
4,343
Incentive units held by employees and directors (see Note 12. ''Incentive Plans'')
2,143
0.6
2,106
0.7
337,744
100.0
318,057
Limited partners have the right to require the Operating Partnership to redeem all or a portion 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 its 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. The common units and incentive units of the Operating Partnership are classified within equity, except for certain common units issued to certain former DuPont Fabros Technology, L.P. unitholders in the Company’s acquisition of DuPont Fabros Technology, Inc., which are subject to certain restrictions and, accordingly, are not presented as permanent equity in the condensed balance sheet.
The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $1,004.4 million and $834.1 million based on the closing market price of Digital Realty Trust, Inc. common stock on September 30, 2024 and December 31, 2023, respectively.
The following table shows activity for noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2024 (in thousands):
Incentive Units
6,449
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)
(89)
(201)
(290)
Incentive units issued upon achievement of market performance condition
88
Grant of incentive units to employees and directors
154
Cancellation / forfeitures of incentive units held by employees and directors
(4)
6,397
Dividends and Distributions
Digital Realty Trust, Inc. Dividends
We have declared and paid the following dividends on our common and preferred stock for the nine months ended September 30, 2024 (in thousands, except per share data):
Series J
Series K
Series L
Date dividend declared
Dividend payment date
February 28, 2024
March 28, 2024
2,625
3,071
4,485
382,208
May 8, 2024
June 28, 2024
397,429
August 7, 2024
400,659
7,875
9,213
13,455
1,180,296
Annual rate of dividend per share
1.31250
1.46250
1.30000
4.88000
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Digital Realty Trust, L.P. Distributions
All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s Board of Directors. The table below shows the distributions declared and paid by the Operating Partnership on its common and preferred units for the nine months ended September 30, 2024 (in thousands, except for per unit data):
Date distribution declared
Distribution payment date
390,356
405,421
408,577
1,204,354
Annual rate of distribution per unit
11. Accumulated Other Comprehensive Income (Loss), Net
The accumulated balances for each item within accumulated other comprehensive income (loss) are shown below (in thousands) for Digital Realty Trust, Inc. and separately for Digital Realty Trust, L.P.:
Foreign currency
Increase (decrease) in
Accumulated other
translation
fair value of derivatives,
comprehensive
adjustments
net of reclassification
income (loss), net
(638,583)
(112,810)
Net current period change
94,952
(924)
(543,631)
(113,734)
income (loss)
(656,063)
(116,605)
96,519
(858)
(559,544)
(117,463)
12. Incentive Plans
2014 Incentive Award Plan
The Company provides incentive awards in the form of common stock or awards convertible into common stock pursuant to the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan, as amended (the “Incentive Plan”). The major categories of awards that have been issued under the Incentive Plan include:
Long-Term Incentive Units (“LTIP Units”): LTIP Units, in the form of profits interest units of the Operating Partnership, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. LTIP Units (other than Class D units), whether vested or not, receive the same quarterly per-unit distributions as Operating Partnership common units. Initially, LTIP Units do not have full parity with common units with respect to liquidating distributions. However, if such parity is reached, vested LTIP Units may be converted into an equal number of common units of the Operating Partnership at any time. The awards generally vest over periods between two and four years.
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Service-Based Restricted Stock Units: Service-based Restricted Stock Units, which vest over periods between two and four years, convert to shares of Digital Realty Trust, Inc.’s common stock upon vesting.
Performance-Based Awards (“the Performance Awards”): Performance-based Class D units of the Operating Partnership and performance-based Restricted Stock Units of Digital Realty Trust, Inc.’s common stock may be issued to officers and employees of the Company. The Performance Awards include performance-based and time-based vesting criteria. Depending on the type of award, the total number of units that qualify to fully vest is determined based on either a market performance criterion (“Market-Based Performance Awards”) or financial performance criterion (“Financial-Based Performance Awards”), in each case, subject to time-based vesting.
Market-Based Performance Awards.
The market performance criterion compares Digital Realty Trust, Inc.’s total shareholder return (“TSR”) relative to the MSCI US REIT Index (“RMS”) over a three-year performance period (“Market Performance Period”), subject to continued service, in order to determine the percentage of the total eligible pool of units that qualifies to be awarded. Following the completion of the Market Performance Period, the awards then have a time-based vesting element pursuant to which 50% of the performance-vested units fully vest in the February immediately following the end of the Market Performance Period and 50% of the performance-vested units fully vest in the subsequent February.
Vesting with respect to the market condition is measured based on the difference between Digital Realty Trust, Inc.’s TSR percentage and the TSR percentage of the RMS as is shown in the subsequent table (the “RMS Relative Market Performance”).
Market
Performance
RMS Relative
Vesting
Level
Market Performance
Percentage
Below Threshold Level
≤ -500 basis points
0
Threshold Level
-500 basis points
Target Level
0 basis points
50
High Level
≥ 500 basis points
100
If the RMS Relative Market Performance falls between the levels specified in the above table, the percentage of the award that will vest with respect to the market condition will be determined using straight-line linear interpolation between such levels.
2021 Awards
●
In January 2024, the RMS Relative Market Performance fell between the threshold and target levels for the 2021 awards and, accordingly, 71,926 Class D units and 7,066 Restricted Stock Units performance vested and qualified for time-based vesting.
The Class D units included 5,131 distribution equivalent units that immediately vested on December 31, 2023.
On February 27, 2024, 50% of the 2021 awards vested and the remaining 50% will vest on February 27, 2025, subject to continued employment through the applicable vesting date.
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The grant date fair value of the Market-Based Performance Awards was approximately $9.8 million and $8.2 million for the nine months ended September 30, 2024 and 2023, respectively. This amount will be recognized as compensation expense on a straight-line basis over the expected service period of approximately four years.
Financial-Based Performance Awards.
On January 1, 2024, the Company granted Financial-Based Performance Awards, which vest based on growth in same-store cash net operating income during the three-year period commencing on January 1, 2024. The awards have a time-based vesting element consistent with the Market-Based Performance Awards discussed above. For these awards, fair value is based on market value on the date of grant and compensation cost is recognized based on the probable achievement of the performance condition at each reporting period. The grant date fair value of these awards was $9.8 million, based on Digital Realty Trust, Inc.’s closing stock price at the grant date.
As of September 30, 2024, approximately 3.7 million shares of common stock, including awards that can be converted to or exchanged for shares of common stock, remained available for future issuance under the Incentive Plan.
Each LTIP unit and each Class D unit issued under the Incentive Plan counts as one share of common stock for purposes of calculating the limit on shares that may be issued under the Incentive Plan and the individual award limits set forth therein.
Below is a summary of our compensation expense and our unearned compensation (in millions):
Expected
period to
Deferred Compensation
Unearned Compensation
recognize
Expensed
Capitalized
As of
unearned
compensation
Type of incentive award
(in years)
Long-term incentive units
4.0
3.7
0.1
26.0
16.6
2.4
Performance-based awards
3.5
3.1
27.6
19.9
Service-based restricted stock units
9.2
8.2
0.8
1.8
78.3
66.4
2.6
Interxion awards
0.3
11.5
10.1
8.6
0.2
25.6
24.1
3.6
4.4
1.6
Activity for LTIP Units and service-based Restricted Stock Units for the nine months ended September 30, 2024 is shown below.
Weighted-Average
Grant Date Fair
Unvested LTIP Units
Value
Unvested, beginning of period
238,360
121.99
Granted
279,670
137.04
Vested
(197,869)
131.41
Cancelled or expired
(49,997)
135.75
Unvested, end of period
270,164
128.12
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Unvested Restricted Stock Units
621,863
132.07
370,447
142.10
(221,850)
124.79
(100,111)
123.85
670,349
141.25
13. Derivative Instruments
Derivatives Designated as Hedging Instruments
Net Investment Hedges
In September 2022, we entered into cross-currency interest rate swaps, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt in order to hedge the currency exposure associated with our net investment in foreign subsidiaries. As of September 30, 2024, we had cross-currency interest rate swaps outstanding with notional amounts of $1.7 billion and maturity dates ranging through 2028.
The effect of these net investment hedges on accumulated other comprehensive loss and the condensed consolidated income statements for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):
Cross-currency interest rate swaps (included component) (1)
(83,624)
52,698
(5,616)
53,853
Cross-currency interest rate swaps (excluded component) (2)
12,121
(14,006)
12,748
(28,423)
(71,503)
38,692
7,132
25,430
Location of
gain or (loss)
5,205
5,505
17,314
16,699
Cash Flow Hedges
As of September 30, 2024, we had derivatives designated as cash flow hedges on the Euro Term Loan Facilities (€375 million notional amount) and the USD Term Loan ($500 million notional amount). Amounts reported in Accumulated other comprehensive loss related to interest rate swaps are reclassified to interest expense as interest payments are made on our debt. As of September 30, 2024, we estimate that an additional $1.6 million will be reclassified as a decrease to interest expense during the twelve months ended September 30, 2025, when the hedged forecasted transactions impact earnings.
The effect of these cash flow hedges on accumulated other comprehensive income and the condensed consolidated income statements for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):
Interest rate swaps
(19,191)
538
(7,991)
12,912
4,031
3,845
12,348
6,688
Fair Value of Derivative Instruments
The subsequent table presents the fair value of derivative instruments recognized in our condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 (in thousands):
Assets (1)
Liabilities (2)
Cross-currency interest rate swaps
4,246
153,867
156,753
7,786
16,300
8,538
12,032
170,167
14. Fair Value of Financial Instruments
There have been no significant changes in our policy for fair value measurements from what was disclosed in our 2023 Form 10-K.
The carrying amounts for cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and other accrued liabilities, accrued dividends and distributions, security deposits and prepaid rents approximate fair value because of the short-term nature of these instruments. The carrying value of our Global Revolving Credit Facilities, Euro Term Loan Facilities and USD Term Loan Facility approximates estimated fair value, because these liabilities have variable interest rates and our credit ratings have remained stable. Differences between the carrying value and fair value of our unsecured senior notes and secured and other debt are caused by differences in interest rates or borrowing spreads that were available to us on September 30, 2024 and December 31, 2023 as compared to those in effect when the debt was issued or assumed.
We calculate the fair value of our secured and other debt and unsecured senior notes based on currently available market rates assuming the loans are outstanding through maturity and considering the collateral and other loan terms. In determining the current market rate for fixed rate debt, a market spread is added to the quoted yields on federal government treasury securities with similar maturity dates to our debt.
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The aggregate estimated fair value and carrying value of our Global Revolving Credit Facilities, Euro Term Loan Facilities and USD Term Loan Facility, unsecured senior notes and secured and other debt as of the respective periods is shown below (in thousands):
Categorization
under the fair value
Estimated Fair
hierarchy
Carrying Value
Global Revolving Credit Facilities (1)
Level 2
Unsecured term loans (1)
Unsecured senior notes (2)
10,866,916
12,417,619
Secured and other debt (2)
759,197
625,473
14,358,603
16,436,245
During the nine months ended September 30, 2024, we recorded an impairment charge of $168.3 million related to Investments in properties, net, on certain non-core properties in secondary U.S. markets. Management estimated the fair values of these investments based on sales of similar properties and ongoing negotiations with third parties. The significant inputs and assumptions used in the estimate of fair value included comparable sales values ranging from $69 per square foot to $151 per square foot. These measurements were classified within Level 3 of the fair value hierarchy as they are not observable.
15. Commitments and Contingencies
Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements including ground up construction. From time to time in the normal course of our business, we enter into various construction contracts with third parties that may obligate us to make payments. At September 30, 2024, we had open commitments, including amounts reimbursable by customers of approximately $62.5 million, related to construction contracts of approximately $1.9 billion.
Legal Proceedings – Although the Company is involved in legal proceedings arising in the ordinary course of business, as of September 30, 2024, the Company is not currently a party to any legal proceedings nor, to its knowledge, is any legal proceeding threatened against it that it believes would have a material adverse effect on its financial position, results of operations or liquidity.
As disclosed previously, the Division of Enforcement of the U.S. Securities and Exchange Commission (SEC) is conducting an investigation into the adequacy of our disclosures of cybersecurity risks and our related disclosure controls and procedures. We are cooperating with the SEC and are not aware of any cybersecurity issue or event that caused the Staff to open this matter. Responding to an investigation of this type can be costly and time-consuming. While we are unable to predict the likely outcome of this matter or the potential cost or exposure or duration of the process, based on the information we currently possess, we do not expect the total potential cost to be material to our financial condition. If the SEC believes that violations occurred, it could seek remedies including, but not limited to, civil monetary penalties and injunctive relief, and/or file litigation against the Company.
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16. Supplemental Cash Flow Information
Cash, cash equivalents, and restricted cash balances as of September 30, 2024, and December 31, 2023:
Restricted cash (included in Other assets)
6,503
10,975
We paid $391.6 million and $345.8 million for interest, net of amounts capitalized, for the nine months ended September 30, 2024 and 2023, respectively.
We paid $53.4 million and $60.1 million for income taxes, net of refunds, for the nine months ended September 30, 2024 and 2023, respectively.
Accrued construction related costs totaled $504.4 million and $607.6 million as of September 30, 2024 and 2023, respectively.
17. Segment and Geographic Information
A majority of the Company’s largest customers are global entities that transact with the Company across multiple geographies worldwide. In order to better address the needs of these global customers, the Company manages critical decisions around development, operations, and leasing globally based on customer demand considerations. In this regard, the Company manages customer relationships on a global basis in order to achieve consistent sales and delivery experience of our products for our customers throughout the global portfolio. In order to best accommodate the needs of global customers (and customers that might one day become global), the Company manages its operations as a single global business – with one operating segment and therefore one reporting segment.
Operating Revenues
(Amounts in millions)
Inside the United States
740.2
727.4
2,159.7
2,144.0
Outside the United States
691.0
675.0
1,959.4
1,963.4
Revenue Outside of U.S. %
48.3
48.1
47.6
47.8
Investments in Properties, net
As of September 30,
As of December 31,
10,309.7
10,429.2
561.9
610.2
14,920.5
13,806.9
666.6
804.1
Net Assets in Foreign Operations
8,229.4
6,778.4
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2023, and our Quarterly Report on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, each as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”). This report contains forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, expected use of borrowings under our credit facilities, expected use of proceeds from our ATM equity program, litigation matters or legal proceedings, portfolio performance, leverage policy, acquisition and capital expenditure plans, capital recycling program, returns on invested capital, supply and demand for data center space, capitalization rates, rents to be received in future periods and expected rental rates on new or renewed data center space contain forward-looking statements. Likewise, all of our statements regarding anticipated market conditions, and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and that we may not be able to realize. We do not guarantee that the transactions and events described will happen as described or that they will happen at all. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: reduced demand for data centers or decreases in information technology spending; decreased rental rates, increased operating costs or increased vacancy rates; increased competition or available supply of data center space; the suitability of our data centers and data center infrastructure, delays or disruptions in connectivity or availability of power, or failures or breaches of our physical and information security infrastructure or services; breaches of our obligations or restrictions under our contracts with our customers; our inability to successfully develop and lease new properties and development space, and delays or unexpected costs in development of properties; the impact of current global and local economic, credit and market conditions; global supply chain or procurement disruptions, or increased supply chain costs; the impact from periods of heightened inflation on our costs, such as operating and general and administrative expenses, interest expense and real estate acquisition and construction costs; the impact on our customers’ and our suppliers’ operations during an epidemic, pandemic, or other global events; our dependence upon significant customers, bankruptcy or insolvency of a major customer or a significant number of smaller customers, or defaults on or non-renewal of leases by customers; changes in political conditions, geopolitical turmoil, political instability, civil disturbances, restrictive governmental actions or nationalization in the countries in which we operate; our inability to retain data center space that we lease or sublease from third parties; information security and data privacy breaches; difficulties managing an international business and acquiring or operating properties in foreign jurisdictions and unfamiliar metropolitan areas; our failure to realize the intended benefits from, or disruptions to our plans and operations or unknown or contingent liabilities related to, our recent and future acquisitions; our failure to successfully integrate and operate acquired or developed properties or businesses; difficulties in identifying properties to acquire and completing acquisitions; risks related to joint venture investments, including as a result of our lack of control of such investments; risks associated with using debt to fund our business activities, including re-financing and interest rate risks, our failure to repay debt when due, adverse changes in our credit ratings or our breach of covenants or other terms contained in our loan facilities and agreements; our failure to obtain necessary debt and equity financing, and our dependence on external sources of capital; financial market fluctuations and changes in foreign currency exchange rates; adverse economic or real estate developments in our industry or the industry sectors that we sell to, including risks relating to decreasing real estate valuations and impairment charges and goodwill and other intangible asset impairment charges; our inability to manage our growth effectively; losses in excess of our insurance coverage; our inability to attract and retain talent; environmental liabilities, risks related to natural disasters and our inability to achieve our sustainability goals; the expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations; our inability to comply with rules and regulations applicable to our Company; Digital Realty
Trust, Inc.’s failure to maintain its status as a REIT for federal income tax purposes; Digital Realty Trust, L.P.’s failure to qualify as a partnership for federal income tax purposes; restrictions on our ability to engage in certain business activities; changes in local, state, federal and international laws and regulations, including related to taxation, real estate and zoning laws, and increases in real property tax rates; the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us; and those additional risks and factors discussed in reports filed with the SEC by us from time to time, including those discussed under the heading “Risk Factors” in our most recently filed Annual Report on Form 10-K and in other sections of this report, including under Part II, Item 1A, Risk Factors.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes.
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in our Annual Report on Form 10-K for the year ended December 31, 2023 and in other sections of this report, including under Part II, Item 1A, Risk Factors. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to identify all such risk factors, nor can we assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.
Occupancy percentages included in the following discussion, for some of our properties, are calculated based on factors in addition to contractually leased square feet, including available power, required support space and common area.
As used in this report: “Ascenty entity” refers to the entity which owns and operates Ascenty, formed with Brookfield Infrastructure.
Business Overview and Strategy
Digital Realty Trust, Inc., through its controlling interest in Digital Realty Trust, L.P. and its subsidiaries, delivers comprehensive space, power, and interconnection solutions that enable its customers and partners to connect with each other and service their own customers on a global technology and real estate platform. We are a leading global provider of data center, colocation and interconnection solutions for customers across a variety of industry verticals. Digital Realty Trust, Inc. operates as a REIT for federal income tax purposes, and our Operating Partnership is the entity through which we conduct our business and own our assets.
Our primary business objectives are to maximize:
We expect to accomplish our objectives by achieving superior risk-adjusted returns, prudently allocating capital, diversifying our product offerings, accelerating our global reach and scale, and driving revenue growth and operating efficiencies. A significant component of our current and future internal growth is anticipated through the development of our existing space held for development, acquisition of land for future development, and acquisition of new properties.
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We target high-quality, strategically located properties containing the physical and connectivity infrastructure that supports the applications and operations of data center and technology industry customers and properties that may be developed for such use. Most of our data center properties contain fully redundant electrical supply systems, multiple power feeds, above-standard cooling systems, raised floor areas, extensive in-building communications cabling and high-level security systems. Fundamentally, we bring together foundational real estate and innovative technology expertise around the world to deliver a comprehensive, dedicated product suite to meet customers’ data and connectivity needs. We represent an important part of the digital economy that we believe will benefit from powerful, long-term growth drivers.
We have developed detailed, standardized procedures for evaluating new real estate investments to ensure that they meet our financial, technical and other criteria. We expect to continue to acquire additional assets as part of our growth strategy. We intend to aggressively manage and lease our assets to increase their cash flow. We may continue to build out our development portfolio when justified by anticipated demand and returns.
We may acquire properties subject to existing mortgage financing and other indebtedness or we may incur new indebtedness in connection with acquiring or refinancing these properties. Debt service on such indebtedness will have a priority over any cash dividends with respect to Digital Realty Trust, Inc.’s common stock and preferred stock. We are committed to maintaining a conservative capital structure. Our goal is to average through business cycles the following financial ratios: 1) a debt-to-Adjusted EBITDA ratio around 5.5x, 2) a fixed charge coverage of greater than three times, and 3) floating rate debt at less than 20% of total outstanding debt. In addition, we strive to maintain a well-laddered debt maturity schedule, and we seek to maximize the menu of our available sources of capital, while minimizing the cost.
Changes in political conditions, geopolitical turmoil, political instability, civil disturbances, restrictive governmental actions or nationalization in the countries in which we operate, including escalations in political and trade tensions involving the U.S. and regulatory and legislative changes, could potentially result in adverse effects on our, and our customers’, operations.
Summary of 2024 Significant Activities
We completed the following significant activities during the nine months ended September 30, 2024:
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46
Revenue Base
Most of our revenue consists of rental income generated by the data centers in our portfolio. Our ability to generate and grow revenue depends on several factors, including our ability to maintain or improve occupancy rates. A summary of our data center portfolio and related occupied square feet (in thousands) (excluding space under development or held for development) is shown below. Unconsolidated portfolios shown below consist of assets owned by unconsolidated entities in which we have invested. We often provide management services for these entities under management agreements and receive management fees. These are shown as Managed Unconsolidated Portfolio. Entities for which we do not provide such services are shown as Non-Managed Unconsolidated Portfolio.
Region
Data Center Buildings
Net Rentable Square Feet (1)
Space Under Active Development (2)
Space Held for Development (3)
Occupancy
North America
103
20,003
1,194
85.4
107
20,150
2,590
1,335
83.8
Europe
113
9,363
2,754
718
77.3
8,873
3,291
319
75.8
Asia Pacific
1,667
73
192
81.8
1,652
207
76.7
Africa
1,611
1,501
79.7
1,528
1,581
71.0
Consolidated Portfolio
239
32,644
7,215
2,125
82.6
242
32,203
7,535
1,884
79.8
Managed Unconsolidated Portfolio
4,819
1,203
400
93.4
3,843
364
93.7
Non-Managed Unconsolidated Portfolio
47
3,629
708
2,338
3,641
571
2,246
85.3
Total Portfolio
312
41,092
9,126
4,863
83.9
309
39,688
8,470
4,130
81.7
Leasing Activities
Due to the capital-intensive and long-term nature of the operations we support, our lease terms with customers are generally longer than standard commercial leases. As of September 30, 2024, our average remaining lease term was approximately five years.
Our ability to re-lease expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. The subsequent table summarizes our leasing activity in the nine months ended September 30, 2024 (square feet in thousands):
TI’s/Lease
Weighted
Commissions
Average Lease
Rentable
Expiring
New
Rental Rate
Per Square
Terms
Square Feet (1)
Rates (2)
Changes
Foot
(years)
Leasing Activity (3)(4)
Renewals Signed
0 — 1 MW
1,545
245
257
4.8
> 1 MW
1,812
133
175
31.9
6.1
Other (6)
368
47.9
5.7
New Leases Signed (5)
440
295
2,450
11.8
96
64
13.0
Leasing Activity Summary
1,985
265
4,262
252
464
We continue to see strong demand in most of our key metropolitan areas for data center space and, subject to the supply of available data center space in these metropolitan areas, we expect average aggregate rental rates on renewed data center leases for 2024 expirations to be positive as compared with the rates currently being paid for the same space on a GAAP basis and on a cash basis. Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our data centers will be re-leased at all or at rental rates equal to or above the current average rental rates. Further, re-leased/renewed rental rates in a particular metropolitan area may not be consistent with rental rates across our portfolio as a whole and may fluctuate from one period to another due to a number of factors, including local economic conditions, local supply and demand for data center space, competition from other data center developers or operators, the condition of the property and whether the property, or space within the property, has been developed.
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Geographic Concentration
We depend on the market for data centers in specific geographic regions and significant changes in these regional or metropolitan areas can impact our future results. The following table shows the geographic concentration based on annualized rent from our portfolio, including data centers held as investments in unconsolidated entities.
Metropolitan Area
Total annualized rent (1)
Northern Virginia
18.5
Chicago
7.5
Frankfurt
5.9
Singapore
5.6
London
5.5
Dallas
New York
4.6
Amsterdam
4.2
Silicon Valley
4.1
Sao Paulo
3.8
Portland
3.3
Paris
3.0
Johannesburg
Tokyo
2.0
Osaka
1.7
22.5
Operating Expenses
Operating expenses primarily consist of utilities, property and ad valorem taxes, property management fees, insurance and site maintenance costs, and rental expenses on our ground and building leases. Our buildings require significant power to support data center operations and the cost of electric power and other utilities is a significant component of operating expenses.
Many of our leases contain provisions under which tenants reimburse us for all or a portion of property operating expenses and real estate taxes incurred by us. However, in some cases we are not entitled to reimbursement of property operating expenses, other than utility expense, and real estate taxes under our leases for Turn-Key Flex® facilities. We expect to incur additional operating expenses as we continue to expand.
Costs pertaining to our asset management function, legal, accounting, corporate governance, reporting and compliance are categorized as general and administrative costs within operating expenses.
Other key components of operating expenses include depreciation of our fixed assets, amortization of intangible assets, and transaction and integration costs.
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Other Income / (Expenses)
Equity in earnings of unconsolidated entities, gain on disposition of properties, interest expense, and income tax expense make up the majority of Other income/(expenses). Equity in earnings of unconsolidated entities represents our share of the income/(loss) of entities in which we invest, but do not consolidate under U.S. GAAP. The largest of these investments is currently our investment in Ascenty, which is located primarily in Latin America. Our second-largest equity-method investment is Digital Core REIT, which is publicly traded on the Singapore Exchange (“SGX”), and which owns a portfolio of 10 properties operating in the United States, Canada, Germany and Japan. Refer to additional discussion of Digital Core REIT and Ascenty in the Notes to the Condensed Consolidated Financial Statements.
Results of Operations
As a result of the consistent and significant growth in our business since the first property acquisition in 2002, we evaluate period-to-period results for revenue and property level operating expenses on a stabilized versus non-stabilized portfolio basis.
Stabilized: The stabilized portfolio includes properties owned as of the beginning of all periods presented with less than 5% of total rentable square feet under development.
Non-stabilized: The non-stabilized portfolio includes: (1) properties that were undergoing, or were expected to undergo, development activities during any of the periods presented; (2) any properties contributed to joint ventures, sold, or held for sale during the periods presented; and (3) any properties that were acquired or delivered at any point during the periods presented.
A roll forward showing changes in the stabilized and non-stabilized portfolios for the nine months ended September 30, 2024 as compared to December 31, 2023 is shown below (in thousands):
Net Rentable Square Feet
Stabilized
Non-Stabilized
22,600
9,603
New development and space reconfigurations
(86)
987
901
Transfers to stabilized from non-stabilized
2,456
(2,519)
(63)
Dispositions / Sales
(328)
(348)
(676)
-
279
24,642
8,002
Comparison of the Results of Operations for the Three and Nine Months Ended September 30, 2024 to the Three and Nine Months Ended September 30, 2023
Revenues
Total operating revenues as shown on our condensed consolidated income statements was as follows (in thousands):
$ Change
% Change
1,085,360
1,121,187
(35,827)
(3.2)
3,212,416
3,271,776
(59,360)
(1.8)
328,367
273,426
54,941
20.1
857,550
803,232
54,318
6.8
19,114
1.4
(5,042)
(0.1)
9,668
123.6
51.6
28,782
2.1
11,684
Total operating revenues increased by approximately $28.8 million and $11.7 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023.
Stabilized rental and other services revenue decreased $35.8 million and $59.4 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to:
Non-stabilized rental and other services revenue increased $54.9 million and $54.3 million in the three and nine months ended September 30, 2024 and 2023, respectively, compared to the same periods in 2023 primarily due to:
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Operating Expenses — Property Level
Property level operating expenses as shown in our condensed consolidated income statements were as follows (in thousands):
282,470
340,568
(58,098)
(17.1)
800,664
949,019
(148,355)
(15.6)
73,593
43,887
29,706
67.7
195,218
156,734
38,484
24.6
Total Utilities
356,063
384,455
(28,392)
(7.4)
995,882
1,105,753
(109,871)
(9.9)
182,910
166,771
16,139
9.7
538,483
503,726
34,757
6.9
66,886
56,318
10,568
18.8
173,334
168,986
4,348
Total Rental property operating and maintenance (excluding utilities)
249,796
223,089
26,707
12.0
711,817
672,712
39,105
5.8
Total Rental property operating and maintenance
(1,685)
(0.3)
(70,766)
(4.0)
40,958
44,428
(3,470)
(7.8)
121,328
107,480
13,848
12.9
9,544
32,140
(22,596)
(70.3)
27,399
64,970
(37,571)
(57.8)
Total Property taxes and insurance
(26,066)
(34.0)
(23,723)
(13.8)
Total property level operating expenses
656,361
684,112
(27,751)
(4.1)
1,856,426
1,950,915
(94,489)
(4.8)
Property level operating expenses include costs to operate and maintain the properties in our portfolio as well as taxes and insurance.
Total stabilized utilities expenses decreased by approximately $58.1 million and $148.4 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to lower power pricing at certain properties in the stabilized portfolio, mainly in EMEA and APAC.
Total non-stabilized utilities expenses increased by approximately $29.7 million and increased by approximately $38.5 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to:
The cost of electric power comprises a significant component of our operating expenses. Any additional taxation or regulation of energy use, including as a result of (i) new legislation that the U.S. Congress may pass, (ii) the regulations that the U.S. EPA has proposed or finalized, (iii) regulations under legislation that states have passed or may pass, or (iv) any further legislation or regulations in EMEA, APAC or other regions where we operate could significantly increase our costs, and we may not be able to effectively pass all of these costs on to our customers. These matters could adversely impact our business, results of operations, or financial condition.
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Total Rental Property Operating and Maintenance (Excluding Utilities)
Total stabilized rental property operating and maintenance expenses (excluding utilities) increased by approximately $16.1 million and $34.8 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to an increase in common area maintenance expense and data center labor.
Total non-stabilized rental property operating and maintenance expenses (excluding utilities) increased by approximately $10.6 million and $4.4 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to an increase in data center labor expense throughout the portfolio.
Total Property Taxes and Insurance
Total stabilized property taxes and insurance decreased by approximately $3.5 million in the three months ended September 30, 2024 compared to the same period in 2023, based on new property tax assessments within the Chicago metro area. Total stabilized property taxes and insurance increased by approximately $13.9 million in the nine months ended September 30, 2024 compared to the same period in 2023 due to a favorable property tax assessment at one of our North American properties realized in early 2023.
Total non-stabilized property taxes and insurance decreased $22.6 million and $37.6 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily related to properties sold or contributed after September 30, 2023.
Other Operating Expenses
Other operating expenses include costs which are either non-cash in nature (such as depreciation and amortization) or which do not directly pertain to operation of data center properties. A comparison of other operating expenses for the respective periods is shown below (in thousands).
39,384
9.4
42,058
6,881
6.2
20,950
6.3
Transaction, integration and other expense
9,729
67.3
37,609
84.5
(113,000)
55,303
3,479
n/m
13,131
Total other operating expenses
606,567
660,094
(53,527)
(8.1)
1,935,138
1,766,087
169,051
9.6
(81,278)
(6.0)
74,562
Equity in Earnings (Loss) of Unconsolidated Entities
The change in Equity in earnings (loss) of unconsolidated entities was approximately $6.7 million and $84.1 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The foreign exchange remeasurement of debt associated with our unconsolidated Ascenty entity creates volatility in our equity in earnings and drove this fluctuation.
Gain on Disposition of Properties, Net
Gain on disposition of properties decreased approximately $811.2 million and $449.7 million for the three and nine months ended September 30, 2024, as compared to the same periods in 2023.
In January 2024, we closed on the sale of our interest in four data centers to Brookfield Infrastructure Partners L.P., or Brookfield, for approximately $271 million. As a result of the sale, we recognized a total gain on disposition of approximately $194.2 million.
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In March 2024, we recognized a total gain of $74.4 million from the sale of an easement to a local power provider in Northern Virginia.
In April 2024, we expanded our existing joint venture with GI Partners with the sale to GI Partners of a 75% interest in a third facility on the same hyperscale data center campus in Chicago. We contributed the data center at a value of approximately $453 million. We received approximately $386 million of net proceeds from the contribution of our data center to the joint venture and the associated financing and retained a 25% interest in the joint venture. As a result of transferring control, we derecognized the data center and recognized a gain on disposition of approximately $172 million.
In July 2023, we received approximately $0.7 billion of gross proceeds from the contribution of our data centers to the joint venture with GI Partners for a net gain on sale of approximately $238 million and we received approximately $1.4 billion of gross proceeds from the contribution of our data centers to the joint venture with TPG Real Estate for a net gain on sale of approximately $576 million.
In May 2023, we disposed of a non-core asset, resulting in a net gain on sale of $90 million.
Loss on Debt Extinguishment and Modifications
Loss on debt extinguishment and modifications increased approximately $2.6 million and $3.7 million for the three and nine months ended September 30, 2024, as compared to the same periods in 2023.
In January 2024, we paid down $240 million on the U.S. term loan facility, leaving $500 million outstanding. The paydown resulted in an early extinguishment charge of approximately $1.1 million.
In September 2024, we paid down €375 million on the Euro Term Loan Facilities, leaving €375 million outstanding. The paydown resulted in an early extinguishment charge of approximately $1.6 million. We also refinanced our Global Revolving Credit Facilities and wrote off deferred loan costs of approximately $1.2 million.
Interest Expense
Interest expense increased approximately $13.0 million and $24.0 million in the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 driven primarily by increased borrowings at Teraco.
Income Tax Expense
Income tax expense decreased by approximately $4.8 million and $5.0 million in the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 due to jurisdictional rate mix in foreign jurisdictions. We carried out an analysis for the purposes of the Model GloBE Rules for Pillar Two and no material top-up tax is expected.
Liquidity and Capital Resources
The sections “Analysis of Liquidity and Capital Resources — Parent” and “Analysis of Liquidity and Capital Resources — Operating Partnership” should be read in conjunction with one another to understand our liquidity and capital resources on a consolidated basis. The term “Parent” refers to Digital Realty Trust, Inc. on an unconsolidated basis, excluding our Operating Partnership. The term “Operating Partnership” or “OP” refers to Digital Realty Trust, L.P. on a consolidated basis.
Analysis of Liquidity and Capital Resources — Parent
Our Parent does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time, incurring certain expenses in operating as a public company (which are fully reimbursed by the Operating Partnership) and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates. If our Operating Partnership or such subsidiaries fail to fulfill their debt requirements, which trigger Parent guarantee obligations, then our Parent will be required to fulfill its cash payment commitments under such guarantees. Our Parent’s only material asset is its investment in our Operating Partnership.
Our Parent’s principal funding requirement is the payment of dividends on its common and preferred stock. Our Parent’s principal source of funding is the distributions it receives from our Operating Partnership.
As the sole general partner of our Operating Partnership, our Parent has the full, exclusive and complete responsibility for our Operating Partnership’s day-to-day management and control. Our Parent causes our Operating Partnership to distribute such portion of its available cash as our Parent may in its discretion determine, in the manner provided in our Operating Partnership’s partnership agreement.
As circumstances warrant, our Parent may issue equity from time to time on an opportunistic basis, dependent upon market conditions and available pricing. Any proceeds from such equity issuances would generally be contributed to our Operating Partnership in exchange for additional equity interests in our Operating Partnership. Our Operating Partnership may use the proceeds to acquire additional properties, to fund development opportunities and for general working capital purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities.
Our Parent and our Operating Partnership were parties to an ATM Equity OfferingSM Sales Agreement dated August 4, 2023 (the “2023 Sales Agreement”). Pursuant to the 2023 Sales Agreement, Digital Realty Trust, Inc. could issue and sell common stock having an aggregate offering price of up to $1.5 billion through various named agents from time to time. From January 1, 2024 through February 23, 2024, Digital Realty Trust, Inc. generated net proceeds of approximately $99 million from the issuance of approximately 0.6 million common shares under the 2023 Sales Agreement at an average price of $133.43 per share after payment of approximately $0.6 million of commissions to the agents.
The sales of common stock made under the 2024 Sales Agreement Amendment will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. Our Parent has used and intends to use the net proceeds from the program to temporarily repay borrowings under our Operating Partnership’s Global Revolving Credit Facilities, to acquire additional properties or businesses, to fund development opportunities and for working capital and other general corporate purposes, including potentially for the repayment of other debt or the repurchase, redemption or retirement of outstanding debt securities.
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We believe our Operating Partnership’s sources of working capital, specifically its cash flow from operations, and funds available under its Global Revolving Credit Facility are adequate for it to make its distribution payments to our Parent and, in turn, for our Parent to make its dividend payments to its stockholders. However, we cannot assure you that our Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including making distribution payments to our Parent. The lack of availability of capital could adversely affect our Operating Partnership’s ability to pay its distributions to our Parent, which would in turn, adversely affect our Parent’s ability to pay cash dividends to its stockholders.
Future Uses of Cash — Parent
Our Parent may from time to time seek to retire, redeem or repurchase its equity or the debt securities of our Operating Partnership or its subsidiaries through cash purchases and/or exchanges for equity securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases, redemptions or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.
Dividends and Distributions — Parent
Our Parent is required to distribute 90% of its taxable income (excluding capital gains) on an annual basis to continue to qualify as a REIT for U.S. federal income tax purposes. Our Parent intends to make, but is not contractually bound to make, regular quarterly distributions to its common stockholders from cash flow from our Operating Partnership’s operating activities. While historically our Parent has satisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of cash or other property. All such distributions are at the discretion of our Parent’s Board of Directors. Our Parent considers market factors and our Operating Partnership’s performance in addition to REIT requirements in determining distribution levels. Our Parent has distributed at least 100% of its taxable income annually since inception to minimize corporate level federal and state income taxes. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, in a manner consistent with our intention to maintain our Parent’s status as a REIT.
As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. Our Parent may need to continue to raise capital in the debt and equity markets to fund our Operating Partnership’s working capital needs, as well as potential developments at new or existing properties, acquisitions or investments in existing or newly created joint ventures. In addition, our Parent may be required to use borrowings under the Operating Partnership’s Global Revolving Credit Facility (which is guaranteed by our Parent), if necessary, to meet REIT distribution requirements and maintain our Parent’s REIT status.
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Distributions out of our Parent’s current or accumulated earnings and profits are generally classified as ordinary income except to the extent that our Parent recognizes capital gains and declares a capital gains dividend, or that such amounts constitute “qualified dividend income” subject to a reduced rate of tax. Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning before January 1, 2026. Distributions in excess of our Parent’s current and accumulated earnings and profits are generally classified as a return of capital to the extent of a stockholder’s U.S. federal income tax basis in our Parent’s stock. Distributions in excess of our Parent’s current and accumulated earnings and profits and in excess of a stockholder’s U.S. federal income tax basis in our Parent’s stock are generally characterized as capital gain. Cash provided by operating activities has been generally sufficient to fund distributions on an annual basis. However, we may also need to utilize borrowings under the Global Revolving Credit Facility to fund distributions.
For additional information regarding dividends declared and paid by our Parent on its common and preferred stock for the nine months ended September 30, 2024, see Note 10. “Equity and Capital” to our condensed consolidated financial statements contained herein.
Analysis of Liquidity and Capital Resources — Operating Partnership
As of September 30, 2024, we had $2,175.6 million of cash and cash equivalents, excluding $6.5 million of restricted cash. Restricted cash primarily consists of contractual capital expenditures plus other deposits. As circumstances warrant, our Operating Partnership may dispose of assets or enter into joint venture arrangements with institutional investors or strategic partners, on an opportunistic basis dependent upon market conditions. Our Operating Partnership may use the proceeds from such dispositions to acquire additional properties, to fund development opportunities and for general working capital purposes, including the repayment of indebtedness. Our liquidity requirements primarily consist of:
On September 24, 2024, we refinanced our Global Revolving Credit Facility and Yen Revolving Credit Facility. The Global Revolving Credit Facilities provide for borrowings up to $4.5 billion (including approximately $0.3 billion available to be drawn on the Yen Revolving Credit Facility) based on currency commitments and foreign exchange rates as of September 30, 2024. The Global Revolving Credit Facility provides for borrowings in a variety of currencies and can be increased by an additional $1.8 billion, subject to receipt of lender commitments and other conditions precedent. Both facilities mature on January 24, 2029, with two six-month extension options available.
These facilities also feature a sustainability-linked pricing component, with pricing subject to adjustment based on annual performance targets, further demonstrating our continued leadership and commitment to sustainable business practices.
The Global Revolving Credit Facility provides for borrowings in a variety of currencies and includes the ability to add additional currencies in the future. We have used and intend to use available borrowings under the Global Revolving Credit Facilities to acquire additional properties, fund development opportunities and for general working capital and other corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities. For additional information regarding our Global Revolving Credit Facility, see Note 8. “Debt of the Operating Partnership” in the Notes to our Condensed Consolidated Financial Statements.
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Future Uses of Cash
Our properties require periodic investments of capital for customer-related capital expenditures and for general capital improvements. Depending upon customer demand, we expect to incur significant improvement costs to build out and develop additional capacity. At September 30, 2024, we had open commitments, related to construction contracts of approximately $1.9 billion, including amounts reimbursable of approximately $62.5 million.
We currently expect to incur approximately $0.4 billion to $0.6 billion of capital expenditures for our consolidated development programs during the remainder of 2024. This amount could go up or down, potentially materially, based on numerous factors, including changes in demand, leasing results and availability of debt or equity capital.
Development Projects
The costs we incur to develop our properties is a key component of our liquidity requirements. The following table summarizes our cumulative investments in current development projects as well as expected future investments in these projects as of the periods presented, excluding costs incurred or to be incurred by unconsolidated entities.
Construction Projects in Progress
Current
Future
(in thousands)
Investment (1)
Investment (2)
Total Cost
Investment (3)
Future Development Capacity (4)
2,177,756
1,097,751
3,275,507
2,222,062
337,681
2,559,743
Data Center Construction
2,519,291
3,085,841
5,605,132
2,116,335
2,231,747
4,348,082
Equipment Pool and Other Inventory (5)
216,476
203,821
Campus, Tenant Improvements and Other (6)
284,922
156,989
441,911
211,187
130,260
341,447
Consolidated Land Held and Development Construction in Progress
5,198,446
4,340,581
9,539,027
4,753,405
2,699,688
7,453,093
Future development reflects cumulative cost spent pending future development and includes ongoing improvements to building infrastructure in preparation for future data center fit-out. We expect to deliver the space within 12 months; however, lease commencement dates may significantly impact final delivery schedules.
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Capital Expenditures (Cash Basis)
The table below summarizes our capital expenditure activity for the nine months ended September 30, 2024 and 2023 (in thousands):
Development projects
1,732,337
2,121,583
Enhancement and improvements
21,859
Recurring capital expenditures
175,467
184,214
Total capital expenditures (excluding indirect costs)
1,929,663
2,311,389
Our development capital expenditures are generally funded by our available cash and equity and debt capital.
Indirect costs, including interest, capitalized in the nine months ended September 30, 2024 and 2023 were $166.7 million and $155.1 million, respectively. Capitalized interest comprised approximately $84.4 million and $83.8 million of the total indirect costs capitalized for the nine months ended September 30, 2024 and 2023, respectively. Capitalized interest in the nine months ended September 30, 2024 increased, compared to the same period in 2023, due to an increase in qualifying activities and higher interest rates.
Excluding capitalized interest, indirect costs in the nine months ended September 30, 2024 increased compared to the same period in 2023 due primarily to capitalized amounts relating to compensation expense of employees directly engaged in construction activities. See “Future Uses of Cash” for a discussion of the amount of capital expenditures we expect to incur during the year ending December 31, 2024.
Consistent with our growth strategy, we actively pursue potential acquisition opportunities, with due diligence and negotiations often at different stages at different times. The dollar value of acquisitions for the year ending December 31, 2024 will depend upon numerous factors, including customer demand, leasing results, availability of debt or equity capital and acquisition opportunities. Further, the growing acceptance by private institutional investors of the data center asset class has generally pushed capitalization rates lower, as such private investors may often have lower return expectations than us. As a result, we anticipate near-term single asset acquisitions activity to comprise a smaller percentage of our growth while this market dynamic persists.
We may from time to time seek to retire or repurchase our outstanding debt or the equity of our Parent through cash purchases and/or exchanges for equity securities of our Parent in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.
Sources of Cash
We expect to meet our short-term and long-term liquidity requirements, including payment of scheduled debt maturities and funding of acquisitions and non-recurring capital improvements, with net cash from operations, future long-term secured and unsecured indebtedness and the issuance of equity and debt securities and the proceeds of equity issuances by our Parent. We also may fund future short-term and long-term liquidity requirements, including acquisitions and non-recurring capital improvements, using our Global Revolving Credit Facilities pending permanent financing. As of October 29, 2024, we had approximately $2.5 billion of borrowings available under our Global Revolving Credit Facilities.
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On September 13, 2024, Digital Dutch Finco B.V., an indirect wholly owned finance subsidiary of the Operating Partnership, issued and sold €850 million aggregate principal amount of 3.875% Guaranteed Notes due 2033. Net proceeds from the offering were approximately €843 million (approximately $933 million based on the exchange rate on September 13, 2024) after deducting managers’ discounts and estimated offering expenses. We used the net proceeds from the offering to pay down a portion of our Euro Term Loan Facilities, temporarily repay borrowings under our Global Revolving Credit Facility and for general corporate purposes.
On July 13, 2023, we formed a joint venture with GI Partners, and GI Partners acquired a 65% interest in two stabilized hyperscale data center buildings in the Chicago metro area that we contributed. We retained a 35% interest in the joint venture. As a result of transferring control, we derecognized the data centers. In addition, GI Partners had a call option to increase their ownership interest in the joint venture from 65% to 80%. The call option top-up election notice was delivered to the Company on December 21, 2023. On January 12, 2024, GI Partners made an additional cash capital contribution, pursuant to the exercise of such call option, in the amount of $68 million, resulting in such additional 15% ownership in the joint venture. Currently, GI Partners has an 80% interest in the joint venture, and we have retained a 20% interest.
We also granted GI Partners an option to purchase an interest in the third facility on the same hyperscale data center campus in Chicago. On April 16, 2024, we expanded our existing joint venture with GI Partners with the sale to GI Partners of a 75% interest in this third facility. We received approximately $386 million of net proceeds from the contribution of our data center to the joint venture and the associated financing and retained a 25% interest in the joint venture.
On January 11, 2024, we formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses across Frankfurt, Paris and Northern Virginia. The campuses are planned to support the construction of 10 data centers with approximately 500 megawatts of potential IT load capacity. The first phase of the joint venture closed on hyperscale data center campuses in Paris and Northern Virginia, while the second phase is scheduled to close in the fourth quarter of 2024, subject to obtaining the required approvals. We received approximately $231 million of net proceeds from the contribution of our data centers to the first phase of the joint venture and retained a 20% interest in the joint venture. Each partner funded its pro rata share of the remaining $3.0 billion estimated development cost for the first phase of the joint venture, which is slated for completion in various stages, contingent on customer demand, which began in the first quarter of 2024.
In January 2024, we closed on the sale of our interest in four data centers to Brookfield Infrastructure Partners L.P., or Brookfield, for approximately $271 million. Two of the data centers were consolidated by us; while two of the data centers were owned by Digital Core REIT. The sale was completed subsequent to Brookfield’s November 2023 acquisition of one of our customers, Cyxtera Technologies. The acquisition was part of Cyxtera’s plan of reorganization under its Chapter 11 bankruptcy proceedings. In conjunction with the sale, we bought out Cyxtera’s leases in three data centers located in Singapore and Frankfurt for approximately $57 million. In addition, Brookfield assumed the leases on three facilities previously leased to Cyxtera and amended the leases on three additional data centers in North America, accelerating the expiration date to September 2024. As a result of the sale, we recognized a total gain on disposition of approximately $203.1 million, of which $194.2 million is included within Gain on disposition of properties, net and $8.9 million is included within Equity in (loss) earnings of unconsolidated entities on our condensed consolidated income statements.
On March 1, 2024, we formed a joint venture with Mitsubishi Corporation, or Mitsubishi, to support the development of two data centers in the Dallas metro area. The facilities were 100% pre-leased prior to construction. We contributed the two data center buildings at a contribution value of approximately $261 million. We received approximately $153 million of gross proceeds from the contribution of our data centers to the joint venture and retained a 35% interest in the joint venture. Mitsubishi contributed such cash in exchange for a 65% interest in the joint venture. Each partner funded its pro rata share of the remaining $140 million estimated development cost for the first phase of the project, of which one project has been completed in June 2024 and another is slated for completion in late 2024.
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All distributions on our units are at the discretion of our Parent’s Board of Directors. For additional information regarding distributions paid on our common and preferred units for the three and nine months ended September 30, 2024, see Note 10. “Equity and Capital” to our condensed consolidated financial statements contained herein.
Outstanding Consolidated Indebtedness
The table below summarizes our outstanding debt as of September 30, 2024 (in millions):
Debt Summary:
Fixed rate
12,211
Variable rate debt subject to interest rate swaps
2,976
Total fixed rate debt (including interest rate swaps)
15,187
Variable rate—unhedged
1,922
17,109
Percent of Total Debt:
Fixed rate (including swapped debt)
88.8
Variable rate
Effective Interest Rate as of September 30, 2024
Fixed rate (including hedged variable rate debt)
2.70
4.10
Effective interest rate
Our ratio of debt to total enterprise value was approximately 23% (based on the closing price of Digital Realty Trust, Inc.’s common stock on September 30, 2024 of $161.83). For this purpose, our total enterprise value is defined as the sum of the market value of Digital Realty Trust, Inc.’s outstanding common stock (which may decrease, thereby increasing our debt to total enterprise value ratio), plus the liquidation value of Digital Realty Trust, Inc.’s preferred stock, plus the aggregate value of Digital Realty Trust, L.P. units not held by Digital Realty Trust, Inc. (with the per unit value equal to the market value of one share of Digital Realty Trust, Inc.’s common stock and excluding long-term incentive units, Class C units and Class D units), plus the book value of our total consolidated indebtedness.
The variable rate debt shown above bears interest based on various one-month SOFR, EURIBOR, HIBOR, TIBOR, SARON and Base CD Rate rates, depending on the respective agreement governing the debt, including our Global Revolving Credit Facilities and unsecured term loans. As of September 30, 2024, our debt had a weighted average term to initial maturity of approximately 4.3 years (or approximately 4.5 years assuming exercise of extension options).
As of September 30, 2024, our pro-rata share of secured debt of unconsolidated entities was approximately $1,479.5 million.
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Cash Flows
The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Comparison of Nine Months Ended September 30, 2024 to Nine Months Ended September 30, 2023
The following table shows cash flows and ending cash, cash equivalents and restricted cash balances for the respective periods (in thousands).
Change
319,527
(1,295,461)
630,209
(345,725)
The changes in the activities that comprise the decrease in net cash used in investing activities for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 consisted of the following amounts (in thousands).
2024 vs 2023
Increase in net cash used in business combinations / asset acquisitions
(271,441)
Decrease in cash used for improvements to investments in real estate
370,132
Increase in cash contributed to investments in unconsolidated entities, net
(122,077)
Decrease in net cash provided by proceeds from sale of real estate
(1,224,333)
Other changes
(47,742)
Increase in net cash used in investing activities
The increase in net cash used in investing activities was primarily due to:
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The changes in the activities that comprise the decrease in net cash provided by financing activities for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 consisted of the following amounts (in thousands).
Increase in cash provided by short-term borrowings
412,911
Increase in cash provided by proceeds from secured / unsecured debt
199,748
Increase in cash used for repayment on secured / unsecured debt
(1,613,272)
Increase in cash provided by proceeds from issuance of common stock, net of costs
1,652,640
Increase in cash used for dividend and distribution payments
(112,599)
Other changes, net
90,781
Increase in net cash provided by financing activities
The increase in net cash provided by financing activities was primarily due to:
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Noncontrolling interests relate to the common units in Digital Realty Trust, L.P. that are not owned by Digital Realty Trust, Inc., which, as of September 30, 2024, amounted to 1.9% of Digital Realty Trust, L.P. common units. Historically, Digital Realty Trust, L.P. has issued common units to third party sellers in connection with our acquisition of real estate interests from such third parties.
Limited partners have the right to require Digital Realty Trust, L.P. 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 its 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. As of September 30, 2024, approximately 0.2 million common units and incentive units of Digital Realty Trust, L.P. are classified within equity, except for certain common units issued to certain former DuPont Fabros Technology, L.P. unitholders in the Company’s acquisition of DuPont Fabros Technology, Inc., which are subject to certain restrictions and, accordingly, are not presented as permanent equity in the condensed consolidated balance sheet.
Inflation
Many of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above. A period of inflation, however, could cause an increase in the cost of our variable-rate borrowings, including borrowings under our Global Revolving Credit Facilities, borrowings under our Euro Term Loan Facilities and USD Term Loan Facility and issuances of unsecured senior notes.
Funds from Operations
We calculate funds from operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts (Nareit) in the Nareit Funds From Operations White Paper - 2018 Restatement. FFO is a non-GAAP financial measure and represents net income (loss) (computed in accordance with GAAP), excluding gain (loss) from the disposition of real estate assets, provision for impairment, real estate related depreciation and amortization (excluding amortization of deferred financing costs), our share of unconsolidated JV real estate related depreciation & amortization, net income attributable to noncontrolling interests in operating partnership and, depreciation related to noncontrolling interests. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our data centers that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our data centers, all of which have real economic effect and could materially impact our financial condition and results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the Nareit definition and, accordingly, our FFO may not be comparable to other REITs’ FFO. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO)
(unaudited, in thousands, except per share and unit data)
GAAP Net Income Available to Common Stockholders
Non-GAAP Adjustments:
Net income attributable to non-controlling interests in operating partnership
1,000
8,700
20,300
Real estate related depreciation and amortization (1)
449,086
410,836
1,284,597
1,247,072
Depreciation related to non-controlling interests
(19,746)
(14,569)
(45,081)
(42,101)
Unconsolidated JV real estate related depreciation and amortization
48,474
43,215
143,468
112,320
Gain from the disposition of real estate assets
556
(810,688)
(459,857)
(908,459)
FFO available to common stockholders and unitholders (2)
520,382
481,531
1,482,508
1,432,117
Basic FFO per share and unit
1.56
4.55
4.74
Diluted FFO per share and unit (2)(3)
1.55
4.52
4.68
Weighted average common stock and units outstanding
Diluted (2)(3)
(1) Real estate related depreciation and amortization was computed as follows:
Depreciation and amortization per income statement
Non-real estate depreciation
(10,911)
(9,777)
(31,845)
(27,312)
Add: Effect of dilutive securities
8,272
9,514
8,676
10,551
Weighted average common stock and units outstanding—diluted
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments depend upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit ratings and other factors.
Analysis of Debt between Fixed and Variable Rate
We use interest rate swap agreements and fixed rate debt to reduce our exposure to interest rate movements. As of September 30, 2024, our consolidated debt was as follows (in millions):
Fixed rate debt
9,461
12,437
Variable rate debt
Total outstanding debt
14,359
Sensitivity to Changes in Interest Rates
The following table shows the effect if assumed changes in interest rates occurred, based on fair values and interest expense as of September 30, 2024:
Assumed event
($ millions)
Increase in fair value of interest rate swaps following an assumed 10% increase in interest rates
Decrease in fair value of interest rate swaps following an assumed 10% decrease in interest rates
(2)
Increase in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% increase in interest rates
Decrease in annual interest expense on our debt that is variable rate and not subject to swapped interest following a 10% decrease in interest rates
(6)
Increase in fair value of fixed rate debt following a 10% decrease in interest rates
(153)
Decrease in fair value of fixed rate debt following a 10% increase in interest rates
(145)
Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.
Foreign Currency Exchange Risk
We are subject to risk from the effects of exchange rate movements of a variety of foreign currencies, which may affect future costs and cash flows. Our primary currency exposures are to the Euro, Japanese yen, British pound sterling, Singapore dollar, South African rand and Brazilian real. Our exposure to foreign exchange risk related to the Brazilian real is limited to the impact that currency has on our share of the Ascenty entity’s operations and financial position. We attempt to mitigate a portion of the risk of currency fluctuations by financing our investments in local currency denominations in order to reduce our exposure to any foreign currency transaction gains or losses resulting from transactions entered into in currencies other than the functional currencies of the associated entities. We also utilize cross-currency interest rate swaps, designated as net investment hedges, which effectively convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign currency-denominated fixed-rate debt, to hedge the currency exposure associated with our net investment in our foreign subsidiaries. In addition, we may also hedge well-defined transactional exposures with foreign currency forwards or options, although there can be no assurances that these will be effective. As a result, changes in the relation of any such foreign currency to U.S. dollar may affect our revenues, operating margins and distributions and may also affect the book value of our assets and the amount of stockholders’ equity.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures (Digital Realty Trust, Inc.)
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and its management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As the Company does not control or manage these entities, its disclosure controls and procedures with respect to such entities may be substantially more limited than those it maintains with respect to its consolidated subsidiaries.
As required by Rule 13a-15(b) or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, management of the Company carried out an evaluation, under the supervision and with participation of its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures that were in effect as of the end of the quarter covered by this report. Based on the foregoing, the Company’s chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during its most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures (Digital Realty Trust, L.P.)
The Operating Partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the chief executive officer and chief financial officer of its general partner, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Operating Partnership’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and its management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Operating Partnership has investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As the Operating Partnership does not control or manage these entities, its disclosure controls and procedures with respect to such entities may be substantially more limited than those it maintains with respect to its consolidated subsidiaries.
As required by Rule 13a-15(b) or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, management of the Operating Partnership carried out an evaluation, under the supervision and with participation of the chief executive officer and chief financial officer of its general partner, of the effectiveness of the design and operation of its disclosure controls and procedures that were in effect as of the end of the quarter covered by this report. Based on the foregoing, the chief executive officer and chief financial officer of the Operating Partnership’s general partner concluded that its disclosure controls and procedures were effective at the reasonable assurance level.
There have been no changes in the Operating Partnership’s internal control over financial reporting during its most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In the ordinary course of our business, we may become subject to various legal proceedings. As of September 30, 2024, we were not a party to any legal proceedings which we believe would have a material adverse effect on our operations or financial position.
ITEM 1A. RISK FACTORS.
The risk factors discussed under the heading “Risk Factors” and elsewhere in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023 continue to apply to our business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
During the three months ended September 30, 2024, Digital Realty Trust, L.P. issued partnership units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:
During the three months ended September 30, 2024, Digital Realty Trust, Inc. issued an aggregate of 9,018 shares of its common stock in connection with restricted stock unit awards for no cash consideration. For each share of common stock issued by Digital Realty Trust, Inc. in connection with such an award, Digital Realty Trust, L.P. issued a restricted common unit to Digital Realty Trust, Inc. During the three months ended September 30, 2024, Digital Realty Trust, L.P. issued an aggregate of 9,018 common units to Digital Realty Trust, Inc., as required by Digital Realty Trust, L.P.’s partnership agreement. During the three months ended September 30, 2024, an aggregate of 27,871 shares of its common stock were forfeited to Digital Realty Trust, Inc. in connection with restricted stock unit awards for a net forfeiture of 18,853 shares of common stock.
For these issuances of common units to Digital Realty Trust, Inc., Digital Realty Trust, L.P. relied on Digital Realty Trust, Inc.’s status as a publicly traded NYSE-listed company with approximately $45.3 billion in total consolidated assets and as Digital Realty Trust, L.P.’s majority owner and general partner as the basis for the exemption under Section 4(a)(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS.
Incorporated by Reference
ExhibitNumber
Description
Form
File Number
Date
Number
Filed Herewith
Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended
10-Q
001-32336 and 000-54023
05/11/2020
3.2
Ninth Amended and Restated Bylaws of Digital Realty Trust, Inc.
8-K
04/03/2023
Certificate of Limited Partnership of Digital Realty Trust, L.P.
000-54023
06/25/2010
3.4
Nineteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.
10/10/2019
Indenture, dated as of September 13, 2024, among Digital Dutch Finco B.V., Digital Realty Trust, Inc., Digital Realty Trust, L.P., Deutsche Trustee Company Limited, as trustee, Deutsche Bank AG, London Branch, as paying agent and a transfer agent, and Deutsche Bank Luxembourg S.A., as registrar, including the form of the 3.875% Guaranteed Notes due 2033.
09/13/2024
Third Amended and Restated Global Senior Credit Agreement, dated as of September 24, 2024, among Digital Realty Trust, L.P. and the other initial borrowers named therein and additional borrowers party thereto, as borrowers, Digital Realty Trust, Inc., as parent guarantor, the additional guarantors party thereto, as additional guarantors, the banks, financial institutions and other institutional lenders listed therein, as the initial lenders, issuing banks and swing line banks listed therein, Citibank, N.A., as administrative agent, BofA Securities, Inc. and Citibank, N.A., as co-sustainability structuring agents, and certain other parties thereto.
X
Second Amended and Restated Credit Agreement, dated as of September 24, 2024, among Digital Realty Trust, L.P., Digital Japan, LLC, as the initial borrower, the additional borrowers party thereto, as borrowers, Digital Realty Trust, Inc., as parent guarantor, the additional guarantors party thereto, the initial lenders and issuing banks named therein, Sumitomo Mitsui Banking Corporation, as administrative agent, Sumitomo Mitsui Banking Corporation as sustainability structuring agent, and certain other parties thereto.
10.3
First Amendment to Term Loan Agreement, dated as of September 26, 2024, among Digital Dutch Finco B.V., as borrower, and Digital Realty Trust, Inc., Digital Realty Trust, L.P., and Digital Euro Finco, LLC, as guarantors, the banks, financial institutions and other institutional lenders party thereto, as lenders, Citibank, N.A., as administrative agent, and certain other parties thereto.
10.4
First Amendment to Term Loan Agreement, dated as of September 25, 2024, among Digital Realty Trust, L.P., as borrower, and Digital Realty Trust, Inc., Digital Dutch Finco B.V., Digital Euro Finco, LLC, and the additional guarantors thereto, as guarantors, the banks, financial institutions and other institutional lenders party thereto, as lenders, Bank of America, N.A., as administrative agent, and certain other parties.
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer for Digital Realty Trust, Inc.
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer for Digital Realty Trust, Inc.
31.3
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer for Digital Realty Trust, L.P.
31.4
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer for Digital Realty Trust, L.P.
32.1
18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, Inc.
32.2
18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, Inc.
32.3
18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, L.P.
32.4
18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, L.P.
101
The following financial statements from Digital Realty Trust, Inc.’s and Digital Realty Trust, L.P.’s Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023; (ii) Condensed Consolidated Income Statements for the three and nine months ended September 30, 2024 and 2023; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023; (iv) Condensed Consolidated Statements of Equity/Capital for the three and nine months ended September 30, 2024 and 2023; (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023; and (vi) Notes to Condensed Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 1, 2024
/S/ ANDREW P. POWER
Andrew P. PowerPresident & Chief Executive Officer(principal executive officer)
/S/ MATTHEW R. MERCIER
Matthew R. MercierChief Financial Officer(principal financial officer)
/s/ CHRISTINE B. KORNEGAY
Christine B. KornegayChief Accounting Officer(principal accounting officer)
By:
Its general partner