Digital Realty Trust, Inc. (Form: 10-Q, Received: 08/07/2014 17:13:24)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014

¨	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.) Maryland (Digital Realty Trust, L.P.)		26-0081711 20-2402955
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)

Four Embarcadero Center, Suite 3200 San Francisco, CA		94111
(Address of principal executive offices)		(Zip Code)

(415) 738-6500

(Registrant’s telephone number, including area code)

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 x No ¨
Digital Realty Trust, L.P.		Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).


Digital Realty Trust, Inc.		Yes x No ¨
Digital Realty Trust, L.P.		Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Digital Realty Trust, Inc.:

Digital Realty Trust, L.P.:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Digital Realty Trust, Inc.		Yes ¨ No x
Digital Realty Trust, L.P.		Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Digital Realty Trust, Inc.:


Class		Outstanding at August 4, 2014
Common Stock, $.01 par value per share		135,500,587

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2014 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. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to Digital Realty Trust, L.P. together with its consolidated subsidiaries.

Digital Realty Trust, Inc. is a real estate investment trust, or REIT, and the sole general partner of Digital Realty Trust, L.P. As of June 30, 2014, Digital Realty Trust, Inc. owned an approximate 97.7% common general partnership interest in Digital Realty Trust, L.P. The remaining approximate 2.3% common limited partnership interests are owned by non-affiliated investors and certain directors and officers of Digital Realty Trust, Inc. As of June 30, 2014, Digital Realty Trust, Inc. 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., Digital Realty Trust, Inc. has the full, exclusive and complete responsibility for the operating partnership’s day-to-day management and control.

We believe combining the quarterly reports on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. into this single report results in the following benefits:

•

enhancing investors’ understanding of our company and our operating partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both our company and our operating partnership; and

•

creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

There are a few differences between our company and our operating partnership, which are reflected in the disclosure in this report. We believe it is important to understand the differences between our company and our operating partnership in the context of how we operate as an interrelated consolidated company. Digital Realty Trust, Inc. is a REIT, whose only material asset is its ownership of partnership interests of Digital Realty Trust, L.P. As a result, Digital Realty Trust, Inc. does not conduct business itself, other than acting as the sole general partner of Digital Realty Trust, L.P., issuing public equity from time to time and guaranteeing certain unsecured debt of Digital Realty Trust, L.P. and certain of its subsidiaries. Digital Realty Trust, Inc. itself does not issue any indebtedness but guarantees the unsecured debt of Digital Realty Trust, L.P. and certain of its subsidiaries, as disclosed in this report. Digital Realty Trust, L.P. holds substantially all the assets of the company and holds the ownership interests in the company’s joint ventures. Digital Realty Trust, L.P. conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by Digital Realty Trust, Inc., which are generally contributed to Digital Realty Trust, L.P. in exchange for partnership units, Digital Realty Trust, L.P. generates the capital required by the company’s business through Digital Realty Trust, L.P.’s operations, by Digital Realty Trust, L.P.’s direct or indirect incurrence of indebtedness or through the issuance of partnership units.

The presentation of noncontrolling interests in operating partnership, stockholders’ equity and partners’ capital are the main areas of difference between the condensed consolidated financial statements of Digital Realty Trust, Inc. and those of Digital Realty Trust, L.P. The common limited partnership interests held by the limited partners in Digital Realty Trust, L.P. are presented as limited partners’ capital within partners’ capital in Digital Realty Trust, L.P.’s condensed consolidated financial statements and as noncontrolling interests in operating partnership within equity in Digital Realty Trust, Inc.’s condensed consolidated financial statements. The common and preferred partnership interests held by Digital Realty Trust, Inc. in Digital Realty Trust, L.P. are presented as general partner’s capital within partners’ capital in Digital Realty Trust, L.P.’s condensed consolidated financial statements and as preferred stock, common stock, additional paid-in capital and accumulated dividends in excess of earnings within stockholders’ equity in Digital Realty Trust, Inc.’s condensed consolidated financial statements. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity issued at the Digital Realty Trust, Inc. and the Digital Realty Trust, L.P. levels.

To help investors understand the significant differences between the company and the operating partnership, this report presents the following separate sections for each of the company and the operating partnership:

•

Condensed consolidated financial statements;

•

the following notes to the condensed consolidated financial statements:

•

Debt of the company and Debt of the operating partnership;

•

Income per Share and Income per Unit; and

•

Equity and Accumulated Other Comprehensive Income, Net of the company and Capital and Accumulated Other Comprehensive Income of the operating partnership;

•

Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

•

Unregistered Sales of Equity Securities and Use of Proceeds.

This report also includes separate Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the company and the operating partnership in order to establish that the Interim Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the company and the operating partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the company and the operating partnership, the separate sections in this report for the company and the operating partnership specifically refer to the company and the operating partnership. In the sections that combine disclosure of the company and the operating partnership, this report refers to actions or holdings as being actions or holdings of the company. Although the operating partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the company is appropriate because the business is one enterprise and the company operates the business through the operating partnership.

As general partner with control of the operating partnership, Digital Realty Trust, Inc. consolidates the operating partnership for financial reporting purposes, and it does not have significant assets other than its investment in the operating partnership. Therefore, the assets and liabilities of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. are the same on their respective condensed consolidated financial statements. The separate discussions of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. 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.

DIGITAL REALTY TRUST, INC. AND DIGITAL REALTY TRUST, L.P.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2014

TABLE OF CONTENTS


		Page Number
PART I.	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements of Digital Realty Trust, Inc.:

	Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013		5

	Condensed Consolidated Income Statements for the three and six months ended June 30, 2014 and 2013 (unaudited)		6

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013 (unaudited)		7

	Condensed Consolidated Statement of Equity for the six months ended June 30, 2014 (unaudited)		8

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (unaudited)		9

	Condensed Consolidated Financial Statements of Digital Realty Trust, L.P.:

	Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013		12

	Condensed Consolidated Income Statements for the three and six months ended June 30, 2014 and 2013 (unaudited)		13

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013 (unaudited)		14

	Condensed Consolidated Statement of Capital for the six months ended June 30, 2014 (unaudited)		15

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (unaudited)		16

	Notes to Condensed Consolidated Financial Statements of Digital Realty Trust, Inc. and Digital Realty Trust, L.P.		19

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		53

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		84

ITEM 4.	Controls and Procedures (Digital Realty Trust, Inc.)		86

	Controls and Procedures (Digital Realty Trust, L.P.)		86

PART II.	OTHER INFORMATION		87

ITEM 1.	Legal Proceedings		87

ITEM 1A.	Risk Factors		87

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		87

ITEM 3.	Defaults Upon Senior Securities		87

ITEM 4.	Mine Safety Disclosures		87

ITEM 5.	Other Information		87

ITEM 6.	Exhibits		88

	Signatures		89

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2014			December 31, 2013
	(unaudited)
ASSETS
Investments in real estate:
Properties:
Land	$	688,664		$	693,791
Acquired ground leases		14,868			14,618
Buildings and improvements		9,056,305			8,680,677
Tenant improvements		500,392			490,492

Total investments in properties		10,260,229			9,879,578
Accumulated depreciation and amortization		(1,778,768	)		(1,565,996	)

Net investments in properties		8,481,461			8,313,582
Investment in unconsolidated joint ventures		92,619			70,504

Net investments in real estate		8,574,080			8,384,086
Cash and cash equivalents		80,926			56,808
Accounts and other receivables, net of allowance for doubtful accounts of $6,530 and $5,576 as of June 30, 2014 and December 31, 2013, respectively		161,495			181,163
Deferred rent		436,443			393,504
Acquired above-market leases, net		47,181			52,264
Acquired in-place lease value and deferred leasing costs, net		470,620			489,456
Deferred financing costs, net		36,914			36,475
Restricted cash		39,778			40,362
Other assets		62,794			51,627

Total assets	$	9,910,231		$	9,685,745

LIABILITIES AND EQUITY
Global revolving credit facility	$	374,641		$	724,668
Unsecured term loan		1,034,830			1,020,984
Unsecured senior notes, net of discount		2,897,068			2,364,232
Exchangeable senior debentures		—			266,400
Mortgage loans, net of premiums		552,696			585,608
Accounts payable and other accrued liabilities		636,783			662,687
Accrued dividends and distributions		—			102,509
Acquired below-market leases, net		118,432			130,269
Security deposits and prepaid rents		161,500			181,876

Total liabilities		5,775,950			6,039,233

Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 70,000,000 shares authorized:
Series E Cumulative Redeemable Preferred Stock, 7.000%, $287,500 and $287,500 liquidation preference, respectively ($25.00 per share), 11,500,000 and 11,500,000 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		277,172			277,172
Series F Cumulative Redeemable Preferred Stock, 6.625%, $182,500 and $182,500 liquidation preference, respectively ($25.00 per share), 7,300,000 and 7,300,000 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		176,191			176,191
Series G Cumulative Redeemable Preferred Stock, 5.875%, $250,000 and $250,000 liquidation preference, respectively ($25.00 per share), 10,000,000 and 10,000,000 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		241,468			241,468
Series H Cumulative Redeemable Preferred Stock, 7.375%, $365,000 and $0 liquidation preference, respectively ($25.00 per share), 14,600,000 and 0 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		353,378			—
Common Stock: $0.01 par value, 215,000,000 shares authorized, 135,370,016 and 128,455,350 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		1,347			1,279
Additional paid-in capital		3,955,830			3,688,937
Accumulated dividends in excess of earnings		(928,626	)		(785,222	)
Accumulated other comprehensive income, net		14,962			10,691

Total stockholders’ equity		4,091,722			3,610,516

Noncontrolling Interests:
Noncontrolling interests in operating partnership		35,632			29,027
Noncontrolling interests in consolidated joint ventures		6,927			6,969

Total noncontrolling interests		42,559			35,996

Total equity		4,134,281			3,646,512

Total liabilities and equity	$	9,910,231		$	9,685,745

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Operating Revenues:
Rental	$	313,420		$	285,953		$	619,206		$	567,352
Tenant reimbursements		85,687			76,681			169,308			152,598
Fee income		1,466			728			2,649			1,534
Other		873			140			873			388

Total operating revenues		401,446			363,502			792,036			721,872

Operating Expenses:
Rental property operating and maintenance		126,796			106,706			244,692			212,186
Property taxes		20,595			19,374			42,720			40,416
Insurance		1,896			2,238			4,318			4,443
Construction management		121			294			285			678
Change in fair value of contingent consideration		766			(370	)		(2,637	)		930
Depreciation and amortization		137,092			115,867			267,712			227,490
General and administrative		20,321			17,891			50,999			33,842
Transactions		755			1,491			836			3,254
Other		651			17			651			53

Total operating expenses		308,993			263,508			609,576			523,292

Operating income		92,453			99,994			182,460			198,580

Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures		3,477			2,330			6,058			4,665
Gain on insurance settlement		—			5,597			—			5,597
Gain on sale of property		15,945			—			15,945			—
Gain on contribution of property to unconsolidated joint venture		—			—			1,906			—
Interest and other income		(83	)		(6	)		1,644			35
Interest expense		(49,146	)		(47,583	)		(96,520	)		(95,661	)
Tax expense		(1,021	)		(210	)		(2,859	)		(1,413	)
Loss from early extinguishment of debt		(293	)		(501	)		(585	)		(501	)

Net income		61,332			59,621			108,049			111,302
Net income attributable to noncontrolling interests		(993	)		(1,145	)		(1,798	)		(2,115	)

Net income attributable to Digital Realty Trust, Inc.		60,339			58,476			106,251			109,187
Preferred stock dividends		(18,829	)		(11,399	)		(30,555	)		(19,453	)

Net income available to common stockholders	$	41,510		$	47,077		$	75,696		$	89,734

Net income per share available to common stockholders:
Basic	$	0.31		$	0.37		$	0.58		$	0.70
Diluted	$	0.31		$	0.37		$	0.58		$	0.70

Weighted average common shares outstanding:
Basic		133,802,622			128,419,745			131,183,857			127,437,970
Diluted		133,977,885			128,623,076			131,320,547			127,627,496

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income	$	61,332		$	59,621		$	108,049		$	111,302

Other comprehensive income:
Foreign currency translation adjustments		4,921			308			8,740			(62,755	)
(Decrease) increase in fair value of interest rate swaps		(4,739	)		6,623			(6,082	)		6,499
Reclassification to interest expense from interest rate swaps		854			1,700			1,700			3,441


Comprehensive income		62,368			68,252			112,407			58,487

Comprehensive income attributable to noncontrolling interests		(1,014	)		(1,313	)		(1,885	)		(1,119	)

Comprehensive income attributable to Digital Realty Trust, Inc.	$	61,354		$	66,939		$	110,522		$	57,368

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands, except share data)


	Preferred Stock		Number of Common Shares		Common Stock		Additional Paid-in Capital			Accumulated Dividends in Excess of Earnings			Accumulated Other Comprehensive Income, net			Total Stockholders’ Equity			Noncontrolling Interests in Operating Partnership			Noncontrolling Interests in Consolidated Joint Ventures			Total Noncontrolling Interests			Total Equity
Balance as of December 31, 2013	$	694,831		128,455,350	$	1,279	$	3,688,937		$	(785,222)		$	10,691		$	3,610,516		$	29,027		$	6,969		$	35,996		$	3,646,512
Conversion of units to common stock		—		14,941		—		191			—			—			191			(191	)		—			(191	)		—
Issuance of unvested restricted stock, net of forfeitures		—		148,653		—		—			—			—			—			—			—			—			—
Common stock offering costs		—		—		—		(93	)		—			—			(93	)		—			—			—			(93	)
Exercise of stock options		—		16,134		—		237			—			—			237			—			—			—			237
Issuance of common stock in exchange for debentures		—		6,734,938		68		261,098			—			—			261,166			—			—			—			261,166
Issuance of series H preferred stock, net of offering costs		353,378		—		—		—			—			—			353,378			—			—			—			353,378
Amortization of unearned compensation regarding share-based awards		—		—		—		15,766			—			—			15,766			—			—			—			15,766
Reclassification of vested share-based awards		—		—		—		(10,306	)		—			—			(10,306	)		10,306			—			10,306			—
Dividends declared on preferred stock		—		—		—		—			(30,555	)		—			(30,555	)		—			—			—			(30,555	)
Dividends and distributions on common stock and common and incentive units		—		—		—		—			(219,100	)		—			(219,100	)		(5,163	)		—			(5,163	)		(224,263	)
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions		—		—		—		—			—			—			—			—			(274	)		(274	)		(274	)
Net income		—		—		—		—			106,251			—			106,251			1,566			232			1,798			108,049
Other comprehensive income—foreign currency translation adjustments		—		—		—		—			—			8,563			8,563			177			—			177			8,740
Other comprehensive loss—fair value of interest rate swaps		—		—		—		—			—			(5,957	)		(5,957	)		(125	)		—			(125	)		(6,082	)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—		—		—		—			—			1,665			1,665			35			—			35			1,700

Balance as of June 30, 2014	$	1,048,209		135,370,016	$	1,347	$	3,955,830		$	(928,626	)	$	14,962		$	4,091,722		$	35,632		$	6,927		$	42,559		$	4,134,281

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:

Net income	$	108,049		$	111,302
Adjustments to reconcile net income to net cash provided by operating activities:

Gain on sale of property		(15,945	)		—
Gain on contribution of investment properties to unconsolidated joint venture		(1,906	)		—
Gain on insurance settlement		—			(5,597	)
Equity in earnings of unconsolidated joint ventures		(6,058	)		(4,665	)
Change in fair value of accrued contingent consideration		(2,637	)		930
Distributions from unconsolidated joint ventures		4,603			2,875
Write-off of net assets due to early lease terminations		651			(53	)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases		225,025			189,997
Amortization of share-based unearned compensation		12,640			6,468
Allowance for doubtful accounts		954			(6	)
Amortization of deferred financing costs		4,487			4,902
Loss on early extinguishment of debt		585			501
Amortization of debt discount/premium		864			340
Amortization of acquired in-place lease value and deferred leasing costs		42,687			37,494
Amortization of acquired above-market leases and acquired below-market leases		(5,340	)		(6,085	)
Changes in assets and liabilities:
Restricted cash		1,922			5,138
Accounts and other receivables		20,583			4,183
Deferred rent		(41,283	)		(41,141	)
Deferred leasing costs		(7,663	)		(9,014	)
Other assets		(13,328	)		(10,065	)
Accounts payable and other accrued liabilities		3,718			(10,614	)
Security deposits and prepaid rents		(17,344	)		(1,383	)

Net cash provided by operating activities		315,264			275,507

Cash flows from investing activities:

Acquisitions of real estate		—			(117,289	)
Proceeds from sale of property, net		37,945			—
Proceeds from contribution of investment properties to unconsolidated joint venture		11,408			—
Investment in unconsolidated joint ventures		(20,627	)		(5,654	)
Investment in equity securities		(3	)		(17,100	)
Deposits paid for acquisitions of real estate		—			(2,250	)
Receipt of value added tax refund		4,956			4,740
Refundable value added tax paid		(3,816	)		(5,002	)
Change in restricted cash		(1,340	)		(862	)
Improvements to and advances for investments in real estate		(431,217	)		(577,075	)
Improvement advances to tenants		(7,091	)		(1,758	)
Collection of advances from tenants for improvements		5,969			1,377
Proceeds from insurance settlement		—			8,625

Net cash used in investing activities		(403,816	)		(712,248	)

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)


	Six Months Ended June 30,
	2014			2013
Cash flows from financing activities:

Borrowings on revolving credit facility	$	677,264		$	845,592
Repayments on revolving credit facility		(1,033,838	)		(932,225	)
Borrowings on 4.250% unsecured senior notes due 2025		—			630,026
Borrowings on 4.750% unsecured senior notes due 2023		495,872			—
Principal payments on mortgage loans		(6,349	)		(46,700	)
Principal repayments on exchangeable senior debentures		(5,234	)		—
Earnout payment related to the acquisition of the Sentrum Portfolio		(5,706	)		(10,009	)
Change in restricted cash		51			406
Payment of loan fees and costs		(5,311	)		(6,720	)
Capital (distributions paid to) contributions received from noncontrolling interests in consolidated joint ventures, net		(274	)		925
Gross proceeds from the issuance of preferred stock		365,000			250,000
Common stock offering costs paid		(93	)		(290	)
Preferred stock offering costs paid		(11,622	)		(8,435	)
Proceeds from exercise of stock options		237			50
Payment of dividends to preferred stockholders		(30,555	)		(19,453	)
Payment of dividends to common stockholders and distributions to noncontrolling interests in operating partnership		(326,772	)		(298,447	)

Net cash provided by financing activities		112,670			404,720

Net increase (decrease) in cash and cash equivalents		24,118			(32,021	)
Cash and cash equivalents at beginning of period		56,808			56,281

Cash and cash equivalents at end of period	$	80,926		$	24,260

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)


	Six Months Ended June 30,
	2014			2013
Supplemental disclosure of cash flow information:

Cash paid for interest, including amounts capitalized	$	98,240		$	91,726
Cash paid for income taxes		2,800			1,649

Supplementary disclosure of noncash investing and financing activities:

Change in net assets related to foreign currency translation adjustments	$	8,740		$	(62,755	)
(Decrease) increase in accounts payable and other accrued liabilities related to change in fair value of interest rate swaps		(6,082	)		6,499
Noncontrolling interests in operating partnership redeemed for or converted to shares of common stock		191			284
Preferred stock converted to shares of common stock		—			119,348
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		191,148			237,933
Additional accrual of contingent purchase price for investments in real estate		—			5,840
Issuance of common units associated with exchange of exchangeable senior debentures		261,166			—
Allocation of purchase price of real estate/investment in partnership to:
Investments in real estate		—			105,521
Acquired above-market leases		—			203
Acquired below-market leases		—			(4,136	)
Acquired in-place lease value and deferred leasing costs		—			15,701

Cash paid for acquisition of real estate	$	—		$	117,289

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except unit and per unit data)


	June 30, 2014			December 31, 2013
	(unaudited)
ASSETS
Investments in real estate:
Properties:
Land	$	688,664		$	693,791
Acquired ground leases		14,868			14,618
Buildings and improvements		9,056,305			8,680,677
Tenant improvements		500,392			490,492

Total investments in properties		10,260,229			9,879,578
Accumulated depreciation and amortization		(1,778,768	)		(1,565,996	)

Net investments in properties		8,481,461			8,313,582
Investment in unconsolidated joint ventures		92,619			70,504

Net investments in real estate		8,574,080			8,384,086
Cash and cash equivalents		80,926			56,808
Accounts and other receivables, net of allowance for doubtful accounts of $6,530 and $5,576 as of June 30, 2014 and December 31, 2013, respectively		161,495			181,163
Deferred rent		436,443			393,504
Acquired above-market leases, net		47,181			52,264
Acquired in-place lease value and deferred leasing costs, net		470,620			489,456
Deferred financing costs, net		36,914			36,475
Restricted cash		39,778			40,362
Other assets		62,794			51,627

Total assets	$	9,910,231		$	9,685,745

LIABILITIES AND CAPITAL
Global revolving credit facility	$	374,641		$	724,668
Unsecured term loan		1,034,830			1,020,984
Unsecured senior notes, net of discount		2,897,068			2,364,232
Exchangeable senior debentures		—			266,400
Mortgage loans, net of premiums		552,696			585,608
Accounts payable and other accrued liabilities		636,783			662,687
Accrued dividends and distributions		—			102,509
Acquired below-market leases, net		118,432			130,269
Security deposits and prepaid rents		161,500			181,876

Total liabilities		5,775,950			6,039,233
Commitments and contingencies
Capital:
Partners’ capital:
General Partner:
Series E Cumulative Redeemable Preferred Units, 7.000%, $287,500 and $287,500 liquidation preference, respectively ($25.00 per unit), 11,500,000 and 11,500,000 units issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		277,172			277,172
Series F Cumulative Redeemable Preferred Units, 6.625%, $182,500 and $182,500 liquidation preference, respectively ($25.00 per unit), 7,300,000 and 7,300,000 units issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		176,191			176,191
Series G Cumulative Redeemable Preferred Units, 5.875%, $250,000 and $250,000 liquidation preference, respectively ($25.00 per unit), 10,000,000 and 10,000,000 units issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		241,468			241,468
Series H Cumulative Redeemable Preferred Units, 7.375%, $365,000 and $0 liquidation preference, respectively ($25.00 per unit), 14,600,000 and 0 units issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		353,378			—
Common units:		—			—
135,370,016 and 128,455,350 units issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		3,028,551			2,904,994
Limited partners, 1,481,814 and 1,491,814 common units, 1,249,197 and 1,077,838 profits interest units and 397,369 and 397,369 class C units outstanding as of June 30, 2014 and December 31, 2013, respectively		37,779			31,261
Accumulated other comprehensive income		12,815			8,457

Total partners’ capital		4,127,354			3,639,543
Noncontrolling interests in consolidated joint ventures		6,927			6,969

Total capital		4,134,281			3,646,512

Total liabilities and capital	$	9,910,231		$	9,685,745

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited, in thousands, except unit and per unit data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Operating Revenues:
Rental	$	313,420		$	285,953		$	619,206		$	567,352
Tenant reimbursements		85,687			76,681			169,308			152,598
Fee income		1,466			728			2,649			1,534
Other		873			140			873			388

Total operating revenues		401,446			363,502			792,036			721,872

Operating Expenses:
Rental property operating and maintenance		126,796			106,706			244,692			212,186
Property taxes		20,595			19,374			42,720			40,416
Insurance		1,896			2,238			4,318			4,443
Construction management		121			294			285			678
Change in fair value of contingent consideration		766			(370	)		(2,637	)		930
Depreciation and amortization		137,092			115,867			267,712			227,490
General and administrative		20,321			17,891			50,999			33,842
Transactions		755			1,491			836			3,254
Other		651			17			651			53

Total operating expenses		308,993			263,508			609,576			523,292

Operating income		92,453			99,994			182,460			198,580

Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures		3,477			2,330			6,058			4,665
Gain on insurance settlement		—			5,597			—			5,597
Gain on sale of property		15,945			—			15,945			—
Gain on contribution of properties to unconsolidated joint venture		—			—			1,906			—
Interest and other income		(83	)		(6	)		1,644			35
Interest expense		(49,146	)		(47,583	)		(96,520	)		(95,661	)
Tax expense		(1,021	)		(210	)		(2,859	)		(1,413	)
Loss from early extinguishment of debt		(293	)		(501	)		(585	)		(501	)

Net income		61,332			59,621			108,049			111,302
Net income attributable to noncontrolling interests in consolidated joint ventures		(120	)		(209	)		(232	)		(355	)

Net income attributable to Digital Realty Trust, L.P.		61,212			59,412			107,817			110,947
Preferred units distributions		(18,829	)		(11,399	)		(30,555	)		(19,453	)

Net income available to common unitholders	$	42,383		$	48,013		$	77,262		$	91,494

Net income per unit available to common unitholders:
Basic	$	0.31		$	0.37		$	0.58		$	0.70
Diluted	$	0.31		$	0.37		$	0.58		$	0.70

Weighted average common units outstanding:
Basic		136,615,338			130,973,952			133,894,119			129,936,759
Diluted		136,790,601			131,177,283			134,030,809			130,126,285

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)


	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
Net income	$	61,332		$	59,621	$	108,049		$	111,302
Other comprehensive income:
Foreign currency translation adjustments		4,921			308		8,740			(62,755	)
(Decrease) increase in fair value of interest rate swaps		(4,739	)		6,623		(6,082	)		6,499
Reclassification to interest expense from interest rate swaps		854			1,700		1,700			3,441


Comprehensive income	$	62,368		$	68,252	$	112,407		$	58,487

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)


	General Partner										Limited Partners						Accumulated Other			Noncontrolling Interests in
	Preferred Units					Common Units					Common Units						Comprehensive			Consolidated Joint
	Units		Amount			Units		Amount			Units			Amount			Income			Ventures			Total Capital
Balance as of December 31, 2013		28,800,000	$	694,831			128,455,350	$	2,904,994			2,967,021		$	31,261		$	8,457		$	6,969		$	3,646,512
Conversion of limited partner common units to general partner common units		—		—			14,941		191			(14,941	)		(191	)		—			—			—
Issuance of unvested restricted common units, net of forfeitures		—		—			148,653		—			—			—			—			—			—
Common unit offering costs		—		—			—		(93	)		—			—			—			—			(93	)
Issuance of common units in connection with the exercise of stock options		—		—			16,134		237			—			—			—			—			237
Issuance of common units, net of forfeitures		—		—			—		—			176,300			—			—			—			—
Issuance of common units in connection with the exchange for debentures		—		—			6,734,938		261,166			—			—			—			—			261,166
Net proceeds from issuance of series H preferred units		14,600,000		353,378			—		—			—			—			—			—			353,378
Amortization of unearned compensation regarding share-based awards		—		—			—		15,766			—			—			—			—			15,766
Reclassification of vested share-based awards		—		—			—		(10,306	)		—			10,306			—			—			—
Distributions		—		(30,555	)		—		(219,100	)		—			(5,163	)		—			—			(254,818	)
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions		—		—			—		—			—			—			—			(274	)		(274	)
Net income		—		30,555			—		75,696			—			1,566			—			232			108,049
Other comprehensive income—foreign currency translation adjustments		—		—			—		—			—			—			8,740			—			8,740
Other comprehensive loss—fair value of interest rate swaps		—		—			—		—			—			—			(6,082	)		—			(6,082	)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense		—		—			—		—			—			—			1,700			—			1,700

Balance as of June 30, 2014		43,400,000	$	1,048,209			135,370,016	$	3,028,551			3,128,380		$	37,779		$	12,815		$	6,927		$	4,134,281

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:

Net income	$	108,049		$	111,302
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of property		(15,945	)		—
Gain on contribution of investment properties to unconsolidated joint venture		(1,906	)		—
Gain on insurance settlement		—			(5,597	)

Equity in earnings of unconsolidated joint ventures		(6,058	)		(4,665	)
Change in fair value of accrued contingent consideration		(2,637	)		930
Distributions from unconsolidated joint ventures		4,603			2,875
Write-off of net assets due to early lease terminations		651			(53	)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases		225,025			189,997
Amortization of share-based unearned compensation		12,640			6,468
Allowance for doubtful accounts		954			(6	)
Amortization of deferred financing costs		4,487			4,902
Loss on early extinguishment of debt		585			501
Amortization of debt discount/premium		864			340
Amortization of acquired in-place lease value and deferred leasing costs		42,687			37,494
Amortization of acquired above-market leases and acquired below-market leases		(5,340	)		(6,085	)
Changes in assets and liabilities:
Restricted cash		1,922			5,138
Accounts and other receivables		20,583			4,183
Deferred rent		(41,283	)		(41,141	)
Deferred leasing costs		(7,663	)		(9,014	)
Other assets		(13,328	)		(10,065	)
Accounts payable and other accrued liabilities		3,718			(10,614	)
Security deposits and prepaid rents		(17,344	)		(1,383	)

Net cash provided by operating activities		315,264			275,507

Cash flows from investing activities:

Acquisitions of real estate		—			(117,289	)
Proceeds from sale of property, net		37,945			—
Proceeds from contribution of investment properties to unconsolidated joint venture		11,408			—
Investment in unconsolidated joint ventures		(20,627	)		(5,654	)
Investment in equity securities		(3	)		(17,100	)
Deposits paid for acquisitions of real estate		—			(2,250	)
Receipt of value added tax refund		4,956			4,740
Refundable value added tax paid		(3,816	)		(5,002	)
Change in restricted cash		(1,340	)		(862	)
Improvements to and advances for investments in real estate		(431,217	)		(577,075	)
Improvement advances to tenants		(7,091	)		(1,758	)
Collection of advances from tenants for improvements		5,969			1,377
Proceeds from insurance settlement		—			8,625

Net cash used in investing activities		(403,816	)		(712,248	)

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)


	Six Months Ended June 30,
	2014			2013
Cash flows from financing activities:
Borrowings on revolving credit facility	$	677,264		$	845,592
Repayments on revolving credit facility		(1,033,838	)		(932,225	)
Borrowings on 4.250% unsecured senior notes due 2025		—			630,026
Borrowings on 4.750% unsecured senior notes due 2023		495,872			—
Principal payments on mortgage loans		(6,349	)		(46,700	)
Principal repayments on exchangeable senior debentures		(5,234	)		—
Earnout payment related to the acquisition of the Sentrum Portfolio		(5,706	)		(10,009	)
Change in restricted cash		51			406
Payment of loan fees and costs		(5,311	)		(6,720	)
Capital (distributions paid to) contributions received from noncontrolling interests in consolidated joint ventures, net		(274	)		925
General partner contributions		353,522			241,325
Payment of distributions to preferred unitholders		(30,555	)		(19,453	)
Payment of distributions to common unitholders		(326,772	)		(298,447	)

Net cash provided by financing activities		112,670			404,720

Net increase (decrease) in cash and cash equivalents		24,118			(32,021	)
Cash and cash equivalents at beginning of period		56,808			56,281

Cash and cash equivalents at end of period	$	80,926		$	24,260

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)


	Six Months Ended June 30,
	2014			2013
Supplemental disclosure of cash flow information:

Cash paid for interest, including amounts capitalized	$	98,240		$	91,726
Cash paid for income taxes		2,800			1,649

Supplementary disclosure of noncash investing and financing activities:

Change in net assets related to foreign currency translation adjustments		8,740			(62,755	)
Decrease (increase) in accounts payable and other accrued liabilities related to change in fair value of interest rate swaps		(6,082	)		6,499
Preferred units converted to common units		—			119,348
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses		191,148			237,933
Additional accrual of contingent purchase price for investments in real estate		—			5,840
Issuance of common units associated with exchange of exchangeable senior debentures		261,166			—

Allocation of purchase price of real estate/investment in partnership to:
Investments in real estate		—			105,521
Acquired above-market leases		—			203
Acquired below-market leases		—			(4,136	)
Acquired in-place lease value and deferred leasing costs		—			15,701

Cash paid for acquisition of real estate	$	—		$	117,289

See accompanying notes to the condensed consolidated financial statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014 and 2013

1. Organization and Description of Business

Digital Realty Trust, Inc. through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership) and the subsidiaries of the Operating Partnership (collectively, we, our, us or the Company) is engaged in the business of owning, acquiring, developing and managing technology-related real estate. The Company is focused on providing customer driven datacenter solutions for domestic and international tenants across a variety of industry verticals ranging from financial services, cloud and information technology services, to manufacturing, energy, health care and consumer products. As of June 30, 2014, our portfolio consisted of 130 properties, including 13 properties held as investments in unconsolidated joint ventures and developable land, of which 104 are located throughout North America, 21 are located in Europe, three are located in Australia and two are located in Asia. We are diversified in major markets where corporate datacenter and technology tenants are concentrated, including the Boston, Chicago, Dallas, Los Angeles, New York Metro, Northern Virginia, Phoenix, San Francisco and Silicon Valley metropolitan areas in the United States, Amsterdam, Dublin, London and Paris markets in Europe and Singapore, Sydney, Melbourne, Hong Kong and Osaka markets in the Asia Pacific region. The portfolio consists of Internet gateway and corporate datacenter properties, technology manufacturing properties and regional or national headquarters of technology companies.

The Operating Partnership was formed on July 21, 2004 in anticipation of Digital Realty Trust, Inc.’s initial public offering (IPO) on November 3, 2004 and commenced operations on that date. As of June 30, 2014, Digital Realty Trust, Inc. owns a 97.7% common interest and a 100% preferred interest in the Operating Partnership. As sole general partner of the Operating Partnership, Digital Realty Trust, Inc. has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control. The limited partners of the Operating Partnership do not have rights to replace Digital Realty Trust, Inc. as the general partner nor do they have participating rights, although they do have certain protective rights.

2. Summary of Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

The accompanying interim condensed consolidated financial statements include all of the accounts of Digital Realty Trust, Inc., the Operating Partnership and the subsidiaries of the Operating Partnership. Intercompany balances and transactions have been eliminated.

The accompanying interim condensed consolidated financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in compliance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation have been included. All such adjustments are considered to be of a normal recurring nature, except as otherwise indicated. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K, as amended, for the year ended December 31, 2013.

The notes to the condensed consolidated financial statements of Digital Realty Trust, Inc. and the Operating Partnership have been combined to provide the following benefits:

•

enhancing investors’ understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

•

creating time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.

There are a few differences between the Company and the Operating Partnership, which are reflected in these condensed consolidated financial statements. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how we operate as an interrelated consolidated company. Digital Realty Trust, Inc.’s only material asset is its ownership of partnership interests of the Operating Partnership. As a result, Digital Realty Trust, Inc. does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain unsecured debt of the Operating Partnership and certain of its subsidiaries. Digital Realty Trust, Inc. itself does not hold any indebtedness but guarantees the unsecured debt of the Operating Partnership and certain of its subsidiaries, as disclosed in these notes.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

The Operating Partnership holds substantially all the assets of the Company and holds the ownership interests in the Company’s joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by Digital Realty Trust, Inc., which are generally contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units.

The presentation of noncontrolling interests in operating partnership, stockholders’ equity and partners’ capital are the main areas of difference between the condensed consolidated financial statements of Digital Realty Trust, Inc. and those of the Operating Partnership. The common limited partnership interests held by the limited partners in the Operating Partnership are presented as limited partners’ capital within partners’ capital in the Operating Partnership’s condensed consolidated financial statements and as noncontrolling interests in operating partnership within equity in Digital Realty Trust, Inc.’s condensed consolidated financial statements. The common and preferred partnership interests held by Digital Realty Trust, Inc. in the Operating Partnership are presented as general partner’s capital within partners’ capital in the Operating Partnership’s condensed consolidated financial statements and as preferred stock, common stock, additional paid-in capital and accumulated dividends in excess of earnings within stockholders’ equity in Digital Realty Trust, Inc.’s condensed consolidated financial statements. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity issued at the Digital Realty Trust, Inc. and the Operating Partnership levels.

To help investors understand the significant differences between the Company and the Operating Partnership, these consolidated financial statements present the following separate sections for each of the Company and the Operating Partnership:

•

condensed consolidated face financial statements; and

•

the following notes to the condensed consolidated financial statements:

•

Debt of the Company and Debt of the Operating Partnership;

•

Income per Share and Income per Unit; and

•

Equity and Accumulated Other Comprehensive Income, Net of the Company and Capital and Accumulated Other Comprehensive Income of the Operating Partnership.

In the sections that combine disclosure of Digital Realty Trust, Inc. and the Operating Partnership, these notes refer to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company operates the business through the Operating Partnership.

(b) Cash Equivalents

For the purpose of the condensed consolidated statements of cash flows, we consider short-term investments with original maturities of 90 days or less to be cash equivalents. As of June 30, 2014, cash equivalents consist of investments in money market instruments.

(c) Investment in Unconsolidated Joint Ventures

The Company’s investment in unconsolidated joint ventures is accounted for using the equity method, whereby the investment is increased for capital contributed and our share of the joint ventures’ net income and decreased by distributions we receive and our share of any losses of the joint ventures.

We amortize the difference between the cost of our investments in unconsolidated joint ventures and the book value of the underlying equity into equity in earnings from unconsolidated affiliates on a straight-line basis consistent with the lives of the underlying assets.

(d) Capitalization of Costs

Direct and indirect project costs that are clearly associated with the development of properties are capitalized as incurred. Project costs include all costs directly associated with the development of a property, including construction costs, interest, property taxes, insurance, legal fees and costs of personnel working on the project. Indirect costs that do not clearly relate to the projects under development are not capitalized and are charged to expense as incurred.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

Capitalization of costs begins when the activities necessary to get the development project ready for its intended use begins, which include costs incurred before the beginning of construction. Capitalization of costs ceases when the development project is substantially complete and ready for its intended use. Determining when a development project commences, and when it is substantially complete and ready for its intended use involves a degree of judgment. We generally consider a development project to be substantially complete and ready for its intended use upon receipt of a certificate of occupancy. If and when development of a property is suspended pursuant to a formal change in the planned use of the property, we will evaluate whether the accumulated costs exceed the estimated value of the project and write off the amount of any such excess accumulated costs. For a development project that is suspended for reasons other than a formal change in the planned use of such property, the accumulated project costs are evaluated for impairment consistent with our impairment policies for long-lived assets. Capitalized costs are allocated to the specific components of a project that are benefited.

During the three months ended June 30, 2014 and 2013, we capitalized interest of approximately $4.9 million and $6.6 million, respectively, and $10.2 million and $12.0 million during the six months ended June 30, 2014 and 2013, respectively. During the three months ended June 30, 2014 and 2013, we capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $12.5 million and $9.6 million, respectively, and $24.9 million and $19.7 million during the six months ended June 30, 2014 and 2013, respectively. Cash flows from capitalized leasing costs of $21.8 million and $21.0 million are included in improvements to and advances for investments in real estate in cash flows from investing activities in the condensed consolidated statements of cash flows for the six months ended June 30, 2014 and 2013, respectively.

(e) Share-Based Compensation

The Company measures all share-based compensation awards at fair value on the date they are granted to employees and directors, and recognizes compensation cost, net of forfeitures, over the requisite service period for awards with only a service condition. The estimated fair value of the long-term incentive units and Class D Units (discussed in note 13) granted by us is being amortized on a straight-line basis over the expected service period.

The fair value of share-based compensation awards that contain a market condition is measured using a lattice model and not adjusted based on actual achievement of the performance goals.

(f) Income Taxes

Digital Realty Trust, Inc. has elected to be treated as a real estate investment trust (a “REIT”) for federal income tax purposes. As a REIT, Digital Realty Trust, Inc. generally is not required to pay federal corporate income tax to the extent taxable income is currently distributed to its stockholders. If Digital Realty Trust, Inc. fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates.

The Company is subject to foreign, state and local income taxes in the jurisdictions in which it conducts business. The Company’s U.S. consolidated taxable REIT subsidiary is subject to both federal and state income taxes to the extent there is taxable income. Accordingly, the Company recognizes current and deferred income taxes for its taxable REIT subsidiaries, certain states and non-U.S. jurisdictions, as appropriate.

We assess our significant tax positions in accordance with U.S. GAAP for all open tax years and determine whether we have any material unrecognized liabilities from uncertain tax benefits. If a tax position is not considered “more-likely-than-not” to be sustained solely on its technical merits, no benefits of the tax position are to be recognized (for financial statement purposes). As of June 30, 2014 and December 31, 2013, we have no assets or liabilities for uncertain tax positions. We classify interest and penalties from significant uncertain tax positions as interest expense and operating expense, respectively, in our condensed consolidated income statements. For the three and six months ended June 30, 2014 and 2013, we had no such interest or penalties. The tax year 2010 and thereafter remain open to examination by the major taxing jurisdictions with which the Company files tax returns.

See Note 10 for further discussion on income taxes.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(g) Presentation of Transactional-based Taxes

We account for transactional-based taxes, such as value added tax, or VAT, for our international properties on a net basis.

(h) Fee Income

Occasionally, customers engage the company for certain services. The nature of these services historically involves property management, construction management, and assistance with financing. The proper revenue recognition of these services can be different, depending on whether the arrangements are service revenue or contractor type revenue.

Service revenues are typically recognized on an equal monthly basis based on the minimum fee to be earned. The monthly amounts could be adjusted depending on if certain performance milestones are met.

Fee income also includes management fees. These fees arise from contractual agreements with entities in which we have a noncontrolling interest. The management fees are recognized as earned under the respective agreements. Management and other fee income related to partially owned entities are recognized to the extent attributable to the unaffiliated interest.

Contractor type revenue for long-term contracts is recognized under the percentage-of-completion method of accounting. Revenues are determined by measuring the percentage of total costs incurred to date to estimated total costs for each construction management contract based on current estimates of costs to complete. Contract costs include all labor and benefits, materials, subcontracts, and an allocation of indirect costs related to contract performance. Indirect costs are allocated to projects based upon labor hours charged. Third party costs are included in construction management expense and their reimbursements are included in construction management revenue to the extent that the Company is the primary obligor for the third party costs. Otherwise, construction management revenue and expense is reflected net of third party costs. As long-term design-build projects extend over one or more years, revisions in cost and estimated earnings during the course of the work are reflected in the accounting period in which the facts which require the revision become known. At the time a loss on a design-build project becomes known, the entire amount of the estimated loss is recognized in the condensed consolidated financial statements. Change orders are recognized when they are approved by the client.

Costs and estimated earnings in excess of billings on uncompleted construction management projects are included in other assets in the condensed consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted construction management projects are included in accounts payable and other accrued liabilities in the condensed consolidated balance sheets. Customers are billed on a monthly basis at the end of each month, which can be in advance of work performed.

(i) Assets and Liabilities Measured at Fair Value

Fair value under U.S. GAAP is a market-based measurement, not an entity-specific measurement. Therefore, our fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair-value measurements, we use a fair-value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair-value measurement is based on inputs from different levels of the fair-value hierarchy, the lowest level input that is significant would be used to determine the fair-value measurement in its entirety. Our assessment of the significance of a particular input to the fair-value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(j) Transactions Expense

Transactions expense includes acquisition-related expenses and other business development expenses, which are expensed as incurred. Acquisition-related expenses include closing costs, broker commissions and other professional fees, including legal and accounting fees related to acquisitions and significant transactions.

(k) Management’s Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates made. On an on-going basis, we evaluate our estimates, including those related to the valuation of our real estate properties, contingent consideration, accounts receivable and deferred rent receivable, performance-based equity compensation plans, the completeness of accrued liabilities and Digital Realty Trust, Inc.’s qualification as a REIT. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could vary under different assumptions or conditions.

(l) Segment and Geographic Information

All of our properties generate similar revenues and expenses related to tenant rent and reimbursements and operating expenses. The delivery of our products is consistent across all properties and although services are provided to a wide range of customers, the types of real estate services provided to them are standardized throughout the portfolio. As such, the properties in our portfolio have similar economic characteristics and the nature of the products and services provided to our customers and the method to distribute such services are consistent throughout the portfolio. Consequently, our properties qualify for aggregation into one reporting segment.

Operating revenues from properties in the United States were $305.5 million and $276.9 million and outside the United States were $95.9 million and $86.6 million for the three months ended June 30, 2014 and 2013, respectively. Operating revenues from properties in the United States were $600.7 million and $550.9 million and outside the United States were $191.3 million and $171.0 million for the six months ended June 30, 2014 and 2013, respectively. We had long-lived assets located in the United States of $5.7 billion and $5.6 billion and outside the United States of $2.8 billion and $2.7 billion as of June 30, 2014 and December 31, 2013, respectively.

Operating revenues from properties located in the United Kingdom were $54.5 million and $48.6 million, or 13.6% and 13.4% of total operating revenues, for the three months ended June 30, 2014 and 2013, respectively. Operating revenues from properties located in the United Kingdom were $109.4 million and $95.9 million, or 13.8% and 13.3% of total operating revenues, for the six months ended June 30, 2014 and 2013, respectively. No other foreign country comprised more than 10% of total operating revenues for each of these periods. We had long-lived assets located in the United Kingdom of $1.8 billion and $1.8 billion, or 21.2% and 21.1% of total long-lived assets, as of June 30, 2014 and December 31, 2013, respectively. No other foreign country comprised more than 10% of total long-lived assets as of June 30, 2014 and December 31, 2013.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(m) Reclassifications

Certain reclassifications to prior year amounts have been made to conform to the current year presentation. During the three and six months ended June 30, 2013, ($0.4) million and $0.9 million were reclassified from rental property operating and maintenance expense to change in fair value of contingent consideration, respectively.

(n) Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components meets the criteria to be classified as held for sale or when the component or group of components is disposed of by sale or other than by sale. In addition, this ASU requires additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. As permitted by the standard, the Company has elected to early adopt the provisions of ASU 2014-08 as of January 1, 2014 and is applying the provisions prospectively.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , a comprehensive new revenue recognition standard that supersedes most all existing revenue recognition guidance. This standard’s core principle is that a company will recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. However, leasing contracts, representing the major source of the Company’s revenues, are not within the scope of the new standard and will continue to be accounted for under existing standards. This new standard is effective for the Company for annual and interim periods beginning on January 1, 2017 with early adoption prohibited. The Company has not yet determined the effects on the condensed consolidated financial statements and related notes resulting from the adoption of this new standard.

3. Investments in Real Estate

We acquired no real estate properties during the six months ended June 30, 2014.

On April 7, 2014, the Operating Partnership sold 6 Braham Street to the tenant pursuant to a sale of the ownership interests in the Operating Partnership’s wholly owned subsidiary that owned the building for £25.0 million (or approximately $41.5 million based on the exchange rate as of April 7, 2014). The transaction after costs and various tenant prepayments resulted in net proceeds of approximately £22.6 million (or approximately $37.5 million based on the exchange rate as of April 7, 2014) and a net gain of approximately $15.9 million. The transaction includes substantially all of the assets of 6 Braham Street and we expect no further cash flows following the sale date.

The property was identified as held for sale in March 2014. 6 Braham Street was not a significant component of our United Kingdom portfolio nor does the sale of 6 Braham represent a significant shift in our strategy.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

4. Investment in Unconsolidated Joint Ventures

As of June 30, 2014, our investment in unconsolidated joint ventures consists of effective 50% interests in joint ventures that own a data center property at 2001 Sixth Avenue in Seattle, Washington, a data center property at 2020 Fifth Avenue in Seattle, Washington and a data center property at 33 Chun Choi Street in Hong Kong, and a 20% interest in a joint venture, which owns ten data center properties, with an investment fund managed by Prudential Real Estate Investors (PREI ^® ). The following tables present summarized financial information for the joint ventures as of June 30, 2014 and December 31, 2013 and for the six months ended June 30, 2014 and 2013 (in thousands):


	As of June 30, 2014										Six Months Ended June 30, 2014
2014	Net Investment in Properties		Total Assets		Debt		Total Liabilities		Equity		Revenues		Property Operating Expense			Net Operating Income		Net Income
Total Unconsolidated Joint Ventures	$	632,896	$	751,515	$	360,240	$	462,084	$	289,431	$	46,188	$	(10,940	)	$	35,248	$	14,896

Our investment in and share of equity in earnings of unconsolidated joint ventures									$	92,619								$	6,058


	As of December 31, 2013										Six Months Ended June 30, 2013
2013	Net Investment in Properties		Total Assets		Debt		Total Liabilities		Equity		Revenues		Property Operating Expense			Net Operating Income		Net Income
Total Unconsolidated Joint Ventures	$	584,837	$	676,015	$	337,953	$	444,062	$	231,953	$	22,440	$	(6,107	)	$	16,333	$	9,357

Our investment in and share of equity in earnings of unconsolidated joint ventures									$	70,504								$	4,665

PREI ^® Joint Venture

On March 5, 2014, we contributed the 636 Pierce Street property, which we acquired in December 2013, to our unconsolidated joint venture with the PREI ^® fund that was formed in September 2013. The property was valued at approximately $40.4 million and subject to $26.1 million in debt, which the joint venture assumed. The PREI ^® fund contributed approximately $11.4 million in cash for their 80% share of the net asset value of $14.3 million. Subsequent to the closing, the joint venture refinanced the existing debt with $23.0 million drawn from the joint venture’s bank facility. Including the refinance costs, the PREI ^® fund contributed $17.5 million for the 636 Pierce Street property, bringing their contributed capital in the joint venture to $164.8 million.

The transaction produced a $1.9 million gain for the Company representing the difference between the $11.4 million of cash proceeds received by the Company for their 80% share of the net asset less the Company’s book value.

Differences between the Company’s investment in the joint venture and the amount of the underlying equity in net assets of the joint venture are due to basis differences resulting from the Company’s equity investment recorded at its historical basis versus the fair value of the Company’s contributed interest in the joint venture. Our proportionate share of the earnings or losses related to this unconsolidated joint venture is reflected as equity in earnings of unconsolidated joint ventures on the accompanying consolidated income statements.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

5. Acquired Intangible Assets and Liabilities

The following summarizes our acquired intangible assets (acquired in-place lease value and acquired above-market lease value) and intangible liabilities (acquired below-market lease value) as of June 30, 2014 and December 31, 2013.


	Balance as of
(Amounts in thousands)	June 30, 2014			December 31, 2013
Acquired in-place lease value:
Gross amount	$	718,319		$	725,458
Accumulated amortization		(450,935	)		(423,549	)

Net	$	267,384		$	301,909

Acquired above-market leases:
Gross amount	$	131,792		$	132,750
Accumulated amortization		(84,611	)		(80,486	)

Net	$	47,181		$	52,264

Acquired below-market leases:
Gross amount	$	289,475		$	291,638
Accumulated amortization		(171,043	)		(161,369	)

Net	$	118,432		$	130,269

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental revenues of $2.6 million and $3.0 million for the three months ended June 30, 2014 and 2013, respectively, and $5.3 million and $6.1 million for the six months ended June 30, 2014 and 2013, respectively. The expected average remaining lives for acquired below-market leases and acquired above-market leases is 6.4 years and 4.2 years, respectively, as of June 30, 2014. Estimated annual amortization of acquired below-market leases, net of acquired above-market leases, for each of the five succeeding years and thereafter, commencing July 1, 2014 is as follows:


(Amounts in thousands)
Remainder of 2014	$	4,635
2015		9,002
2016		7,484
2017		5,968
2018		4,348
Thereafter		39,814

Total	$	71,251

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

Amortization of acquired in-place lease value (a component of depreciation and amortization expense) was $18.4 million and $15.4 million for the three months ended June 30, 2014 and 2013, respectively, and $33.4 million and $30.3 million for the six months ended June 30, 2014 and 2013, respectively. The expected average amortization period for acquired in-place lease value is 6.3 years as of June 30, 2014. The weighted average remaining contractual life for acquired leases excluding renewals or extensions is 4.8 years as of June 30, 2014. Estimated annual amortization of acquired in-place lease value for each of the five succeeding years and thereafter, commencing July 1, 2014 is as follows:


(Amounts in thousands)
Remainder of 2014	$	21,771
2015		44,416
2016		41,471
2017		28,650
2018		26,253
Thereafter		104,823

Total	$	267,384

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

6. Debt of the Company

In this Note 6, the “Company” refers only to Digital Realty Trust, Inc. and not to any of its subsidiaries.

The Company itself does not have any indebtedness. All debt is held directly or indirectly by the Operating Partnership.

Guarantee of Debt

The Company guarantees the Operating Partnership’s obligations with respect to its 4.50% notes due 2015 (2015 Notes), 5.875% notes due 2020 (2020 Notes), 5.250% notes due 2021 (2021 Notes), 3.625% notes due 2022 (2022 Notes) and its unsecured senior notes sold to Prudential Investment Management, Inc. and certain of its affiliates pursuant to the Amended and Restated Note Purchase and Private Shelf Agreement, as amended, which we refer to as the Prudential Shelf Facility. The Company and the Operating Partnership guarantee the obligations of Digital Stout Holding, LLC, a wholly owned subsidiary of the Operating Partnership, with respect to its 4.750% notes due 2023 (2023 Notes) and 4.250% notes due 2025 (2025 Notes). The Company is also the guarantor of the Operating Partnership’s and its subsidiary borrowers’ obligations under the global revolving credit facility and unsecured term loan.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

7. Debt of the Operating Partnership

A summary of outstanding indebtedness of the Operating Partnership as of June 30, 2014 and December 31, 2013 is as follows (in thousands):


Indebtedness	Interest Rate at June 30, 2014	Maturity Date	Principal Outstanding June 30, 2014			Principal Outstanding December 31, 2013
Global revolving credit facility	Various (1)	Nov. 3, 2017	$	374,641	(2)	$	724,668	(2)

Unsecured term loan	Various (3)(8)	Apr. 16, 2017	$	1,034,830	(4)	$	1,020,984	(4)

Unsecured senior notes:
Prudential Shelf Facility:
Series C	9.680%	Jan. 6, 2016		25,000			25,000
Series D	4.570%	Jan. 20, 2015		50,000			50,000
Series E	5.730%	Jan. 20, 2017		50,000			50,000
Series F	4.500%	Feb. 3, 2015		17,000			17,000

Total Prudential Shelf Facility				142,000			142,000
Senior Notes:
4.50% notes due 2015	4.500%	Jul. 15, 2015		375,000			375,000
5.875% notes due 2020	5.875%	Feb. 1, 2020		500,000			500,000
5.25% notes due 2021	5.250%	Mar. 15, 2021		400,000			400,000
3.625% notes due 2022	3.625%	Oct. 1, 2022		300,000			300,000
4.75% notes due 2023	4.750%	Oct. 13, 2023		513,180	(9)		—
4.25% notes due 2025	4.250%	Jan. 17, 2025		684,240	(9)		662,280	(9)
Unamortized discounts				(17,352	)		(15,048	)

Total senior notes, net of discount				2,755,068			2,222,232

Total unsecured senior notes, net of discount				2,897,068			2,364,232

Exchangeable senior debentures:
5.50% exchangeable senior debentures due 2029	5.500%	Apr. 15, 2029 (5)		—			266,400

Total exchangeable senior debentures				—			266,400

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013


Indebtedness	Interest Rate at June 30, 2014	Maturity Date	Principal Outstanding June 30, 2014			Principal Outstanding December 31, 2013
Mortgage loans:
Secured Term Debt (6)(7)	5.65%	Nov. 11, 2014	$	131,377		$	132,966
200 Paul Avenue 1-4 (7)	5.74%	Oct. 8, 2015		69,698			70,713
2045 & 2055 Lafayette Street (7)	5.93%	Feb. 6, 2017		63,096			63,623
34551 Ardenwood Boulevard 1-4 (7)	5.95%	Nov. 11, 2016		51,747			52,152
1100 Space Park Drive (7)	5.89%	Dec. 11, 2016		51,707			52,115
600 West Seventh Street	5.80%	Mar. 15, 2016		48,699			49,548
150 South First Street (7)	6.30%	Feb. 6, 2017		49,709			50,097
2334 Lundy Place (7)	5.96%	Nov. 11, 2016		37,637			37,930
Cressex 1 (10)	5.68%	Oct. 16, 2014		29,268	(9)		28,583	(9)
636 Pierce Street	5.27%	Apr. 15, 2023		—	(11)		26,327
Manchester Technopark (10)	5.68%	Oct. 16, 2014		8,904	(9)		8,695	(9)
8025 North Interstate 35	4.09%	Mar. 6, 2016		6,187			6,314
731 East Trade Street	8.22%	Jul. 1, 2020		4,014			4,186
Unamortized net premiums				653			2,359

Total mortgage loans, net of premiums				552,696			585,608

Total indebtedness			$	4,859,235		$	4,961,892

(1)

The interest rate for borrowings under the global revolving credit facility equals the applicable index plus a margin of 110 basis points, which is based on the current credit ratings of our long-term debt. An annual facility fee of 20 basis points, which is based on the credit ratings of our long-term debt, is due and payable quarterly on the total commitment amount of the facility. Two six-month extensions are available, which we may exercise if certain conditions are met.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(2)	Balances as of June 30, 2014 and December 31, 2013 are as follows (balances, in thousands):


Denomination of Draw	Balance as of June 30, 2014			Weighted-average interest rate			Balance as of December 31, 2013			Weighted-average interest rate
*Floating Rate Borrowing (a)*
U.S. dollar ($)	$	85,000			1.25	%	$	466,000			1.27	%
Euro (€)		73,937	(c)		1.21	%		78,335	(d)		1.33	%
Australian dollar (AUD)		77,351	(c)		3.76	%		67,212	(d)		3.70	%
Hong Kong dollar (HKD)		76,990	(c)		1.31	%		57,390	(d)		1.31	%
Japanese yen (JPY)		14,507	(c)		1.20	%		12,858	(d)		1.21	%
Canadian dollar (CAD)		46,856	(c)		2.34	%		14,873	(d)		2.32	%


Total	$	374,641			1.91	%	$	696,668			1.53	%


*Base Rate Borrowing (b)*

U.S. dollar ($)	$	—			—		$	28,000			3.35	%

Total borrowings	$	374,641			1.91	%	$	724,668			1.60	%

(a)

The interest rates for floating rate borrowings under the global revolving credit facility equal the applicable index plus a margin of 110 basis points, which is based on the credit ratings of our long-term debt.

(b)

The interest rates for base rate borrowings under the global revolving credit facility equal the U.S. Prime Rate plus a margin of 10 basis points, which is based on the credit ratings of our long-term debt.

(c)

Based on exchange rates of $1.37 to €1.00, $0.94 to 1.00 AUD, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY and $0.94 to 1.00 CAD, respectively, as of June 30, 2014.

(d)

Based on exchange rates of $1.37 to €1.00, $0.89 to 1.00 AUD, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY and $0.94 to 1.00 CAD, respectively, as of December 31, 2013.

(3)	Interest rates are based on our current senior unsecured debt ratings and are 120 basis points over the applicable index for floating rate advances. Two six-month extensions are available, which we may exercise if certain conditions are met.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(4)	Balances as of June 30, 2014 and December 31, 2013 are as follows (balances, in thousands):


Denomination of Draw	Balance as of June 30, 2014			Weighted-average interest rate			Balance as of December 31, 2013			Weighted-average interest rate
U.S. dollar ($)	$	410,905			1.35	% (b)	$	410,905			1.37	% (d)
Singapore dollar (SGD)		183,299	(a)		1.41	% (b)		180,918	(c)		1.40	% (d)
British pound sterling (£)		206,854	(a)		1.73	%		200,216	(c)		1.72	%
Euro (€)		136,235	(a)		1.38	%		136,743	(c)		1.43	%
Australian dollar (AUD)		97,537	(a)		3.90	%		92,202	(c)		3.78	%

Total	$	1,034,830			1.68	% (b)	$	1,020,984			1.67	% (d)

(a)

Based on exchange rates of $0.80 to 1.00 SGD, $1.71 to £1.00, $1.37 to €1.00 and $0.94 to 1.00 AUD, respectively, as of June 30, 2014.

(b)

As of June 30, 2014, the weighted-average interest rate reflecting interest rate swaps was 1.92% (U.S. dollar), 2.00% (Singapore dollar) and 2.01% (Total). See Note 14 for further discussion on interest rate swaps.

(c)

Based on exchange rates of $0.79 to 1.00 SGD, $1.66 to £1.00, $1.37 to €1.00 and $0.89 to 1.00 AUD, respectively, as of December 31, 2013.

(d)

As of December 31, 2013, the weighted-average interest rate reflecting interest rate swaps was 1.92% (U.S. dollar), 2.00% (Singapore dollar) and 2.00% (Total). See Note 14 for further discussion on interest rate swaps.

(5)	The 2029 Debentures were redeemed in April 2014.

(6)	This amount represents six mortgage loans secured by our interests in 36 NE 2nd Street, 3300 East Birch Street, 100 & 200 Quannapowitt Parkway, 300 Boulevard East, 4849 Alpha Road, and 11830 Webb Chapel Road. Each of these loans is cross-collateralized by the six properties.

(7)	The respective borrower’s assets and credit are not available to satisfy the debts and other obligations of affiliates or any other person.

(8)	We have entered into interest rate swap agreements as a cash flow hedge for interest generated by the U.S. dollar and Singapore dollar tranches of the unsecured term loan. See note 14 for further information.

(9)	Based on exchange rate of $1.71 to £1.00 as of June 30, 2014 and $1.66 to £1.00 as of December 31, 2013.

(10)	These loans are also secured by a £7.8 million letter of credit. These loans are cross-collateralized by the two properties.

(11)

On March 5, 2014, we contributed this property to our unconsolidated joint venture with an investment fund managed by Prudential Real Estate Investors which was formed in September 2013. Also on March 5, 2014, the joint venture assumed the debt and repaid in full the outstanding balance of $26.1 million on the mortgage loan.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

Global Revolving Credit Facility

On August 15, 2013, the Operating Partnership refinanced its global revolving credit facility, increasing its total borrowing capacity to $2.0 billion from $1.8 billion. The global revolving credit facility has an accordion feature that would enable us to increase the borrowing capacity of the credit facility to $2.55 billion, subject to the receipt of lender commitments and other conditions precedent. The refinanced facility matures on November 3, 2017, with two six-month extension options. The interest rate for borrowings under the expanded facility equals the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 110 basis points. An annual facility fee on the total commitment amount of the facility, based on the credit ratings of our long-term debt, currently 20 basis points, is payable quarterly. Funds may be drawn in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as Euro, British pound sterling, Swiss franc, Japanese yen and Mexican peso denominations. As of June 30, 2014, interest rates are based on 1-month LIBOR, 1-month EURIBOR, 1-month BBR, 1-month HIBOR, 1-month JPY LIBOR and 1-month CDOR plus a margin of 1.10%. We have used and intend to use available borrowings under the global revolving credit facility to acquire additional properties, to 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. As of June 30, 2014, we have capitalized approximately $18.0 million of financing costs related to the global revolving credit facility. As of June 30, 2014, approximately $374.6 million was drawn under the global revolving credit facility and $24.8 million of letters of credit were issued.

The global revolving credit facility contains various restrictive covenants, including limitations on our ability to incur additional indebtedness, make certain investments or merge with another company, and requirements to maintain financial coverage ratios, including with respect to unencumbered assets. In addition, the global revolving credit facility restricts Digital Realty Trust, Inc. from making distributions to its stockholders, or redeeming or otherwise repurchasing shares of its capital stock, after the occurrence and during the continuance of an event of default, except in limited circumstances including as necessary to enable Digital Realty Trust, Inc. to maintain its qualification as a REIT and to minimize the payment of income or excise tax. As of June 30, 2014, we were in compliance with all of such covenants.

Unsecured Term Loan

On August 15, 2013, we refinanced the senior unsecured multi-currency term loan facility, increasing its total borrowing capacity to $1.0 billion from $750.0 million, and pursuant to the accordion feature total commitments can be increased up to $1.1 billion, subject to the receipt of lender commitments and other conditions precedent. The facility matures on April 16, 2017, with two six-month extension options. Interest rates are based on our senior unsecured debt ratings and are currently 120 basis points over the applicable index for floating rate advances. Funds may be drawn in U.S, Singapore and Australian dollars, as well as Euro and British pound sterling denominations with the option to add Hong Kong dollars and Japanese yen upon an accordion exercise. Based on exchange rates in effect at June 30, 2014, the balance outstanding is approximately $1,034.8 million. We have used borrowings under the term loan for acquisitions, repayment of indebtedness, development, working capital and general corporate purposes. The covenants under this loan are consistent with our global revolving credit facility and, as of June 30, 2014, we were in compliance with all of such covenants. As of June 30, 2014, we have capitalized approximately $8.4 million of financing costs related to the unsecured term loan.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

Exchangeable Senior Debentures

5.50% Exchangeable Senior Debentures due 2029

On April 20, 2009, the Operating Partnership issued $266.4 million of its 5.50% exchangeable senior debentures due April 15, 2029 (the 2029 Debentures). Costs incurred to issue the 2029 Debentures were approximately $7.8 million. These costs were amortized over a period of five years, which represented the estimated term of the 2029 Debentures, and are included in deferred financing costs, net in the condensed consolidated balance sheet. The 2029 Debentures were general unsecured senior obligations of the Operating Partnership, ranked equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and were fully and unconditionally guaranteed by Digital Realty Trust, Inc.

Interest was payable on October 15 and April 15 of each year beginning October 15, 2009 until the maturity date of April 15, 2029. The 2029 Debentures bore interest at 5.50% per annum and were exchangeable for shares of Digital Realty Trust, Inc. common stock at an exchange rate that was initially 23.2558 shares per $1,000 principal amount of 2029 Debentures. The exchange rate on the 2029 Debentures was subject to adjustment for certain events, including, but not limited to, certain dividends on Digital Realty Trust, Inc. common stock in excess of $0.33 per share per quarter (the “reference dividend”). Effective December 11, 2013, the exchange rate had been adjusted to 25.5490 shares per $1,000 principal amount of 2029 Debentures as a result of the aggregate dividends in excess of the reference dividend that Digital Realty Trust, Inc. declared and paid on its common stock beginning with the quarter ended September 30, 2013 and through the quarter ended December 31, 2013.

On March 17, 2014, we commenced an offer to repurchase, at the option of each holder, any and all of the outstanding 2029 Debentures at a price equal to 100% of the principal amount, as required by the terms of the indenture governing the 2029 Debentures. The repurchase offer expired on April 11, 2014. No 2029 Debentures were repurchased pursuant to this offer. On March 17, 2014, we also distributed a Notice of Redemption to the holders of the 2029 Debentures that the Operating Partnership intended to redeem all of the outstanding 2029 Debentures, pursuant to its option under the indenture governing the 2029 Debentures, on April 18, 2014, at a price equal to 100% of the principal amount, plus accrued and unpaid interest thereon up to the redemption date. In connection with the redemption, holders of the 2029 Debentures had the right to exchange their 2029 Debentures on or prior to April 16, 2014. The 2029 Debentures not surrendered pursuant to the repurchase offer on or prior to April 11, 2014, or for exchange on or prior to April 16, 2014, were redeemed on April 18, 2014.

In connection with the redemption, at the request of the holders that exercised their exchange right pursuant to the terms of the 2029 Debentures, we issued 6,734,938 restricted shares of Digital Realty Trust, Inc. common stock in exchange for approximately $261.2 million in aggregate principal amount of the 2029 Debentures based on the then-applicable exchange rate of 25.7880 shares per $1,000 principal amount of 2029 Debentures. On April 18, 2014, the Operating Partnership redeemed for cash approximately $5.2 million in aggregate principal amount of the 2029 Debentures pursuant to its option under the indenture governing the 2029 Debentures at a price equal to 100% of the principal amount plus accrued and unpaid interest thereon up to the redemption date.

On July 11, 2014, we issued 134,974 restricted shares of Digital Realty Trust, Inc. common stock in exchange for approximately $5.2 million in aggregate principal amount of the 2029 Debentures to certain previous holders of the 2029 Debentures. The holders had the right to exchange the 2029 Debentures for shares of Digital Realty Trust, Inc. common stock, but inadvertently failed to exercise such rights. As a result, the 2029 Debentures were redeemed by the Operating Partnership for cash. We agreed to issue the shares of the common stock to the holders in exchange for the redemption payment that they received in the original redemption, effectively putting such holders in the same place as if they had originally exercised their rights to exchange their 2029 Debentures for the shares of Digital Realty Trust, Inc. common stock.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

Senior Notes

4.750% Notes due 2023

On April 1, 2014, Digital Stout Holding, LLC, a wholly owned subsidiary of Digital Realty Trust, L.P., issued £300.0 million (or approximately $498.9 million based on the April 1, 2014 exchange rate of £1.00 to $1.66) aggregate principal amount of its 4.750% Guaranteed Notes due 2023, or the 2023 Notes. The 2023 Notes are senior unsecured obligations of Digital Stout Holding, LLC and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and Digital Realty Trust, L.P. Interest on the 2023 Notes is payable semiannually in arrears at a rate of 4.750% per annum. The 2023 Notes mature on October 13, 2023. The net proceeds from the offering after deducting the original issue discount of approximately $3.0 million and underwriting commissions and estimated expenses of approximately $5.0 million was approximately $490.9 million. We used the net proceeds from this offering to temporarily repay borrowings under our global revolving credit facility. The 2023 Notes have been reflected net of discount in the condensed consolidated balance sheet. The indenture governing the 2023 Notes contains 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, and also requires us to maintain total unencumbered assets of not less than 150% of the aggregate principal amount of the unsecured debt. At June 30, 2014, we were in compliance with these financial covenants.

The table below summarizes our debt maturities and principal payments as of June 30, 2014 (in thousands):


	Global Revolving Credit Facility ⁽¹⁾		Unsecured Term Loan ⁽¹⁾		Prudential Shelf Facility		Senior Notes			Mortgage Loans ⁽²⁾		Total Debt
Remainder of 2014	$	—	$	—	$	—	$	—		$	173,806	$	173,806
2015		—		—		67,000		375,000			75,493		517,493
2016		—		—		25,000		—			191,979		216,979
2017		374,641		1,034,830		50,000		—			108,395		1,567,866
2018		—		—		—		—			593		593
Thereafter		—		—		—		2,397,420			1,777		2,399,197

Subtotal	$	374,641	$	1,034,830	$	142,000	$	2,772,420		$	552,043	$	4,875,934
Unamortized discount		—		—		—		(17,352	)		—		(17,352	)
Unamortized premium		—		—		—		—			653		653

Total	$	374,641	$	1,034,830	$	142,000	$	2,755,068		$	552,696	$	4,859,235

(1)

Subject to two six-month extension options exercisable by us. The bank group is obligated to grant the extension options provided we give proper notice, we make certain representations and warranties and no default exists under the global revolving credit facility and the unsecured term loan, as applicable.

(2)

Our mortgage loans are generally non-recourse to us, subject to carve-outs for specified actions by us or specified undisclosed environmental liabilities. As of June 30, 2014, we provided partial letter of credit support with respect to approximately $38.2 million of the outstanding mortgage indebtedness (based on exchange rates as of June 30, 2014).

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

8. Income per Share

The following is a summary of basic and diluted income per share (in thousands, except share and per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Net income available to common stockholders	$	41,510	$	47,077	$	75,696	$	89,734

Weighted average shares outstanding—basic		133,802,622		128,419,745		131,183,857		127,437,970
Potentially dilutive common shares:
Stock options		45,278		68,146		43,023		69,304
Unvested incentive units		74,345		135,185		65,847		120,222
2014 market performance-based awards		55,640		—		27,820		—

Weighted average shares outstanding—diluted		133,977,885		128,623,076		131,320,547		127,627,496

Income per share:
Basic	$	0.31	$	0.37	$	0.58	$	0.70

Diluted	$	0.31	$	0.37	$	0.58	$	0.70

We have excluded the following potentially dilutive securities in the calculations above as they would be antidilutive or not dilutive:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.		2,812,716		2,556,095		2,710,262		2,499,738
Potentially dilutive 2029 Debentures		1,121,910		6,609,993		3,948,379		6,600,286
Potentially dilutive Series D Cumulative Convertible Preferred Stock		—		—		—		949,299
Potentially dilutive Series E Cumulative Redeemable Preferred Stock		5,060,744		4,929,167		5,367,507		4,655,435
Potentially dilutive Series F Cumulative Redeemable Preferred Stock		3,209,512		3,126,066		3,404,060		2,952,466
Potentially dilutive Series G Cumulative Redeemable Preferred Stock		4,388,483		3,893,598		4,654,496		1,957,555
Potentially dilutive Series H Cumulative Redeemable Preferred Stock		6,437,332		—		3,449,841		—

		23,030,697		21,114,919		23,534,545		19,614,779

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

9. Income per Unit

The following is a summary of basic and diluted income per unit (in thousands, except unit and per unit amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Net income available to common unitholders	$	42,383	$	48,013	$	77,262	$	91,494

Weighted average units outstanding—basic		136,615,338		130,973,952		133,894,119		129,936,759
Potentially dilutive common units:
Stock options		45,278		68,146		43,023		69,304
Unvested incentive units		74,345		135,185		65,847		120,222
2014 market performance-based awards		55,640		—		27,820		—

Weighted average units outstanding—diluted		136,790,601		131,177,283		134,030,809		130,126,285

Income per unit:
Basic	$	0.31	$	0.37	$	0.58	$	0.70

Diluted	$	0.31	$	0.37	$	0.58	$	0.70

We have excluded the following potentially dilutive securities in the calculations above as they would be antidilutive or not dilutive:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Potentially dilutive 2029 Debentures		1,121,910		6,609,993		3,948,379		6,600,286
Potentially dilutive Series D Cumulative Convertible Preferred Units		—		—		—		949,299
Potentially dilutive Series E Cumulative Redeemable Preferred Units		5,060,744		4,929,167		5,367,507		4,655,435
Potentially dilutive Series F Cumulative Redeemable Preferred Units		3,209,512		3,126,066		3,404,060		2,952,466
Potentially dilutive Series G Cumulative Redeemable Preferred Units		4,388,483		3,893,598		4,654,496		1,957,555
Potentially dilutive Series H Cumulative Redeemable Preferred Units		6,437,332		—		3,449,841		—

		20,217,981		18,558,824		20,824,283		17,115,041

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

10. Income Taxes

Digital Realty Trust, Inc. has elected to be treated and believes that it has been organized and has operated in a manner that has enabled it to qualify as a REIT for federal income tax purposes. As a REIT, Digital Realty Trust, Inc. is generally not subject to corporate level federal income taxes on earnings distributed currently to its stockholders. Since inception, Digital Realty Trust, Inc. has distributed at least 100% of its taxable income annually and intends to do so for the tax year ending December 31, 2014. As such, no provision for federal income taxes has been included in the accompanying condensed consolidated financial statements for the three and six months ended June 30, 2014 and 2013.

The Operating Partnership is a partnership and is not required to pay federal income tax. Instead, taxable income is allocated to its partners, who include such amounts on their federal income tax returns. As such, no provision for federal income taxes has been included in the Operating Partnership’s accompanying condensed consolidated financial statements.

We have elected taxable REIT subsidiary (“TRS”) status for some of our consolidated subsidiaries. In general, a TRS may provide services that would otherwise be considered impermissible for REITs to provide and may hold assets that REITs cannot hold directly. Income taxes for TRS entities were accrued, as necessary, for the three and six months ended June 30, 2014 and 2013.

For our TRS entities and foreign subsidiaries that are subject to U.S. federal, state and foreign income taxes, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if we believe it is more likely than not that the deferred tax asset may not be realized, based on available evidence at the time the determination is made. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in income. Deferred tax assets (net of valuation allowance) and liabilities for our TRS entities and foreign subsidiaries were accrued, as necessary, for the three and six months ended June 30, 2014 and 2013. As of June 30, 2014, we had deferred tax liabilities, net of deferred tax assets, of approximately $151.5 million primarily related to our foreign properties. The majority of our net deferred tax liability relates to differences between tax basis and book basis of the assets acquired in the Sentrum Portfolio acquisition during 2012.

11. Equity and Accumulated Other Comprehensive Income, Net

(a) Equity Distribution Agreements

Digital Realty Trust, Inc. entered into equity distribution agreements in June 2011, which we refer to as the 2011 Equity Distribution Agreements, with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC, or the Agents, under which it can issue and sell shares of its common stock having an aggregate offering price of up to $400.0 million from time to time through, at its discretion, any of the Agents as its sales agents. The sales of common stock made under the 2011 Equity Distribution Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. To date, Digital Realty Trust, Inc. has generated net proceeds of approximately $342.7 million from the issuance of approximately 5.7 million common shares under the 2011 Equity Distribution Agreements at an average price of $60.35 per share after payment of approximately $3.5 million of commissions to the sales agents and before offering expenses. No sales were made under the program during the six months ended June 30, 2014 and 2013. As of June 30, 2014, shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

(b) Redeemable Preferred Stock

7.375% Series H Cumulative Redeemable Preferred Stock

On March 26, 2014, Digital Realty Trust, Inc. issued 12,000,000 shares of its 7.375% series H cumulative redeemable preferred stock, or the series H preferred stock, for net proceeds of approximately $289.3 million. In addition, on April 7, 2014, Digital Realty Trust, Inc. issued an additional 600,000 shares of series H preferred stock pursuant to a partial exercise of the underwriters’ over-allotment option. Also, on April 7, 2014, Digital Realty Trust, Inc. re-opened and issued an additional 2,000,000 shares of series H preferred

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

stock. Pursuant to these issuances, Digital Realty Trust, Inc. issued a total of 14,600,000 shares of its series H preferred stock, for net proceeds of approximately $353.4 million. Dividends are cumulative on the series H preferred stock from the date of original issuance in the amount of $1.84375 per share each year, which is equivalent to 7.375% of the $25.00 liquidation preference per share. Dividends on the series H preferred stock are payable quarterly in arrears. The first dividend payable on the series H preferred stock on June 30, 2014 was a pro rata dividend from and including the original issue date to and including June 30, 2014 in the amount of $0.48655 per share. The series H 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 H preferred stock will rank senior to Digital Realty Trust, Inc. common stock and rank on parity with Digital Realty Trust, Inc.’s series E cumulative redeemable preferred stock, series F cumulative redeemable preferred stock and series G cumulative redeemable preferred stock with respect to the payment of distributions and other amounts. Digital Realty Trust, Inc. is not allowed to redeem the series H preferred stock before March 26, 2019, except in limited circumstances to preserve its status as a REIT. On or after March 26, 2019, Digital Realty Trust, Inc. may, at its option, redeem the series H 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 H preferred stock up to but excluding the redemption date. Holders of the series H preferred stock generally have no voting rights except for limited voting rights if Digital Realty Trust, Inc. fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. Upon the occurrence of specified changes of control, as a result of which neither Digital Realty Trust, Inc.’s common stock nor the common securities of the acquiring or surviving entity (or American Depositary Receipts representing such securities) is listed on the New York Stock Exchange, the NYSE MKT, LLC or the NASDAQ Stock Market or listed or quoted on a successor exchange or quotation system, each holder of series H preferred stock will have the right (unless, prior to the change of control conversion date specified in the Articles Supplementary governing the series H preferred stock, Digital Realty Trust, Inc. has provided or provides notice of its election to redeem the series H preferred stock) to convert some or all of the series H preferred stock held by it into a number of shares of Digital Realty Trust, Inc.’s common stock per share of series H preferred stock to be converted equal to the lesser of:

•

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

•

0.9632, or the share cap, subject to certain adjustments;

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

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(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 interests in the Operating Partnership as of June 30, 2014 and December 31, 2013:


	June 30, 2014					December 31, 2013
	Number of units		Percentage of total			Number of units		Percentage of total
Digital Realty Trust, Inc.		135,370,016		97.7	%		128,455,350		97.7	%
Noncontrolling interests consist of:
Common units held by third parties		1,481,814		1.1			1,491,814		1.2
Incentive units held by employees and directors (see note 13)		1,646,566		1.2			1,475,207		1.1

		138,498,396		100.0	%		131,422,371		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 $164.1 million and $124.1 million based on the closing market price of Digital Realty Trust, Inc. common stock on June 30, 2014 and December 31, 2013, respectively.

The following table shows activity for the noncontrolling interests in the Operating Partnership for the six months ended June 30, 2014:


	Common Units			Incentive Units			Total
As of December 31, 2013		1,491,814			1,475,207			2,967,021

Redemption of common units for shares of Digital Realty Trust, Inc. common stock (1)		(10,000	)		—			(10,000	)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock (1)		—			(4,941	)		(4,941	)
Cancellation of incentive units held by employees and directors		—			(18,773	)		(18,773	)
Grant of incentive units to employees and directors		—			195,073			195,073

As of June 30, 2014		1,481,814			1,646,566			3,128,380

(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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(d) Dividends

We have declared and paid the following dividends on our common and preferred stock for the six months ended June 30, 2014 (in thousands, except per share data):


Date dividend declared	Dividend payment date	Series E Preferred Stock		Series F Preferred Stock		Series G Preferred Stock		Series H Preferred Stock			Common Stock
February 11, 2014	March 31, 2014	$	5,031	$	3,023	$	3,672	$	—		$	106,743
April 29, 2014	June 30, 2014		5,031		3,023		3,672		7,104	⁽¹⁾		112,357

		$	10,062	$	6,046	$	7,344	$	7,104		$	219,100

Annual rate of dividend per share		$	1.750	$	1.656	$	1.469	$	1.844		$	3.320

(1)	Represents a pro rata dividend from and including the original issue date (March 26, 2014) to and including June 30, 2014.

Distributions out of Digital Realty Trust, Inc.’s current or accumulated earnings and profits are generally classified as dividends whereas distributions in excess of its current and accumulated earnings and profits, to the extent of a stockholder’s U.S. federal income tax basis in Digital Realty Trust, Inc.’s stock, are generally classified as a return of capital. Distributions in excess of a stockholder’s U.S. federal income tax basis in Digital Realty Trust, Inc.’s stock are generally characterized as capital gain. Cash provided by operating activities has generally been sufficient to fund all distributions; however, in the future we may also need to utilize borrowings under the global revolving credit facility to fund all or a portion of distributions.

(e) Accumulated Other Comprehensive Income, Net

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


	Foreign currency translation adjustments		Cash flow hedge adjustments			Accumulated other comprehensive income, net
Balance as of December 31, 2013	$	11,745	$	(1,054	)	$	10,691
Net current period change		8,563		(5,957	)		2,606
Reclassification to interest expense from interest rate swaps		—		1,665			1,665

Balance as of June 30, 2014	$	20,308	$	(5,346	)	$	14,962

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

12. Capital and Accumulated Other Comprehensive Income

(a) Redeemable Preferred Units

7.375% Series H Cumulative Redeemable Preferred Units

On March 26, 2014 and April 7, 2014, the Operating Partnership issued in the aggregate a total of 14,600,000 of its 7.375% series H cumulative redeemable preferred units, or series H preferred units, to Digital Realty Trust, Inc. (the General Partner) in conjunction with the General Partner’s issuance of an equivalent number of shares of its 7.375% series H cumulative redeemable preferred stock, or the series H preferred stock. Distributions are cumulative on the series H preferred units from the date of original issuance in the amount of $1.84375 per unit each year, which is equivalent to 7.375% of the $25.00 liquidation preference per unit. Distributions on the series H preferred units are payable quarterly in arrears. The first distribution payable on the series H preferred units on June 30, 2014 will be a pro rata distribution from and including the original issue date to and including June 30, 2014 in the amount of $0.48655 per unit. The series H preferred units do not have a stated maturity date and are not subject to any sinking fund. The Operating Partnership is required to redeem the series H preferred units in the event that the General Partner redeems the series H preferred stock. The General Partner is not allowed to redeem the series H preferred stock prior to March 26, 2019 except in limited circumstances to preserve the General Partner’s status as a REIT. On or after March 26, 2019, the General Partner may, at its option, redeem the series H 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 H preferred stock up to but excluding the redemption date. Upon liquidation, dissolution or winding up, the series H preferred units will rank senior to the Operating Partnership’s common units with respect to the payment of distributions and other amounts and rank on parity with the Operating Partnership’s series E cumulative redeemable preferred units, series F cumulative redeemable preferred units and series G cumulative redeemable preferred units. Except in connection with specified change of control transactions of the General Partner, the series H preferred units are not convertible into or exchangeable for any other property or securities of the Operating Partnership.

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

Except for special allocations to holders of profits interest units described below in note 13(a) under the heading “Incentive Plan-Long-Term Incentive Units,” the Operating Partnership’s net income will generally be allocated to the General Partner to the extent of the accrued preferred return on its preferred units, and then to the General Partner and the Operating Partnership’s limited partners in accordance with the respective percentage interests in the common units issued by the Operating Partnership. Net loss will generally be allocated to the General Partner and the Operating Partnership’s limited partners in accordance with the respective common percentage interests in the Operating Partnership until the limited partner’s capital is reduced to zero and any remaining net loss would be allocated to the General Partner. However, in some cases, losses may be disproportionately allocated to partners who have guaranteed our debt. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Code, and the associated Treasury Regulations.

(c) Partnership Units

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

The redemption value of the limited partners’ common units and the vested incentive units was approximately $164.1 million and $124.1 million based on the closing market price of Digital Realty Trust, Inc.’s common stock on June 30, 2014 and December 31, 2013, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(d) Distributions

All distributions on the Operating Partnership’s units are at the discretion of Digital Realty Trust, Inc.’s board of directors. The Operating Partnership has declared and paid the following distributions on its common and preferred units for the six months ended June 30, 2014 (in thousands, except for per unit data):


Date distribution declared	Distribution payment date	Series E Preferred Units		Series F Preferred Units		Series G Preferred Units		Series H Preferred Units			Common Units
February 11, 2014	March 31, 2014	$	5,031	$	3,023	$	3,672	$	—		$	109,378
April 29, 2014	June 30, 2014	$	5,031	$	3,023	$	3,672	$	7,104	⁽¹⁾	$	115,008

		$	10,062	$	6,046	$	7,344	$	7,104		$	224,386

Annual rate of distribution per unit		$	1.750	$	1.656	$	1.469	$	1.844		$	3.320

(1)	Represents a pro rata distribution from and including the original issue date (March 26, 2014) to and including June 30, 2014.

(e) Accumulated Other Comprehensive Income

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


	Foreign currency translation adjustments		Cash flow hedge adjustments			Accumulated other comprehensive income
Balance as of December 31, 2013	$	10,235	$	(1,778	)	$	8,457
Net current period change		8,740		(6,082	)		2,658
Reclassification to interest expense from interest rate swaps		—		1,700			1,700

Balance as of June 30, 2014	$	18,975	$	(6,160	)	$	12,815

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

13. Incentive Plan

Our Amended and Restated 2004 Incentive Award Plan (as defined below) previously provided for the grant of incentive awards to employees, directors and consultants. Awards issuable under the Amended and Restated 2004 Incentive Award Plan included stock options, restricted stock, dividend equivalents, stock appreciation rights, long-term incentive units, cash performance bonuses and other incentive awards. Only employees were eligible to receive incentive stock options under the Amended and Restated 2004 Incentive Award Plan. Initially, we had reserved a total of 4,474,102 shares of common stock for issuance pursuant to the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan (the 2004 Incentive Award Plan), subject to certain adjustments set forth in the 2004 Incentive Award Plan. On May 2, 2007, Digital Realty Trust, Inc.’s stockholders approved the First Amended and Restated Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan (as amended, the Amended and Restated 2004 Incentive Award Plan). The Amended and Restated 2004 Incentive Award Plan increased the aggregate number of shares of stock which could have been issued or transferred under the plan by 5,000,000 shares to a total of 9,474,102 shares, and provided that the maximum number of shares of stock with respect to awards granted to any one participant during a calendar year was 1,500,000 shares and the maximum amount that could have been paid in cash during any calendar year with respect to any performance-based award not denominated in stock or otherwise for which the foregoing limitation would not be an effective limitation for purposes of Section 162(m) of the Code was $10.0 million.

On April 28, 2014, Digital Realty Trust, Inc. held its 2014 Annual Meeting of Stockholders, or the 2014 Annual Meeting, at which the Company’s stockholders approved the Digital Realty Trust, Inc., Digital Services, Inc., and Digital Realty Trust, L.P. 2014 Incentive Award Plan, or the 2014 Incentive Award Plan, which had been previously adopted by the Board of Directors and recommended to the stockholders for approval by the Company’s Board of Directors. The 2014 Incentive Award Plan became effective and replaced the Amended and Restated 2004 Incentive Award Plan as of the date of such stockholder approval. The material features of the 2014 Incentive Award Plan are described in our definitive Proxy Statement filed on March 19, 2014 in connection with the 2014 Annual Meeting, which description is incorporated herein by reference.

As of June 30, 2014, 5,332,996 shares of common stock or awards convertible into or exchangeable for common stock remained available for future issuance under the 2014 Incentive Award Plan. Each long-term incentive unit and Class D Unit issued under the 2014 Incentive Award Plan counts as one share of common stock for purposes of calculating the limit on shares that may be issued under the 2014 Incentive Award Plan and the individual award limits set forth therein.

(a) Long-Term Incentive Units

Long-term incentive units, which are also referred to as profits interest units, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. Long-term incentive units, whether vested or not, will receive the same quarterly per unit distributions as Operating Partnership common units, which equal per share distributions on Digital Realty Trust, Inc. common stock. Initially, long-term incentive units do not have full parity with common units with respect to liquidating distributions. If such parity is reached, vested long-term incentive units may be converted into an equal number of common units of the Operating Partnership at any time, and thereafter enjoy all the rights of common units of the Operating Partnership, including redemption rights. For a discussion of how long-term incentive units reach parity with common units, see note 13(a) to our consolidated financial statements for the fiscal year ended December 31, 2013, included in our Annual Report on 10-K, as amended, for the year ended December 31, 2013.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

Below is a summary of our long-term incentive unit activity for the six months ended June 30, 2014.


Unvested Long-term Incentive Units	Units			Weighted-Average Grant Date Fair Value
Unvested, beginning of period		440,951		$	62.42
Granted		195,073			52.19
Vested		(302,836	)		58.85
Cancelled or expired		(18,773	)		65.21

Unvested, end of period		314,415			59.34

During the six months ended June 30, 2013, certain employees were granted an aggregate of 95,316 long-term incentive units, which, in addition to a service condition, were subject to a performance condition that impacted the number of units which ultimately vested. The performance condition was based upon our achievement of the 2013 Core Funds From Operations, or CFFO, per share targets. Based on our 2013 CFFO per diluted share and unit, 75,105 of the 2013 long-term incentive units, net of forfeitures satisfied the performance condition. The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock, are being expensed on a straight-line basis for service awards over four years, the current vesting period of the long-term incentive units. We expense the fair value of awards that contain a performance condition using an accelerated method with each vesting tranche valued as a separate award.

The expense recorded for the three months ended June 30, 2014 and 2013 related to long-term incentive units was approximately $2.0 million and $2.8 million, respectively, and approximately $9.9 million and $5.1 million for the six months ended June 30, 2014 and 2013, respectively. We capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $0.4 million and $0.4 million for the three months ended June 30, 2014 and 2013, respectively, and approximately $0.9 million and $0.9 million for the six months ended June 30, 2014 and 2013, respectively. Unearned compensation representing the unvested portion of the long-term incentive units totaled $12.7 million and $12.9 million as of June 30, 2014 and December 31, 2013, respectively. We expect to recognize this unearned compensation over the next 2.4 years on a weighted-average basis.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(b) 2014 Market Performance-Based Awards

On February 11, 2014, the Compensation Committee of the Board of Directors of the Company approved the grant of market performance-based Class D Units of the Operating Partnership and market performance-based restricted stock units, or RSUs, covering shares of the Company’s common stock (collectively, the “awards”), under the Amended and Restated 2004 Incentive Award Plan to officers and employees of the Company. In March 2014 and April 2014, the Compensation Committee of the Board of Directors of the Company approved the grant of additional market performance-based Class D Units of the Operating Partnership to certain officers of the Company, under the Amended and Restated 2004 Incentive Award Plan and 2014 Incentive Plan, respectively.

The awards, which were determined to contain a market condition, utilize total shareholder return, or TSR, over a three-year measurement period as the market performance metric. Awards will vest based on the Company’s TSR relative to the MSCI US REIT Index, or RMS, over a three-year market performance period, or the Market Performance Period, commencing in January 2014 (or, if earlier, ending on the date on which a change in control of the Company occurs), subject to continued services. Market performance vesting is measured based on the difference between the Company’s TSR percentage and the TSR percentage of the RMS, or the RMS Relative Market Performance. In the event that the RMS Relative Performance during the Market Performance Period is achieved at the “threshold,” “target” or “high” level as set forth below, the awards will become market performance-vested with respect to the percentage of Class D units or RSUs, as applicable, set forth below:


Level	RMS Relative Market Performance	Market Performance Vesting Percentage
	< 0 basis points		0	%
Threshold Level	0 points		25	%
Target Level	325 basis points		50	%
High Level	> 650 basis points		100	%

If the RMS Relative Market Performance falls between the levels specified above, the percentage of the award that will performance vest will be determined using straight-line linear interpolation between such levels.

Following the completion of the Market Performance Period, market performance-vested awards, if any, will vest 50% on February 27, 2017 and 50% on February 27, 2018, subject to continued employment through each applicable vesting date.

Vesting will be accelerated, in full or on a pro rata basis, in the event of a change in control, termination of employment by the Company without cause, or termination of employment by the award recipient for good reason, death, disability or retirement.

The fair value of the 2014 grant of awards was measured using a Monte Carlo simulation to estimate the probability of the market performance vesting conditions being satisfied. The Company’s achievement of the market performance vesting conditions is contingent on its TSR over a three-year market performance period, relative to the total shareholder return of the RMS. The Monte Carlo simulation is a probabilistic technique based on the underlying theory of the Black-Scholes formula, which was run for 100,000 trials to determine the fair value of the awards. For each trial, the payoff to an award is calculated at the settlement date and is then discounted to the grant date at a risk-free interest rate. The total expected value of the awards on the grant date was determined by multiplying the average value per award over all trials by the number of awards granted. Assumptions used in the valuation include expected stock price volatility of 33 percent and a risk-free interest rate of 0.67 percent. The valuation was performed in a risk-neutral framework, so no assumption was made with respect to an equity risk premium.

As of June 30, 2014, 664,316 market performance-based Class D Units and 247,158 market performance-based RSUs had been awarded to our executive officers and other employees. The number of units granted reflects the maximum number of Class D units or RSUs, as applicable, which will become market performance-vested assuming the achievement of the highest level of market performance conditions under the awards, and in the case of the Class D units, also includes dividend equivalent units. The fair value of these awards of approximately $17.4 million will be recognized as compensation expense on a straight-line basis over the expected service period of approximately four years. The unearned compensation as of June 30, 2014 was $12.5 million, net of cancellations. As of June 30, 2014, none of the above awards had vested. We recognized compensation expense related to these awards of approximately $1.0 million and $1.4 million in the three and six months ended June 30, 2014, respectively. We capitalized amounts relating to compensation expense of employees directly engaged in construction and leasing activities of approximately $0.4 million and $0.6 million for the three and six months ended June 30, 2014, respectively. If the market condition is not met, the unamortized amount will be recognized as an expense at that time.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(c) Stock Options

The following table summarizes the Amended and Restated 2004 Incentive Award Plan’s stock option activity for the period ended June 30, 2014:


	Period Ended June 30, 2014
	Shares			Weighted average exercise price
Options outstanding, beginning of period		123,690		$	30.13
Exercised		(16,134	)		14.71
Cancelled / Forfeited		—			—

Options outstanding, end of period		107,556		$	32.44

Exercisable, end of period		107,556		$	32.44

The following table summarizes information about stock options outstanding and exercisable as of June 30, 2014:


Options outstanding and exercisable
Exercise price	Number outstanding		Weighted-average remaining contractual life (years)		Weighted-average exercise price		Aggregate intrinsic value
$12.00-13.02		20,204		0.33	$	12.00	$	935,849
$20.37-28.09		17,000		1.39		21.28		629,710
$33.18-41.73		70,352		2.80		41.01		1,217,807

		107,556		2.11	$	32.44	$	2,783,366

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

(d) Restricted Stock

Below is a summary of our restricted stock activity for the six months ended June 30, 2014.


Unvested Restricted Stock	Shares			Weighted-Average Grant Date Fair Value
Unvested, beginning of period		255,081		$	63.35
Granted		168,260			52.15
Vested		(72,735	)		60.79
Cancelled or expired		(19,607	)		63.55

Unvested, end of period		330,999			58.21

The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock, are being expensed on a straight-line basis for service awards over the vesting period of the restricted stock, which ranges from three to four years. We expense the fair value of awards that contain a performance condition using an accelerated method with each vesting tranche valued as a separate award.

During the six months ended June 30, 2013, certain employees were granted an aggregate of 69,995 shares of restricted stock, which, in addition to a service condition, were subject to a performance condition that impacted the number of shares which ultimately vested. The performance condition was based upon our achievement of the 2013 CFFO per share targets. Upon evaluating the results of the performance condition, the final number of shares was determined and such shares vest based on satisfaction of the service conditions. Based on our 2013 CFFO per diluted share and unit, 50,805 shares of the 2013 restricted stock awards (net of forfeitures) satisfied the performance condition.

The expense recorded for the three months ended June 30, 2014 and 2013 related to grants of restricted stock was approximately $0.6 million and $0.8 million, respectively, and approximately $1.4 million and $1.4 million for the six months ended June 30, 2014 and 2013, respectively. We capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $0.8 million and $0.7 million for the three months ended June 30, 2014 and 2013, respectively, and approximately $1.6 million and $1.3 million for the six months ended June 30, 2014 and 2013, respectively. Unearned compensation representing the unvested portion of the restricted stock totaled $14.1 million and $8.7 million as of June 30, 2014 and December 31, 2013, respectively. We expect to recognize this unearned compensation over the next 2.8 years on a weighted-average basis.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

14. Derivative Instruments

As of June 30, 2014 and December 31, 2013, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands):


Notional Amount										Fair Value at Significant Other Observable Inputs (Level 2)
As of June 30, 2014		As of December 31, 2013			Type of Derivative	Strike Rate		Effective Date	Expiration Date	As of June 30, 2014			As of December 31, 2013

	*Currently-paying contracts*
	$410,905 ⁽¹⁾	$	410,905	⁽¹⁾	Swap		0.717	Various	Various	$	(1,080	)	$	(76	)
	152,013 ⁽²⁾		150,040	⁽²⁾	Swap		0.925	Jul. 17, 2012	Apr. 18, 2017		(376	)		131

	562,918		560,945								(1,456	)		55


	*Forward-starting contracts*
	150,000 ⁽³⁾		—		Forward- starting Swap		2.091	Jul. 15, 2014	Jul. 15, 2019		(2,871	)		—


	*Total*
	$712,918	$	560,945							$	(4,327	)	$	55

(1)	Represents the U.S. dollar tranche of the unsecured term loan.

(2)	Represents a portion of the Singapore dollar tranche of the unsecured term loan. Translation to U.S. dollars is based on exchange rate of $0.80 to 1.00 SGD as of June 30, 2014 and $0.79 to 1.00 SGD as of December 31, 2013.

(3)

In January 2014, we entered into a forward-starting swap agreement with a notional amount of USD $150.0 million for a future debt issuance with a tenor of five years or greater, which initially was expected to occur on July 15, 2014. The forward-starting swap has a mandatory early termination date of January 15, 2015 to cash settle the swap.

As of June 30, 2014, we estimate that an additional $5.8 million will be reclassified as an increase to interest expense during the twelve months ending June 30, 2015, when the hedged forecasted transactions impact earnings.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

15. Fair Value of Instruments

We disclose fair value information about all financial instruments, whether or not recognized in the condensed consolidated balance sheets, for which it is practicable to estimate fair value. Current accounting guidance requires the Company to disclose fair value information about all financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate fair value.

The Company’s disclosures of estimated fair value of financial instruments at June 30, 2014 and December 31, 2013 were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

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. As described in note 14, the interest rate swaps are recorded at fair value.

We calculate the fair value of our mortgage loans, unsecured term loan, unsecured senior notes and exchangeable senior debentures 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. The carrying value of our global revolving credit facility approximates fair value, due to the variability of interest rates.

As of June 30, 2014 and December 31, 2013, the aggregate estimated fair value and carrying value of our global revolving credit facility, unsecured term loan, unsecured senior notes, exchangeable senior debentures and mortgage loans were as follows (in thousands):


	Categorization under the fair value hierarchy		As of June 30, 2014				As of December 31, 2013
	Categorization under the fair value hierarchy		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value
Global revolving credit facility ⁽¹⁾		Level 2	$	374,641	$	374,641	$	724,668	$	724,668
Unsecured term loan ⁽²⁾		Level 2		1,034,830		1,034,830		1,020,984		1,020,984
Unsecured senior notes ⁽³⁾⁽⁴⁾		Level 2		2,996,208		2,897,068		2,379,999		2,364,232
Exchangeable senior debentures ⁽³⁾		Level 2		—		—		336,847		266,400
Mortgage loans ⁽³⁾		Level 2		585,296		552,696		622,580		585,608

			$	4,990,975	$	4,859,235	$	5,085,078	$	4,961,892

(1)	The carrying value of our global revolving credit facility approximates estimated fair value, due to the variability of interest rates and the stability of our credit ratings.

(2)	The carrying value of our unsecured term loan approximates estimated fair value, due to the variability of interest rates and the stability of our credit ratings.

(3)	Valuations for our unsecured senior notes and mortgage loans are determined based on the expected future payments discounted at risk-adjusted rates. The 2015 Notes, 2020 Notes, 2021 Notes, 2022 Notes, 2023 Notes and 2025 Notes and 2029 Debentures are valued based on quoted market prices.

(4)	The carrying value of the 2015 Notes, 2020 Notes, 2021 Notes, 2022 Notes, 2023 Notes and 2025 Notes are net of discount of $17,352 and $15,048 in the aggregate as of June 30, 2014 and December 31, 2013, respectively.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

16. Commitments and Contingencies

(a) Contingent liabilities

As part of the acquisition of 29A International Business Park, the seller could earn additional consideration based on future net operating income growth in excess of certain performance targets, as defined in the agreements for the acquisition. As of June 30, 2014, construction is not complete and none of the leases executed subsequent to purchase would cause an amount to become probable of payment and therefore no amount is accrued as of June 30, 2014. The maximum amount that could be earned by the seller is $50.0 million SGD (or approximately $40.1 million based on the exchange rate as of June 30, 2014). The earnout contingency expires in November 2020.

One of the tenants at our Convergence Business Park property has an option to expand as part of their lease agreement, which expires in April 2017. As part of this option, development activities were not permitted on specifically identified expansion space within the property until April 2014. From April 2014 through April 2017, the tenant has the right of first refusal on any third party’s bona fide offer to buy the adjacent land. If the tenant exercises their option, we may either construct and lease to the tenant an additional shell building on the expansion space at a stipulated rate of return on cost or sell the existing building and the expansion space to the tenant for a price of approximately $24.0 million and $225,000 per square acre, respectively, plus additional adjustments as provided in the lease.

As part of the acquisition of the Sentrum Portfolio in July 2012, the seller could earn additional consideration based on future net returns on vacant space to be developed, but not currently leased, as defined in the purchase agreement for the acquisition. The initial estimate of fair value of contingent consideration was approximately £56.5 million (or approximately $87.6 million based on the exchange rate as of July 11, 2012, the acquisition date). We have adjusted the contingent consideration to fair value at each reporting date with changes in fair value recognized in operating income. At June 30, 2014, the fair value of the contingent consideration for the Sentrum Portfolio was £36.6 million (or approximately $62.7 million based on the exchange rate as of June 30, 2014) and is currently accrued in accounts payable and other accrued expenses in the condensed consolidated balance sheet. We made earnout payments of approximately £3.4 million (or approximately $5.7 million based on the exchange rates as of the date of each payment) during the six months ended June 30, 2014. During the six months ended June 30, 2013, we made earnout payments of approximately £6.6 million (or approximately $10.0 million based on the exchange rates as of the date of each payment). From the acquisition date through June 30, 2014, we have made earnout payments of approximately £20.3 million (or approximately $31.5 million based on the exchange rates as of the date of each payment). The impact of the change in fair value of contingent consideration for the Sentrum Portfolio on operating income was approximately ($0.8) million and $0.4 million for the three months ended June 30, 2014 and 2013, respectively, and approximately $2.6 million and ($0.9) million for the six months ended June 30, 2014 and 2013, respectively. The earn-out contingency expires in July 2015. This amount will be reassessed on a quarterly basis, with any changes being recognized in earnings. Increases or decreases in the fair value of the contingent consideration can result from changes in discount periods, discount rates and probabilities that contingencies will be met.

(b) Construction Commitments

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. 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 June 30, 2014, we had open commitments related to construction contracts of approximately $214.3 million.

(c) Legal Proceedings

Although the Company is involved in legal proceedings arising in the ordinary course of business, as of June 30, 2014, 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.

DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

June 30, 2014 and 2013

17. Subsequent Events

On July 21, 2014, we declared the following dividends per share and the Operating Partnership declared an equivalent distribution per unit:


Share / Unit Class	Series E Preferred Stock and Unit		Series F Preferred Stock and Unit		Series G Preferred Stock and Unit		Series H Preferred Stock and Unit		Common stock and common unit
Dividend and distribution amount	$	0.437500	$	0.414063	$	0.367188	$	0.460938	$	0.830000
Dividend and distribution payable date		September 30, 2014		September 30, 2014		September 30, 2014		September 30, 2014		September 30, 2014
Dividend and distribution payable to holders of record on		September 15, 2014		September 15, 2014		September 15, 2014		September 15, 2014		September 15, 2014
Annual equivalent rate of dividend and distribution	$	1.750	$	1.656	$	1.469	$	1.844	$	3.320

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. 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 proceeds from our equity distribution program and other securities offerings, expected use of borrowings under our credit facility, portfolio performance, leverage policy, acquisition and capital expenditure plans, supply and demand for data center space, capitalization rates and expected rental rates on new or renewed data center space, as well as our discussion of “Factors Which May Influence Future Results of Operations,” contain forward-looking statements. Likewise, all of our statements regarding anticipated market conditions, demographics 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 and discussions 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: the impact of current global economic, credit and market conditions; current local economic conditions in our geographic markets; decreases in information technology spending, including as a result of economic slowdowns or recession; 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); our dependence upon significant tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; defaults on or non-renewal of leases by tenants; our failure to obtain necessary debt and equity financing; 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; financial market fluctuations; changes in foreign currency exchange rates; our inability to manage our growth effectively; difficulty acquiring or operating properties in foreign jurisdictions; the suitability of our properties and data center infrastructure, delays or disruptions in connectivity, failure of our physical infrastructure or services or availability of power; our failure to successfully integrate and operate acquired or developed properties or businesses; risks related to joint venture investments, including as a result of our lack of control of such investments; delays or unexpected costs in development of properties; decreased rental rates, increased operating costs or increased vacancy rates; increased competition or available supply of data center space; our inability to successfully develop and lease new properties and development space; difficulties in identifying properties to acquire and completing acquisitions; our inability to acquire off-market properties; our inability to comply with the rules and regulations applicable to reporting companies; Digital Realty Trust, Inc.’s failure to maintain its status as a REIT for federal income tax purposes; possible adverse changes to tax laws; restrictions on our ability to engage in certain business activities; environmental uncertainties and risks related to natural disasters; losses in excess of our insurance coverage; changes in foreign laws and regulations, including those related to taxation and real estate ownership and operation; and changes in local, state and federal regulatory requirements, including changes in real estate and zoning laws and increases in real property tax rates.

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 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 predict 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.

Overview

Our company . Digital Realty Trust, Inc. completed its initial public offering of common stock, or our IPO, on November 3, 2004. We believe that we have operated in a manner that has enabled us to qualify, and have elected to be treated, as a REIT under Sections 856 through 860 of the Code. Our company was formed on March 9, 2004. During the period from our formation until we commenced operations in connection with the completion of our IPO, we did not have any corporate activity other than the issuance of shares of Digital Realty Trust, Inc. common stock in connection with the initial capitalization of the company. Our operating partnership was formed on July 21, 2004.

Business and strategy . Our primary business objectives are to maximize: (i) sustainable long-term growth in earnings and funds from operations per share and unit, (ii) cash flow and returns to our stockholders and our operating partnership’s unitholders through the payment of distributions and (iii) return on invested capital. We expect to achieve our objectives by focusing on our core business of investing in and developing technology-related real estate. A significant component of our current and future internal growth is anticipated through the development of our existing space held for development and acquisition of new properties. We target high quality, strategically located properties containing applications and operations critical to the day-to-day operations of corporate enterprise datacenter and technology industry tenants and properties that may be developed for such use. Most of our properties contain fully redundant electrical supply systems, multiple power feeds, above-standard precision cooling systems, raised floor areas, extensive in-building communications cabling and high-level security systems. We focus solely on technology-related real estate because we believe that the growth in corporate datacenter adoption and the technology-related real estate industry generally will continue to be superior to that of the overall economy.

As of June 30, 2014, we owned an aggregate of 130 properties, including 13 properties held as investments in unconsolidated joint ventures, with approximately 24.5 million rentable square feet including approximately 1.4 million square feet of space under active development and approximately 1.3 million square feet of space held for future development. The 13 properties held as investments in unconsolidated joint ventures have an aggregate of approximately 1.7 million rentable square feet. The 11 parcels of developable land we own comprised approximately 154 acres. At June 30, 2014, approximately 1.4 million square feet was under construction for Turn-Key Flex ^® , Powered Base Building ^® and Custom Solutions (formerly referred to as Build-to-Suit) products, all of which are expected to be income producing on or after completion, in six U.S. domestic markets, two European markets, one Canadian market, one Australian market and our Singapore market, consisting of approximately 0.8 million square feet of base building construction and 0.6 million square feet of data center construction.

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 a 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 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 currently intend to limit our indebtedness to 60% of our total enterprise value and, based on the closing price of Digital Realty Trust, Inc. common stock on June 30, 2014 of $58.32, our ratio of debt to total enterprise value was approximately 35%. 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), excluding options issued under our company’s incentive award plan, plus the liquidation value of Digital Realty Trust, Inc.’s preferred stock, plus the aggregate value of our operating partnership’s 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. common stock and excluding long-term incentive units, Class C units and Class D units), plus the book value of our total consolidated indebtedness.

Revenue base . As of June 30, 2014, we owned 130 properties through our operating partnership, including 13 properties held as investments in unconsolidated joint ventures and developable land. These properties are mainly located throughout the U.S., with 21 properties located in Europe, three properties in Australia, two properties in Canada and two properties in Asia. We, through our predecessor, acquired our first portfolio property in January 2002 and have added properties through acquisition and development activities as follows:


Year Ended December 31:	Properties Acquired ⁽¹⁾			Net Rentable Square Feet ⁽²⁾		Square Feet of Space Under Active Development as of June 30, 2014 ⁽³⁾		Square Feet of Space Held for Future Development as of June 30, 2014 ⁽⁴⁾
2002		4			1,093,250		—		46,530
2003		6			1,074,662		—		—
2004		10			2,536,234		14,659		121,372
2005		20			3,458,111		—		107,826
2006		18			2,859,335		—		22,722
2007		13	⁽⁵⁾⁽⁸⁾		1,742,139		—		84,527
2008		5			436,458		86,656		127,790
2009		7	⁽⁶⁾⁽⁸⁾		1,571,101		152,379		48,214
2010		15			2,352,338		120,135		150,127
2011		10	⁽⁷⁾		1,142,455		521,405		158,105
2012		15			2,510,519		250,000		277,540
2013		7			994,883		250,656		138,785
2014		—			—		—		—

Properties owned as of June 30, 2014		130			21,771,485		1,395,890		1,283,538

(1)

Excludes properties sold: 6 Braham Street (April 2014), 100 Technology Center Drive (March 2007), 4055 Valley View Lane (March 2007) and 7979 East Tufts Avenue (July 2006). In addition, also excludes 701 & 717 Leonard Street, a parking garage located adjacent to our internet gateway datacenter located at 2323 Bryan Street and not considered a separate property. Also excludes a leasehold interest acquired in March 2007 related to an acquisition made in 2006. Includes 11 properties held in our managed portfolio of unconsolidated joint ventures consisting of 4650 Old Ironsides Drive (Silicon Valley), 2950 Zanker Road (Silicon Valley), 4700 Old Ironsides Drive (Silicon Valley), 444 Toyama Drive (Silicon Valley), 43790 Devin Shafron Drive (Northern Virginia), 21551 Beaumeade Circle (Northern Virginia), 7505 Mason King Court (Northern Virginia), 14901 FAA Boulevard (Dallas), 900 Dorothy Drive (Dallas), 636 Pierce Street (New York Metro) and 33 Chun Choi Street (Hong Kong); and two unconsolidated non-managed joint ventures: 2001 Sixth Avenue (Seattle) and 2020 Fifth Avenue (Seattle).

(2)

Current net rentable square feet as of June 30, 2014, which represents the current square feet under lease as specified in the applicable lease agreements plus management’s estimate of space available for lease based on engineering drawings. Includes tenants’ proportional share of common areas but excludes space held for development.

(3)	Space under active development includes current base building and data center projects in progress.

(4)	Space held for future development includes space held for future data center development, and excludes space under active development.

(5)	Includes three developed buildings (43915 Devin Shafron Drive, 43830 Devin Shafron Drive and 43790 Devin Shafron Drive) placed into service in 2010 and 2011 that are being included with a property (Devin Shafron buildings) that was acquired in 2007.

(6)	Includes a developed building (21551 Beaumeade Circle) placed into service in 2011 that is being included with a property (Beaumeade Circle Portfolio) that was acquired in 2009.

(7)	Includes four developed buildings (43940 Digital Loudoun Plaza in Northern Virginia, 3825 NW Aloclek Place in Portland, Oregon, 98 Radnor Drive in Melbourne, Australia and 1-23 Templar Road in Sydney, Australia) placed into service in 2012 and 2013 that were acquired in 2011.

(8)

43790 Devin Shafron Drive and 21551 Beaumeade Circle, which were previously included as part of the Devin Shafron buildings and Beaumeade Circle Portfolio, respectively, are now each separately included in the property count because they were separately contributed to an unconsolidated joint venture in September 2013.

As of June 30, 2014, the properties in our portfolio, including the 13 properties held as investments in unconsolidated joint ventures, were approximately 92.8% leased excluding approximately 1.4 million square feet of space under active development and approximately 1.3 million square feet of space held for future development. Due to the capital-intensive and long-term nature of the operations being supported, our lease terms are generally longer than standard commercial leases. As of June 30, 2014, our average lease term is approximately 12 years, with an average of approximately seven years remaining. Our scheduled lease expirations through December 31, 2015 are 11.4% of rentable square feet excluding month-to-month leases, space under active development and space held for future development as of June 30, 2014.

Factors Which May Influence Future Results of Operations

Global market and economic conditions

United States and international market and economic conditions in recent years have been unprecedented and challenging with tighter credit conditions and slower economic growth in many markets in which we own properties and conduct our operations. The U.S. and global economies have experienced a recession and face continued concerns about the systemic impact of adverse economic conditions, such as high energy costs, geopolitical issues, the availability and cost of credit, unstable global financial and mortgage markets, high corporate, consumer and governmental debt levels, ongoing sovereign debt and economic issues in European countries, and high unemployment. The European debt crisis has raised concerns regarding the debt burden of certain countries using the euro as their currency and their ability to meet future financial obligations. While recent economic trends across the eurozone have been largely positive, concerns remain regarding the creditworthiness of certain European countries, and there can be no assurance that these improvements will be sustainable.

As a result of these conditions, general economic conditions and the cost and availability of capital have been and may again be adversely affected in some or all of the markets in which we own properties and conduct our operations. Renewed or increased turbulence in the U.S., European, Asia Pacific and other international financial markets and economies may adversely affect our ability, and the ability of our tenants, to replace or renew maturing liabilities on a timely basis, access the capital markets to meet liquidity and capital expenditure requirements and may result in adverse effects on our, and our tenants’, financial condition and results of operations.

In addition, our access to funds under our global revolving credit facility depends on the ability of the lenders that are parties to such facilities to meet their funding commitments to us. We cannot assure you that long-term disruptions in the global economy and the return of tighter credit conditions among, and potential failures or nationalizations of, third party financial institutions as a result of such disruptions will not have an adverse effect on our lenders. If our lenders are not able to meet their funding commitments to us, our business, results of operations, cash flows and financial condition could be adversely affected.

If we do not have sufficient cash flow to continue operating our business and are unable to borrow additional funds, access our existing lines of credit or raise equity or debt capital, we may need to source alternative ways to increase our liquidity. Such alternatives may include, without limitation, curtailing development activity, disposing of one or more of our properties possibly on disadvantageous terms or entering into or renewing leases on less favorable terms than we otherwise would.

Rental income . The amount of rental income generated by the properties in our portfolio depends on several factors, including our ability to maintain or improve the occupancy rates of currently leased space and to lease currently available space and space available from lease terminations. Excluding approximately 1.4 million square feet of space under active development and approximately 1.3 million square feet of space held for future development as of June 30, 2014, the occupancy rate of the properties in our portfolio, including the 13 properties held as investments in unconsolidated joint ventures, was approximately 92.8% of our net rentable square feet.

As of June 30, 2014, we had approximately 2,500 leases with over 650 tenants in our portfolio, including the 11 properties held in our managed portfolio of unconsolidated joint ventures. As of June 30, 2014, approximately 89% of our leases (on a rentable square footage basis) contained base rent escalations that were either fixed (generally ranging from 2% to 4%) or indexed based on a consumer price index or other similar inflation related index. We cannot assure you that these escalations will cover any increases in our costs or will otherwise keep rental rates at or above market rates.

The amount of rental income generated by us also depends on maintaining or increasing rental rates at our properties, which in turn depends on several factors, including supply and demand and market rates for data center space. Included in our approximately 20.1 million net rentable square feet, excluding space under active development and space held for future development and 13 properties held as investments in unconsolidated joint ventures, at June 30, 2014 is approximately 0.6 million square feet of datacenter space with extensive installed tenant improvements available for lease. Since our IPO, we have leased approximately 4.9 million square feet of similar space, including Turn-Key Flex ^® space. Our Turn-Key Flex ^® product is an effective solution for tenants who prefer to utilize

a partner with the expertise or capital budget to provide extensive datacenter infrastructure and security. Our expertise in datacenter construction and operations enables us to lease space to these tenants at a premium over other uses. In addition, as of June 30, 2014, we had approximately 1.4 million square feet of space under active development and approximately 1.3 million square feet of space held for future development, or approximately 11% of the total rentable space in our portfolio, including one vacant property comprising approximately 0.1 million square feet and the 13 properties held as investments in unconsolidated joint ventures. Our ability to grow earnings depends in part on our ability to develop space and lease development space at favorable rates, which we may not be able to obtain. Development space requires significant capital investment in order to develop datacenter facilities that are ready for use and, in addition, we may require additional time or encounter delays in securing tenants for development space. We may purchase additional vacant properties and properties with vacant development space in the future. We will require additional capital to finance our development activities, which may not be available or may not be available on terms acceptable to us, including as a result of the conditions described above under “Global market and economic conditions.”

In addition, the timing between when we sign a new lease with a tenant and when that lease commences and we begin to generate rental income may be significant and may not be easily predictable. Certain leases may provide for staggered commencement dates for additional space, the timing of which may be delayed significantly.

Economic downturns, including as a result of the conditions described above under “Global market and economic conditions,” or regional downturns affecting our markets or downturns in the technology-related real estate industry that impair our ability to lease or renew or re-lease space, or otherwise reduce returns on our investments or the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties.

Scheduled lease expirations. 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. In addition to approximately 1.6 million square feet of available space in our portfolio, which excludes approximately 1.4 million square feet of space under active development and approximately 1.3 million square feet of space held for future development as of June 30, 2014 and the two properties held as investments in our non-managed unconsolidated joint ventures, leases representing approximately 2.9% and 8.5% of the net rentable square footage of our portfolio are scheduled to expire during the six months ending December 31, 2014 and the year ending December 31, 2015, respectively.

During the six months ended June 30, 2014, we signed new leases totaling approximately 0.7 million square feet of space and renewal leases totaling approximately 0.4 million square feet of space. The following table summarizes our leasing activity in the six months ended June 30, 2014:


	Number of Leases ⁽¹⁾		Rentable Square Feet ⁽²⁾		Expiring Rates ⁽³⁾		New Rates ⁽³⁾		Rental Rate Changes			TI’s/Lease Commissions Per Square Foot		Weighted Average Lease Terms (years)

*Leasing Activity ⁽⁴⁾⁽⁵⁾*

Renewals Signed
Turn-Key Flex ^®		4		25,357	$	100.78	$	108.89		8.0	%	$	0.96		1.4
Powered Base Building ^®		15		306,714	$	41.96	$	49.28		17.4	%	$	6.90		6.0
Colocation		41		29,507	$	192.51	$	194.05		0.8	%	$	4.60		2.5
Non-technical		12		59,442	$	21.69	$	31.74		46.3	%	$	7.64		6.1

New Leases Signed ⁽⁶⁾
Turn-Key Flex ^®		29		330,759		—	$	172.57		—		$	53.75		6.4
Powered Base Building ^®		2		160,632		—	$	74.95		—		$	0.00		15.0
Colocation		99		51,298		—	$	191.14		—		$	49.12		4.2
Non-technical		29		110,184		—	$	24.69		—		$	23.80		8.1

*Leasing Activity Summary*
Turn-Key Flex ^®		33		356,116		—	$	168.04		—			—
Powered Base Building ^®		17		467,346		—	$	58.10		—			—
Colocation		140		80,805		—	$	192.20		—			—
Non-technical		41		169,626		—	$	27.16		—			—

(1)	The number of leases represents the leased-unit count; a lease could include multiple units.

(2)	For some of our properties, we calculate square footage based on factors in addition to contractually leased square feet, including power, required support space and common area.

(3)	Rental rates represent annual estimated cash rent per rentable square foot adjusted for straight-line rents in accordance with GAAP. GAAP rental rates are inclusive of tenant concessions, if any.

(4)	Excludes short term leases.

(5)	Commencement dates for the leases signed range from 2014 to 2016.

(6)	Includes leases signed for new and re-leased space.

Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. We continue to see strong demand in most of our key markets for datacenter space and, subject to the supply of available datacenter space in these markets, expect the rental rates we are likely to achieve on any new, re-leased or renewed datacenter space leases for 2014 expirations on an average aggregate basis will generally be higher than the rates currently being paid for the same space on a GAAP basis and flat on a cash basis. For the six months ended June 30, 2014, rents on renewed space increased by an average of 8.0% on a GAAP basis on our Turn-Key Flex ^® space compared to the expiring rents and increased by an average of 17.4% on a GAAP basis on our Powered Base Building ^® space compared to the expiring rents. Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our properties 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 market 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 real estate conditions, local supply and demand for datacenter space, competition from other datacenter developers or operators, the condition of the property and whether the property, or space within the property, has been developed.

Market concentration. We depend on the market for technology-based real estate in specific geographic regions and significant changes in these regional markets can impact our future results. As of June 30, 2014, our portfolio, including the 13 properties held as investments in unconsolidated joint ventures, was geographically concentrated in the following metropolitan markets.


Metropolitan Market	Percentage of June 30, 2014 total annualized rent ⁽¹⁾
London, United Kingdom		11.8	%
Northern Virginia		10.4	%
Dallas		10.1	%
Silicon Valley		9.2	%
New York Metro		8.8	%
Chicago		6.9	%
Phoenix		6.7	%
San Francisco		6.4	%
Boston		4.1	%
Los Angeles		3.3	%
Seattle		2.9	%
Singapore		2.9	%
Paris, France		2.5	%
Other		14.0	%

Total		100.0	%

(1)	Annualized rent is monthly contractual rent (defined as cash base rent before abatements) under existing leases as of June 30, 2014 multiplied by 12. The aggregate amount of abatements for the six months ended June 30, 2014 was approximately $15.7 million.

Operating expenses. Our operating expenses generally consist of utilities, property and ad valorem taxes, property management fees, insurance and site maintenance costs, as well as rental expenses on our ground and building leases. In particular, our buildings require significant power to support the datacenter operations contained in them. Many of our leases contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by us. However, we generally 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 also incur general and administrative expenses, including expenses relating to our asset management function, as well as significant legal, accounting and other expenses related to corporate governance, SEC reporting and compliance with the various provisions of the Sarbanes-Oxley Act. Increases or decreases in such operating expenses will impact our overall performance. We expect to incur additional operating expenses as we continue to expand.

Climate change legislation. In June 2009, the U.S. House of Representatives approved comprehensive clean energy and climate change legislation intended to cut greenhouse gas, or GHG, emissions, create new clean energy jobs and enhance the energy independence of the United States, which included a cap-and-trade program for GHG emissions. The U.S. Senate did not subsequently pass similar legislation. New climate change legislation was introduced in the U.S. Senate in 2013, but significant opposition to federal climate change legislation exists. As a result, near-term action to reduce GHG emissions likely will be focused on regulatory agencies, primarily the U.S. Environmental Protection Agency, or EPA, and state actions. The EPA has been moving aggressively to regulate GHG emissions from automobiles and large stationary sources, including electricity producers, using its own authority under the Clean Air Act. The EPA made an endangerment finding in 2009 that allows it to create regulations imposing emission reporting, permitting, control technology installation, and monitoring requirements applicable to certain emitters of GHGs, including facilities that provide electricity to our data centers, although the materiality of the impacts will not be known until all regulations are finalized.

The EPA has already finalized its GHG “reporting rule,” which requires that certain emitters, including electricity generators, monitor and report GHG emissions. The EPA has also finalized its “tailoring rule,” which imposes permitting and control technology requirements upon certain newly-constructed or modified facilities which emit GHGs under the Clean Air Act New Source Review

Prevention of Significant Deterioration, or NSR PSD, and Title V permitting programs. As a result, newly-issued NSR PSD or Title V permits for new or modified electricity generating and other facilities may need to address GHG emissions, including by requiring the installation of Best Available Control Technology. Some of those regulations have been finalized and currently are in litigation. Courts have rejected certain legal challenges to the endangerment finding, the tailoring rule, and other regulations but other legal challenges are pending. In addition, the EPA proposed in April 2012 a rule that would set a GHG emission standard applicable to new electricity generating units, and the EPA re-proposed the rule in September 2013. The Obama Administration issued a plan in June 2013 under which the EPA is to issue a final rule by 2015 regulating GHG emissions from existing electricity generating units. At the state level, California implemented a GHG cap-and-trade program that began imposing compliance obligations on industrial sectors, including electricity generators and importers, in January 2013. In addition, since 2005 the European Union (including the United Kingdom) has been operating under a cap-and-trade program, which directly affects the largest emitters of GHGs, including electricity producers from whom we purchase power.

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 Congress may pass, (ii) the regulations that the EPA has proposed or finalized, (iii) regulations under legislation that states have passed or may pass, or (iv) any further reductions in the EU program could significantly increase our costs, and we may not be able to effectively pass all of these costs on to our tenants. These matters could adversely impact our business, results of operations, or financial condition.

Interest rates . As of June 30, 2014, we had approximately $562.9 million of variable rate debt subject to interest rate swap agreements on certain tranches of our unsecured term loan, along with $374.6 million and $471.9 million of variable rate debt that was outstanding on the global revolving credit facility and the unswapped portion of the unsecured term loan, respectively. The availability of debt and equity capital may decrease as a result of the circumstances described above under “Global market and economic conditions.” The effects on commercial real estate mortgages, if available, include, but may not be limited to: higher loan spreads, tightened loan covenants, reduced loan to value ratios resulting in lower borrower proceeds and higher principal payments. Potential future increases in interest rates and credit spreads may increase our interest expense and fixed charges and negatively affect our financial condition and results of operations, potentially impacting our future access to the debt and equity capital markets. Increased interest rates may also increase the risk that the counterparties to our swap agreements will default on their obligations, which could further increase our interest expense. If we cannot obtain capital from third party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our debt service obligations or pay the cash dividends to Digital Realty Trust, Inc.’s stockholders necessary to maintain its qualification as a REIT.

Demand for datacenter space . Our portfolio of properties consists primarily of technology-related real estate and datacenter real estate in particular. A decrease in the demand for, or increase in supply of, datacenter space, Internet gateway facilities or other technology-related real estate would have a greater adverse effect on our business and financial condition than if we owned a portfolio with a more diversified tenant base or less specialized use. Over the past two years, we have made a significant investment in building out additional inventory primarily in what we anticipate will be our active major markets prior to having executed leases with respect to this space. We believe that demand continues to exceed supply in most markets in which we operate, particularly in Dallas and London; whereas we anticipate that our Northern Virginia and Silicon Valley markets may be at risk of significant over-supply. However, until this inventory is leased up, which will depend on a number of factors, including available datacenter space in these markets, our return on invested capital is negatively impacted. Our development activities make us particularly susceptible to general economic slowdowns, including recessions and the other circumstances described above under “Global market and economic conditions,” as well as adverse developments in the corporate datacenter, Internet and data communications and broader technology industries. Any such slowdown or adverse development could lead to reduced corporate IT spending or reduced demand for datacenter space. Reduced demand could also result from business relocations, including to markets that we do not currently serve. Changes in industry practice or in technology, such as virtualization technology, more efficient computing or networking devices, or devices that require higher power densities than today’s devices, could also reduce demand for the physical datacenter space we provide or make the tenant improvements in our facilities obsolete or in need of significant upgrades to remain viable. In addition, the development of new technologies, the adoption of new industry standards or other factors could render many of our tenants’ current products and services obsolete or unmarketable and contribute to a downturn in their businesses, thereby increasing the likelihood that they default under their leases, become insolvent or file for bankruptcy. In addition, demand for datacenter space in our properties, or the rates at which we lease space, may be adversely impacted either across our portfolio or in specific markets as a result of an increase in the number of competitors, or the amount of space being offered in our markets and other markets by our competitors.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses in the reporting period. Our actual results may differ from these estimates. We have provided a summary of our significant accounting policies in note 2 to our

condensed consolidated financial statements included elsewhere in this report. We describe below those accounting policies that require material subjective or complex judgments and that have the most significant impact on our financial condition and consolidated results of operations. Our management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions management believes are reasonable as of the date on the front cover of this report.

Investments in Real Estate

Acquisition of real estate. The price that we pay to acquire a property is impacted by many factors including the condition of the property and improvements, the occupancy of the building, the term and rate of in-place leases, the creditworthiness of the tenants, favorable or unfavorable financing, above or below-market ground leases and numerous other factors.

Accordingly, we are required to make subjective assessments to allocate the purchase price paid to acquire investments in real estate among the identifiable assets including intangibles and liabilities assumed based on our estimate of the fair value of such assets and liabilities. This includes determining the value of the property and improvements, land, ground leases, if any, and tenant improvements. Additionally, we evaluate the value of in-place leases on occupancy and market rent, the value of the tenant relationships, the value (or negative value) of above (or below) market leases, any debt or deferred taxes assumed from the seller or loans made by the seller to us and any building leases assumed from the seller. Each of these estimates requires a great deal of judgment and some of the estimates involve complex calculations. These allocation assessments have a direct impact on our results of operations. For example, if we were to allocate more value to land, there would be no depreciation with respect to such amount. If we were to allocate more value to the property as opposed to allocating to the value of in-place tenant leases, this amount would be recognized as an expense over a much longer period of time. This potential effect occurs because the amounts allocated to property are depreciated over the estimated lives of the property whereas amounts allocated to in-place tenant leases are amortized over the estimated term (including renewal and extension assumptions) of the leases. Additionally, the amortization of the value (or negative value) assigned to above (or below) market rate leases is recorded as an adjustment to rental revenue as compared to amortization of the value of in-place tenant leases and tenant relationships, which is included in depreciation and amortization in our condensed consolidated income statements.

From time to time, we will receive offers for sale of our properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. We classify real estate as “held for sale” when all criteria under the FASB guidance has been met.

Capitalization of costs. Direct and indirect project costs that are clearly associated with the development of properties are capitalized as incurred. Project costs include all costs directly associated with the development of a property, including construction costs, interest, property taxes, insurance, legal fees and costs of personnel working on the project. Indirect costs that do not clearly relate to the projects under development are not capitalized and are charged to expense as incurred.

Capitalization of costs begins when the activities necessary to get the development project ready for its intended use begin, which include costs incurred before the beginning of construction. Capitalization of costs ceases when the development project is substantially complete and ready for its intended use. Determining when a development project commences, and when it is substantially complete and ready for its intended use involves a degree of judgment. We generally consider a development project to be substantially complete and ready for its intended use upon receipt of a certificate of occupancy. If and when development of a property is suspended pursuant to a formal change in the planned use of the property, we will evaluate whether the accumulated costs exceed the estimated value of the project and write off the amount of any such excess accumulated costs. For a development project that is suspended for reasons other than a formal change in the planned use of such property, the accumulated project costs are evaluated for impairment consistent with our impairment policies for long-lived assets. Capitalized costs are allocated to the specific components of a project that are benefited.

Useful lives of assets. We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate we would depreciate such investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

Asset impairment evaluation. We review each of our properties for indicators that its carrying amount may not be recoverable. Examples of such indicators may include a significant decrease in the market price of the property, a significant adverse change in the extent or manner in which the property is being used in its physical condition or expected to be used based on the underwriting at the time of acquisition, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of the property, or a history of operating or cash flow losses of the property. When such impairment indicators exist, we review an estimate of the future undiscounted net cash flows (excluding interest charges) expected to result from the real estate investment’s use and eventual disposition and compare that estimate to the carrying value of the property. We consider factors such as

future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If our future undiscounted net cash flow evaluation indicates that we are unable to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. These losses have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be long-lived assets to be held and used are considered on an undiscounted basis to determine whether the carrying value of a property is recoverable, our strategy of holding properties over the long-term directly decreases the likelihood of their carrying values not being recoverable and therefore requiring the recording of an impairment loss. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If we determine that the asset fails the recoverability test, the affected assets must be reduced to their fair value. No such impairment losses have been recognized to date.

We generally estimate the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs that a market participant would use based on the highest and best use of the asset, which is similar to the income approach that is commonly utilized by appraisers.

Revenue Recognition

Rental revenue is recognized using the straight-line method over the terms of the tenant leases. Deferred rents included in our condensed consolidated balance sheets represent the aggregate excess of rental revenue recognized to date on a straight-line basis versus the contractual rental payments under the terms of the leases. Many of our leases contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by us. However, we generally 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. Such reimbursements are recognized in the period that the expenses are incurred. Lease termination fees are recognized over the remaining term of the lease, effective as of the date the lease modification is finalized, assuming collection is not considered doubtful. As discussed above, we recognize amortization of the value of acquired above or below-market tenant leases as a reduction of rental revenue in the case of above-market leases or an increase to rental revenue in the case of below-market leases.

We must make subjective estimates as to when our revenue is earned and the collectability of our accounts receivable related to minimum rent, deferred rent, expense reimbursements, lease termination fees and other income. We specifically analyze accounts receivable and historical bad debts, tenant concentrations, tenant creditworthiness and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on our net income because a higher bad debt allowance would result in lower net income, and recognizing rental revenue as earned in one period versus another would result in higher or lower net income for a particular period.

Share-Based Awards

We recognize compensation expense related to share-based awards. We generally amortize this compensation expense over the vesting period of the award. The calculation of the fair value of share-based awards is subjective and requires several assumptions over such items as expected stock volatility, dividend payments and future company results. These assumptions have a direct impact on our net income because a higher share-based awards amount would result in lower net income for a particular period.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , a comprehensive new revenue recognition standard that supersedes most all existing revenue recognition guidance. This standard’s core principle is that a company will recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. However, leasing contracts, representing the major source of our revenues, are not within the scope of the new standard and will continue to be accounted for under existing standards. This new standard is effective for annual and interim periods beginning on January 1, 2017 with early adoption prohibited. We have not yet determined the effects on our condensed consolidated financial statements and related notes resulting from the adoption of this new standard.

Results of Operations

The discussion below relates to our financial condition and results of operations for the three and six months ended June 30, 2014 and 2013. A summary of our operating results for the three and six months ended June 30, 2014 and 2013 is as follows (in thousands).


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Income Statement Data:
Total operating revenues	$	401,446		$	363,502		$	792,036		$	721,872
Total operating expenses		(308,993	)		(263,508	)		(609,576	)		(523,292	)

Operating income		92,453			99,994			182,460			198,580
Other expenses, net		(31,121	)		(40,373	)		(74,411	)		(87,278	)

Net income	$	61,332		$	59,621		$	108,049		$	111,302

Our property portfolio has experienced consistent and significant growth since the first property acquisition in January 2002. As a result of this growth, our period-to-period comparison of our financial performance focuses on the impact on our revenues and expenses resulting both from the new property additions to our portfolio, as well as on a “same store” property basis (same store properties are properties that were owned as of December 31, 2012 and excludes the 10 properties that were contributed to our joint venture with the PREI ^® -managed fund in September 2013 and March 2014 along with any properties that have been sold). The following table identifies each of the properties in our portfolio acquired from January 1, 2013 through June 30, 2014.

Our stabilized portfolio includes properties owned as of December 31, 2012 with less than 5% of total rentable square feet under development and excludes properties that were undergoing, or were expected to undergo, development activities in 2013-2014 and properties sold or contributed to joint ventures.

The following table identifies each of the properties in our portfolio acquired from January 1, 2013 through June 30, 2014.


Acquired Buildings (Metropolitan Area)	Acquisition Date		Space under active development as of June 30, 2014 ⁽¹⁾		Space held for future development as of June 30, 2014 ⁽¹⁾		Net rentable square feet excluding space held for development ⁽²⁾		Square feet including development space		Occupancy rate as of June 30, 2014 ⁽³⁾
*As of December 31, 2012 (123 properties)*				1,245,749		1,144,753		20,776,602		23,167,104		92.5	%

*January 1, 2013 through June 30, 2014*

17201 Waterview Parkway (Dallas)		Jan-13		—		—		61,750		61,750		100.0
1900 S. Price Road (Phoenix)		Jan-13		—		108,926		118,348		227,274		100.0
371 Gough Road (Toronto)		Mar-13		43,741		29,859		24,176		97,776		100.0
1500 Towerview Road (Minneapolis)		Mar-13		—		—		328,765		328,765		100.0
MetCenter Business Park (Austin)		May-13		—		—		336,695		336,695		94.3
Liverpoolweg 10 (Amsterdam)		Jun-13		—		—		16,813		16,813		100.0
Principal Park (London)		Sep-13		106,400		—		—		106,400		—
636 Pierce Street ⁽⁴⁾ (New York Metro)		Dec-13		—		—		108,336		108,336		100.0

*Subtotal*				150,141		138,785		994,883		1,283,809		98.1	%

Total				1,395,890		1,283,538		21,771,485		24,450,913		92.8	%

(1)	Space under active development includes current base building and data center projects in progress. Space held for future development includes space held for future data center development, and excludes space under active development.

(2)

Net rentable square feet at a building represents the current square feet at that building under lease as specified in the lease agreements plus management’s estimate of space available for lease based on engineering drawings. Net rentable square feet includes tenants’ proportional share of common areas but excludes development space.

(3)	Occupancy rates exclude development space. For some of our properties, we calculate occupancy based on factors in addition to contractually leased square feet, including available power, required support space and common area.

(4)	On March 5, 2014, we contributed the 636 Pierce Street property to our unconsolidated joint venture with a fund managed by Prudential Real Estate Investors that was formed in September 2013. We maintain a 20% interest in the joint venture.

Comparison of the Three Months Ended June 30, 2014 to the Three Months Ended June 30, 2013 and the Six Months Ended June 30, 2014 to the Six Months Ended June 30, 2013

Portfolio

As of June 30, 2014, our portfolio consisted of 130 properties, including 13 properties held as investments in unconsolidated joint ventures and developable land, with an aggregate of 24.5 million rentable square feet including 1.4 million square feet of space under active development and 1.3 million square feet of space held for future development compared to a portfolio consisting of 129 properties, including three properties held as investments in unconsolidated joint ventures and developable land, with an aggregate of 24.5 million rentable square feet including 1.3 million square feet of space under active development and 2.3 million square feet of space held for future development as of June 30, 2013. The increase in our portfolio reflects the acquisition of two properties during the twelve months ended June 30, 2014, one of which was contributed to our unconsolidated joint venture, and the addition of one property placed into service during the twelve months ended June 30, 2014 related to a land parcel that was acquired prior to January 1, 2013, less one property sold in April 2014.

Revenues

Total operating revenues for the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2014		2013		Change		2014		2013		Change
Rental	$	313,420	$	285,953	$	27,467	$	619,206	$	567,352	$	51,854
Tenant reimbursements		85,687		76,681		9,006		169,308		152,598		16,710
Fee income		1,466		728		738		2,649		1,534		1,115
Other		873		140		733		873		388		485

Total operating revenues	$	401,446	$	363,502	$	37,944	$	792,036	$	721,872	$	70,164

As shown by the same store and new properties table below, the increases in rental revenues and tenant reimbursement revenues in the three and six months ended June 30, 2014 compared to the same periods in 2013 were due primarily to new leasing at our same store properties, including completed and leased development space. Other revenues changes in the periods presented were primarily due to tenant termination revenues.


	Same Store						New Properties
	Three Months Ended June 30,						Three Months Ended June 30,
	2014		2013		Change		2014		2013		Change
Rental	$	309,632	$	275,648	$	33,984	$	3,788	$	10,305	$	(6,517	)
Tenant reimbursements		85,084		75,197		9,887		603		1,484		(881	)
Fee income		—		—		—		1,466		728		738
Other		873		140		733		—		—		—

Total operating revenues	$	395,589	$	350,985	$	44,604	$	5,857	$	12,517	$	(6,660	)


	Same Store						New Properties
	Six Months Ended June 30,						Six Months Ended June 30,
	2014		2013		Change		2014		2013		Change
Rental	$	609,827	$	548,472	$	61,355	$	9,379	$	18,880	$	(9,501	)
Tenant reimbursements		168,202		149,916		18,286		1,106		2,682		(1,576	)
Fee income		—		—		—		2,649		1,534		1,115
Other		873		388		485		—		—		—

Total operating revenues	$	778,902	$	698,776	$	80,126	$	13,134	$	23,096	$	(9,962	)

Same store rental revenues increased for the three and six months ended June 30, 2014 compared to the same periods in 2013 primarily as a result of new leases at our properties during the twelve months ended June 30, 2014, including leases of completed development space, the largest of which were for space in the Sentrum Portfolio, 43940 Digital Loudoun Plaza and 2121 South Price Road. Same store growth was driven by the delivery of approximately 690,000 square feet of leased data center space from within our same store development platform during the last 12 months. In our same store portfolio, we calculate the change in rental rates on renewals signed during the quarter as compared to the previous rent on that same space. During the twelve months ended June 30, 2014, the percentage increase was 19.5% on a GAAP basis. During the twelve months ended June 30, 2014, we also delivered approximately 150,000 square feet of un-leased data center space which was one of the drivers impacting same store occupancy which decreased slightly to 92.0% as of June 30, 2014 from 92.5% as of June 30, 2013 along with certain leases expiring at one of our non-technical properties during 2013. Same store tenant reimbursement revenues increased for the three and six months ended June 30, 2014 as compared to the same periods in 2013 primarily as a result of new leasing and higher utility and operating expenses being billed to our tenants, the largest occurrences of which were at the Sentrum Portfolio, 111 8 ^th Avenue (2 ^nd and 6 ^th Floors), 365 South Randolphville Road, 600 West Seventh Street and Digital Houston.

Excluding the effect of 10 properties contributed to our unconsolidated joint venture and 6 Braham Street (sold in April 2014), new properties revenues increased approximately $2.3 million and $6.3 million for the three and six months ended June 30, 2014 compared to the same periods in 2013. For the three and six months ended June 30, 2014, 1500 Towerview Road, 7401 E. Ben White Boulevard and 371 Gough Road contributed $1.0 million, or approximately 64%, and $3.4 million, or 66%, respectively, of the new properties increase in rental revenues and tenant reimbursements compared to the same periods in 2013.

The following table shows revenues for stabilized properties and pre-stabilized properties (all other properties) (in thousands).


	Stabilized							Pre-Stabilized
	Three Months Ended June 30,							Three Months Ended June 30,
	2014		2013		Change			2014		2013		Change
Rental	$	198,293	$	190,487	$	7,806		$	115,127	$	95,466	$	19,661
Tenant reimbursements		56,306		53,286		3,020			29,381		23,395		5,986
Fee income		—		—		—			1,466		728		738
Other		—		140		(140	)		873		—		873

Total operating revenues	$	254,599	$	243,913	$	10,686		$	146,847	$	119,589	$	27,258


	Stabilized							Pre-stabilized
	Six Months Ended June 30,							Six Months Ended June 30,
	2014		2013		Change			2014		2013		Change
Rental	$	395,514	$	385,699	$	9,815		$	223,692	$	181,653	$	42,039
Tenant reimbursements		113,345		108,902		4,443			55,963		43,696		12,267
Fee income		—		—		—			2,649		1,534		1,115
Other		—		388		(388	)		873		—		873

Total operating revenues	$	508,859	$	494,989	$	13,870		$	283,177	$	226,883	$	56,294

Stabilized rental revenues increased for the three and six months ended June 30, 2014 compared to the same periods in 2013 primarily as a result of new or renewed leases at our properties during the twelve months ended June 30, 2014, the largest of which were for space at 350 East Cermak Road and 43791 Devin Shafron Drive. Stabilized tenant reimbursement revenues increased for the three and six months ended June 30, 2014 as compared to the same periods in 2013 primarily as a result of new leasing and higher utility expenses being billed to our tenants, the largest occurrences of which were at 111 8 ^th Avenue (2 ^nd and 6 ^th Floors), 600 West Seventh Avenue and 350 East Cermak Road.

Pre-stabilized revenue increases were a result of new leases at our properties during the twelve months ended June 30, 2014, primarily leases of completed development space, the largest of which were for space at Unit 21 Goldsworth Park, 43940 Digital Loudoun Plaza, 2121 South Price Road, Digital Houston, 365 South Randolphville Road and 9333, 9355, 9377 Grand Avenue.

Operating Expenses and Interest Expense

Operating expenses and interest expense during the three and six months ended June 30, 2014 and 2013 were as follows (in thousands):


	Three Months Ended June 30,								Six Months Ended June 30,
	2014		2013			Change			2014			2013		Change
Rental property operating and maintenance	$	126,796	$	106,706		$	20,090		$	244,692		$	212,186	$	32,506
Property taxes		20,595		19,374			1,221			42,720			40,416		2,304
Insurance		1,896		2,238			(342	)		4,318			4,443		(125	)
Construction management		121		294			(173	)		285			678		(393	)
Change in fair value of contingent consideration		766		(370	)		1,136			(2,637	)		930		(3,567	)
Depreciation and amortization		137,092		115,867			21,225			267,712			227,490		40,222
General and administrative		20,321		17,891			2,430			50,999			33,842		17,157
Transactions		755		1,491			(736	)		836			3,254		(2,418	)
Other		651		17			634			651			53		598

Total operating expenses	$	308,993	$	263,508		$	45,485		$	609,576		$	523,292	$	86,284

Interest expense	$	49,146	$	47,583		$	1,563		$	96,520		$	95,661	$	859

As shown in the same store and new properties table below, total same store expenses for the three and six months ended June 30, 2014 increased compared to the same periods in 2013 primarily as a result of higher utility rates in several of our properties along with development projects being placed into service leading to higher utility expense (included in rental property operating and maintenance) in 2014.


	Same Store									New Properties
	Three Months Ended June 30,									Three Months Ended June 30,
	2014			2013			Change			2014		2013		Change
Rental property operating and maintenance	$	126,203		$	106,029		$	20,174		$	593	$	677	$	(84	)
Property taxes		20,107			18,295			1,812			488		1,079		(591	)
Insurance		1,877			2,064			(187	)		19		174		(155	)
Construction management ⁽¹⁾		—			—			—			121		294		(173	)
Change in fair value of contingent consideration		766			(370	)		1,136			—		—		—
Depreciation and amortization		135,658			112,347			23,311			1,434		3,520		(2,086	)
General and administrative ⁽²⁾		20,321			17,891			2,430			—		—		—
Transactions ⁽³⁾		—			—			—			755		1,491		(736	)
Other		651			17			634			—		—		—

Total operating expenses	$	305,583		$	256,273		$	49,310		$	3,410	$	7,235	$	(3,825	)

Interest expense ⁽⁴⁾	$	48,740		$	47,391		$	1,349		$	406	$	192	$	214


	Same Store									New Properties
	Six Months Ended June 30,									Six Months Ended June 30,
	2014			2013			Change			2014		2013		Change
Rental property operating and maintenance	$	244,020		$	211,028		$	32,992		$	672	$	1,158	$	(486	)
Property taxes		41,710			38,341			3,369			1,010		2,075		(1,065	)
Insurance		4,275			4,097			178			43		346		(303	)
Construction management ⁽¹⁾		—			—			—			285		678		(393	)
Change in fair value of contingent consideration		(2,637	)		930			(3,567	)		—		—		—
Depreciation and amortization		264,523			221,201			43,322			3,189		6,289		(3,100	)
General and administrative ⁽²⁾		50,999			33,842			17,157			—		—		—
Transactions ⁽³⁾		—			—			—			836		3,254		(2,418	)
Other		651			53			598			—		—		—

Total operating expenses	$	603,541		$	509,492		$	94,049		$	6,035	$	13,800	$	(7,765	)

Interest expense ⁽⁴⁾	$	95,240		$	95,313		$	(73	)	$	1,280	$	348	$	932

(1)	Construction management expenses are included entirely in new properties as they are not allocable to specific properties.

(2)	General and administrative expenses are included in same store as they are not allocable to specific properties.

(3)	Transaction expenses are included entirely in new properties as they are not allocable to same store properties.

(4)	Interest expense on our global revolving credit facility and unsecured term loan is allocated on a specific property basis.

Same store rental property operating and maintenance expenses increased in the three and six months ended June 30, 2014 compared to the same periods in 2013 primarily as a result of higher consumption and utility rates in several of our properties along with development projects being placed into service leading to higher utility expense in 2014. During the three months ended June 30, 2014 and 2013, we capitalized amounts relating to compensation expense of employees direct and incremental to construction and successful leasing activities of approximately $12.5 million and $9.6 million, respectively, and $24.9 million and $19.7 million during the six months ended June 30, 2014 and 2013, respectively.

Same store property taxes increased by approximately $1.8 million and $3.4 million in the three and six months ended June 30, 2014 compared to the same periods in 2013, primarily as a result of higher supplemental property tax assessments at one of our properties in 2013.

Same store depreciation and amortization expense increased by approximately $23.3 million and $43.3 million in the three and six months ended June 30, 2014 compared to the same periods in 2013, principally because of depreciation of development projects that were placed into service in late 2013 and during 2014.

General and administrative expenses increased by approximately $2.4 million in the three months ended June 30, 2014 compared to the same period in 2013 primarily due to the growth of our company, which resulted in more employees, additional incentive compensation, and higher professional fees and marketing expenses. General and administrative expenses increased by approximately $17.2 million in the six months ended June 30, 2014 compared to the same period in 2013 primarily due to the $12.7 million severance related to the departure of our former Chief Executive Officer, Michael Foust recorded in the six months ended June 30, 2014. The severance was determined in accordance with the non-cause termination provisions of Mr. Foust’s existing employment agreement and applicable equity award agreements with the Company.

Same store interest expense increased by approximately $1.3 million for the three months ended June 30, 2014 as compared to the same period in 2013 primarily as a result of interest on our 2023 Notes that were issued in April 2014 partially offset by lower average outstanding mortgage loan balances during 2014 compared to 2013 primarily due to the repayment of the following mortgage loans: Clonshaugh Industrial Estate II (June 2013), 1500 Space Park Drive (July 2013), Paul van Vlissingenstraat 16 (July 2013), Chemin de l’Epinglier 2 (July 2013), Mundells Roundabout (October 2013), Gyroscoopweg 2E-2F (October 2013) and 360 Spear Street (November 2013) along with the redemption of the 2029 Debentures in April 2014. For the six months ended June 30, 2014, interest expense decreased slightly as compared to the same period in 2013 primarily as a result of lower average outstanding mortgage loan and Prudential Shelf Facility balances during 2014 as compared to 2013 along with the redemption of the 2029 Debentures in April 2014, offset by the issuance of our 2025 Notes (January 2013) and 2023 Notes (April 2014). We capitalized interest of approximately $4.9 million and $6.6 million during the three months ended June 30, 2014 and 2013, respectively, and $10.2 million and $12.0 million during the six months ended June 30, 2014 and 2013, respectively.

Excluding the effect of 10 properties contributed to our unconsolidated joint venture and 6 Braham Street (sold in April 2014), new properties expenses (excluding construction management and transactions) increased approximately $0.8 million and $2.3 million for the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. For the three and six months ended June 30, 2014, 7401 E. Ben White Boulevard, 1500 Towerview Road and 8201 E. Riverside Drive contributed $0.5 million, or 62%, and $1.8 million, or 75%, respectively, of the total new properties increase in total operating expenses (excluding construction management and transactions) compared to the same periods in 2013.

Transactions expense decreased by approximately $0.7 million and $2.4 million in the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, principally because there have been no acquisitions in 2014 compared to the acquisition of six properties in the six months ended June 30, 2013.

The following table shows expenses for stabilized properties and pre-stabilized properties (all other properties) (in thousands).


	Stabilized							Pre-stabilized
	Three Months Ended June 30,							Three Months Ended June 30,
	2014		2013		Change			2014			2013			Change
Rental property operating and maintenance	$	78,853	$	72,535	$	6,318		$	47,943		$	34,171		$	13,772
Property taxes		13,483		12,677		806			7,112			6,697			415
Insurance		1,306		1,647		(341	)		590			591			(1	)
Construction management ⁽¹⁾		—		—		—			121			294			(173	)
Change in fair value of contingent consideration		—		—		—			766			(370	)		1,136
Depreciation and amortization		81,134		74,311		6,823			55,958			41,556			14,402
General and administrative ⁽²⁾		20,321		17,891		2,430			—			—			—
Transactions ⁽³⁾		—		—		—			755			1,491			(736	)
Other		28		17		11			623			—			623

Total operating expenses	$	195,125	$	179,078	$	16,047		$	113,868		$	84,430		$	29,438

Interest expense ⁽⁴⁾	$	30,510	$	34,964	$	(4,454	)	$	18,636		$	12,619		$	6,017


	Stabilized							Pre-stabilized
	Six Months Ended June 30,							Six Months Ended June 30,
	2014		2013		Change			2014			2013			Change
Rental property operating and maintenance	$	153,885	$	145,618	$	8,267		$	90,807		$	66,568		$	24,239
Property taxes		27,807		27,527		280			14,913			12,889			2,024
Insurance		3,134		3,161		(27	)		1,184			1,282			(98	)
Construction management ⁽¹⁾		—		—		—			285			678			(393	)
Change in fair value of contingent consideration		—		—		—			(2,637	)		930			(3,567	)
Depreciation and amortization		159,236		149,275		9,961			108,476			78,215			30,261
General and administrative ⁽²⁾		50,999		33,842		17,157			—			—			—
Transactions ⁽³⁾		—		—		—			836			3,254			(2,418	)
Other		28		53		(25	)		623			—			623

Total operating expenses	$	395,089	$	359,476	$	35,613		$	214,487		$	163,816		$	50,671

Interest expense ⁽⁴⁾	$	65,040	$	73,463	$	(8,423	)	$	31,480		$	22,198		$	9,282

(1)	Construction management expenses are included entirely in pre-stabilized properties as they are not allocable to specific properties.

(2)	General and administrative expenses are included in stabilized properties as they are not allocable to specific properties.

(3)	Transaction expenses are included entirely in pre-stabilized properties as they are not allocable to stabilized properties.

(4)	Interest expense on our global revolving credit facility and unsecured term loan is allocated on a specific property basis.

Stabilized rental property operating and maintenance expenses increased approximately $6.3 million and $8.3 million in the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013 primarily as a result of higher consumption and utility rates in several of our properties.

Stabilized property taxes increased by approximately $0.8 million and $0.3 million in the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, primarily as a result of higher assessed values in certain properties in the stabilized portfolio in 2014.

Stabilized depreciation and amortization expense increased approximately $6.8 million and $10.0 million in the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, principally because of depreciation of a development project that was placed into service during 2013.

Stabilized interest expense decreased approximately $4.5 million and $8.4 million for the three and six months ended June 30, 2014, respectively, as compared to the same periods in 2013 primarily as a result of lower average outstanding mortgage loan balances during 2014 compared to 2013 primarily due to the repayment of the following mortgage loans: Clonshaugh Industrial Estate II (June 2013), 1500 Space Park Drive (July 2013), Paul van Vlissingenstraat 16 (July 2013), Chemin de l’Epinglier 2 (July 2013), Mundells Roundabout (October 2013), Gyroscoopweg 2E-2F (October 2013) and 360 Spear Street (November 2013) along with the redemption of the 2029 Debentures in April 2014.

Pre-stabilized rental property operating and maintenance expenses increased by approximately $13.8 million and $24.2 million in the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013 primarily as a result of higher consumption and utility rates in several of our properties along with development projects being placed into service leading to higher utility expense in 2014.

Pre-stabilized depreciation and amortization expense increased approximately $14.4 million and $30.3 million in the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013, principally because of depreciation of development projects that were placed into service in late 2013 and during 2014.

Gain on Sale of Property

During the three and six months ended June 30, 2014, we recognized a gain on sale of property of $15.9 million, related to the disposition of 6 Braham Street, which sold for £25.0 million (or approximately $41.5 million based on the exchange rate as of April 7, 2014, the date of sale).

Gain on Contribution of Property to Unconsolidated Joint Venture

During the six months ended June 30, 2014, we recognized a gain of $1.9 million related to the contribution of one property to the PREI joint venture. We received net proceeds of $11.4 million in connection with this transaction and retained our 20% interest in the joint venture.

Liquidity and Capital Resources of the Parent Company

In this “Liquidity and Capital Resources of the Parent Company” section and in the “Liquidity and Capital Resources of the Operating Partnership” section below, the term, our “parent company”, refers to Digital Realty Trust, Inc. on an unconsolidated basis, excluding our operating partnership.

Analysis of Liquidity and Capital Resources

Our parent company’s business is operated primarily through our operating partnership of which our parent company is the sole general partner and which it consolidates for financial reporting purposes. Because our parent company operates on a consolidated basis with our operating partnership, the section entitled “Liquidity and Capital Resources of the Operating Partnership” should be read in conjunction with this section to understand the liquidity and capital resources of our parent company on a consolidated basis and how our company is operated as a whole.

Our parent company issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the operating partnership. Our parent company itself does not hold any indebtedness other than guarantees of the indebtedness of our operating partnership and certain of its subsidiaries, and its only material asset is its ownership of partnership interests of our operating partnership. Therefore, the consolidated assets and liabilities and the consolidated revenues and expenses of our parent company and our operating partnership are the same on their respective financial statements, except for immaterial differences related to cash, other assets and accrued liabilities that arise from public company expenses paid by our parent company. However, all debt is held directly or indirectly at the operating partnership level. Our parent company’s principal funding requirement is the payment of dividends on its common and preferred shares. Our parent company’s principal source of funding for its dividend payments is distributions it receives from our operating partnership.

As the sole general partner of our operating partnership, our parent company has the full, exclusive and complete responsibility for our operating partnership’s day-to-day management and control. Our parent company causes our operating partnership to distribute such portion of its available cash as our parent company may in its discretion determine, in the manner provided in our operating partnership’s partnership agreement. Our parent company receives proceeds from its equity issuances from time to time, but is generally required by our operating partnership’s partnership agreement to contribute the proceeds from its equity issuances to our operating partnership in exchange for partnership units of our operating partnership.

Our parent company is a well-known seasoned issuer with an effective shelf registration statement filed on April 23, 2012 that allows our parent company to register an unspecified amount of various classes of equity securities. As circumstances warrant, our parent company 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 be generally 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.

The liquidity of our parent company is dependent on our operating partnership’s ability to make sufficient distributions to our parent company. The primary cash requirement of our parent company is its payment of dividends to its stockholders. Our parent company also guarantees our operating partnership’s, as well as certain of its subsidiaries’, unsecured debt. If our operating partnership or such subsidiaries fail to fulfill their debt requirements, which trigger parent company guarantee obligations, then our parent company will be required to fulfill its cash payment commitments under such guarantees. However, our parent company’s only asset is its investment in our operating partnership.

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 company and, in turn, for our parent company 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 its ability to make distribution payments to our parent company. The lack of availability of capital could adversely affect our operating partnership’s ability to pay its distributions to our parent company, which would in turn, adversely affect our parent company’s ability to pay cash dividends to its stockholders.

On March 26, 2014 and April 7, 2014, our parent company issued an aggregate of 14.6 million shares of its 7.375% Series H Cumulative Redeemable Preferred Stock for total net proceeds, after underwriting discounts and estimated offering expenses, of $353.4 million, including the proceeds from the partial exercise of the underwriters’ over-allotment option. We used the net proceeds from the offerings to temporarily repay borrowings under our global revolving credit facility.

On April 1, 2014, Digital Stout Holding, LLC, a wholly-owned subsidiary of Digital Realty Trust, L.P, issued £300.0 million (or approximately $498.9 million based on the April 1, 2014 exchange rate of £1.00 to $1.66) aggregate principal amount of its 4.750% Guaranteed Notes due 2023, or the 2023 notes. The 2023 notes are senior unsecured obligations of Digital Stout Holding, LLC and are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and Digital Realty Trust, L.P. Interest on the 2023 notes is payable semiannually in arrears at a rate of 4.750% per annum. The 2023 notes will mature on October 13, 2023. We used the net proceeds from the offering of the 2023 notes to temporarily repay borrowings under our global revolving credit facility.

On April 18, 2014, the Operating Partnership redeemed approximately $5.2 million in aggregate principal amount of the 2029 Debentures pursuant to its option under the indenture governing the 2029 Debentures at a price equal to 100% of the principal amount plus accrued and unpaid interest thereon up to April 18, 2014. In connection with the redemption, the holders of approximately $261.2 million in aggregate principal amount of the 2029 Debentures exchanged such 2029 Debentures for an aggregate of 6,734,938 restricted shares of Digital Realty Trust, Inc. common stock pursuant to the terms of the indenture governing the 2029 Debentures.

On July 11, 2014, we issued an aggregate of 134,974 restricted shares of common stock of Digital Realty Trust, Inc. in exchange for approximately $5.2 million in aggregate principal amount of the 2029 Debentures to certain previous holders of the 2029 Debentures. The holders had the right to exchange the 2029 Debentures for shares of Digital Realty Trust, Inc. common stock, but inadvertently failed to exercise such rights. As a result, the 2029 Debentures were redeemed by the operating partnership for cash. We agreed to issue the shares of the common stock to the holders in exchange for the redemption payment that they received in the original redemption, effectively putting such holders in the same place as if they had originally exercised their rights to exchange their 2029 Debentures for the shares of Digital Realty Trust, Inc. common stock.

Future Uses of Cash

Our parent company may from time to time seek to retire, redeem or repurchase its equity or the debt securities of our operating partnership 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.

We are also subject to the commitments discussed below under “Dividends and Distributions.”

Dividends and Distributions

Our parent company is required to distribute 90% of its taxable income (excluding capital gains) on an annual basis in order for it to continue to qualify as a REIT for federal income tax purposes. Accordingly, our parent company 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 company 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 company’s board of directors. Our parent company considers market factors and our operating partnership’s performance in addition to REIT requirements in determining distribution levels. Our parent company has distributed at least 100% of its taxable income annually since inception to minimize corporate level federal income taxes. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, which are consistent with our intention to maintain our parent company’s status as a REIT.

As a result of this distribution requirement, our operating partnership cannot rely on retained earnings to fund its on-going operations to the same extent that other companies whose parent companies are not REITs can. Our parent company 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 company may be required to use borrowings under our operating partnership’s global revolving credit facility, if necessary, to meet REIT distribution requirements and maintain our parent company’s REIT status.

Our parent company has declared and paid the following dividends on its common and preferred stock for the six months ended June 30, 2014 (in thousands):


Date dividend declared	Dividend payment date		Series E Preferred Stock		Series F Preferred Stock		Series G Preferred Stock		Series H Preferred Stock			Common Stock
February 11, 2014		March 31, 2014	$	5,031	$	3,023	$	3,672	$	—		$	106,743
April 29, 2014		June 30, 2014		5,031		3,023		3,672		7,104	⁽¹⁾		112,357

			$	10,062	$	6,046	$	7,344	$	7,104		$	219,100

Annual rate of dividend per share			$	1.750	$	1.656	$	1.469	$	1.844		$	3.320

(1)	Represents a pro rata dividend from and including the original issue date (March 26, 2014) to and including June 30, 2014.

Distributions out of our parent company’s current or accumulated earnings and profits are generally classified as ordinary income whereas distributions in excess of our company’s current and accumulated earnings and profits, to the extent of a stockholder’s U.S. federal income tax basis in our parent company’s stock, are generally classified as a return of capital. Distributions in excess of a stockholder’s U.S. federal income tax basis in our parent company’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.

Liquidity and Capital Resources of the Operating Partnership

In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we”, “our” and “us” refer to our operating partnership together with its consolidated subsidiaries or our operating partnership and our parent company together with their consolidated subsidiaries, as the context requires.

Analysis of Liquidity and Capital Resources

Our parent company is our sole general partner and consolidates our results of operations for financial reporting purposes. Because we operate on a consolidated basis with our parent company, the section entitled “Liquidity and Capital Resources of the Parent Company” should be read in conjunction with this section to understand our liquidity and capital resources on a consolidated basis.

As of June 30, 2014, we had $80.9 million of cash and cash equivalents, excluding $39.8 million of restricted cash. Restricted cash primarily consists of interest-bearing cash deposits required by the terms of several of our mortgage loans for a variety of purposes, including real estate taxes, insurance, anticipated or contractually obligated tenant improvements, as well as capital expenditures.

Our short-term liquidity requirements primarily consist of operating expenses, development costs and other expenditures associated with our properties, distributions to our parent company in order for it to make dividend payments on its preferred stock, distributions to our parent company in order for it to make dividend payments to its stockholders required to maintain its REIT status, distributions to the unitholders in our operating partnership, capital expenditures, debt service on our loans and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, restricted cash accounts established for certain future payments and by drawing upon our global revolving credit facility.

On August 15, 2013, we refinanced our global revolving credit facility, increasing the total borrowing capacity to $2.0 billion from $1.8 billion. The global revolving credit facility has an accordion feature that would enable us to increase the borrowing capacity of the credit facility to $2.55 billion, subject to the receipt of lender commitments and other conditions precedent. The refinanced facility matures on November 3, 2017, with two six-month extension options. The interest rate for borrowings under the expanded facility equals the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 110 basis points. An annual facility fee on the total commitment amount of the facility, based on the credit rating of our long-term debt and currently 20 basis points, is payable quarterly. Funds may be drawn in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as Euro, British pound sterling, Swiss franc, Japanese yen and Mexican peso denominations. As of June 30, 2014, borrowings under the global revolving credit facility bore interest at an overall blended rate of 1.91% comprised of 1.25% (U.S. dollars), 1.21% (Euros), 3.76% (Australian dollars), 1.31% (Hong Kong dollars), 1.20% (Japanese yen) and 2.34% (Canadian dollars). The interest rates are based on 1-month LIBOR, 1-month EURIBOR, 1-month BBR, 1-month HIBOR, 1-month JPY LIBOR and 1-month CDOR, respectively, plus a margin of 1.10%. We have used and intend to use borrowings under the global revolving credit facility to acquire additional properties, fund development opportunities and to provide for working capital and other corporate purposes, including

potentially for the repurchase, redemption or retirement of outstanding debt or equity securities. As of June 30, 2014, we have capitalized approximately $18.0 million of financing costs related to the global revolving credit facility. As of June 30, 2014, approximately $374.6 million was drawn under this facility and $24.8 million of letters of credit were issued, leaving approximately $1.6 billion available for use.

On August 15, 2013, we refinanced the senior unsecured multi-currency term loan facility, increasing the total borrowing capacity to $1.0 billion from $750.0 million. Pursuant to the accordion feature, total commitments can be increased up to $1.1 billion, subject to the receipt of lender commitments and other conditions precedent. The facility matures on April 16, 2017, with two six-month extension options. Interest rates are based on our senior unsecured debt ratings and are currently 120 basis points over the applicable index for floating rate advances. Funds may be drawn in U.S, Singapore and Australian dollars, as well as Euro and British pound sterling denominations with the option to add Hong Kong dollars and Japanese yen upon an accordion exercise. Based on exchange rates in effect at June 30, 2014, the balance outstanding is approximately $1,034.8 million. We have used borrowings under the term loan for acquisitions, repayment of indebtedness, development, working capital and general corporate purposes. As of June 30, 2014, we have capitalized approximately $8.4 million of financing costs related to the unsecured term loan.

For a discussion of the potential impact of current global economic and market conditions on our liquidity and capital resources, see “—Factors Which May Influence Future Results of Operations—Global market and economic conditions” above.

Our parent company commenced its At-the-Market equity distribution program in June 2011, which is discussed under “Liquidity and Capital Resources of the Parent Company” above. To date, our parent company has generated net proceeds of approximately $342.7 million from the issuance of approximately 5.7 million shares of common stock under the program at an average price of $60.35 per share after payment of approximately $3.5 million of commissions to the sales agents before offering expenses. The proceeds from the issuances were contributed to us in exchange for the issuance of approximately 5.7 million common units to our parent company. No sales were made under the program during the six months ended June 30, 2014 and 2013. As of June 30, 2014, shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

On March 5, 2014, we contributed the 636 Pierce Street property, which we acquired in December 2013, to our unconsolidated joint venture with a fund managed by Prudential Real Estate Investors (PREI ^® ) that was formed in September 2013. The property was valued at approximately $40.4 million and subject to $26.1 million in debt, which the joint venture assumed. The PREI ^® fund contributed approximately $11.4 million in cash for their 80% share of the net asset value of $14.3 million. Subsequent to the closing, the joint venture refinanced the existing debt with $23.0 million drawn from the joint venture’s bank facility. Including the refinance costs, the PREI ^® fund contributed $17.5 million for the 636 Pierce Street property, bringing their contributed capital in the joint venture to $164.8 million.

The growing acceptance by private institutional investors of the data center asset class has generally pushed capitalization rates lower; as such private investors typically have lower return expectations than us. As a result, we anticipate that near-term acquisitions activity will comprise a smaller percentage of our growth until seller price expectations realign with our return requirements.

Construction

The table below summarizes our construction in progress as of June 30, 2014 and December 31, 2013 (in thousands):


	As of June 30, 2014									As of December 31, 2013
(dollars in thousands)	Net Rentable Square Feet			Current Investment ⁽²⁾		Future Investment ⁽³⁾		Total Cost		Net Rentable Square Feet		Current Investment ⁽⁴⁾		Future Investment ⁽³⁾		Total Cost
Development Lifecycle
Land Inventory		⁽¹	⁾	$	117,878	$	—	$	117,878			$	106,327	$	—	$	106,327
Space Held for Development		1,283,538			361,643		—		361,643		1,331,685		340,076		—		340,076
Base Building Construction		772,000			189,091		49,823		238,914		1,062,647		207,568		120,808		328,376
Datacenter Construction		623,890			282,553		411,507		694,060		697,034		269,669		373,560		643,229
Equipment Pool & Other Inventory					25,274		—		25,274				26,361		—		26,361
Campus, Tenant Improvements & Other					37,250		13,289		50,539				33,129		10,719		43,848

Total Development		2,679,428			1,013,689		474,619		1,488,308		3,091,366		983,130		505,087		1,488,217
Enhancement & Other					67,054		22,517		89,571				60,619		37,594		98,213
Recurring					9,700		10,798		20,498				9,482		7,036		16,518

Total Construction in Progress				$	1,090,443	$	507,934	$	1,598,377			$	1,053,231	$	549,717	$	1,602,948

(1)	Represents approximately 154 acres.

(2)	Represents balances incurred through June 30, 2014.

(3)	Represents estimated cost to complete specific scope of work pursuant to contract, budget or approved capital plan.

(4)	Represents balances incurred through December 31, 2013.

Land inventory and space held for development reflect cumulative cost spent pending future development. Base building construction consists of ongoing improvements to building infrastructure in preparation for future datacenter fit-out. Datacenter construction includes 0.6 million square feet of Turn Key Flex ^® , Powered Base Building ^® , and Custom Solutions product with a cost to date of approximately $282.6 million. Generally, we expect to deliver the space within 12 months; however, lease commencement dates may significantly impact final delivery schedules. Equipment pool and other inventory represent the value of long-lead equipment and materials required for timely deployment and delivery of datacenter construction fit-out. Campus, tenant improvements and other costs include the value of development work which benefits space recently converted to our operating portfolio and is composed primarily of shared infrastructure projects and first generation tenant improvements.

Future Uses of Cash

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. As of June 30, 2014, we had approximately 1.4 million square feet of space under active development and approximately 1.3 million square feet of space held for future development and we also owned approximately 0.6 million net rentable square feet of datacenter space with extensive installed tenant improvements. Turn-Key Flex ^® space is move-in-ready space for the placement of computer and network equipment required to provide a datacenter environment. Depending on demand for additional Turn-Key Flex ^® space, we expect to incur significant tenant improvement costs to build out and develop these types of spaces. At June 30, 2014, approximately 1.4 million square feet was under construction for Turn-Key Flex ^® , Powered Base Building ^® and Custom Solutions (formerly referred to as Build-to-Suit) products, all of which are expected to be income producing on or after completion, in six U.S. domestic markets, two European markets, one Canadian market, one Australian market and our Singapore market, consisting of approximately 0.8 million square feet of base building construction and 0.6 million square feet of data center construction. At June 30, 2014, we had commitments under construction contracts for approximately $214.3 million. We currently expect to incur approximately $425.0 million to $500.0 million of capital expenditures for our development programs during the six months ending December 31, 2014, although this amount may increase or decrease, potentially materially, based on numerous factors, including changes in demand, leasing results and availability of debt or equity capital.

Historical Capital Expenditures (Cash Basis) (in thousands)

The table below summarizes our capital expenditure activity for the six months June 30, 2014 and 2013 (in thousands):


	Six Months Ended June 30,
	2014		2013
Development projects	$	357,958	$	474,071
Enhancement and improvements		32,134		48,680
Recurring capital expenditures		20,040		23,289

Total capital expenditures (excluding indirect costs)	$	410,132	$	546,040

For the six months ended June 30, 2014, total capital expenditures decreased $135.9 million to approximately $410.1 million from $546.0 million for the same period in 2013. Capital expenditures on our development projects plus our enhancement and improvements projects for the six months ended June 30, 2014 were approximately $390.1 million, which reflects a decrease of approximately 25% from the same period in 2013. This decrease was primarily due to completion of and decreased spending for ground-up Custom Solutions projects, Turn-Key Flex and base building improvements. Our development capital expenditures are generally funded by our available cash and equity and debt capital.

Indirect costs, including capitalized interest, capitalized in the six months ended June 30, 2014 and 2013 were $34.0 million and $31.9 million, respectively. Capitalized interest comprised approximately $10.2 million and $12.0 million, respectively, of the total indirect costs capitalized for the six months ended June 30, 2014 and 2013. Capitalized interest in the six months ended June 30, 2014 decreased compared to the same period in 2013 due to a reduction in qualifying activities. Excluding capitalized interest, the increase in indirect costs in the six months ended June 30, 2014 compared to the same period in 2013 was primarily due to capitalized amounts relating to compensation expense of employees directly engaged in construction and leasing 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, 2014.

We are in the process of analyzing the extent of the environmental cleanup work required at the 47700 Kato Road and 1055 Page Avenue property. We intend to seek recovery of costs related to this work from a prior tenant of the building and/or performance by the prior tenant of the required work. We cannot at this time estimate the likelihood of recovery or the impact on our financial condition and results of operations, however, the amounts are not expected to be material.

We are also subject to the commitments discussed below under “Commitments and Contingencies,” “Off-Balance Sheet Arrangements” and “Distributions.”

Consistent with our growth strategy, we actively pursue opportunities for potential acquisitions, with due diligence and negotiations often at different stages at different times. The dollar value of acquisitions for the year ending December 31, 2014 will be based on numerous factors, including tenant demand, leasing results, availability of debt or equity capital and acquisition opportunities.

We may from time to time seek to retire or repurchase our outstanding debt or the equity of our parent company through cash purchases and/or exchanges for equity securities of our parent company in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions or other factors. The amounts involved may be material.

We expect to meet our short- and long-term liquidity requirements, including to pay for scheduled debt maturities and to fund property 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 company. We also may fund future short- and long-term liquidity requirements, including property acquisitions and non-recurring capital improvements using our global revolving credit facility pending permanent financing. If we are not able to obtain additional financing on terms attractive to us, or at all, including as a result of the circumstances described above under “Factors Which May Influence Future Results of Operations—Global market and economic conditions”, we may be required to reduce our acquisition or capital expenditure plans, which could have a material adverse effect upon our business and results of operations.

Distributions

All distributions on our units are at the discretion of our parent company’s board of directors. During the six months ended June 30, 2014, our operating partnership declared and paid the following distributions (in thousands):


Date distribution declared	Distribution payment date	Series E Preferred Units		Series F Preferred Units		Series G Preferred Units		Series H Preferred Units			Common Units
February 11, 2014	March 31, 2014	$	5,031	$	3,023	$	3,672	$	—		$	109,378
April 29, 2014	June 30, 2014	$	5,031	$	3,023	$	3,672	$	7,104	⁽¹⁾	$	115,008

		$	10,062	$	6,046	$	7,344	$	7,104		$	224,386

Annual rate of distribution per unit		$	1.750	$	1.656	$	1.469	$	1.844		$	3.320

(1)	Represents a pro rata distribution from and including the original issue date (March 26, 2014) to and including June 30, 2014.

Commitments and Contingencies

As of June 30, 2014, we were a party to interest rate swap agreements which hedge variability in cash flows related the U.S. LIBOR and SGD-SOR based tranches of the unsecured term loan. Under these swaps, we pay variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amounts. See Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

Outstanding Consolidated Indebtedness

The table below summarizes our debt, as of June 30, 2014 (in millions):


Debt Summary:
Fixed rate	$	3,449.7
Variable rate debt subject to interest rate swaps		562.9

Total fixed rate debt (including interest rate swaps)		4,012.6
Variable rate—unhedged		846.6

Total	$	4,859.2

Percent of Total Debt:
Fixed rate (including swapped debt)		82.6	%
Variable rate		17.4	%

Total		100.0	%

Effective Interest Rate as of June 30, 2014 ⁽¹⁾ :
Fixed rate (including hedged variable rate debt)		4.55	%
Variable rate		1.96	%
Effective interest rate		4.10	%

(1)	Excludes impact of deferred financing cost amortization.

As of June 30, 2014, we had approximately $4.9 billion of outstanding consolidated long-term debt as set forth in the table above. Our ratio of debt to total enterprise value was approximately 35% (based on the closing price of Digital Realty Trust, Inc.’s common stock on June 30, 2014 of $58.32). 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), excluding options issued under our incentive award plan, plus the liquidation value of Digital Realty Trust, Inc.’s preferred stock, plus the aggregate value of our operating partnership’s 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 at interest rates based on various one-month LIBOR, EURIBOR, GBP LIBOR, SIBOR, BBR, HIBOR, JPY LIBOR and CDOR rates, depending on the respective agreement governing the debt, including our global revolving credit facility and unsecured term loan. As of June 30, 2014, our debt had a weighted average term to initial maturity of approximately 5.2 years (or approximately 5.5 years assuming exercise of extension options).

Off-Balance Sheet Arrangements

As of June 30, 2014, we were party to interest rate swap agreements related to $562.9 million of outstanding principal on our variable rate debt. See Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

As of June 30, 2014, our pro-rata share of debt of unconsolidated joint ventures was approximately $117.7 million, of which $44.3 million is subject to interest rate swap agreements.

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 Six Months Ended June 30, 2014 to Six Months Ended June 30, 2013

The following table shows cash flows and ending cash and cash equivalent balances for the six months ended June 30, 2014 and 2013 (in thousands).


	Six Months Ended June 30,
	2014			2013			Change
Net cash provided by operating activities	$	315,264		$	275,507		$	39,757
Net cash used in investing activities		(403,816	)		(712,248	)		308,432
Net cash provided by financing activities		112,670			404,720			(292,050	)

Net increase (decrease) in cash and cash equivalents	$	24,118		$	(32,021	)	$	56,139

The increase in net cash provided by operating activities was due to increased cash flows from new leasing at our same store properties, completed and leased development space and our acquisition of new operating properties in the twelve months ended June 30, 2014, which was partially offset by increased operating expenses.

Net cash used in investing activities decreased for the six months ended June 30, 2014, as we had a decrease in cash paid for capital expenditures for the six months ended June 30, 2014 ($431.2 million) as compared to the same period in 2013 ($577.1 million), along with a decrease in cash paid for acquisitions for the six months ended June 30, 2014 ($0) as compared to in the same period in 2013 ($117.3 million).

Net cash flows provided by financing activities for the company consisted of the following amounts (in thousands).


	Six Months Ended June 30,
	2014			2013			Change
Proceeds from borrowings, net of repayments	$	(373,468	)	$	(140,053	)	$	(233,415	)
Net proceeds from issuance of common and preferred stock, including exercise of stock options		353,522			241,325			112,197
Net proceeds from 2023 Notes		495,872			—			495,872
Net proceeds from 2025 Notes		—			630,026			(630,026	)
Dividend and distribution payments		(357,327	)		(317,900	)		(39,427	)
Other		(5,929	)		(8,678	)		2,749

Net cash provided by financing activities	$	112,670		$	404,720		$	(292,050	)

The decrease in net cash provided by financing activities was primarily due to the issuance of our 2025 Notes (net proceeds of $630.0 million) in January 2013 along with lower net repayments during the six months ended June 30, 2013 (net repayments of $140.1 million) as compared to the six months ended June 30, 2014 (net repayments of $373.5 million) partially offset by the issuance of our 2023 Notes (net proceeds of $495.9 million) in April 2014. The increase in dividend and distribution payments for the six months ended June 30, 2014 as compared to the same period in 2013 was due to an increase in the number of shares outstanding and dividend amount per share of common stock in 2014 as compared to 2013 and the payment of dividends on our series G preferred stock and series H preferred stock during the six months ended June 30, 2014, whereas these series of preferred stock were not outstanding for the entire portion of the six months ended June 30, 2013.

Net cash flows provided by financing activities for the operating partnership consisted of the following amounts (in thousands).


	Six Months Ended June 30,
	2014			2013			Change
Proceeds from borrowings, net of repayments	$	(373,468	)	$	(140,053	)	$	(233,415	)
General partner contributions, net		353,522			241,325			112,197
Net proceeds from 2023 Notes		495,872			—			495,872
Net proceeds from 2025 Notes		—			630,026			(630,026	)
Distribution payments		(357,327	)		(317,900	)		(39,427	)
Other		(5,929	)		(8,678	)		2,749

Net cash provided by financing activities	$	112,670		$	404,720		$	(292,050	)

The decrease in net cash provided by financing activities was primarily due to the issuance of our 2025 Notes (net proceeds of $630.0 million) in January 2013, along with lower net repayments during the six months ended June 30, 2013 (net repayments of $140.1 million) as compared to the six months ended June 30, 2014 (net repayments of $373.5 million) partially offset by the issuance of our 2023 Notes (net proceeds of $495.9 million) in April 2014. The increase in distribution payments for the six months ended June 30, 2014 as compared to the same period in 2013 was due to an increase in the number of units outstanding and distribution amount per common unit in 2014 as compared to 2013 and the payment of distributions on our series G preferred units and series H preferred units during the six months ended June 30, 2014, whereas these series of preferred units were not outstanding for the entire portion of the six months ended June 30, 2013.

Noncontrolling Interests in Operating Partnership

Noncontrolling interests relate to the common units in our operating partnership that are not owned by Digital Realty Trust, Inc., which, as of June 30, 2014, amounted to 2.3% of our operating partnership common units. In conjunction with our formation, our operating partnership issued common units to third party sellers in connection with our acquisition of real estate interests from such third parties.

Limited partners who acquired common units in connection with our formation have the right to require our operating partnership to redeem part or all of their common units for cash based upon the fair market value of an equivalent number of shares of Digital Realty Trust, Inc. common stock at the time of the redemption. Alternatively, we 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 registration rights agreements we entered into with third party contributors, we filed a shelf registration statement covering the issuance of the shares of our common stock issuable upon redemption of the common units, and the resale of those shares of common stock by the holders.

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.

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, or NAREIT. FFO represents net income (loss) available to common stockholders (computed in accordance with U.S. GAAP), excluding gains (or losses) from sales of property, impairment charges, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, 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 properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, 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 such other REITs’ FFO. Accordingly, 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 data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income available to common stockholders	$	41,510		$	47,077		$	75,696		$	89,734
Adjustments:
Noncontrolling interests in operating partnership		873			936			1,566			1,760
Real estate related depreciation and amortization ⁽¹⁾		135,938			114,913			265,434			225,603
Real estate related depreciation and amortization related to investment in unconsolidated joint ventures		1,802			797			3,430			1,630
Gain on sale of property		(15,945	)		—			(15,945	)		—
Gain on contribution of property to unconsolidated joint venture		—			—			(1,906	)		—

FFO available to common stockholders and unitholders ⁽²⁾	$	164,178		$	163,723		$	328,275		$	318,727

Basic FFO per share and unit	$	1.20		$	1.25		$	2.45		$	2.45
Diluted FFO per share and unit ⁽²⁾	$	1.20		$	1.22		$	2.41		$	2.37
Weighted average common stock and units outstanding
Basic		136,615			130,974			133,894			129,937
Diluted ⁽²⁾		137,912			137,787			137,979			137,676
(1) Real estate related depreciation and amortization was computed as follows:
Depreciation and amortization per income statement		137,092			115,867			267,712			227,490
Non-real estate depreciation		(1,154	)		(954	)		(2,278	)		(1,887	)

	$	135,938		$	114,913		$	265,434		$	225,603

(2)

At June 30, 2013, we had no series D convertible preferred shares outstanding, as a result of the conversion of all remaining shares on February 26, 2013, which calculates into 949 common shares on a weighted average basis for the six months ended June 30, 2013. For all periods presented, we have excluded the effect of dilutive series E, series F, series G and series H preferred stock, as applicable, that may be converted upon the occurrence of specified change in control transactions as described in the articles supplementary governing the series E, series F, series G and series H preferred stock, as applicable, which we consider highly improbable. In addition, we had a balance of $0 and $266,400 of 5.50% exchangeable senior debentures due 2029 that were exchangeable for 1,122 and 6,610 common shares on a weighted average basis for the three months ended June 30, 2014 and June 30, 2013, respectively, and were exchangeable for 3,948 and 6,600 common shares on a weighted average basis for the six months ended June 30, 2014 and June 30, 2013, respectively. See below for calculations of diluted FFO available to common stockholders and unitholders and weighted average common stock and units outstanding.


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
FFO available to common stockholders and unitholders	$	164,178	$	163,723	$	328,275	$	318,727
Add: 5.50% exchangeable senior debentures interest expense		675		4,050		4,725		8,100

FFO available to common stockholders and unitholders—diluted	$	164,853	$	167,773	$	333,000	$	326,827


Weighted average common stock and units outstanding		136,615		130,974		133,894		129,937
Add: Effect of dilutive securities (excluding series D convertible preferred stock and 5.50% exchangeable senior debentures)		175		203		137		190
Add: Effect of dilutive series D convertible preferred stock		—		—		—		949
Add: Effect of dilutive 5.50% exchangeable senior debentures		1,122		6,610		3,948		6,600

Weighted average common stock and units outstanding—diluted		137,912		137,787		137,979		137,676

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 rating 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 June 30, 2014, our consolidated debt was as follows (in millions):


	Carrying Value		Estimated Fair Value
Fixed rate debt	$	3,449.7	$	3,581.5
Variable rate debt subject to interest rate swaps		562.9		562.9

Total fixed rate debt (including interest rate swaps)		4,012.6		4,144.4
Variable rate debt		846.6		846.6

Total outstanding debt	$	4,859.2	$	4,991.0

Interest rate derivatives included in this table and their fair values as of June 30, 2014 and December 31, 2013 were as follows (in thousands):


Notional Amount													Fair Value at Significant Other Observable Inputs (Level 2)
As of June 30, 2014			As of December 31, 2013			Type of Derivative	Strike Rate		Effective Date		Expiration Date		As of June 30, 2014			As of December 31, 2013

	*Currently-paying contracts*
	$410,905	⁽¹⁾	$	410,905	⁽¹⁾	Swap		0.717		Various		Various	$	(1,080	)	$	(76	)
	152,013	⁽²⁾		150,040	⁽²⁾	Swap		0.925		Jul. 17, 2012		Apr. 18, 2017		(376	)		131

	562,918			560,945										(1,456	)		55


	*Forward-starting contracts*
	150,000	⁽³⁾		—		Forward- starting Swap		2.091		Jul. 15, 2014		Jul. 15, 2019		(2,871	)		—


	*Total*
	$712,918		$	560,945									$	(4,327	)	$	55

(1)	Represents the U.S. dollar tranche of the unsecured term loan.

(2)	Represents a portion of the Singapore dollar tranche of the unsecured term loan. Translation to U.S. dollars is based on exchange rate of $0.80 to 1.00 SGD as of June 30, 2014 and $0.79 to 1.00 SGD as of December 31, 2013.

(3)

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 June 30, 2014:


Assumed event	Interest rate change (basis points)			Change ($ millions)
Increase in fair value of interest rate swaps following an assumed 10% increase in interest rates		9		$	1.8
Decrease in fair value of interest rate swaps following an assumed 10% decrease in interest rates		(9	)		(1.8	)
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		9			0.8
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		(9	)		(0.8	)
Increase in fair value of fixed rate debt following a 10% decrease in interest rates		(9	)		16.5
Decrease in fair value of fixed rate debt following a 10% increase in interest rates		9			(15.6	)

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

For the three and six months ended June 30, 2014 and 2013, we had foreign operations in the United Kingdom, Ireland, France, The Netherlands, Switzerland, Canada, Singapore, Australia and Hong Kong as well as Japan in the three and six months ended June 30, 2014, and, as such, are subject to risk from the effects of exchange rate movements of foreign currencies, which may affect future costs and cash flows. Our foreign operations are conducted in the British pound sterling, Euro, Swiss franc, Australian dollar, Singapore dollar, Canadian dollar, Hong Kong dollar and the Japanese yen. Our primary currency exposures are to the British pound sterling, Euro and the Singapore dollar. We attempt to mitigate a portion of the risk of currency fluctuation by financing our investments in the local currency, although there can be no assurance that this will be effective. As a result, changes in the relation of any such foreign currency to U.S. dollars may affect our revenues, operating margins and distributions and may also affect the book value of our assets and the amount of stockholders’ equity. For the three months ended June 30, 2014 and 2013, operating revenues from properties outside the United States contributed $95.9 million and $86.6 million, respectively, which represented 23.9% and 23.8% of our total operating revenues, respectively. For the six months ended June 30, 2014 and 2013, operating revenues from properties outside the United States contributed $191.3 million and $171.0 million, respectively, which represented 24.2% and 23.7% of our total operating revenues, respectively. Net investment in properties outside the United States was $2.8 billion and $2.7 billion as of June 30, 2014 and December 31, 2013, respectively. Net assets in foreign operations were approximately $0.7 billion and $1.2 billion as of June 30, 2014 and December 31, 2013, respectively. The decrease was a result of the issuance of the 2023 Notes in April 2014, the proceeds of which were used to pay down British pound sterling and U.S. dollar borrowings on the global revolving credit facility.

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 interim 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 interim 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 interim chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level.

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.

On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued an updated version of its Internal Control — Integrated Framework (2013 Framework). Originally issued in 1992 (1992 Framework), the framework helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application. The 1992 Framework remains available during the transition period, which extends to December 15, 2014, after which time COSO will consider it as superseded by the 2013 Framework. As of June 30, 2014, the company continues to utilize the 1992 Framework during the transition to the 2013 Framework by the end of 2014. We expect that management’s assessment of the overall effectiveness of our internal controls over financial reporting for the year ending December 31, 2014 will be based on the 2013 Framework and that the change will not be significant to our overall control structure 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 interim 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 interim 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 interim 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.

On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued an updated version of its Internal Control — Integrated Framework (2013 Framework). Originally issued in 1992 (1992 Framework), the framework helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application. The 1992 Framework remains available during the transition period, which extends to December 15, 2014, after which time COSO will consider it as superseded by the 2013 Framework. As of June 30, 2014, the operating partnership continues to utilize the 1992 Framework during the transition to the 2013 Framework by the end of 2014. We expect that management’s assessment of the overall effectiveness of our internal controls over financial reporting for the year ending December 31, 2014 will be based on the 2013 Framework and that the change will not be significant to our overall control structure over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

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, as amended, for the year ended December 31, 2013 continue to apply to our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Digital Realty Trust, Inc.

On April 22, 2014, Digital Realty Trust, Inc. issued 6,734,938 restricted shares of its common stock in exchange for approximately $261.2 million in aggregate principal amount of the 2029 Debentures at the request of the holders pursuant to the terms of the indenture governing the 2029 Debentures.

The shares were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. The issuance of the shares did not involve a public offering and was made without general solicitation or advertising. Each holder represented that, among other things, it is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended.

Digital Realty Trust, L.P.

In connection with the issuance by Digital Realty Trust, Inc. of 6,734,938 restricted shares of its common stock in exchange for approximately $261.2 million in aggregate principal amount of the 2029 Debentures at the request of the holders pursuant to the terms of the indenture governing the 2029 Debentures, our operating partnership issued to Digital Realty Trust, Inc. 6,734,938 common units in exchange for such shares.

During the three months ended June 30, 2014, Digital Realty Trust, Inc. issued an aggregate of 15,217 shares of its common stock upon the exercise of stock options. Digital Realty Trust, Inc. contributed the proceeds of approximately $199,000 to our operating partnership in exchange for an aggregate of 15,217 common units, as required by our operating partnership’s partnership agreement.

During the three months ended June 30, 2014, Digital Realty Trust, Inc. issued, net of forfeitures, an aggregate of 2,896 shares of its common stock in connection with restricted stock awards for no cash consideration. For each share of common stock issued by Digital Realty Trust, Inc. in connection with such awards, our operating partnership issued a restricted common unit to Digital Realty Trust, Inc. During the three months ended June 30, 2014, our operating partnership issued an aggregate of 2,896 common units to Digital Realty Trust, Inc., as required by our operating partnership’s partnership agreement.

For these issuances of common units to Digital Realty Trust, Inc., our operating partnership relied on Digital Realty Trust, Inc.’s status as a publicly traded NYSE-listed company with over $9 billion in total consolidated assets and as our operating partnership’s majority owner and general partner as the basis for the exemption under Section 4(2) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.


Exhibit Number		Description

3.1		Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended (incorporated by reference to Exhibit 4.1 to Digital Realty Trust, Inc.’s Registration Statement on Form S-8 filed on April 28, 2014).

3.2		Fifth Amended and Restated Bylaws of Digital Realty Trust, Inc. (incorporated by reference to Exhibit 3.1 to Digital Realty Trust, Inc.’s Current Report on Form 8-K filed on May 2, 2014).

3.3		Certificate of Limited Partnership of Digital Realty Trust, L.P. (incorporated by reference to Exhibit 3.1 to Digital Realty Trust, L.P.’s General Form for Registration of Securities on Form 10 filed on June 25, 2010 (File No. 000-54023)).

3.4		Thirteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as amended (incorporated by reference to Exhibit 3.4 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. filed on May 12, 2014).

4.1		Specimen Certificate for Digital Realty Trust, Inc.’s 7.375% Series H Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to Digital Realty Trust, Inc.’s Registration Statement on Form 8-A filed on March 21, 2014).

4.2		Indenture, dated as of April 1, 2014, among Digital Stout Holding, LLC, 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 and a transfer agent, including the form of the 4.750% Guaranteed Notes due 2023 (incorporated by reference to Exhibit 4.1 to the Combined Current Report of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. on Form 8-K filed on April 1, 2014).

10.1†		Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan.

12.1		Statement of Computation of Ratios.

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer for Digital Realty Trust, Inc.

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer for Digital Realty Trust, L.P.

32.1		18 U.S.C. § 1350 Certification of Chief Executive Officer and Chief Financial Officer for Digital Realty Trust, Inc.

32.2		18 U.S.C. § 1350 Certification of Chief Executive Officer and 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 June 30, 2014, formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013; (ii) Condensed Consolidated Income Statements for the three and six months ended June 30, 2014 and 2013; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013; (iv) Condensed Consolidated Statements of Equity/Capital for the six months ended June 30, 2014; (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013; and (vi) Notes to Condensed Consolidated Financial Statements.

†	Management contract or compensatory plan or arrangement.

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.


				DIGITAL REALTY TRUST, INC.

August 7, 2014				/ S / A. W ILLIAM S TEIN
				A. William Stein Interim Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial officer)

August 7, 2014				/ S / E DWARD F. S HAM
				Edward F. Sham Sr. Vice President and Controller (principal accounting officer)

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.


		DIGITAL REALTY TRUST, L.P.

		By: Digital Realty Trust, Inc. Its general partner

		By:

August 7, 2014		/s/ A. W ILLIAM S TEIN
		A. William Stein Interim Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial officer)

August 7, 2014		/s/ E DWARD F. S HAM
		Edward F. Sham Sr. Vice President and Controller (principal accounting officer)

Exhibit Index


Exhibit Number		Description

3.1		Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended (incorporated by reference to Exhibit 4.1 to Digital Realty Trust, Inc.’s Registration Statement on Form S-8 filed on April 28, 2014).

3.2		Fifth Amended and Restated Bylaws of Digital Realty Trust, Inc. (incorporated by reference to Exhibit 3.1 to Digital Realty Trust, Inc.’s Current Report on Form 8-K filed on May 2, 2014).

3.3		Certificate of Limited Partnership of Digital Realty Trust, L.P. (incorporated by reference to Exhibit 3.1 to Digital Realty Trust, L.P.’s General Form for Registration of Securities on Form 10 filed on June 25, 2010 (File No. 000-54023)).

3.4		Thirteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as amended (incorporated by reference to Exhibit 3.4 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. filed on May 12, 2014).

4.1		Specimen Certificate for Digital Realty Trust, Inc.’s 7.375% Series H Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to Digital Realty Trust, Inc.’s Registration Statement on Form 8-A filed on March 21, 2014).

4.2		Indenture, dated as of April 1, 2014, among Digital Stout Holding, LLC, 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 and a transfer agent, including the form of the 4.750% Guaranteed Notes due 2023 (incorporated by reference to Exhibit 4.1 to the Combined Current Report of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. on Form 8-K filed on April 1, 2014).

10.1†		Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan.

12.1		Statement of Computation of Ratios.

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer for Digital Realty Trust, Inc.

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer for Digital Realty Trust, L.P.

32.1		18 U.S.C. § 1350 Certification of Chief Executive Officer and Chief Financial Officer for Digital Realty Trust, Inc.

32.2		18 U.S.C. § 1350 Certification of Chief Executive Officer and 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 June 30, 2014, formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013; (ii) Condensed Consolidated Income Statements for the three and six months ended June 30, 2014 and 2013; (iii) Condensed Consolidated Statements Comprehensive Income for the three and six months ended June 30, 2014 and 2013; (iv) Condensed Consolidated Statements of Equity/Capital for the six months ended June 30, 2014; (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013; and (vi) Notes to Condensed Consolidated Financial Statements.

†	Management contract or compensatory plan or arrangement.

Exhibit 10.1

DIGITAL REALTY TRUST, INC., DIGITAL SERVICES, INC.

AND DIGITAL REALTY TRUST, L.P.

2014 INCENTIVE AWARD PLAN

ARTICLE 1.

PURPOSE

The purpose of the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan (the “ Plan ”) is to promote the success and enhance the value of Digital Realty Trust, Inc., a Maryland corporation (the “ Company ”), Digital Services, Inc. (the “ Services Company ”) and Digital Realty Trust, L.P. (the “ Partnership ”) by linking the individual interests of Employees, Consultants and members of the Board and Services Company Directors to those of the Company’s stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company, the Services Company, the Partnership and their subsidiaries in their ability to motivate, attract, and retain the services of those individuals upon whose judgment, interest, and special effort the successful conduct of the Company’s, the Services Company’s and the Partnership’s operation is largely dependent.

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

2.1 “ Administrator ” shall mean the entity that conducts the general administration of the Plan as provided in Article 12 hereof. With reference to the duties of the Administrator under the Plan which have been delegated to one or more persons pursuant to Section 12.6 hereof, or which the Board has assumed, the term “Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.

2.2 “ Affiliate ” shall mean the Partnership, the Services Company, any Parent or any Subsidiary.

2.3 “ Applicable Accounting Standards ” shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.

2.4 “ Applicable Law ” shall mean any applicable law, including without limitation, (a) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (b) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state, local or foreign; and (c) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.

2.5 “ Award ” shall mean an Option, a Restricted Stock award, a Performance Award, a Dividend Equivalent award, a Stock Payment award, a Restricted Stock Unit award, a Performance Share award, an Other Incentive Award, a Profits Interest Unit award or a Stock Appreciation Right, which may be awarded or granted under the Plan.

2.6 “ Award Agreement ” shall mean any written notice, agreement, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan.

2.7 “ Board ” shall mean the Board of Directors of the Company.

2.8 “ Change in Control ” shall mean the occurrence of any of the following events:

(a) A transaction or series of transactions (other than an offering of Shares to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, the Services Company, the Partnership or any Subsidiary, an employee benefit plan maintained by any of the foregoing entities or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than thirty-five percent (35%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

(b) Individuals who, as of the Effective Date, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.8(a) or Section 2.8(c) hereof) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors as of the Effective Time or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction:

(i) Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “ Successor Entity ”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(ii) After which no person or group beneficially owns voting securities representing thirty-five percent (35%) or more of the combined voting power of the Successor Entity; provided , however , that no person or group shall be treated for purposes of this Section 2.8(c)(ii) as beneficially owning thirty-five percent (35%) or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

(d) Approval by the Company’s stockholders of a liquidation or dissolution of the Company.

Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A of the Code, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event” (within the meaning of Section 409A of the Code). Consistent with the terms of this Section 2.8, the Administrator shall have full and final authority to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto.

2.9 “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and official guidance promulgated thereunder, whether issued prior or subsequent to the grant of any Award.

2.10 “ Committee ” shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board described in Article 12 hereof.

2.11 “ Common Stock ” shall mean the common stock of the Company, par value $0.01 per share.

2.12 “ Company ” shall mean Digital Realty Trust, Inc., a Maryland corporation.

2.13 “ Consultant ” shall mean any consultant or advisor of the Company, the Services Company, the Partnership or any Subsidiary who qualifies as a consultant or advisor under the applicable rules of Form S-8 Registration Statement.

2.14 “ Covered Employee ” shall mean any Employee who is, or could become, a “covered employee” within the meaning of Section 162(m) of the Code.

2.15 “ Director ” shall mean a member of the Board, as constituted from time to time.

2.16 “ Dividend Equivalent ” shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 9.2 hereof.

2.17 “ DRO ” shall mean a “domestic relations order” as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.

2.18 “ Effective Date ” shall mean the date of the 2014 annual meeting of stockholders of the Company, provided that the Plan is approved by the Company’s stockholders on such date.

2.19 “ Eligible Individual ” shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Administrator.

2.20 “ Employee ” shall mean any officer or other employee (within the meaning of Section 3401(c) of the Code) of the Company, the Services Company, the Partnership or any Subsidiary.

2.21 “ Equity Restructuring ” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding stock-based Awards.

2.22 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time.

2.23 “ Fair Market Value ” shall mean, as of any given date, the value of a Share determined as follows:

(a) If the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(b) If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(c) If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.

2.24 “ Greater Than 10% Stockholder” shall mean an individual then-owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any “parent corporation” or “subsidiary corporation” (as defined in Sections 424(e) and 424(f) of the Code, respectively).

2.25 “ Incentive Stock Option ” shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.

2.26 “ Individual Award Limit ” shall mean the cash and share limits applicable to Awards granted under the Plan, as set forth in Section 3.3 hereof.

2.27 “ Non-Employee Director ” shall mean a Director of the Company or a Services Company Director, in either case, who is not an Employee.

2.28 “ Non-Qualified Stock Option ” shall mean an Option that is not an Incentive Stock Option or which is designated as an Incentive Stock Option but does not meet the applicable requirements of Section 422 of the Code.

2.29 “ Option ” shall mean a right to purchase Shares at a specified exercise price, granted under Article 6 hereof. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided , however , that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.

2.30 “ Other Incentive Award ” shall mean an Award denominated in, linked to or derived from Shares or value metrics related to Shares, granted pursuant to Section 9.6 hereof.

2.31 “ Parent ” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

2.32 “ Participant ” shall mean a person who has been granted an Award pursuant to the Plan.

2.33 “ Partnership ” shall mean Digital Realty Trust, L.P.

2.34 “ Partnership Agreement ” shall mean the Twelfth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as the same may be amended, modified or restated from time to time.

2.35 “ Performance Award ” shall mean an Award that is granted under Section 9.1 hereof.

2.36 “ Performance-Based Compensation ” shall mean any compensation that is intended to qualify as “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

2.37 “ Performance Criteria ” shall mean the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:

(a) The Performance Criteria that shall be used to establish Performance Goals are limited to the following: (i) net earnings (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation, (D) amortization, and (E) non-cash equity-based compensation expense); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings or profit; (vi) cash flow (including, but not limited to, operating cash flow, free cash flow and cash flow return on capital); (vii) return on assets; (viii) return on net assets; (ix) return on capital or return on invested capital; (x) return on stockholders’ equity; (xi) total stockholder return; (xii) return on sales; (xiii) gross or net profit or operating margin; (xiv) costs; (xv) funds from operations; (xvi) adjusted funds from operations; (xvii) core funds from operations; (xviii) cash available for distribution; (xvix) productivity; (xx) expenses; (xxi) margins; (xxii) working capital; (xxiii) earnings per share; (xxiv) adjusted earnings per share; (xxv) price per Share; (xxvi) leasing activity; (xxvii) implementation or completion of critical projects; (xxviii) market share; (xxix) economic value (as determined by the Administrator); (xxx) debt levels or reduction; (xxxi) sales-related goals; (xxxii) comparisons with other stock market indices; (xxxiii) operating efficiency; (xxxiv) financing and other capital raising transactions; (xxxv) recruiting and maintaining personnel; (xxxvi) year-end cash; (xxxvii) acquisition activity; (xxxviii) investment sourcing activity; (xxxix) customer service; (xxxx) customer satisfaction; (xxxxi) employee satisfaction; and (xxxxii) marketing initiatives, any of which may be measured either in absolute terms for the Company or any operating unit of the Company or as compared to any incremental increase or decrease, or on a relative basis, or as compared to results of a peer group or to market performance indicators or indices.

(b) The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include, but are not limited to, one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the sale or disposition of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments; (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in Applicable Law, accounting principles or business conditions. For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

2.38 “ Performance Goals ” shall mean, for a Performance Period, one or more goals established in writing by the Administrator for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall performance of the Company, the Services Company, the Partnership, any Subsidiary, any division or business unit thereof or an individual. The achievement of each Performance Goal shall be determined in accordance with Applicable Accounting Standards.

2.39 “ Performance Period ” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.

2.40 “ Performance Share ” shall mean a contractual right awarded under Section 9.5 hereof to receive a number of Shares or the Fair Market Value of such number of Shares in cash based on the attainment of specified Performance Goals or other criteria determined by the Administrator.

2.41 “ Permitted Transferee ” shall mean, with respect to a Participant, any “family member” of the Participant, as defined under the General Instructions to Form S-8 Registration Statement under the Securities Act or any successor Form thereto, or any other transferee specifically approved by the Administrator, after taking into account Applicable Law.

2.42 “ Plan ” shall mean this Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan, as it may be amended from time to time.

2.43 “ Prior Plan ” shall mean the First Amended and Restated Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan, as amended from time to time.

2.44 “ Profits Interest Unit ” shall mean a “Profits Interest Unit” of the Partnership (as defined in the Partnership Agreement) that is granted pursuant to Section 9.7 hereof and is intended to constitute a “profits interest” within the meaning of the Code.

2.45 “ Program ” shall mean any program adopted by the Administrator pursuant to the Plan containing the terms and conditions intended to govern a specified type of Award granted under the Plan and pursuant to which such type of Award may be granted under the Plan.

2.46 “ REIT ” shall mean a real estate investment trust within the meaning of Sections 856 through 860 of the Code.

2.47 “ Restricted Stock ” shall mean an award of Shares made under Article 8 hereof that is subject to certain restrictions and may be subject to risk of forfeiture.

2.48 “ Restricted Stock Unit ” shall mean a contractual right awarded under Section 9.4 hereof to receive in the future a Share or the cash value of a Share.

2.49 “ Securities Act ” shall mean the Securities Act of 1933, as amended.

2.50 “ Services Company ” shall mean Digital Services, Inc.

2.51 “ Services Company Director ” shall mean a member of the Board of Directors of the Services Company.

2.52 “ Share Limit ” shall have the meaning provided in Section 3.1(a) hereof.

2.53 “ Shares ” shall mean shares of Common Stock.

2.54 “ Stock Appreciation Right ” shall mean a stock appreciation right granted under Article 10 hereof.

2.55 “ Stock Payment ” shall mean a payment in the form of Shares awarded under Section 9.3 hereof.

2.56 “ Subsidiary ” shall mean (a) a corporation, association or other business entity of which fifty percent (50%) or more of the total combined voting power of all classes of capital stock is owned, directly or indirectly, by the Company, the Services Company, the Partnership and/or by one or more Subsidiaries, (b) any partnership or limited liability company of which fifty percent (50%) or more of the equity interests are owned, directly or indirectly, by the Company, the Partnership, the Services Company and/or by one or more Subsidiaries, and (c) any other entity not described in clauses (a) or (b) above of which fifty percent (50%) or more of the ownership and the power (whether voting interests or otherwise), pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Company, the Partnership, the Services Company and/or by one or more Subsidiaries.

2.57 “ Substitute Award ” shall mean an Award granted under the Plan in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, in any case, upon the assumption of, or in substitution for, an outstanding equity award previously granted by a company or other entity that is a party to such transaction; provided , however , that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.

2.58 “ Successor Entity ” shall have the meaning provided in Section 2.8(c)(i) hereof.

2.59 “ Termination of Service ” shall mean:

(a) As to a Consultant, the time when the engagement of a Participant as a Consultant to the Company and its Affiliates is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death or retirement, but, unless otherwise determined by the Administrator, excluding terminations where the Consultant simultaneously commences or remains in employment and/or service as an Employee and/or Director with the Company or any Affiliate.

(b) As to a Non-Employee Director, the time when a Participant who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but, unless otherwise determined by the Administrator, excluding terminations where the Participant simultaneously commences or remains in employment and/or service as an Employee and/or Consultant with the Company or any Affiliate.

(c) As to an Employee, the time when the employee-employer relationship between a Participant and the Company and its Affiliates is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement, but, unless otherwise determined by the Administrator, excluding terminations where the Participant simultaneously commences or remains in service as a Consultant and/or Director with the Company or any Affiliate.

The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, whether a Termination of Service has occurred, whether any Termination of Service resulted from a discharge for cause and whether any particular leave of absence constitutes a Termination of Service; provided , however , that, with respect to Incentive Stock Options, unless the Administrator otherwise provides in the terms of any Program, Award Agreement or otherwise, or as otherwise required by Applicable Law, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code. For purposes of the Plan, unless otherwise determined by the Administrator, a Participant’s employee-employer relationship or consultancy relationship shall be deemed to be terminated in the event that the Affiliate employing or contracting with such Participant ceases to remain an Affiliate following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).

ARTICLE 3.

SHARES SUBJECT TO THE PLAN

3.1 Number of Shares .

(a) Subject to Section 3.1(b) and Section 13.2 hereof, the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan shall equal the sum of (i) 1,700,000 Shares, (ii) the number of Shares which, as of the Effective Date, remain available for issuance under the Prior Plan and (iii) any Shares subject to awards outstanding under the Prior Plan as of the Effective Date which, on or after the Effective Date, are forfeited or otherwise terminate or expire for any reason without the issuance of shares to the holder thereof (the “ Share Limit ”). In order that the applicable regulations under the Code relating to Incentive Stock Options be satisfied, the maximum number of Shares that may be issued under the Plan upon the exercise of Incentive Stock Options shall be 1,700,000 Shares. Subject to Section 13.2 hereof, each Profits Interest Unit issued pursuant to an Award shall count as one Share for purposes of calculating the aggregate number of Shares available for issuance under the Plan as set forth in this Section 3.1(a) and for purposes of calculating the Individual Award Limit set forth in Section 3.3 hereof.

(b) If any Shares subject to an Award are forfeited or expire or such Award is settled for cash (in whole or in part), the Shares subject to such Award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future grants of Awards under the Plan and shall be added back to the Share Limit in the same number of Shares as were debited from the Share Limit in respect of the grant of such Award (as may be adjusted in accordance with Section 13.2 hereof). Notwithstanding anything to the contrary contained herein, the following Shares shall not be added back to the Share Limit and will not be available for future grants of Awards: (i) Shares tendered by a Participant or withheld by the Company in payment of the exercise price of an Option; (ii) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award; (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof; and (iv) Shares purchased on the open market with the cash proceeds from the exercise of Options. Any Shares repurchased by the Company under Section 8.4 hereof at the same price paid by the Participant so that such Shares are returned to the Company will again be available for Awards. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the Shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.

(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Affiliate, or with which the Company or any Affiliate combines, has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan, to the extent that grants of Awards using such available shares are permitted without stockholder approval under the rules of the principal securities exchange on which the Common Stock is then listed and made only to individuals who were not employed by or providing services to the Company or its Affiliates immediately prior to such acquisition or combination.

3.2 Stock Distributed . Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock or Common Stock purchased on the open market.

3.3 Limitation on Number of Shares Subject to Awards . Notwithstanding any provision in the Plan to the contrary, and subject to Section 13.2 hereof, (a) the maximum aggregate number of Shares with respect to one or

more Awards that may be granted to any one person during any calendar year shall be 1,500,000 Shares, (b) the maximum aggregate amount of cash that may be paid in cash during any calendar year with respect to one or more Awards payable in cash shall be $10,000,000, and (c) the maximum aggregate value (determined as of the date of grant under Applicable Accounting Standards), determined as of the date of grant, of Awards that may be granted to any Non-Employee Director during any calendar year shall be $500,000 (together, the “ Individual Award Limits ”).

ARTICLE 4.

GRANTING OF AWARDS

4.1 Participation. The Administrator may, from time to time, select from among all Eligible Individuals, those to whom one or more Awards shall be granted and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. No Eligible Individual shall have any right to be granted an Award pursuant to the Plan.

4.2 Award Agreement . Each Award shall be evidenced by an Award Agreement stating the terms and conditions applicable to such Award, consistent with the requirements of the Plan and any applicable Program.

4.3 Limitations Applicable to Section 16 Persons . Notwithstanding anything contained herein to the contrary, with respect to any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, the Plan, any applicable Program and the applicable Award Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule, and such additional limitations shall be deemed to be incorporated by reference into such Award to the extent permitted by Applicable Law.

4.4 At-Will Service . Nothing in the Plan or in any Program or Award Agreement hereunder shall confer upon any Participant any right to continue as an Employee, Director or Consultant of the Company or any Affiliate, or shall interfere with or restrict in any way the rights of the Company or any Affiliate, which rights are hereby expressly reserved, to discharge any Participant at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of any Participant’s employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Participant and the Company or any Affiliate.

4.5 Foreign Participants . Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Affiliates operate or have Employees, Non-Employee Directors or Consultants, or in order to comply with the requirements of any foreign securities exchange, the Administrator, in its sole discretion, shall have the power and authority to: (a) determine which Affiliates shall be covered by the Plan; (b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable; provided , however , that no such subplans and/or modifications shall increase the Share Limit or Individual Award Limits contained in Sections 3.1 and 3.3 hereof, respectively; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate Applicable Law.

4.6 Stand-Alone and Tandem Awards . Awards granted pursuant to the Plan may, in the sole discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

ARTICLE 5.

PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS

PERFORMANCE-BASED COMPENSATION

5.1 Purpose . The Committee, in its sole discretion, may determine whether any Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this Article 5 shall control over any contrary provision contained in the Plan. The Administrator may in its sole discretion grant Awards to Eligible Individuals that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 5 and that are not intended to qualify as Performance-Based Compensation. Unless otherwise specified by the Committee at the time of grant, the Performance Criteria with respect to an Award intended to be Performance-Based Compensation payable to a Covered Employee shall be determined on the basis of Applicable Accounting Standards.

5.2 Applicability . The grant of an Award to an Eligible Individual for a particular Performance Period shall not require the grant of an Award to such Eligible Individual in any subsequent Performance Period and the grant of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in such period or in any other period.

5.3 Procedures with Respect to Performance-Based Awards . To the extent necessary to comply with the requirements of Section 162(m)(4)(C) of the Code, with respect to any Award which is intended to qualify as Performance-Based Compensation, no later than ninety (90) days following the commencement of any Performance Period or any designated fiscal period or period of service (or such earlier time as may be required under Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Eligible Individuals; (b) select the Performance Criteria applicable to the Performance Period; (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Criteria; and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned under such Awards, unless otherwise provided in an Award Agreement, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant, including the assessment of individual or corporate performance for the Performance Period.

5.4 Payment of Performance-Based Awards . Unless otherwise provided in the applicable Program or Award Agreement (and only to the extent otherwise permitted by Section 162(m)(4)(C) of the Code), the holder of an Award that is intended to qualify as Performance-Based Compensation must be employed by the Company or an Affiliate throughout the applicable Performance Period. Unless otherwise provided in the applicable Performance Goals, Program or Award Agreement, a Participant shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such Performance Period are achieved.

5.5 Additional Limitations . Notwithstanding any other provision of the Plan and except as otherwise determined by the Administrator, any Award which is granted to an Eligible Individual and is intended to qualify

as Performance-Based Compensation shall be subject to any additional limitations imposed by Section 162(m) of the Code that are requirements for qualification as Performance-Based Compensation, and the Plan, the Program and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements.

ARTICLE 6.

GRANTING OF OPTIONS

6.1 Granting of Options to Eligible Individuals . The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine which shall not be inconsistent with the Plan.

6.2 Qualification of Incentive Stock Options . No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or any “parent corporation” or “subsidiary corporation” of the Company (as defined in Sections 424(e) and 424(f) of the Code, respectively). No person who qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Participant, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. To the extent that the aggregate fair market value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Participant during any calendar year under the Plan and all other plans of the Company or any “parent corporation” or “subsidiary corporation” of the Company (as defined in Section 424(e) and 424(f) of the Code, respectively) exceeds one hundred thousand dollars ($100,000), the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the Fair Market Value of stock shall be determined as of the time the respective options were granted. In addition, to the extent that any Options otherwise fail to qualify as Incentive Stock Options, such Options shall be treated as Nonqualified Stock Options.

6.3 Option Exercise Price . The exercise price per Share subject to each Option shall be set by the Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).

6.4 Option Term . The term of each Option shall be set by the Administrator in its sole discretion; provided , however , that the term shall not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Participant has the right to exercise the vested Options, which time period may not extend beyond the stated term of the Option. Except as limited by the requirements of Section 409A or Section 422 of the Code, subject to the limitations set forth in the first sentence of this Section 6.4, the Administrator may extend the term of any outstanding Option, and may extend the time period during which vested Options may be exercised, in connection with any Termination of Service of the Participant, and may amend any other term or condition of such Option relating to such a Termination of Service.

6.5 Option Vesting .

(a) The terms and conditions pursuant to which an Option vests in the Participant and becomes exercisable shall be determined by the Administrator and set forth in the applicable Award Agreement. Such vesting may be based on service with the Company or any Affiliate, any of the Performance Criteria, or any other criteria selected by the Administrator. At any time after the grant of an Option, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the vesting of the Option.

(b) No portion of an Option which is unexercisable at a Participant’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in an applicable Program, the applicable Award Agreement or by action of the Administrator following the grant of the Option.

6.6 Substitute Awards . Notwithstanding the foregoing provisions of this Article 6 to the contrary, in the case of an Option that is a Substitute Award, the price per Share of the Shares subject to such Option may be less than the Fair Market Value per share on the date of grant, provided , however , that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.

6.7 Substitution of Stock Appreciation Rights . The Administrator may, in its sole discretion, substitute an Award of Stock Appreciation Rights for an outstanding Option at any time prior to or upon exercise of such Option; provided , however , that such Stock Appreciation Rights shall be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable, and shall also have the same exercise price and remaining term as the substituted Option.

ARTICLE 7.

EXERCISE OF OPTIONS

7.1 Partial Exercise . An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of Shares.

7.2 Manner of Exercise . All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, or such other person or entity designated by the Administrator, or his or its office, as applicable:

(a) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Participant or other person then entitled to exercise the Option or such portion of the Option;

(b) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with Applicable Law. The Administrator may, in its sole discretion, also take such additional actions as it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;

(c) In the event that the Option shall be exercised pursuant to Section 11.3 hereof by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option, as determined in the sole discretion of the Administrator; and

(d) Full payment of the exercise price and applicable withholding taxes to the stock administrator of the Company for the Shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by the Administrator in accordance with Sections 11.1 and 11.2 hereof.

7.3 Notification Regarding Disposition . The Participant shall give the Company prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two (2) years after the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) of such Option to such Participant, or (b) one (1) year after the date of transfer of such Shares to such Participant.

ARTICLE 8.

RESTRICTED STOCK

8.1 Award of Restricted Stock .

(a) The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.

(b) The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock; provided , however , that if a purchase price is charged, such purchase price shall be no less than the par value of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock to the extent required by Applicable Law.

8.2 Rights as Stockholders . Subject to Section 8.4 hereof, upon issuance of Restricted Stock, the Participant shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares, subject to the restrictions in an applicable Program or in the applicable Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided , however , that, in the sole discretion of the Administrator, any extraordinary distributions with respect to the shares shall be subject to the restrictions set forth in Section 8.3 hereof.

8.3 Restrictions . All shares of Restricted Stock (including any shares received by Participants thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of an applicable Program or the applicable Award Agreement, be subject to such restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including, without limitation, criteria based on the Participant’s continued employment, directorship or consultancy with the Company, the Performance Criteria, Company or Affiliate performance, individual performance or other criteria selected by the Administrator. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of any Program or by the applicable Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.

8.4 Repurchase or Forfeiture of Restricted Stock . If no purchase price was paid by the Participant for the Restricted Stock, upon a Termination of Service, the Participant’s rights in unvested Restricted Stock then subject to restrictions shall lapse and be forfeited, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration. If a purchase price was paid by the Participant for the Restricted Stock, upon a Termination of Service the Company shall have the right to repurchase from the Participant the unvested Restricted Stock then-subject to restrictions at a cash price per share equal to the price paid by the Participant for such Restricted Stock or such other amount as may be specified in an applicable Program or the applicable Award Agreement. The Administrator in its sole discretion may provide that, upon certain events, including

without limitation a Change in Control, the Participant’s death, retirement or disability, any other specified Termination of Service or any other event, the Participant’s rights in unvested Restricted Stock shall not terminate, such Restricted Stock shall vest and cease to be forfeitable and, if applicable, the Company shall cease to have a right of repurchase.

8.5 Certificates for Restricted Stock . Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, in its sole discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse.

ARTICLE 9.

PERFORMANCE AWARDS; DIVIDEND EQUIVALENTS; STOCK PAYMENTS;

RESTRICTED STOCK UNITS; PERFORMANCE SHARES; OTHER INCENTIVE

AWARDS; PROFITS INTEREST UNITS

9.1 Performance Awards .

(a) The Administrator is authorized to grant Performance Awards to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation. The value of Performance Awards may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator.

(b) Without limiting Section 9.1(a) hereof, the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to a Participant which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of Article 5 hereof.

9.2 Dividend Equivalents .

(a) Subject to Section 9.2(b) hereof, Dividend Equivalents may be granted by the Administrator, either alone or in tandem with another Award, based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date the Dividend Equivalents are granted to a Participant and the date such Dividend Equivalents terminate or expire, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Administrator. In addition, Dividend Equivalents with respect to Shares covered by a Performance Award shall only be paid out to the Participant at the same time or times and to the same extent that the vesting conditions, if any, are subsequently satisfied and the Performance Award vests with respect to such Shares.

(b) Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights.

9.3 Stock Payments . The Administrator is authorized to make one or more Stock Payments to any Eligible Individual. The number or value of Shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Criteria or any other specific criteria, including service to the Company or any Affiliate, determined by the Administrator. Stock Payments may, but are not required to be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.

9.4 Restricted Stock Units . The Administrator is authorized to grant Restricted Stock Units to any Eligible Individual. The number and terms and conditions of Restricted Stock Units shall be determined by the Administrator. The Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including conditions based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, in each case, on a specified date or dates or over any period or periods, as determined by the Administrator. The Administrator shall specify, or may permit the Participant to elect, the conditions and dates upon which the Shares underlying the Restricted Stock Units shall be issued, which dates shall not be earlier than the date as of which the Restricted Stock Units vest and become nonforfeitable and which conditions and dates shall be consistent with the applicable provisions of Section 409A of the Code or an exemption therefrom. On the distribution dates, the Company shall issue to the Participant one unrestricted, fully transferable Share (or the Fair Market Value of one such Share in cash) for each vested and nonforfeitable Restricted Stock Unit.

9.5 Performance Share Awards . Any Eligible Individual selected by the Administrator may be granted one or more Performance Share awards which shall be denominated in a number of Shares and the vesting of which may be linked to any one or more of the Performance Criteria, other specific performance criteria (in each case on a specified date or dates or over any period or periods determined by the Administrator) and/or time-vesting or other criteria, as determined by the Administrator.

9.6 Other Incentive Awards . The Administrator is authorized to grant Other Incentive Awards to any Eligible Individual, which Awards may cover Shares or the right to purchase Shares or have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in or based on, Shares, shareholder value or shareholder return, in each case, on a specified date or dates or over any period or periods determined by the Administrator. Other Incentive Awards may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Administrator.

9.7 Profits Interest Units . The Administrator is authorized to grant Profits Interest Units in such amount and subject to such terms and conditions as may be determined by the Administrator; provided , however , that Profits Interest Units may only be issued to a Participant for the performance of services to or for the benefit of the Partnership (a) in the Participant’s capacity as a partner of the Partnership, (b) in anticipation of the Participant becoming a partner of the Partnership, or (c) as otherwise determined by the Administrator, provided that the Profits Interest Units are intended to constitute “profits interests” within the meaning of the Code, including, to the extent applicable, Revenue Procedure 93-27, 1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191. The Administrator shall specify the conditions and dates upon which the Profits Interest Units shall vest and become nonforfeitable. Profits Interest Units shall be subject to the terms and conditions of the Partnership Agreement and such other restrictions, including restrictions on transferability, as the Administrator may impose. These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter.

9.8 Granting of Profits Interest Units to Non-Employee Directors .

(a) Pro-Rata Grant . During the term of the Plan, commencing after the Effective Date, each person who first becomes a Non-Employee Director of the Company on a date other than the date of an annual meeting of the Company’s stockholders shall, on the date of such person first becoming a Non-Employee Director of the Company, be granted a number of Profits Interest Units equal to the product of (A) the quotient obtained by dividing (x) $100,000 by (y) the Fair Market Value of a Share on such date, multiplied by (B) the quotient obtained by dividing (x) twelve (12) minus the number of whole months that have elapsed since the immediately preceding annual meeting of the Company’s stockholders, by (y) twelve (12) (the “ Pro-Rata Grant ”).

(b) Annual Grant . During the term of the Plan, commencing as of the 2014 Annual Meeting, each person who first becomes a Non-Employee Director of the Company at such annual meeting and each person who otherwise continues to be a Non-Employee Director of the Company immediately following such annual

meeting shall, on the date of the 2014 Annual Meeting and on each subsequent annual meeting occurring thereafter, be granted a number of Profits Interest Units equal to the quotient obtained by dividing (x) $100,000 by (y) the Fair Market Value of a Share on the date of such annual meeting (the “ Annual Grant ”). A Director who is also an Employee who subsequently incurs a termination of employment and remains on the Board will not receive a Pro-Rata Grant, but, to the extent such Director is otherwise eligible, will receive Annual Grants after such termination of his status as an Employee.

(c) Stock in Lieu of Profits Interests . Notwithstanding the foregoing, effective with respect to any grant of Profits Interest Units to a Non-Employee Director of the Company pursuant to this Section 9.8, such Non-Employee Director of the Company may elect in advance to receive in lieu thereof an equivalent number of Shares in the form of a Stock Payment or Restricted Stock, as applicable, which shall be subject to the same vesting schedule (if any) that would have applied to the corresponding grant of Profits Interest Units. Notwithstanding the foregoing, in the event that a Non-Employee Director of the Company does not qualify as an “accredited investor” within the meaning of Regulation D of the Securities Act, on the date of any grant of Profits Interest Units to such Non-Employee Director of the Company pursuant to this Section 9.8, then such Non-Employee Director of the Company shall not receive such grant of Profits Interest Units and in lieu thereof shall automatically be granted an equivalent number of Shares in the form of a Stock Payment or Restricted Stock, as applicable, which shall be subject to the same vesting schedule (if any) as would have applied to the corresponding grant of Profits Interest Units.

(d) Vesting . Each Annual Grant and Pro-Rata Grant shall be fully vested on the date of grant. Consistent with the foregoing, the terms and conditions of such Profits Interest Units (including, without limitation, any transfer restrictions related thereto) shall be set forth in an Award Agreement to be entered into by the Company and each Non-Employee Director of the Company which shall evidence the grant of the Profits Interest Units.

(e) As of the Effective Date, (i) Awards made to Non-Employee Directors of the Company pursuant to this Section 9.8 shall be in lieu of all future Awards to Non-Employee Directors of the Company under Section 8.10 of the Prior Plan, and (ii) with respect to future Awards, the provisions of this Section 9.8 shall replace and supersede the relevant provisions of Section 8.10 of the Prior Plan.

9.9 Other Terms and Conditions . All applicable terms and conditions of each Award described in this Article 9, including without limitation, as applicable, the term, vesting conditions and exercise/purchase price applicable to the Award, shall be set by the Administrator in its sole discretion, provided , however , that the value of the consideration paid by a Participant for an Award shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.

9.10 Exercise upon Termination of Service . Awards described in this Article 9 are exercisable or distributable, as applicable, only while the Participant is an Employee, Director or Consultant, as applicable. The Administrator, however, in its sole discretion may provide that such Award may be exercised or distributed subsequent to a Termination of Service as provided under an applicable Program, Award Agreement, payment deferral election and/or in certain events, including without limitation, a Change in Control, the Participant’s death, retirement or disability or any other specified Termination of Service.

ARTICLE 10.

STOCK APPRECIATION RIGHTS

10.1 Grant of Stock Appreciation Rights .

(a) The Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan.

(b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then-exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per Share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Except as described in Section 10.1(c) hereof, the exercise price per Share subject to each Stock Appreciation Right shall be set by the Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value on the date the Stock Appreciation Right is granted.

(c) Notwithstanding the foregoing provisions of Section 10.1(b) hereof to the contrary, in the case of a Stock Appreciation Right that is a Substitute Award, the price per share of the shares subject to such Stock Appreciation Right may be less than 100% of the Fair Market Value per share on the date of grant; provided , however , that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.

10.2 Stock Appreciation Right Vesting .

(a) The Administrator shall determine the period during which the Participant shall vest in a Stock Appreciation Right and have the right to exercise such Stock Appreciation Rights (subject to Section 10.4 hereof) in whole or in part. Such vesting may be based on service with the Company or any Affiliate, any of the Performance Criteria or any other criteria selected by the Administrator. At any time after grant of a Stock Appreciation Right, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which the Stock Appreciation Right vests.

(b) No portion of a Stock Appreciation Right which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in an applicable Program or Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right.

10.3 Manner of Exercise . All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the stock administrator of the Company, or such other person or entity designated by the Administrator, or his or its office, as applicable:

(a) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed by the Participant or other person then-entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;

(b) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance;

(c) In the event that the Stock Appreciation Right shall be exercised pursuant to this Section 10.3 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right; and

(d) Full payment of the applicable withholding taxes for the Shares with respect to which the Stock Appreciation Rights, or portion thereof, are exercised, in a manner permitted by the Administrator in accordance with Sections 11.1 and 11.2 hereof.

10.4 Stock Appreciation Right Term . The term of each Stock Appreciation Right shall be set by the Administrator in its sole discretion; provided , however , that the term shall not be more than ten (10) years from

the date the Stock Appreciation Right is granted. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Participant has the right to exercise the vested Stock Appreciation Rights, which time period may not extend beyond the expiration date of the Stock Appreciation Right term. Except as limited by the requirements of Section 409A of the Code, subject to the limitations set forth in the first sentence of this Section 10.4, the Administrator may extend the term of any outstanding Stock Appreciation Right, and may extend the time period during which vested Stock Appreciation Rights may be exercised, in connection with any Termination of Service of the Participant, and may amend any other term or condition of such Stock Appreciation Right relating to such a Termination of Service.

ARTICLE 11.

ADDITIONAL TERMS OF AWARDS

11.1 Payment . The Administrator shall determine the methods by which payments by any Participant with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise of the Award) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Participant has placed a market sell order with a broker with respect to Shares then-issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided , however , that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) other form of legal consideration acceptable to the Administrator. The Administrator shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.

11.2 Tax Withholding . The Company and its Affiliates shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company or an Affiliate, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s social security, Medicare and any other employment tax obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising in connection with any Award. The Administrator may in its sole discretion and in satisfaction of the foregoing requirement allow a Participant to satisfy such obligations by any payment means described in Section 11.1 hereof, including without limitation, by allowing such Participant to elect to have the Company or an Affiliate withhold Shares otherwise issuable under an Award (or allow the surrender of Shares). The number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase no greater than the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income. The Administrator shall determine the fair market value of the Shares, consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of Shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.

11.3 Transferability of Awards .

(a) Except as otherwise provided in Section 11.3(b) or (c) hereof:

(i) No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a

DRO, unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed;

(ii) No Award or interest or right therein shall be subject to the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed, and any attempted disposition of an Award prior to the satisfaction of these conditions shall be null and void and of no effect, except to the extent that such disposition is permitted by clause (i) of this provision; and

(iii) During the lifetime of the Participant, only the Participant may exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a DRO; after the death of the Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Program or Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Participant’s will or under the then-applicable laws of descent and distribution.

(b) Notwithstanding Section 11.3(a) hereof, the Administrator, in its sole discretion, may determine to permit a Participant or a Permitted Transferee of such Participant to transfer an Award other than an Incentive Stock Option (unless such Incentive Stock Option is to become a Non-Qualified Stock Option) to any one or more Permitted Transferees of such Participant, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee (other than to another Permitted Transferee of the applicable Participant) other than by will or the laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award); and (iii) the Participant (or transferring Permitted Transferee) and the Permitted Transferee shall execute any and all documents requested by the Administrator, including without limitation, documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal, state and foreign securities laws and (C) evidence the transfer. In addition, and further notwithstanding Section 11.3(a) hereof, the Administrator, in its sole discretion, may determine to permit a Participant to transfer Incentive Stock Options to a trust that constitutes a Permitted Transferee if, under Section 671 of the Code and applicable state law, the Participant is considered the sole beneficial owner of the Incentive Stock Option while it is held in the trust.

(c) Notwithstanding Section 11.3(a) hereof, a Participant may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Program or Award Agreement applicable to the Participant, except to the extent the Plan, the Program and the Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a “community property” state, a designation of a person other than the Participant’s spouse or domestic partner, as applicable, as his beneficiary with respect to more than fifty percent (50%) of the Participant’s interest in the Award shall not be effective without the prior written or electronic consent of the Participant’s spouse or domestic partner. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is delivered to the Administrator prior to the Participant’s death.

11.4 Conditions to Issuance of Shares .

(a) Notwithstanding anything herein to the contrary, neither the Company nor its Affiliates shall be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel, that the issuance of such Shares is in compliance with Applicable Law, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Administrator may require that a Participant make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems advisable in order to comply with any such Applicable Law.

(b) All Share certificates delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with Applicable Law. The Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares.

(c) The Administrator shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.

(d) No fractional Shares shall be issued and the Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding down.

(e) Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by Applicable Law, the Company and/or its Affiliates may, in lieu of delivering to any Participant certificates evidencing Shares issued in connection with any Award, record the issuance of Shares in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

11.5 Forfeiture and Claw-Back Provisions .

(a) Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Awards made under the Plan, or to require a Participant to agree by separate written or electronic instrument, that: (i) any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (x) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (y) the Participant at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (z) the Participant incurs a Termination of Service for cause; and

(b) All Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the applicable provisions of any claw-back policy implemented by the Company, whether implemented prior to or after the grant of such Award, including without limitation, any claw-back policy adopted to comply with the requirements of Applicable Law, including without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.

11.6 Prohibition on Repricing . Subject to Section 13.2 hereof, the Administrator shall not, without the approval of the stockholders of the Company, (a) authorize the amendment of any outstanding Option or Stock

Appreciation Right to reduce its price per share, or (b) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares. Subject to Section 13.2 hereof, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding award to increase the price per share or to cancel and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.

11.7 Cash Settlement . Without limiting the generality of any other provision of the Plan, the Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any Award may be settled in cash, Shares or a combination thereof.

11.8 Leave of Absence . Unless the Administrator provides otherwise, vesting of Awards granted hereunder shall not be suspended during any unpaid leave of absence. A Participant shall not cease to be considered an Employee, Non-Employee Director or Consultant, as applicable, in the case of any (a) leave of absence approved by the Company, (b) transfer between locations of the Company or between the Company and any of its Affiliates or any successor thereof, or (c) change in status (Employee to Director, Employee to Consultant, etc.), provided that such change does not affect the specific terms applying to the Participant’s Award.

11.9 Terms May Vary Between Awards . The terms and conditions of each Award shall be determined by the Administrator in its sole discretion and the Administrator shall have complete flexibility to provide for varied terms and conditions as between any Awards, whether of the same or different Award type and/or whether granted to the same or different Participants (in all cases, subject to the terms and conditions of the Plan).

ARTICLE 12.

ADMINISTRATION

12.1 Administrator . The Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and, unless otherwise determined by the Board, shall consist solely of two or more Non-Employee Directors of the Company appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as a “non-employee director” as defined by Rule 16b-3 of the Exchange Act, an “outside director” for purposes of Section 162(m) of the Code and an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded, in each case, to the extent required under such provision; provided , however , that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 12.l or otherwise provided in the Company’s charter or bylaws or any charter of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment, Committee members may resign at any time by delivering written or electronic notice to the Board, and vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors of the Company and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 12.6 hereof.

12.2 Duties and Powers of Administrator . It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan and all Programs and Award Agreements, and to adopt such rules for the administration, interpretation and application of the Plan and any Program as are not inconsistent with the Plan, to interpret, amend or revoke any such rules and to amend any Program or Award Agreement provided that the rights or obligations of the holder of the Award that is the subject of any such Program or Award Agreement are not affected adversely by

such amendment, unless the consent of the Participant is obtained or such amendment is otherwise permitted under Section 13.13 hereof. Any such grant or award under the Plan need not be the same with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act, Section 162(m) of the Code, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee.

12.3 Action by the Committee . Unless otherwise established by the Board or in the Committee’s charter, the Company’s charter or bylaws or as required by Applicable Law, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

12.4 Authority of Administrator . Subject to any specific designation in the Plan and Applicable Law, the Administrator has the exclusive power, authority and sole discretion to:

(a) Designate Eligible Individuals to receive Awards;

(b) Determine the type or types of Awards to be granted to each Eligible Individual;

(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any performance criteria, any reload provision, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;

(e) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

(g) Determine as between the Company, the Services Company, the Partnership and any Subsidiary which entity will make payments with respect to an Award, consistent with applicable securities laws and other Applicable Law;

(h) Decide all other matters that must be determined in connection with an Award;

(i) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

(j) Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement; and

(k) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.

12.5 Decisions Binding . The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Program, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.

12.6 Delegation of Authority . To the extent permitted by Applicable Law, the Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Article 12; provided , however , that in no event shall an officer of the Company be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, (b) Covered Employees with respect to Awards intended to constitute Performance-Based Compensation, or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided , further , that any delegation of administrative authority shall only be permitted to the extent it is permissible under Section 162(m) of the Code and other Applicable Law. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board or Committee, as applicable, may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.6 shall serve in such capacity at the pleasure of the Board and the Committee.

ARTICLE 13.

MISCELLANEOUS PROVISIONS

13.1 Amendment, Suspension or Termination of the Plan . Except as otherwise provided in this Section 13.1, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 13.2 hereof, (i) increase the Share Limit or any Individual Award Limit, (ii) reduce the price per share of any outstanding Option or Stock Appreciation Right granted under the Plan, or (iii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award in violation of Section 11.6 hereof. Except as provided in Section 13.13 hereof, no amendment, suspension or termination of the Plan shall, without the consent of the Participant, impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. Notwithstanding anything herein to the contrary, no Incentive Stock Option shall be granted under the Plan after the tenth (10 ^th ) anniversary of the Effective Date.

13.2 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events .

(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s stock or the share price of the Company’s stock other than an Equity Restructuring, the Administrator may make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the Share Limit and Individual Award Limits); (ii) the number and kind of Shares (or other securities or property) subject to outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and/or (iv) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code unless otherwise determined by the Administrator.

(b) In the event of any transaction or event described in Section 13.2(a) hereof or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law or accounting principles, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

(i) To provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 13.2, the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion;

(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

(iii) To make adjustments in the number and type of securities subject to outstanding Awards and Awards which may be granted in the future and/or in the terms, conditions and criteria included in such Awards (including the grant or exercise price, as applicable);

(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all securities covered thereby, notwithstanding anything to the contrary in the Plan or an applicable Program or Award Agreement; and

(v) To provide that the Award cannot vest, be exercised or become payable after such event.

(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 13.2(a) and 13.2(b) hereof:

(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted; and/or

(ii) The Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments to the Share Limit and the Individual Award Limits).

The adjustments provided under this Section 13.2(c) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.

(d) Except as may otherwise be provided in any applicable Award Agreement or other written agreement entered into between the Company (or an Affiliate) and a Participant, if a Change in Control occurs and a Participant’s outstanding Awards are not continued, converted, assumed, or replaced by the surviving or successor entity in such Change in Control, then immediately prior to the Change in Control such outstanding Awards, to the extent not continued, converted, assumed, or replaced, shall become fully vested and, as applicable, exercisable, and all forfeiture, repurchase and other restrictions on such Awards shall lapse. Upon, or

in anticipation of, a Change in Control, the Administrator may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Administrator, in its sole and absolute discretion, shall determine. For the avoidance of doubt, if the value of an Award that is terminated in connection with this Section 13.2(d) is zero or negative at the time of such Change in Control, such Award shall be terminated upon the Change in Control without payment of consideration therefor.

(e) The Administrator may, in its sole discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.

(f) With respect to Awards which are granted to Covered Employees and are intended to qualify as Performance-Based Compensation, no adjustment or action described in this Section 13.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify as Performance-Based Compensation, unless the Administrator determines that the Award should not so qualify. No adjustment or action described in this Section 13.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized with respect to any Award to the extent such adjustment or action would result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 of the Exchange Act unless the Administrator determines that the Award is not to comply with such exemptive conditions.

(g) The existence of the Plan, any Program, any Award Agreement and/or any Award granted hereunder shall not affect or restrict in any way the right or power of the Company, the stockholders of the Company or any Affiliate to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s or such Affiliate’s capital structure or its business, any merger or consolidation of the Company or any Affiliate, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock, the securities of any Affiliate or the rights thereof or which are convertible into or exchangeable for Common Stock or securities of any Affiliate, or the dissolution or liquidation of the Company or any Affiliate, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

(h) No action shall be taken under this Section 13.2 which shall cause an Award to fail to comply with Section 409A of the Code or an exemption therefrom, in either case, to the extent applicable to such Award, unless the Administrator determines any such adjustments to be appropriate.

(i) In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of thirty (30) days prior to the consummation of any such transaction.

13.3 Approval of Plan by Stockholders . The Plan shall be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval, provided , however , that such Awards shall not be exercisable, shall not vest and the restrictions thereon shall not lapse and no Shares shall be issued pursuant thereto prior to the time when the Plan is approved by the Company’s stockholders, and provided, further , that if such approval has not been obtained at the end of such twelve (12)-month period, all such Awards previously granted or awarded under the Plan shall thereupon be canceled and become null and void.

13.4 No Stockholders Rights . Except as otherwise provided herein or in an applicable Program or Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record owner of such Shares.

13.5 Paperless Administration . In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.

13.6 Section 83(b) Election . No Participant may make an election under Section 83(b) of the Code with respect to any Award under the Plan without the consent of the Administrator, which the Administrator may grant or withhold in its sole discretion. If, with the consent of the Administrator, a Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, the Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

13.7 Grant of Awards to Certain Employees or Consultants . The Company, the Partnership or any Subsidiary may provide through the establishment of a formal written policy or otherwise for the method by which Shares or other securities of the Company or the Partnership may be issued and by which such Shares or other securities and/or payment therefor may be exchanged or contributed among such entities, or may be returned upon any forfeiture of Shares or other securities by the Participant.

13.8 REIT Status . The Plan shall be interpreted and construed in a manner consistent with the Company’s status as a REIT. No Award shall be granted or awarded, and with respect to any Award granted under the Plan, such Award shall not vest, be exercisable or be settled:

(a) to the extent that the grant, vesting, exercise or settlement of such Award could cause the Participant or any other person to be in violation of the Common Stock Ownership Limit or the Aggregate Stock Ownership Limit (each as defined in the Company’s charter, as amended from time to time) or any other provision of Section 6.2.1 of the Company’s charter; or

(b) if, in the discretion of the Administrator, the grant, vesting, exercise or settlement of such Award could impair the Company’s status as a REIT.

13.9 Effect of Plan upon Other Compensation Plans . The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in the Plan shall be construed to limit the right of the Company or any Affiliate: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Affiliate or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.

13.10 Compliance with Laws . The Plan, the granting and vesting of Awards under the Plan, the issuance and delivery of Shares and Profits Interest Units and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all Applicable Law and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all Applicable Law. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such Applicable Law.

13.11 Titles and Headings, References to Sections of the Code or Exchange Act . The titles and headings of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.

13.12 Governing Law . The Plan and any Programs or Award Agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of California without regard to conflicts of laws thereof.

13.13 Section 409A . To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the Plan, any applicable Program and the Award Agreement covering such Award shall be interpreted in accordance with Section 409A of the Code. Notwithstanding any provision of the Plan to the contrary, in the event that, following the Effective Date, the Administrator determines that any Award may be subject to Section 409A of the Code, the Administrator may adopt such amendments to the Plan, any applicable Program and the Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to avoid the imposition of taxes on the Award under Section 409A of the Code, either through compliance with the requirements of Section 409A of the Code or with an available exemption therefrom.

13.14 No Rights to Awards . No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Participants or any other persons uniformly.

13.15 Unfunded Status of Awards . The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate.

13.16 Indemnification . To the extent allowable pursuant to Applicable Law and the Company’s charter and bylaws, each member of the Board and any officer or other employee to whom authority to administer any component of the Plan is delegated shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him in satisfaction of judgment in such action, suit, or proceeding against him or her; provided , however , that he gives the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s charter or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

13.17 Relationship to other Benefits . No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

13.18 Expenses . The expenses of administering the Plan shall be borne by the Company and its Affiliates.

* * * * *

I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Digital Realty Trust, Inc. on March 18, 2014.

* * * * *

I hereby certify that the foregoing Plan was approved by the stockholders of Digital Realty Trust, Inc. on April 28, 2014.

[SIGNATURE PAGE FOLLOWS]

Executed on this 28 ^th day of April, 2014.

/s/ Joshua A. Mills

Joshua A. Mills

Senior Vice President, General Counsel and Assistant Secretary

[Signature Page to 2014 Incentive Award Plan]

Exhibit 12.1

Digital Realty Trust, Inc. and Subsidiaries

Statement of Computation of Ratios

(in thousands, except ratios)


	Six Months Ended June 30,						Year Ended December 31,
	2014			2013			2013			2012		2011		2010		2009
Income from continuing operations before noncontrolling interests	$	108,049		$	111,302		$	320,449		$	216,047	$	162,126	$	105,412	$	91,234
Interest expense		96,520			95,661			189,399			157,108		149,350		137,384		88,442
Interest within rental expense ⁽¹⁾		2,644			1,868			7,687			3,410		2,847		2,604		2,633
Noncontrolling interests in consolidated joint ventures		(232	)		(355	)		(595	)		444		324		288		(140	)

Earnings available to cover fixed charges	$	206,981		$	208,476		$	516,940		$	377,009	$	314,647	$	245,688	$	182,169
Fixed charges:
Interest expense	$	96,520		$	95,661		$	189,399		$	157,108	$	149,350	$	137,384	$	88,442
Interest within rental expense ⁽¹⁾		2,644			1,868			7,687			3,410		2,847		2,604		2,633
Capitalized interest		10,200			11,960			26,277			21,456		17,905		10,241		9,196

Total fixed charges		109,364			109,489			223,363			181,974		170,102		150,229		100,271
Preferred stock dividends		30,555			19,453			42,905			38,672		25,397		37,004		40,404

Fixed charges and preferred stock dividends	$	139,919		$	128,942		$	266,268		$	220,646	$	195,499	$	187,233	$	140,675
Ratio of earnings to fixed charges		1.89			1.90			2.31			2.07		1.85		1.64		1.82
Ratio of earnings to fixed charges and preferred stock dividends		1.48			1.62			1.94			1.71		1.61		1.31		1.29

(1)	Interest within rental expense represents one-third of rental expense (the approximate portion of rental expense representing interest).

Digital Realty Trust, L.P. and Subsidiaries

Statement of Computation of Ratios

(in thousands, except ratios)


	Six Months Ended June 30,						Year Ended December 31,
	2014			2013			2013			2012		2011		2010		2009
Income from continuing operations before noncontrolling interests	$	108,049		$	111,302		$	320,449		$	216,047	$	162,126	$	105,412	$	91,234
Interest expense		96,520			95,661			189,399			157,108		149,350		137,384		88,442
Interest within rental expense ⁽¹⁾		2,644			1,868			7,687			3,410		2,847		2,604		2,633
Noncontrolling interests in consolidated joint ventures		(232	)		(355	)		(595	)		444		324		288		(140	)

Earnings available to cover fixed charges	$	206,981		$	208,476		$	516,940		$	377,009	$	314,647	$	245,688	$	182,169
Fixed charges:
Interest expense	$	96,520		$	95,661		$	189,399		$	157,108	$	149,350	$	137,384	$	88,442
Interest within rental expense ⁽¹⁾		2,644			1,868			7,687			3,410		2,847		2,604		2,633
Capitalized interest		10,200			11,960			26,277			21,456		17,905		10,241		9,196

Total fixed charges		109,364			109,489			223,363			181,974		170,102		150,229		100,271
Preferred unit distributions		30,555			19,453			42,905			38,672		25,397		37,004		40,404

Fixed charges and preferred unit distributions	$	139,919		$	128,942		$	266,268		$	220,646	$	195,499	$	187,233	$	140,675
Ratio of earnings to fixed charges		1.89			1.90			2.31			2.07		1.85		1.64		1.82
Ratio of earnings to fixed charges and preferred unit distributions		1.48			1.62			1.94			1.71		1.61		1.31		1.29

(1)	Interest within rental expense represents one-third of rental expense (the approximate portion of rental expense representing interest).

Exhibit 31.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, A. William Stein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: August 7, 2014

By:		/s/ A. WILLIAM STEIN
		A. William Stein
		Interim Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)

Exhibit 31.2

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, A. William Stein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, L.P.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: August 7, 2014

By:		/s/ A. WILLIAM STEIN
		A. William Stein
		Interim Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)
		Digital Realty Trust, Inc., sole general partner of
		Digital Realty Trust, L.P.

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Digital Realty Trust, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Dated: August 7, 2014

/s/ A. WILLIAM STEIN

A. William Stein

Interim Chief Executive Officer and Chief Financial Officer

Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Digital Realty Trust, Inc., in its capacity as the sole general partner of Digital Realty Trust, L.P. (the “Operating Partnership”), hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarterly period ended June 30, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership at the dates and for the periods indicated.

Dated: August 7, 2014

/s/ A. WILLIAM STEIN

A. William Stein

Interim Chief Executive Officer and Chief Financial Officer

Digital Realty Trust, Inc., sole general partner of

Digital Realty Trust, L.P.

Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Operating Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Operating Partnership filed under the Securities Act of 1933, as amended.

A signed original of this written statement required by Section 906 has been provided to the Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request.