Equity And Accumulated Other Comprehensive Loss, Net

9 Months Ended

Sep. 30, 2011

Equity And Accumulated Other Comprehensive Loss, Net [Abstract]

Equity And Accumulated Other Comprehensive Loss, Net

10. Equity and Accumulated Other Comprehensive Loss, Net

(a) Equity Distribution Agreements

On December 31, 2009, Digital Realty Trust, Inc. entered into equity distribution agreements, which we refer to as the Original Equity Distribution Agreements, with each of Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Credit Suisse Securities (USA) LLC, or the Original Agents, under which it could issue and sell shares of its common stock having an aggregate offering price of up to $400.0 million from time to time through, at its discretion, any of the Original Agents as its sales agents. On January 22, 2010, Digital Realty Trust, Inc. amended and restated each Original Equity Distribution Agreement with the applicable Original Agent, and also entered into a new equity distribution agreement with Morgan Stanley & Co. Incorporated, or collectively the Equity Distribution Agreements, under which it could issue and sell shares of its common stock having an aggregate offering price of up to $400.0 million (including the approximately 1.1 million shares of common stock having an aggregate offering price of approximately $54.3 million sold pursuant to the Original Equity Distribution Agreements as of January 22, 2010), from time to time through, at its discretion, any of the Original Agents or Morgan Stanley & Co. Incorporated as its sales agents. On March 2, 2011, the Equity Distribution Agreements were amended to amend certain representations. The sales of common stock made under the Equity Distribution Agreements were made in "at the market" offerings as defined in Rule 415 of the Securities Act. In June 2011, we completed the equity distribution program. For the nine months ended September 30, 2011, Digital Realty Trust, Inc. generated net proceeds of approximately $176.9 million from the issuance of approximately 3.0 million common shares under the Equity Distribution Agreements at an average price of $60.51 per share after payment of approximately $2.7 million of commissions to the sales agents and before offering expenses. Pursuant to the program, we sold 6.8 million shares of common stock for gross proceeds of $400.0 million, resulting in net proceeds of approximately $394.0 million after deducting commissions.

On June 29, 2011, Digital Realty Trust, Inc. entered into equity distribution agreements, which we refer to as the 2011 Equity Distribution Agreements, with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC, or the Agents, under which it could issue and sell shares of its common stock having an aggregate offering price of up to $400.0 million from time to time through, at its discretion, any of the Agents as its sales agents. The sales of common stock made under the 2011 Equity Distribution Agreements will be made in "at the market" offerings as defined in Rule 415 of the Securities Act. For the three months ended September 30, 2011, Digital Realty Trust, Inc. generated net proceeds of approximately $237.6 million from the issuance of approximately 4.1 million common shares under the 2011 Equity Distribution Agreements at an average price of $58.38 per share after payment of approximately $2.4 million of commissions to the sales agents and before offering expenses.

(b) Redeemable Preferred Stock

On September 15, 2011, Digital Realty Trust, Inc. issued 11,500,000 shares of its 7.000% series E cumulative redeemable preferred stock, or the series E preferred stock for gross proceeds of $287.5 million. Dividends are cumulative on the series E preferred stock from the date of original issuance in the amount of $1.750 per share each year, which is equivalent to 7.000% of the $25.00 liquidation preference per share. Dividends on the series E preferred stock are payable quarterly in arrears. The first dividend payable on the series E preferred stock on December 30, 2011 will be a pro rata dividend from and including the original issue date to and including December 31, 2011 in the amount of $0.515278 per share. The series E preferred stock does not have a stated maturity date and is not subject to any sinking fund or mandatory redemption provisions. Upon liquidation, dissolution or winding up, the series E preferred stock will rank senior to Digital Realty Trust, Inc. common stock with respect to the payment of distributions and other amounts and rank on parity with Digital Realty Trust, Inc. series C preferred stock and series D preferred stock. Digital Realty Trust, Inc. is not allowed to redeem the series E preferred stock before September 15, 2016, except in limited circumstances to preserve its status as a REIT. On or after September 15, 2016, Digital Realty Trust, Inc. may, at its option, redeem the series E preferred stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such series E preferred stock up to but excluding the redemption date. Holders of the series E preferred stock generally have no voting rights except for limited voting rights if Digital Realty Trust, Inc. fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. Except in connection with specified change of control transactions, the series E preferred stock is not convertible into or exchangeable for any other property or securities of Digital Realty Trust, Inc.

(c) Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the interests that are not owned by Digital Realty Trust, Inc. The following table shows the ownership interest in the Operating Partnership as of September 30, 2011 and December 31, 2010:

	September 30, 2011					December 31, 2010
	Number of units		Percentage of total			Number of units		Percentage of total
Digital Realty Trust, Inc.		104,102,878		95.4	%		91,159,221		94.3	%
Noncontrolling interests consist of:
Common units held by third parties		3,420,814		3.1			3,937,827		4.1
Incentive units held by employees and directors (see note 12)		1,603,858		1.5			1,525,622		1.6
		109,127,550		100.0	%		96,622,670		100.0	%

Limited partners have the right to require the Operating Partnership to redeem part or all of their common units for cash based on the fair market value of an equivalent number of shares of Digital Realty Trust, Inc. common stock at the time of redemption. Alternatively, Digital Realty Trust, Inc. may elect to acquire those common units in exchange for shares of Digital Realty Trust, Inc. common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events. Pursuant to authoritative accounting guidance, Digital Realty Trust, Inc. evaluated whether it controls the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement of the noncontrolling Operating Partnership common and incentive units. Based on the results of this analysis, we concluded that the common and incentive Operating Partnership units met the criteria to be classified within equity.

The redemption value of the noncontrolling Operating Partnership common units and the vested incentive units was approximately $244.8 million and $244.5 million based on the closing market price of Digital Realty Trust, Inc. common stock on September 30, 2011 and December 31, 2010, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2011:

	Common Units			Incentive Units			Total
As of December 31, 2010		3,937,827			1,525,622			5,463,449
Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)		(517,013	)		—			(517,013	)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)		—			(53,168	)		(53,168	)
Cancellation of incentive units held by employees and directors		—			(53,138	)		(53,138	)
Grant of incentive units to employees and directors		—			184,542			184,542
As of September 30, 2011		3,420,814			1,603,858			5,024,672

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

Under the terms of certain third parties' (the eXchange parties) contribution agreements signed in the third quarter of 2004, we have agreed to indemnify each eXchange party against adverse tax consequences in the event the Operating Partnership directly or indirectly sells, exchanges or otherwise disposes of (whether by way of merger, sale of assets or otherwise) in a taxable transaction any interest in 200 Paul Avenue 1-4 or 1100 Space Park Drive until the earlier of November 3, 2013 and the date on which these contributors or certain transferees hold less than 25% of the Operating Partnership common units issued to them in the formation transactions consummated concurrently with the IPO. Under the eXchange parties' amended contribution agreement, the Operating Partnership has agreed to make approximately $17.8 million of indebtedness available for guaranty by the eXchange parties until the earlier of November 3, 2013 and the date on which these contributors or certain transferees hold less than 25% of the Operating Partnership common units issued to them in the formation transactions consummated concurrently with the IPO, and we have agreed to indemnify each eXchange party against adverse tax consequences if the Operating Partnership does not provide such indebtedness to guarantee.

(d) Dividends

We have declared the following dividends on our common and preferred stock for the nine months ended September 30, 2011 (in thousands):

Date dividend declared	Dividend payable date		Series C Preferred Stock (1)		Series D Preferred Stock (2)		Common Stock  (3)
February 10, 2011		March 31, 2011	$	1,832	$	4,690	$	62,459
April 25, 2011		June 30, 2011	$	1,441	$	3,272	$	67,031
July 25, 2011		September 30, 2011	$	1,402	$	3,034	$	69,830
			$	4,675	$	10,996	$	199,320

(1) $1.094 annual rate of dividend per share.

(2) $1.375 annual rate of dividend per share.

(3) $2.720 annual rate of dividend per share.

Distributions out of Digital Realty Trust, Inc.'s current or accumulated earnings and profits are generally classified as dividends whereas distributions in excess of its current and accumulated earnings and profits, to the extent of a stockholder's U.S. federal income tax basis in Digital Realty Trust, Inc.'s stock, are generally classified as a return of capital. Distributions in excess of a stockholder's U.S. federal income tax basis in Digital Realty Trust, Inc.'s stock are generally characterized as capital gain. Cash provided by operating activities has been sufficient to fund all distributions.

(e) Accumulated Other Comprehensive Loss, Net

The accumulated balances for each classification of other comprehensive loss, net as of September 30, 2011 are as follows (in thousands):

	Foreign currency translation adjustments			Cash flow hedge adjustments			Accumulated other comprehensive loss, net
Balance as of December 31, 2010	$	(33,175	)	$	(8,906	)	$	(42,081	)
Net current period change		(10,262	)		(2,907	)		(13,169	)
Reclassification to interest expense from interest rate swaps		—			4,257			4,257
Balance as of September 30, 2011	$	(43,437	)	$	(7,556	)	$	(50,993	)

(f) Noncontrolling Interests in Consolidated Joint Ventures

On June 24, 2011, we acquired all of the noncontrolling ownership interest in the entity that owns Datacenter Park Dallas from our joint venture partner for approximately $53.2 million (subject to adjustment in limited circumstances). The acquisition was financed with borrowings under our corporate revolving credit facility. The amount paid in excess of the carrying value of the noncontrolling ownership interest resulted in a decrease to additional paid-in capital, as presented in the accompanying condensed consolidated statement of equity.