Digital Realty Trust, Inc. (Form: 10-Q, Received: 05/10/2017 16:17:12)

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 March 31, 2017



¨	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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Digital Realty Trust, Inc.:



Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Emerging growth company	¨

Digital Realty Trust, L.P.:



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Emerging growth company	¨

Digital Realty Trust, Inc.:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 May 5, 2017
Common Stock, $.01 par value per share		159,774,915

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2017 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 March 31, 2017 , Digital Realty Trust, Inc. owned an approximate 98.4% common general partnership interest in Digital Realty Trust, L.P. The remaining approximate 1.6% common limited partnership interests are owned by non-affiliated investors and certain directors and officers of Digital Realty Trust, Inc. As of March 31, 2017 , 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. generally does not conduct business itself, other than acting as the sole general partner of Digital Realty Trust, L.P., issuing public securities from time to time and guaranteeing certain unsecured debt of Digital Realty Trust, L.P. and certain of its subsidiaries and affiliates. Digital Realty Trust, Inc. itself has not issued 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. generally generates the capital required by the company’s business primarily through Digital Realty Trust, L.P.’s operations, by Digital Realty Trust, L.P.’s or its affiliates’ 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.

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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 Loss, Net" and "Capital and Accumulated Other Comprehensive Loss";


•	Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources of the Parent Company" and "—Liquidity and Capital Resources of the Operating Partnership"; and


•	Part II, Item 2. "Unregistered Sales of Equity Securities and Use of Proceeds".

This report also includes separate Part I, 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 Chief Executive Officer and the Chief Financial Officer of each entity during the period covered by this report 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 generally 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 generally 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.

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

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2017

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 March 31, 2017 (unaudited) and December 31, 2016	5

	Condensed Consolidated Income Statements for the three months ended March 31, 2017 and 2016 (unaudited)	6

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016 (unaudited)	7

	Condensed Consolidated Statement of Equity for the three months ended March 31, 2017 (unaudited)	8

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (unaudited)	9

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

	Condensed Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016	12

	Condensed Consolidated Income Statements for the three months ended March 31, 2017 and 2016 (unaudited)	13

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016 (unaudited)	14

	Condensed Consolidated Statement of Capital for the three months ended March 31, 2017 (unaudited)	15

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (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	48

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	72

ITEM 4.	Controls and Procedures (Digital Realty Trust, Inc.)	73

	Controls and Procedures (Digital Realty Trust, L.P.)	73

PART II.	OTHER INFORMATION	75

ITEM 1.	Legal Proceedings	75

ITEM 1A.	Risk Factors	75

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

ITEM 3.	Defaults Upon Senior Securities	75

ITEM 4.	Mine Safety Disclosures	75

ITEM 5.	Other Information	75

ITEM 6.	Exhibits	76

	Signatures	77

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)



	March 31, 2017			December 31, 2016
	(unaudited)
ASSETS
Investments in real estate:
Properties:
Land	$	767,148		$	746,822
Acquired ground leases	11,489			11,335
Buildings and improvements	10,558,200			10,267,525
Tenant improvements	532,168			532,787
Total investments in properties	11,869,005			11,558,469
Accumulated depreciation and amortization	(2,792,910		)	(2,668,509		)
Net investments in properties	9,076,095			8,889,960
Investment in unconsolidated joint ventures	112,856			106,402
Net investments in real estate	9,188,951			8,996,362
Cash and cash equivalents	14,950			10,528
Accounts and other receivables, net of allowance for doubtful accounts of $6,147 and $7,446 as of March 31, 2017 and December 31, 2016, respectively	195,406			203,938
Deferred rent	418,858			412,269
Acquired above-market leases, net	20,826			22,181
Goodwill	757,444			752,970
Acquired in-place lease value, deferred leasing costs and intangibles, net	1,501,843			1,522,378
Restricted cash	10,447			11,508
Assets held for sale	56,154			56,097
Other assets	164,669			204,354
Total assets	$	12,329,548		$	12,192,585
LIABILITIES AND EQUITY
Global revolving credit facility, net	$	564,467		$	199,209
Unsecured term loan, net	1,505,667			1,482,361
Unsecured senior notes, net	4,128,110			4,153,797
Mortgage loans, including premiums, net	3,085			3,240
Accounts payable and other accrued liabilities	804,371			824,878
Accrued dividends and distributions	—			144,194
Acquired below-market leases, net	78,641			81,899
Security deposits and prepaid rents	171,692			168,111
Obligations associated with assets held for sale	3,070			2,599
Total liabilities	7,259,103			7,060,288
Commitments and contingencies
Equity:
Stockholders’ Equity:
Preferred Stock: $0.01 par value per share, 110,000,000 shares authorized; 41,900,000 and 41,900,000 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively	1,012,961			1,012,961
Common Stock: $0.01 par value per share, 265,000,000 shares authorized; 159,539,892 and 159,019,118 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively	1,584			1,582
Additional paid-in capital	5,769,091			5,764,497
Accumulated dividends in excess of earnings	(1,629,633		)	(1,547,420		)
Accumulated other comprehensive loss, net	(122,540		)	(135,605		)
Total stockholders’ equity	5,031,463			5,096,015
Noncontrolling Interests:
Noncontrolling interests in operating partnership	32,409			29,684
Noncontrolling interests in consolidated joint ventures	6,573			6,598
Total noncontrolling interests	38,982			36,282
Total equity	5,070,445			5,132,297
Total liabilities and equity	$	12,329,548		$	12,192,585

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

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



	Three Months Ended March 31,
	2017			2016
Operating Revenues:
Rental	$	404,126		$	371,128
Tenant reimbursements	87,288			84,218
Interconnection and other	57,225			46,963
Fee income	1,895			1,799
Other	35			91
Total operating revenues	550,569			504,199
Operating Expenses:
Rental property operating and maintenance	169,339			154,168
Property taxes	26,919			27,331
Insurance	2,592			2,412
Depreciation and amortization	176,466			169,016
General and administrative	34,647			31,256
Transactions	3,323			1,900
Total operating expenses	413,286			386,083
Operating income	137,283			118,116
Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures	5,324			4,078
Gain (loss) on sale of properties	(522		)	1,097
Interest and other (expense) income	151			(624		)
Interest expense	(55,450		)	(57,261		)
Tax expense	(2,223		)	(2,109		)
Loss from early extinguishment of debt	—			(964		)
Net income	84,563			62,333
Net income attributable to noncontrolling interests	(1,025		)	(784		)
Net income attributable to Digital Realty Trust, Inc.	83,538			61,549
Preferred stock dividends	(17,393		)	(22,424		)
Net income available to common stockholders	$	66,145		$	39,125
Net income per share available to common stockholders:
Basic	$	0.42		$	0.27
Diluted	$	0.41		$	0.27
Weighted average common shares outstanding:
Basic	159,297,027			146,565,564
Diluted	160,421,655			147,433,194

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Net income	$	84,563		$	62,333
Other comprehensive income:
Foreign currency translation adjustments	16,578			(1,441		)
Decrease in fair value of interest rate swaps and foreign currency hedges	(4,364		)	(7,409		)
Reclassification to interest expense from interest rate swaps	1,030			1,058
Comprehensive income	97,807			54,541
Comprehensive income attributable to noncontrolling interests	(1,204		)	(654		)
Comprehensive income attributable to Digital Realty Trust, Inc.	$	96,603		$	53,887

See accompanying notes to the condensed consolidated financial statements.

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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 Loss, 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, 2016	$	1,012,961	159,019,118	$	1,582	$	5,764,497		$	(1,547,420	)	$	(135,605	)	$	5,096,015		$	29,684		$	6,598		$	36,282		$	5,132,297
Conversion of units to common stock	—		216,964	2		2,742			—			—			2,744			(2,744		)	—			(2,744		)	—
Issuance of unvested restricted stock	—		258,835	—		—			—			—			—			—			—			—			—
Issuance of common stock, net of offering costs	—		—	—		118			—			—			118			—			—			—			118
Exercise of stock options	—		17,668	—		687			—			—			687			—			—			—			687
Shares issued under employee stock purchase plan	—		27,307	—		1,919			—			—			1,919			—			—			—			1,919
Amortization of share-based compensation	—		—	—		6,067			—			—			6,067			—			—			—			6,067
Reclassification of vested share-based awards	—		—	—		(6,939		)	—			—			(6,939		)	6,939			—			6,939			—
Dividends declared on preferred stock	—		—	—		—			(17,393		)	—			(17,393		)	—			—			—			(17,393		)
Dividends and distributions on common stock and common and incentive units	—		—	—		—			(148,358		)	—			(148,358		)	(2,553		)	—			(2,553		)	(150,911		)
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions	—		—	—		—			—			—			—			—			(146		)	(146		)	(146		)
Net income	—		—	—		—			83,538			—			83,538			904			121			1,025			84,563
Other comprehensive income—foreign currency translation adjustments	—		—	—		—			—			16,354			16,354			224			—			224			16,578
Other comprehensive loss—fair value of interest rate swaps and foreign currency hedges	—		—	—		—			—			(4,305		)	(4,305		)	(59		)	—			(59		)	(4,364		)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense	—		—	—		—			—			1,016			1,016			14			—			14			1,030
Balance as of March 31, 2017	$	1,012,961	159,539,892	$	1,584	$	5,769,091		$	(1,629,633	)	$	(122,540	)	$	5,031,463		$	32,409		$	6,573		$	38,982		$	5,070,445

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	84,563		$	62,333
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on sale of properties	522			(1,097		)
Equity in earnings of unconsolidated joint ventures	(5,324		)	(4,078		)
Distributions from unconsolidated joint ventures	4,448			4,115
Write-off of net assets due to early lease terminations	—			(1		)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases	131,807			127,175
Amortization of share-based compensation	4,064			4,304
Non-cash amortization of terminated swaps	301			—
Allowance for (recovery of) doubtful accounts	(1,310		)	(1,931		)
Amortization of deferred financing costs	2,443			2,260
Loss on early extinguishment of debt	—			964
Amortization of debt discount/premium	674			611
Amortization of acquired in-place lease value and deferred leasing costs	44,659			41,841
Amortization of acquired above-market leases and acquired below-market leases, net	(2,026		)	(2,266		)
Changes in assets and liabilities:
Accounts and other receivables	9,455			3,221
Deferred rent	(4,033		)	(7,456		)
Deferred leasing costs	(1,898		)	(4,147		)
Other assets	(13,040		)	(15,424		)
Accounts payable and other accrued liabilities	(38,421		)	(39,317		)
Security deposits and prepaid rents	2,182			9,507
Net cash provided by operating activities	219,066			180,614
Cash flows from investing activities:
Acquisitions of real estate	(13,585		)	(1,329		)
Proceeds from sale of properties, net	—			35,769
Excess proceeds from forward contracts	51,308			—
Investment in unconsolidated joint ventures	(5,749		)	(11		)
Receipt of value added tax refund	—			951
Refundable value added tax paid	—			(4,319		)
Improvements to investments in real estate	(254,359		)	(183,890		)
Improvement advances to tenants	(5,073		)	(9,617		)
Collection of advances from tenants for improvements	11,890			8,318
Net cash used in investing activities	(215,568		)	(154,128		)

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Cash flows from financing activities:
Borrowings on global revolving credit facility	$	715,524		$	692,593
Repayments on global revolving credit facility	(358,219		)	(975,287		)
Borrowings on unsecured term loan	—			766,201
Repayments on unsecured term loan	—			(150,873		)
Repayments on unsecured notes	(50,000		)	(25,000		)
Principal payments on mortgage loans	(132		)	(53,041		)
Earnout payments related to acquisition	—			(12,129		)
Payment of loan fees and costs	(144		)	(14,207		)
Capital distributions paid to noncontrolling interests in consolidated joint ventures, net	(146		)	(115		)
Common and preferred stock offering costs paid, net	118			137
Proceeds from equity plans	2,606			1,805
Payment of dividends to preferred stockholders	(17,393		)	(22,424		)
Payment of dividends to common stockholders and distributions to noncontrolling interests in operating partnership	(295,105		)	(258,475		)
Net cash used in financing activities	(2,891		)	(50,815		)
Net increase (decrease) in cash, cash equivalents and restricted cash	607			(24,329		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	2,754			—
Cash, cash equivalents and restricted cash at beginning of period	22,036			75,062
Cash, cash equivalents and restricted cash at end of period	$	25,397		$	50,733

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Supplemental disclosure of cash flow information:
Cash paid for interest	$	53,819		$	61,678
Cash paid for income taxes	3,569			1,541
Supplementary disclosure of noncash investing and financing activities:
Change in net assets related to foreign currency translation adjustments	$	16,578		$	(1,441	)
Decrease in accounts payable and other accrued liabilities related to change in fair value of interest rate swaps and foreign currency hedges	(4,364		)	(7,409		)
Acquisition measurement period adjustment to goodwill and accounts payable and other accrued liabilities	2,162			—
Noncontrolling interests in operating partnership redeemed for or converted to shares of common stock	(2,744		)	2,930
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses	138,162			108,251
Allocation of purchase price of real estate/investment in partnership to:
Investments in real estate	$	13,585		$	1,329
Cash paid for acquisition of real estate	$	13,585		$	1,329

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)



	March 31, 2017			December 31, 2016
	(unaudited)
ASSETS
Investments in real estate:
Properties:
Land	$	767,148		$	746,822
Acquired ground leases	11,489			11,335
Buildings and improvements	10,558,200			10,267,525
Tenant improvements	532,168			532,787
Total investments in properties	11,869,005			11,558,469
Accumulated depreciation and amortization	(2,792,910		)	(2,668,509		)
Net investments in properties	9,076,095			8,889,960
Investment in unconsolidated joint ventures	112,856			106,402
Net investments in real estate	9,188,951			8,996,362
Cash and cash equivalents	14,950			10,528
Accounts and other receivables, net of allowance for doubtful accounts of $6,147 and $7,446 as of March 31, 2017 and December 31, 2016, respectively	195,406			203,938
Deferred rent	418,858			412,269
Acquired above-market leases, net	20,826			22,181
Goodwill	757,444			752,970
Acquired in-place lease value, deferred leasing costs and intangibles, net	1,501,843			1,522,378
Restricted cash	10,447			11,508
Assets held for sale	56,154			56,097
Other assets	164,669			204,354
Total assets	$	12,329,548		$	12,192,585
LIABILITIES AND CAPITAL
Global revolving credit facility, net	$	564,467		$	199,209
Unsecured term loan, net	1,505,667			1,482,361
Unsecured senior notes, net	4,128,110			4,153,797
Mortgage loans, including premiums, net	3,085			3,240
Accounts payable and other accrued liabilities	804,371			824,878
Accrued dividends and distributions	—			144,194
Acquired below-market leases, net	78,641			81,899
Security deposits and prepaid rents	171,692			168,111
Obligations associated with assets held for sale	3,070			2,599
Total liabilities	7,259,103			7,060,288
Commitments and contingencies
Capital:
Partners’ capital:
General Partner	6,783,636			6,779,040
Limited Partners	37,244			34,698
Accumulated distributions in excess of earnings	(1,629,633		)	(1,547,420		)
Accumulated other comprehensive loss	(127,375		)	(140,619		)
Total partners’ capital	5,063,872			5,125,699
Noncontrolling interests in consolidated joint ventures	6,573			6,598
Total capital	5,070,445			5,132,297
Total liabilities and capital	$	12,329,548		$	12,192,585

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

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



	Three Months Ended March 31,
	2017			2016
Operating Revenues:
Rental	$	404,126		$	371,128
Tenant reimbursements	87,288			84,218
Interconnection and other	57,225			46,963
Fee income	1,895			1,799
Other	35			91
Total operating revenues	550,569			504,199
Operating Expenses:
Rental property operating and maintenance	169,339			154,168
Property taxes	26,919			27,331
Insurance	2,592			2,412
Depreciation and amortization	176,466			169,016
General and administrative	34,647			31,256
Transactions	3,323			1,900
Total operating expenses	413,286			386,083
Operating income	137,283			118,116
Other Income (Expenses):
Equity in earnings of unconsolidated joint ventures	5,324			4,078
Gain (loss) on sale of properties	(522		)	1,097
Interest and other (expense) income	151			(624		)
Interest expense	(55,450		)	(57,261		)
Tax expense	(2,223		)	(2,109		)
Loss from early extinguishment of debt	—			(964		)
Net income	84,563			62,333
Net income attributable to noncontrolling interests in consolidated joint ventures	(121		)	(121		)
Net income attributable to Digital Realty Trust, L.P.	84,442			62,212
Preferred units distributions	(17,393		)	(22,424		)
Net income available to common unitholders	$	67,049		$	39,788
Net income per unit available to common unitholders:
Basic	$	0.42		$	0.27
Diluted	$	0.41		$	0.27
Weighted average common units outstanding:
Basic	161,474,901			149,047,798
Diluted	162,599,529			149,915,428

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Net income	$	84,563		$	62,333
Other comprehensive income:
Foreign currency translation adjustments	16,578			(1,441		)
Decrease in fair value of interest rate swaps and foreign currency hedges	(4,364		)	(7,409		)
Reclassification to interest expense from interest rate swaps	1,030			1,058
Comprehensive income	$	97,807		$	54,541
Comprehensive income attributable to noncontrolling interests in consolidated joint ventures	(121		)	(121		)
Comprehensive income attributable to Digital Realty Trust, L.P.	$	97,686		$	54,420

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CAPITAL

(unaudited, in thousands, except unit data)



	General Partner								Limited Partners					Accumulated Other Comprehensive Loss			Noncontrolling Interests in Consolidated Joint Ventures			Total Capital
	Preferred Units				Common Units				Common Units
	Units	Amount			Units	Amount			Units		Amount
Balance as of December 31, 2016	41,900,000	$	1,012,961		159,019,118	$	4,218,659		2,475,663		$	34,698		$	(140,619	)	$	6,598		$	5,132,297
Conversion of limited partner common units to general partner common units	—	—			216,964	2,744			(216,964	)	(2,744		)	—			—			—
Issuance of unvested restricted common units	—	—			258,835	—			—		—			—			—			—
Common unit offering costs, net	—	—			—	118			—		—			—			—			118
Issuance of common units in connection with the exercise of stock options	—	—			17,668	687			—		—			—			—			687
Issuance of common units, net of forfeitures	—	—			—	—			287,472		—			—			—			—
Units issued in connection with employee stock purchase plan	—	—			27,307	1,919			—		—			—			—			1,919
Amortization of share-based compensation	—	—			—	6,067			—		—			—			—			6,067
Reclassification of vested share-based awards	—	—			—	(6,939		)	—		6,939			—			—			—
Distributions	—	(17,393		)	—	(148,358		)	—		(2,553		)	—			—			(168,304		)
Distributions to noncontrolling interests in consolidated joint ventures, net of contributions	—	—			—	—			—		—			—			(146		)	(146		)
Net income	—	17,393			—	66,145			—		904			—			121			84,563
Other comprehensive income—foreign currency translation adjustments	—	—			—	—			—		—			16,578			—			16,578
Other comprehensive loss—fair value of interest rate swaps and foreign currency hedges	—	—			—	—			—		—			(4,364		)	—			(4,364		)
Other comprehensive income—reclassification of accumulated other comprehensive loss to interest expense	—	—			—	—			—		—			1,030			—			1,030
Balance as of March 31, 2017	41,900,000	$	1,012,961		159,539,892	$	4,141,042		2,546,171		$	37,244		$	(127,375	)	$	6,573		$	5,070,445

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	84,563		$	62,333
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on sale of properties	522			(1,097		)
Equity in earnings of unconsolidated joint ventures	(5,324		)	(4,078		)
Distributions from unconsolidated joint ventures	4,448			4,115
Write-off of net assets due to early lease terminations	—			(1		)
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground leases	131,807			127,175
Amortization of share-based compensation	4,064			4,304
Non-cash amortization of terminated swaps	301			—
Allowance for doubtful accounts	(1,310		)	(1,931		)
Amortization of deferred financing costs	2,443			2,260
Loss on early extinguishment of debt	—			964
Amortization of debt discount/premium	674			611
Amortization of acquired in-place lease value and deferred leasing costs	44,659			41,841
Amortization of acquired above-market leases and acquired below-market leases, net	(2,026		)	(2,266		)
Changes in assets and liabilities:
Accounts and other receivables	9,455			3,221
Deferred rent	(4,033		)	(7,456		)
Deferred leasing costs	(1,898		)	(4,147		)
Other assets	(13,040		)	(15,424		)
Accounts payable and other accrued liabilities	(38,421		)	(39,317		)
Security deposits and prepaid rents	2,182			9,507
Net cash provided by operating activities	219,066			180,614
Cash flows from investing activities:
Acquisitions of real estate	(13,585		)	(1,329		)
Proceeds from sale of properties, net	—			35,769
Excess proceeds from forward contracts	51,308			—
Investment in unconsolidated joint ventures	(5,749		)	(11		)
Receipt of value added tax refund	—			951
Refundable value added tax paid	—			(4,319		)
Improvements to investments in real estate	(254,359		)	(183,890		)
Improvement advances to tenants	(5,073		)	(9,617		)
Collection of advances from tenants for improvements	11,890			8,318
Net cash used in investing activities	(215,568		)	(154,128		)

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Cash flows from financing activities:
Borrowings on global revolving credit facility	$	715,524		$	692,593
Repayments on global revolving credit facility	(358,219		)	(975,287		)
Borrowings on unsecured term loan	—			766,201
Repayments on unsecured term loan	—			(150,873		)
Repayments on unsecured notes	(50,000		)	(25,000		)
Principal payments on mortgage loans	(132		)	(53,041		)
Earnout payments related to acquisition	—			(12,129		)
Payment of loan fees and costs	(144		)	(14,207		)
Capital distributions paid to noncontrolling interests in consolidated joint ventures, net	(146		)	(115		)
General partner contributions, net	2,724			1,942
Payment of distributions to preferred unitholders	(17,393		)	(22,424		)
Payment of distributions to common unitholders	(295,105		)	(258,475		)
Net cash used in financing activities	(2,891		)	(50,815		)
Net increase (decrease) in cash, cash equivalents and restricted cash	607			(24,329		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	2,754			—
Cash, cash equivalents and restricted cash at beginning of period	22,036			75,062
Cash, cash equivalents and restricted cash at end of period	$	25,397		$	50,733

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(unaudited, in thousands)



	Three Months Ended March 31,
	2017			2016
Supplemental disclosure of cash flow information:
Cash paid for interest	$	53,819		$	61,678
Cash paid for income taxes	3,569			1,541
Supplementary disclosure of noncash investing and financing activities:
Change in net assets related to foreign currency translation adjustments	$	16,578		$	(1,441	)
Decrease in accounts payable and other accrued liabilities related to change in fair value of interest rate swaps and foreign currency hedges	(4,364		)	(7,409		)
Acquisition measurement period adjustment to goodwill and accounts payable and other accrued liabilities	2,162			—
Accrual for additions to investments in real estate and tenant improvement advances included in accounts payable and accrued expenses	138,162			108,251
Allocation of purchase price of real estate/investment in partnership to:
Investments in real estate	$	13,585		$	1,329
Cash paid for acquisition of real estate	$	13,585		$	1,329

See accompanying notes to the condensed consolidated financial statements.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2017 and 2016

1. Organization and Description of Business

Digital Realty Trust, Inc. through its controlling interest in Digital Realty Trust, L.P. (the Operating Partnership) and their subsidiaries (collectively, we, our, us or the Company) is engaged in the business of owning, acquiring, developing and managing data centers. The Company is focused on providing data center, colocation and interconnection solutions for domestic and international customers across a variety of industry verticals ranging from financial services, cloud and information technology services, to manufacturing, energy, healthcare, and consumer products. As of March 31, 2017 , our portfolio consisted of 145 operating properties, including three held-for-sale properties and 14 properties held as investments in unconsolidated joint ventures, of which 104 are located throughout the United States, 32 are located in Europe, four are located in Asia, three are located in Australia and two are located in Canada.

We are diversified in major metropolitan areas where data center and technology customers are concentrated, including the Atlanta, Boston, Chicago, Dallas, Los Angeles, New York, Northern Virginia, Phoenix, San Francisco, Seattle and Silicon Valley metropolitan areas in the United States, the Amsterdam, Dublin, Frankfurt, London and Paris metropolitan areas in Europe and the Singapore, Sydney, Melbourne, Hong Kong and Osaka metropolitan areas in the Asia Pacific region. The portfolio consists of data centers, Internet gateway data centers and office and other non-data center space.

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 March 31, 2017 , Digital Realty Trust, Inc. owns a 98.4% common interest and a 100.0% 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 their subsidiaries. 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 for the year ended December 31, 2016 .

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. As a result, Digital Realty Trust, Inc. generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public securities from time to time and guaranteeing certain unsecured debt of the Operating Partnership and certain of

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

its subsidiaries and affiliates. Digital Realty Trust, Inc. itself has not issued any indebtedness but guarantees the unsecured debt of the Operating Partnership and certain of its subsidiaries and affiliates, as disclosed in these notes.

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 generally generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s or its affiliates 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 Loss, Net" and "Capital and Accumulated Other Comprehensive Loss".

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 generally 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 March 31, 2017 , cash equivalents consist of investments in money market instruments.

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.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

(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.

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.

We capitalized interest of approximately $4.6 million and $3.8 million during the three months ended March 31, 2017 and 2016 , respectively. We capitalized amounts relating to compensation and other overhead expense of employees direct and incremental to construction and successful leasing activities of approximately $18.7 million and $17.7 million during the three months ended March 31, 2017 and 2016 , respectively. Capitalized leasing costs of approximately $12.3 million and $10.4 million are included in improvements to investments in real estate in cash flows from investing activities in the condensed consolidated statements of cash flows for the three months ended March 31, 2017 and 2016 , respectively.

(e) Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is not amortized. Management performs an annual impairment test for goodwill and between annual tests, management will evaluate the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. In its impairment tests of goodwill, management will first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If based on this assessment, management determines that the fair value of the reporting unit is not less than its carrying value, then performing the additional two-step impairment test is unnecessary. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. If the carrying value of goodwill exceeds its fair value, an impairment charge is recognized. We have not recognized any goodwill impairments since our inception. Goodwill amounted to approximately $757.4 million and $753.0 million as of March 31, 2017 and December 31, 2016 , respectively.

(f) Share-Based Compensation

The Company measures all share-based compensation awards at fair value on the date they are granted to employees, consultants and directors. The fair value of share-based compensation awards that contain a market condition, including market performance-based Class D units of the Operating Partnership and market performance-based restricted stock units (discussed in Note 13 "Incentive Plan"), is measured using a Monte Carlo simulation method and not adjusted based on actual achievement of the performance goals.

We recognize compensation cost, net of forfeitures, for all of our existing awards, including long-term incentive units, market performance-based awards and restricted stock, over a four -year period.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

(g) 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 subsidiaries are 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 March 31, 2017 and December 31, 2016 , 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 months ended March 31, 2017 and 2016 , we had no such interest or penalties. The tax year 2013 and thereafter remain open to examination by the major taxing jurisdictions with which the Company files tax returns.

See Note 10 "Income Taxes" for further discussion on income taxes.

(h) 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.

(i) 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.

(j) 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

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

(k) Transactions Expense

Transactions expense includes acquisition-related expenses, other business development expenses and other expenses to integrate newly acquired investments, 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.

(l) Gains on Sale of Properties

Gains on sale of properties are recognized using the full accrual or partial sale methods, as applicable, in accordance with U.S. GAAP, provided various criteria relating to the terms of sale and any subsequent involvement with the real estate sold are satisfied.

(m) 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.

(n) 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 and services are 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. In addition, the chief operating decision makers evaluate operating performance and make resource allocation decisions for the portfolio as a whole, rather than by property type or revenue stream. Consequently, our properties qualify for aggregation into one reporting segment.

Operating revenues from properties in the United States were $429.1 million and $406.3 million and outside the United States were $121.4 million and $97.9 million for the three months ended March 31, 2017 and 2016 , respectively. We had investments in real estate located in the United States of $6.3 billion and $6.3 billion , and outside the United States of $2.7 billion and $2.6 billion , as of March 31, 2017 and December 31, 2016 , respectively.

Operating revenues from properties located in the United Kingdom were $65.2 million and $51.6 million , or 11.8% and 10.2% of total operating revenues, for the three months ended March 31, 2017 and 2016 , respectively. No other foreign country comprised more than 10% of total operating revenues for each of these periods. We had investments in real estate located in the United Kingdom of $1.5 billion and $1.5 billion , or 16.5% and 16.6% of total long-lived assets, as of March 31, 2017 and December 31, 2016 , respectively. No other foreign country comprised more than 10% of total long-lived assets as of March 31, 2017 and December 31, 2016 .

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March 31, 2017 and 2016

(o) New Accounting Pronouncements

New Accounting Standards Adopted

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2017-01, "Clarifying the Definition of a Business (Topic 805)." ASU 2017-01 clarifies the definition of a business and provides further guidance for evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. ASU 2017-01 is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The update should be applied prospectively. We adopted ASU 2017-01 as of January 1, 2017 and the adoption did not require any additional disclosures. We believe most of our future acquisitions of operating properties will qualify as asset acquisitions and most future transaction costs associated with these acquisitions will be capitalized.

In November 2016, the FASB issued an ASU that will require companies to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU will require a disclosure of a reconciliation between the statement of financial position and the statement of cash flows when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. Entities with material restricted cash and restricted cash equivalents balances will be required to disclose the nature of the restrictions. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted, and will be applied retrospectively to all periods presented. We adopted this ASU as of January 1, 2017, and restricted cash balances are included along with cash and cash equivalents as of the end of period and beginning of period in our condensed consolidated statement of cash flows for all periods presented; separate line items showing changes in restricted cash balances have been eliminated from our condensed consolidated statement of cash flows.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which provides for simplification of certain aspects of employee share-based payment accounting, including income taxes, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard must be applied prospectively, retrospectively, or as of the beginning of the earliest comparative period presented in the year of adoption, depending on the type of amendment. We adopted ASU 2016-09 as of January 1, 2017, and did not have a material impact on our consolidated financial statements.

New Accounting Standards Issued but not yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers", and since that date has issued several additional ASUs intended to clarify certain aspects of ASU 2014-09 and to provide for certain practical expedients entities may elect upon adoption. Collectively, these ASUs outline a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers. While lease contracts with customers, which constitute the vast majority of our revenues, are a specific scope exception, this update may have implications in certain variable payment terms included in lease agreements. The standard is effective for the Company on January 1, 2018, with early adoption permitted. The standard permits the use of either a retrospective or cumulative effect transition method and permits the use of certain practical expedients. We currently anticipate using the cumulative effect transition method, however, this determination is subject to change. As the standard does not significantly impact lessor accounting, we do not believe adoption will have a material impact on our accounting for rental revenue. In addition, we do not anticipate a significant impact to our accounting for certain of our revenue streams which are not based on contractually specified lease amounts, including interconnection, tenant reimbursement and other revenue.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)", which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Accounting for leases with a term of 12 months or less will be similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 is expected to impact the Company’s

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consolidated financial statements as the Company has certain operating and land lease arrangements for which it is the lessee. ASU 2016-02 supersedes the previous leases standard, Leases (Topic 840). The standard is effective on January 1, 2019, with early adoption permitted. A set of practical expedients for implementation, which must be elected as a package and for all leases, may also be elected. These practical expedients include relief from re-assessing lease classification at the adoption date for expired or existing leases, although a right-of-use asset and lease liability would still be recorded for such leases. We are currently assessing the method of adoption and the impact that ASU 2016-02 will have on our consolidated financial statements.

In January 2017, the FASB issued guidance codified in ASU Topic 2017-04, "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating the process of measuring the implied value of goodwill, known as step two, from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The standard will be effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We do not expect the provisions of ASC 2017-04 to have a material impact on our consolidated financial statements.

3. Investments in Real Estate

We acquired the following real estate during the three months ended March 31, 2017 :



Location	Market	Date Acquired	Amount (in millions)
Osaka Phase II ⁽¹⁾	Osaka, Japan	March 15, 2017	$	13.6


(1)	Represents currently vacant land which is not included in our operating property count. Purchase price in U.S. dollars and excludes capitalized closing costs.

As of March 31, 2017 , three properties had an aggregate carrying value of $56.2 million within total assets and $3.1 million within total liabilities and are shown as assets held for sale and obligations associated with assets held for sale on the condensed consolidated balance sheet. The three properties are not representative of a significant component of our portfolio, nor do the potential sales represent a significant shift in our strategy.

European Portfolio Acquisition

On July 5, 2016, the Company completed the acquisition of a portfolio of eight high-quality, carrier-neutral data centers in Europe from Equinix, which we refer to as the European Portfolio Acquisition. The purchase price was $818.9 million in the aggregate (based on the exchange rate at the date of acquisition). The final purchase price allocation was completed in early 2017. The final adjustments to the preliminary purchase price allocation were not material. The following table summarizes the amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):



Investments in real estate	$	270,195
Goodwill	442,975
Intangibles:
Tenant relationship value	249,070
Acquired in-place lease value	18,807
Above/below-market lease value, net	4,817
Capital lease and other long-term obligations	(118,923		)
Deferred taxes and other	(48,037		)
Total purchase price	$	818,904

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March 31, 2017 and 2016

4. Investment in Unconsolidated Joint Ventures

As of March 31, 2017 , our investment in unconsolidated joint ventures consists of effective 50% interests in three joint ventures that own data center properties at 2001 Sixth Avenue in Seattle, Washington, 2020 Fifth Avenue in Seattle, Washington and 33 Chun Choi Street in Hong Kong, effective 20% interests in two joint ventures, one of which owns 10 data center properties with an investment fund managed by Prudential Real Estate Investors (PREI ^® ) and the other which owns one data center property with an affiliate of Griffin Capital Essential Asset REIT, Inc. (GCEAR) and a 17% interest in a joint venture that operates a high density colocation facility at 1101 Space Park Drive in Santa Clara, California. The following tables present summarized financial information for our joint ventures as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016 (unaudited, in thousands):



	As of March 31, 2017										Three Months Ended March 31, 2017
2017	Net Investment in Properties		Total Assets		Debt		Total Liabilities		Equity		Revenues		Property Operating Expense			Net Operating Income		Net Income
Total Unconsolidated Joint Ventures	$	736,735	$	925,439	$	456,870	$	546,389	$	379,050	$	35,062	$	(10,391	)	$	24,671	$	11,286
Our investment in and share of equity in earnings of unconsolidated joint ventures									$	112,856								$	5,324

	As of December 31, 2016										Three Months Ended March 31, 2016
2016	Net Investment in Properties		Total Assets		Debt		Total Liabilities		Equity		Revenues		Property Operating Expense			Net Operating Income		Net Income
Total Unconsolidated Joint Ventures	$	741,228	$	922,694	$	457,141	$	549,997	$	372,697	$	33,608	$	(10,583	)	$	23,025	$	9,000
Our investment in and share of equity in earnings of unconsolidated joint ventures									$	106,402								$	4,078

We amortize the difference between the cost of our investment in the joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was immaterial for the three months ended March 31, 2017 and 2016 , respectively.

Differences between the Company’s investment in the joint ventures and the amount of the underlying equity in net assets of the joint ventures 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 ventures. Our proportionate share of the earnings or losses related to these unconsolidated joint ventures is reflected as equity in earnings of unconsolidated joint ventures on the accompanying condensed consolidated income statements.

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March 31, 2017 and 2016

5. Acquired Intangible Assets and Liabilities

The following summarizes our acquired intangible assets (real estate intangibles, comprised of acquired in-place lease value and tenant relationship value along with acquired above-market lease value) and intangible liabilities (acquired below-market lease value) as of March 31, 2017 and December 31, 2016 .



	Balance as of
(Amounts in thousands)	March 31, 2017			December 31, 2016
Real Estate Intangibles:
Acquired in-place lease value:
Gross amount	$	898,904		$	896,693
Accumulated amortization	(532,545		)	(517,443		)
Net	$	366,359		$	379,250
Tenant relationship value:
Gross amount	$	975,188		$	971,519
Accumulated amortization	(99,926		)	(82,069		)
Net	$	875,262		$	889,450
Acquired above-market leases:
Gross amount	$	110,748		$	110,142
Accumulated amortization	(89,922		)	(87,961		)
Net	$	20,826		$	22,181
Acquired below-market leases:
Gross amount	$	284,695		$	283,899
Accumulated amortization	(206,054		)	(202,000		)
Net	$	78,641		$	81,899

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental revenues of $1.8 million and $2.3 million for the three months ended March 31, 2017 and 2016 , respectively. The expected average remaining lives for acquired below-market leases and acquired above-market leases is 6.3 years and 4.0 years, respectively, as of March 31, 2017 . Estimated annual amortization of acquired below-market leases, net of acquired above-market leases, for each of the five succeeding years and thereafter, commencing April 1, 2017 is as follows:



(Amounts in thousands)
Remainder of 2017	$	5,179
2018	5,538
2019	5,680
2020	7,434
2021	7,423
Thereafter	26,561
Total	$	57,815

Amortization of acquired in-place lease value (a component of depreciation and amortization expense) was $14.2 million and $13.7 million for the three months ended March 31, 2017 and 2016 , respectively. The expected average amortization period for acquired in-place lease value is 8.0 years as of March 31, 2017 . The weighted average remaining contractual life for acquired leases excluding renewals or extensions is 6.9 years as of March 31, 2017 . Estimated annual amortization of acquired

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March 31, 2017 and 2016

in-place lease value for each of the five succeeding years and thereafter, commencing April 1, 2017 is as follows:



(Amounts in thousands)
Remainder of 2017	$	40,295
2018	47,854
2019	40,648
2020	36,692
2021	34,077
Thereafter	166,793
Total	$	366,359

Amortization of tenant relationship value and trade names (a component of depreciation and amortization expense) was approximately $17.6 million and $0.0 million , respectively, for the three months ended March 31, 2017 and approximately $15.9 million and $0.5 million , respectively, for the three months ended March 31, 2016 . During the quarter ended June 30, 2016, management of the Company decided to retire the Telx trade name. Accordingly, the Company wrote off the net remaining balance of approximately $6.1 million . As of March 31, 2017 , the weighted average remaining contractual life for customer contracts was 12.7 years. Estimated annual amortization of customer contracts for each of the five succeeding years and thereafter, commencing April 1, 2017 is as follows:



(Amounts in thousands)
Remainder of 2017	$	52,687
2018	70,249
2019	70,249
2020	70,249
2021	70,249
Thereafter	541,579
Total	$	875,262

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March 31, 2017 and 2016

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 currently have any indebtedness. All debt is currently held directly or indirectly by the Operating Partnership.

Guarantee of Debt

The Company guarantees the Operating Partnership’s obligations with respect to its 5.875% notes due 2020 ( 5.875% 2020 Notes ), 3.400% Notes due 2020 ( 3.400% 2020 Notes), 5.250% notes due 2021 ( 2021 Notes ), 3.950% notes due 2022 ( 3.950% 2022 Notes ), 3.625% notes due 2022 ( 3.625% 2022 Notes ), and 4.750% notes due 2025 ( 4.750% 2025 Notes). 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 ( 4.250% 2025 Notes ) and the obligations of Digital Euro Finco, LLC, a wholly owned subsidiary of the Operating Partnership, with respect to its 2.625% notes due 2024 (2024 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.

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March 31, 2017 and 2016

7. Debt of the Operating Partnership

A summary of outstanding indebtedness of the Operating Partnership as of March 31, 2017 and December 31, 2016 is as follows (in thousands):



Indebtedness	Interest Rate at March 31, 2017		Maturity Date	Principal Outstanding March 31, 2017				Principal Outstanding December 31, 2016
Global revolving credit facility	Various	(1)	Jan 15, 2020	$	574,379		(2)	$	210,077		(2)
Deferred financing costs, net				(9,912		)		(10,868		)
Global revolving credit facility, net				564,467				199,209
Unsecured Term Loans
Unsecured term loan — 5-year	Various	(3)(4)	Jan 15, 2021	1,211,515			(5)	1,188,498			(5)
Unsecured term loan — 7-year	Various	(3)(4)	Jan 15, 2023	300,000			(5)	300,000			(5)
Deferred financing costs, net				(5,848		)		(6,137		)
Unsecured term loan, net				1,505,667				1,482,361
Unsecured senior notes:
Prudential Shelf Facility:
Series E	5.730%		Jan 20, 2017	—			(6)	50,000
Total Prudential Shelf Facility				—				50,000
Senior Notes:
5.875% notes due 2020	5.875%		Feb 1, 2020	500,000				500,000
3.400% notes due 2020	3.400%		Oct 1, 2020	500,000				500,000
5.250% notes due 2021	5.250%		Mar 15, 2021	400,000				400,000
3.950% notes due 2022	3.950%		Jul 1, 2022	500,000				500,000
3.625% notes due 2022	3.625%		Oct 1, 2022	300,000				300,000
4.750% notes due 2023	4.750%		Oct 13, 2023	376,500			(7)	370,200			(7)
2.625% notes due 2024	2.625%		Apr 15, 2024	639,120			(8)	631,020			(8)
4.250% notes due 2025	4.250%		Jan 17, 2025	502,000			(7)	493,600			(7)
4.750% notes due 2025	4.750%		Oct 1, 2025	450,000				450,000
Unamortized discounts				(15,040		)		(15,649		)
Total senior notes, net of discount				4,152,580				4,129,171
Deferred financing costs, net				(24,470		)		(25,374		)
Total unsecured senior notes, net of discount and deferred financing costs				4,128,110				4,153,797

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March 31, 2017 and 2016



Indebtedness	Interest Rate at March 31, 2017	Maturity Date	Principal Outstanding March 31, 2017			Principal Outstanding December 31, 2016
Mortgage loans:
731 East Trade Street	8.22%	Jul 1, 2020	$	2,784		$	2,916
Unamortized net premiums			311			334
Total mortgage loans, including premiums			3,095			3,250
Deferred financing costs, net			(10		)	(10		)
Total mortgage loans, including premiums and net of deferred financing costs			3,085			3,240
Total indebtedness			$	6,241,569		$	5,838,607

_________________________________

(1)

The interest rate for borrowings under the global revolving credit facility equals the applicable index plus a margin of 100 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.


(2)	Balances as of March 31, 2017 and December 31, 2016 are as follows (balances, in thousands):



Denomination of Draw	Balance as of March 31, 2017			Weighted-average interest rate		Balance as of December 31, 2016			Weighted-average interest rate
Floating Rate Borrowing (a)
U.S. dollar ($)	$	80,000		1.91	%	$	105,000		1.67	%
British pound sterling (£)	328,183		(b)	1.27	%	11,106		(c)	1.25	%
Euro (€)	43,141		(b)	0.63	%	15,250		(c)	0.63	%
Hong Kong dollar (HKD)	2,432		(b)	1.45	%	1,728		(c)	1.66	%
Japanese yen (JPY)	96,530		(b)	0.96	%	54,273		(c)	0.92	%
Singapore dollar (SGD)	2,004		(b)	1.66	%	11,186		(c)	1.52	%
Canadian dollar (CAD)	12,089		(b)	1.94	%	11,534		(c)	1.92	%
Total	$	564,379		1.27	%	$	210,077		1.39	%
Base Rate Borrowing (d)
U.S. dollar ($)	$	10,000		4.00	%	$	—		—	%
Total borrowings	$	574,379		1.32	%	$	210,077		1.39	%


(a)	The interest rates for floating rate borrowings under the global revolving credit facility equal the applicable index plus a margin of 100 basis points, which is based on the credit ratings of our long-term debt.


(b)	Based on exchange rates of $1.26 to £1.00, $1.07 to €1.00, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY, $0.72 to 1.00 SGD and $0.75 to 1.00 CAD, respectively, as of March 31, 2017 .


(c)	Based on exchange rates of $1.23 to £1.00, $1.05 to €1.00, $0.13 to 1.00 HKD, $0.01 to 1.00 JPY, $0.69 to 1.00 SGD and $0.74 to 1.00 CAD, respectively, as of December 31, 2016 .


(d)	The interest rates for base rate borrowings under the global revolving credit facility equal the U.S. Prime Rate plus the applicable margin, currently zero basis points, which is based on the credit rating of our long-term debt.


(3)	Interest rates are based on our current senior unsecured debt ratings and are 110 basis points and 155 basis points over the applicable index for floating rate advances for the 5 -Year Term Loan and the 7 -Year Term Loan, respectively.

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(4)	We have entered into interest rate swap agreements as a cash flow hedge for interest generated by the U.S. dollar, Singapore dollar, British pound sterling and Canadian dollar tranches of the unsecured term loan. See Note 14 "Derivative Instruments" for further information.


(5)	Balances as of March 31, 2017 and December 31, 2016 are as follows (balances, in thousands):



Denomination of Draw	Balance as of March 31, 2017			Weighted-average interest rate			Balance as of December 31, 2016			Weighted-average interest rate
U.S. dollar ($)	$	710,911		2.20	%	(b)	$	710,911		1.99	%	(d)
British pound sterling (£)	212,691		(a)	1.36	%	(b)	209,132		(c)	1.36	%	(d)
Singapore dollar (SGD)	231,021		(a)	1.86	%	(b)	222,824		(c)	1.76	%	(d)
Australian dollar (AUD)	180,273		(a)	2.73	%		170,325		(c)	2.72	%
Hong Kong dollar (HKD)	85,868		(a)	1.54	%		86,029		(c)	1.77	%
Canadian dollar (CAD)	73,964		(a)	1.99	%	(b)	73,294		(c)	2.00	%	(d)
Japanese yen (JPY)	16,787		(a)	1.05	%		15,983		(c)	0.98	%
Total	$	1,511,515		2.03	%	(b)	$	1,488,498		1.93	%	(d)


(a)	Based on exchange rates of $1.26 to £1.00, $0.72 to 1.00 SGD, $0.76 to 1.00 AUD, $0.13 to 1.00 HKD, $0.75 to 1.00 CAD and $0.01 to 1.00 JPY, respectively, as of March 31, 2017 .


(b)	As of March 31, 2017 , the weighted-average interest rate reflecting interest rate swaps was 2.43% (U.S. dollar), 1.89% (British pound sterling), 1.91% (Singapore dollar), 1.88% (Canadian dollar) and 2.22% (Total). See Note 14 "Derivative Instruments" for further discussion on interest rate swaps.


(c)	Based on exchange rates of $1.23 to £1.00, $0.69 to 1.00 SGD, $0.72 to 1.00 AUD, $0.13 to 1.00 HKD, $0.74 to 1.00 CAD and $0.01 to 1.00 JPY, respectively, as of December 31, 2016 .


(d)	As of December 31, 2016 , the weighted-average interest rate reflecting interest rate swaps was 2.45% (U.S. dollar), 1.89% (British pound sterling), 1.90% (Singapore dollar), 1.88% (Canadian dollar) and 2.23% (Total).


(6)	Unsecured note paid in full at maturity.


(7)	Based on exchange rate of $1.26 to £1.00 as of March 31, 2017 and $1.23 to £1.00 as of December 31, 2016 .


(8)	Based on exchange rate of $1.07 to €1.00 as of March 31, 2017 and $1.05 to €1.00 as of December 31, 2016 .

Global Revolving Credit Facility

On January 15, 2016, we refinanced our global revolving credit facility and entered into a global senior credit agreement for a $2.0 billion senior unsecured revolving credit facility, which we refer to as the global revolving credit facility, that replaced the $2.0 billion revolving credit facility executed on August 15, 2013, as amended. The global revolving credit facility has an accordion feature that would enable us to increase the borrowing capacity of the credit facility to up to $2.5 billion , subject to the receipt of lender commitments and other conditions precedent. The refinanced facility matures on January 15, 2020 , with two six -month extension options available. The interest rate for borrowings under the global revolving credit facility equals the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 100 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 and Japanese yen. As of March 31, 2017 , interest rates are based on 1-month LIBOR, 1-month EURIBOR, 1-month GBP LIBOR, 1-month HIBOR, 1-month JPY LIBOR, 1-month SOR and 1-month CDOR, plus a margin of 1.00% . The facility also bore a base borrowing rate of 4.00% (USD) which is based on the U.S. Prime Rate. We have used and intend to use available borrowings under the global revolving credit facility to acquire additional properties, fund development opportunities and for general working capital and other corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities. As of March 31, 2017 , we have capitalized approximately $9.9 million of financing costs, net of accumulated amortization, related to the global revolving credit facility. As of March 31, 2017 , approximately $574.4 million was drawn under the global revolving credit facility and $19.1 million of letters of credit were issued.

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March 31, 2017 and 2016

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 March 31, 2017 , we were in compliance with all of such covenants.

Unsecured Term Loans

On January 15, 2016, we refinanced our senior unsecured multi-currency term loan facility and entered into a term loan agreement, which governs (i) a $1.25 billion 5 -year senior unsecured term loan, which we refer to as the 5 -Year Term Loan, and (ii) a $300 million 7 -year senior unsecured term loan, which we refer to as the 7 -Year Term Loan. The 2016 term loan agreement replaced the $1.0 billion term loan agreement executed on April 16, 2012, as amended. The 5 -Year Term Loan matures on January 15, 2021 and the 7 -Year Term Loan matures on January 15, 2023 . In addition, we have the ability from time to time to increase the aggregate size of lending under the 2016 term loan agreement from $1.55 billion to up to $1.8 billion , subject to receipt of lender commitments and other conditions precedent. Interest rates are based on our senior unsecured debt ratings and are currently 110 basis points and 155 basis points over the applicable index for floating rate advances for the 5 -Year Term Loan and the 7 -Year Term Loan, respectively. Funds may be drawn in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as Euro, British pound sterling and Japanese yen. Based on exchange rates in effect at March 31, 2017 , the balance outstanding is approximately $1.5 billion , excluding deferred financing costs. We have used borrowings under the term loan for acquisitions, repayment of indebtedness, development, working capital and general corporate purposes. The covenants under the term loans are consistent with our global revolving credit facility and, as of March 31, 2017 , we were in compliance with all of such covenants. As of March 31, 2017 , we have capitalized approximately $5.8 million of financing costs, net of accumulated amortization, related to the 2016 unsecured term loans.

The table below summarizes our debt maturities and principal payments as of March 31, 2017 (in thousands):



	Global Revolving Credit Facility ⁽¹⁾		Unsecured Term Loan		Senior Notes			Mortgage Loans		Total Debt
Remainder of 2017	$	—	$	—	$	—		$	414	$	414
2018	—		—		—			593		593
2019	—		—		—			644		644
2020	574,379		—		1,000,000			1,133		1,575,512
2021	—		1,211,515		400,000			—		1,611,515
Thereafter	—		300,000		2,767,620			—		3,067,620
Subtotal	$	574,379	$	1,511,515	$	4,167,620		$	2,784	$	6,256,298
Unamortized discount	—		—		(15,040		)	—		(15,040		)
Unamortized premium	—		—		—			311		311
Total	$	574,379	$	1,511,515	$	4,152,580		$	3,095	$	6,241,569


(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.

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March 31, 2017 and 2016

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 March 31,
	2017		2016
Net income available to common stockholders	$	66,145	$	39,125
Weighted average shares outstanding—basic	159,297,027		146,565,564
Potentially dilutive common shares:
Stock options	4		11,286
Unvested incentive units	237,336		122,601
Forward equity offering	283,388		—
Market performance-based awards	603,900		733,743
Weighted average shares outstanding—diluted	160,421,655		147,433,194
Income per share:
Basic	$	0.42	$	0.27
Diluted	$	0.41	$	0.27

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



	Three Months Ended March 31,
	2017	2016
Weighted average of Operating Partnership common units not owned by Digital Realty Trust, Inc.	2,177,874	2,482,234
Potentially dilutive Series E Cumulative Redeemable Preferred Stock	—	3,345,087
Potentially dilutive Series F Cumulative Redeemable Preferred Stock	1,783,083	2,121,447
Potentially dilutive Series G Cumulative Redeemable Preferred Stock	2,438,074	2,900,732
Potentially dilutive Series H Cumulative Redeemable Preferred Stock	3,572,744	4,250,720
Potentially dilutive Series I Cumulative Redeemable Preferred Stock	2,440,928	2,904,126
Total	12,412,703	18,004,346

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March 31, 2017 and 2016

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 March 31,
	2017		2016
Net income available to common unitholders	$	67,049	$	39,788
Weighted average units outstanding—basic	161,474,901		149,047,798
Potentially dilutive common units:
Stock options	4		11,286
Unvested incentive units	237,336		122,601
Forward equity offering	283,388		—
Market performance-based awards	603,900		733,743
Weighted average units outstanding—diluted	162,599,529		149,915,428
Income per unit:
Basic	$	0.42	$	0.27
Diluted	$	0.41	$	0.27

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



	Three Months Ended March 31,
	2017	2016
Potentially dilutive Series E Cumulative Redeemable Preferred Units	—	3,345,087
Potentially dilutive Series F Cumulative Redeemable Preferred Units	1,783,083	2,121,447
Potentially dilutive Series G Cumulative Redeemable Preferred Units	2,438,074	2,900,732
Potentially dilutive Series H Cumulative Redeemable Preferred Units	3,572,744	4,250,720
Potentially dilutive Series I Cumulative Redeemable Preferred Units	2,440,928	2,904,126
Total	10,234,829	15,522,112

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March 31, 2017 and 2016

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, 2017 . As such, no provision for federal income taxes has been included in the Company's accompanying condensed consolidated financial statements for the three months ended March 31, 2017 and 2016 .

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 months ended March 31, 2017 and 2016 .

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 the income statement. Deferred tax assets (net of valuation allowance) and liabilities for our TRS entities and foreign subsidiaries were accrued, as necessary, for the three months ended March 31, 2017 and 2016 . As of March 31, 2017 and December 31, 2016, we had deferred tax liabilities net of deferred tax assets of approximately $155.4 million and $153.8 million , respectively, primarily related to our foreign properties, classified in accounts payable and other accrued expenses in the condensed consolidated balance sheet. 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 and the European Portfolio Acquisition in July 2016. The valuation allowances at March 31, 2017 and December 31, 2016 relate primarily to certain foreign jurisdictions and net operating loss carryforwards from the acquisition of Telx, or the Telx Acquisition, that we do not expect to utilize, and deferred tax assets resulting from certain foreign real estate acquisition costs, which are not depreciated for tax purposes, but are deductible upon ultimate sale of the property. Given the indefinite holding period associated with these assets, realization of these deferred tax assets is not more-likely-than-not as of March 31, 2017 and December 31, 2016 .

11. Equity and Accumulated Other Comprehensive Loss, 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. Cumulatively through March 31, 2017 , 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 three months ended March 31, 2017 and 2016 . As of March 31, 2017 , shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

(b) Forward Equity Sale

On May 20, 2016, Digital Realty Trust, Inc. completed an underwritten public offering of 12,500,000 shares of its common stock, all of which were offered in connection with forward sale agreements it entered into with certain financial institutions acting as forward purchasers. On June 2, 2016, the underwriters exercised their option in full to purchase an additional 1,875,000 shares of Digital Realty Trust, Inc.’s common stock from the forward purchasers. The forward purchasers

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March 31, 2017 and 2016

borrowed and sold an aggregate of 14,375,000 shares of Digital Realty Trust, Inc.’s common stock in the public offering. Digital Realty Trust, Inc. did not receive any proceeds from the sale of our common stock by the forward purchasers in the public offering. On September 27, 2016, we physically settled a portion of the forward sale agreements by issuing an aggregate of 12,000,000 shares of our common stock to the forward purchasers in exchange for net proceeds of approximately $1.1 billion . Following such settlement, 2,375,000 shares of our common stock remain subject to the forward sale agreements, which are anticipated to be settled no later than May 19, 2017.

On April 5, 2017, Digital Realty Trust, Inc. redeemed all 7,300,000 outstanding shares of its 6.625% series F cumulative redeemable preferred stock, or the series F preferred stock, for $25.01840 per share. The redemption price was equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date. Digital Realty Trust, Inc. funded the redemption with borrowings under the global revolving credit facility, which the Operating Partnership distributed to Digital Realty Trust, Inc. in connection with the Operating Partnership’s redemption of all 7,300,000 of its outstanding series F preferred units held by Digital Realty Trust, Inc. The excess of the redemption price over the carrying value of the series F preferred stock of approximately $6.3 million relates to the original issuance costs and will be reflected as a reduction to net income available to common stockholders.

(d) Noncontrolling Interests in Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the interests that are not owned by Digital Realty Trust, Inc. The following table shows the ownership interests in the Operating Partnership as of March 31, 2017 and December 31, 2016 :



	March 31, 2017			December 31, 2016
	Number of units	Percentage of total		Number of units	Percentage of total
Digital Realty Trust, Inc.	159,539,892	98.4	%	159,019,118	98.5	%
Noncontrolling interests consist of:
Common units held by third parties	1,011,814	0.6	%	1,141,814	0.7	%
Incentive units held by employees and directors (see Note 13)	1,534,357	1.0	%	1,333,849	0.8	%
	162,086,063	100.0	%	161,494,781	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 $255.9 million and $226.3 million based on the closing market price of Digital Realty Trust, Inc. common stock on March 31, 2017 and December 31, 2016 , respectively.

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March 31, 2017 and 2016

The following table shows activity for the noncontrolling interests in the Operating Partnership for the three months ended March 31, 2017 :



	Common Units		Incentive Units		Total
As of December 31, 2016	1,141,814		1,333,849		2,475,663
Redemption of common units for shares of Digital Realty Trust, Inc. common stock ⁽¹⁾	(130,000	)	—		(130,000	)
Conversion of incentive units held by employees and directors for shares of Digital Realty Trust, Inc. common stock ⁽¹⁾	—		(86,964	)	(86,964	)
Incentive units issued upon achievement of market performance condition	—		232,148		232,148
Grant of incentive units to employees and directors	—		55,324		55,324
As of March 31, 2017	1,011,814		1,534,357		2,546,171


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

(e) Dividends

We have declared and paid the following dividends on our common and preferred stock for the three months ended March 31, 2017 (in thousands, except per share data):



Date dividend declared	Dividend payment date	Series F Preferred Stock ⁽¹⁾		Series G Preferred Stock		Series H Preferred Stock		Series I Preferred Stock		Common Stock
March 1, 2017	March 31, 2017	$	3,023	$	3,672	$	6,730	$	3,969	$	148,358

Annual rate of dividend per share		$	1.656	$	1.469	$	1.844	$	1.588	$	3.720

(1)

Redeemed on April 5, 2017 for $25.01840 per share, or a redemption price of $25.00 per share, plus accrued and unpaid dividends up to but not including the redemption date of approximately $0.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $6.3 million will be deducted in the computation of net income available to common stockholders.

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

(f) Accumulated Other Comprehensive Loss, Net

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



	Foreign currency translation adjustments			Cash flow hedge adjustments			Accumulated other comprehensive income (loss), net
Balance as of December 31, 2016	$	(175,642	)	$	40,037		$	(135,605	)
Net current period change	16,354			(4,305		)	12,049
Reclassification to interest expense from interest rate swaps	—			1,016			1,016
Balance as of March 31, 2017	$	(159,288	)	$	36,748		$	(122,540	)

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March 31, 2017 and 2016

12. Capital and Accumulated Other Comprehensive Loss

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

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

(b) 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 $255.9 million and $226.3 million based on the closing market price of Digital Realty Trust, Inc.’s common stock on March 31, 2017 and December 31, 2016 , respectively.

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 three months ended March 31, 2017 (in thousands, except for per unit data):



Date distribution declared	Distribution payment date	Series F Preferred Units ⁽¹⁾		Series G Preferred Units		Series H Preferred Units		Series I Preferred Units		Common Units
March 1, 2017	March 31, 2017	$	3,023	$	3,672	$	6,730	$	3,969	$	150,968

Annual rate of distribution per unit		$	1.656	$	1.469	$	1.844	$	1.588	$	3.720

(1)

Redeemed on April 5, 2017 for $25.01840 per unit, or a redemption price of $25.00 per unit, plus accrued and unpaid distributions up to but not including the redemption date of approximately $0.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $6.3 million will be deducted in the computation of net income available to common unitholders.

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March 31, 2017 and 2016

(d) Accumulated Other Comprehensive Loss

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 loss
Balance as of December 31, 2016	$	(180,504	)	$	39,885		$	(140,619	)
Net current period change	16,578			(4,364		)	12,214
Reclassification to interest expense from interest rate swaps	—			1,030			1,030
Balance as of March 31, 2017	$	(163,926	)	$	36,551		$	(127,375	)

13. Incentive Plan

Our Amended and Restated 2004 Incentive Award Plan (as defined below) previously provided for grants 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 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 its stockholders approved the Digital Realty Trust, Inc., Digital Services, Inc., and Digital Realty Trust, L.P. 2014 Incentive Award Plan (as amended, the 2014 Incentive Award Plan), which had been previously adopted by its Board of Directors and recommended to the stockholders for approval by its 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 March 31, 2017 , 3,697,500 shares of common stock, including awards convertible into or exchangeable for shares of common stock, remained available for future issuance under the 2014 Incentive Award Plan. Each long-term incentive unit and each 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 (other than Class D units), whether vested or not, will receive the same quarterly per unit distributions as Operating Partnership common units, which equal the 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 and privileges of common units of the Operating Partnership, including redemption rights. For a discussion of how long-term incentive units achieve parity with common units, see Note 13(a) to our consolidated financial statements for the fiscal year ended December 31, 2016 , included in our Annual Report on 10-K for the year ended December 31, 2016 .

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March 31, 2017 and 2016

Below is a summary of our long-term incentive unit activity for the three months ended March 31, 2017 .



Unvested Long-term Incentive Units	Units		Weighted-Average Grant Date Fair Value
Unvested, beginning of period	128,822		$	66.58
Granted	55,324		107.98
Vested	(41,558	)	60.83
Unvested, end of period	142,588		$	84.32

The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock on the applicable grant date(s), are being expensed on a straight-line basis for service awards over four years, the current vesting period of the long-term incentive units.

The expense recorded for the three months ended March 31, 2017 and 2016 related to long-term incentive units was approximately $0.7 million and $1.0 million , 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 $0.5 million for the three months ended March 31, 2017 and 2016 , respectively. Unearned compensation representing the unvested portion of the long-term incentive units totaled $10.5 million and $5.6 million as of March 31, 2017 and December 31, 2016 , respectively. We expect to recognize this unearned compensation over the next 3.0 years on a weighted-average basis.

(b) Market Performance-Based Awards

During the three months ended March 31, 2017 and 2016 , the Compensation Committee of the Board of Directors of Digital Realty Trust, Inc. 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 Digital Realty Trust, Inc.’s common stock (collectively, the “awards”), under the 2014 Incentive Award Plan to officers and employees of the Company.

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 Digital Realty Trust, Inc.’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 2017 or January 2016, as applicable (or, if earlier, ending on the date on which a change in control of the Company occurs), subject to continued services. Vesting with respect to the market condition is measured based on the difference between Digital Realty Trust, Inc.’s TSR percentage and the TSR percentage of the RMS, or the RMS Relative Market Performance. In the event that the RMS Relative Market Performance during the Market Performance Period is achieved at the “threshold,” “target” or “high” level as set forth below, the awards will become vested as to the market condition 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
Below Threshold Level	≤ -300 basis points	0%
Threshold Level	-300 basis points	25%
Target Level	100 basis points	50%
High Level	> 500 basis points	100%

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

Following the completion of the Market Performance Period, the 2016 awards that have satisfied the market condition, if any, will service-vest 50% on February 27, 2019 and 50% on February 27, 2020, subject to continued employment through each applicable vesting date. Following the completion of the Market Performance Period, the 2017 awards that have satisfied the market condition, if any, will service-vest 50% on February 27, 2020 and 50% on February 27, 2021, subject to continued employment through each applicable vesting date.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

Service-based 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, in any case prior to the completion of the Market Performance Period. However, vesting with respect to the market condition will continue to be measured based on RMS Relative Market Performance during the three -year Market Performance Period (or, in the case of a change in control, shortened Market Performance Period).

The fair values of the 2017 awards and 2016 awards were measured using a Monte Carlo simulation to estimate the probability of the market vesting condition being satisfied. Digital Realty Trust, Inc.’s achievement of the market vesting condition 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 2017 valuation include expected stock price volatility of 25 percent and a risk-free interest rate of 1.49 percent . Assumptions used in the 2016 valuations include expected stock price volatility of 22 percent and 26 percent and risk-free interest rates of 1.32 percent and 0.89 percent , respectively. These valuations were performed in a risk-neutral framework, so no assumption was made with respect to an equity risk premium.

As of March 31, 2017 , 2,029,908 Class D units and 543,923 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 market performance-based RSUs, as applicable, which will become vested assuming the achievement of the highest level of RMS Relative Market Performance 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 $74.9 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 March 31, 2017 and December 31, 2016 was $41.1 million and $25.6 million , respectively, net of cancellations. As of March 31, 2017 , 490,529 Class D units and 104,313 market performance-based RSUs had fully vested. We recognized compensation expense related to these awards of approximately $2.1 million and $2.2 million in the three months ended March 31, 2017 and 2016 , respectively. We capitalized amounts relating to compensation expense of employees directly engaged in construction and leasing activities of approximately $0.7 million and $0.7 million for the three months ended March 31, 2017 and 2016 , respectively. If the market conditions are not met, at the end of the applicable performance periods, the unamortized amount will be recognized as an expense at that time.

The following table summarizes the Amended and Restated 2004 Incentive Award Plan’s stock option activity for the three -month period ended March 31, 2017 :



	Period Ended March 31, 2017
	Shares		Weighted average exercise price
Options outstanding, beginning of period	17,674		$	41.73
Exercised	(17,668	)	41.73
Options outstanding, end of period	6		$	41.73
Exercisable, end of period	6		$	41.73

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2017 :



Options outstanding and exercisable
Exercise price	Number outstanding	Weighted-average remaining contractual life (years)	Weighted-average exercise price		Aggregate intrinsic value
$41.73	6	0.09	$	41.73	$	388

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

(d) Restricted Stock

Below is a summary of our restricted stock activity for the three months ended March 31, 2017 .



Unvested Restricted Stock	Shares		Weighted-Average Grant Date Fair Value
Unvested, beginning of period	274,642		$	73.81
Granted	107,411		108.00
Vested	(86,209	)	67.27
Cancelled or expired	(4,366	)	79.75
Unvested, end of period	291,478		$	88.25

The grant date fair values, which equal the market price of Digital Realty Trust, Inc. common stock on the grant date, are expensed on a straight-line basis for service awards over the vesting period of the restricted stock, which is generally four years.

The expense recorded for the three months ended March 31, 2017 and 2016 related to grants of restricted stock was approximately $1.0 million and $0.9 million , 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 $0.8 million for the three months ended March 31, 2017 and 2016 , respectively. Unearned compensation representing the unvested portion of the restricted stock totaled $24.3 million and $14.7 million as of March 31, 2017 and December 31, 2016 , respectively. We expect to recognize this unearned compensation over the next 3.3 years on a weighted-average basis.

14. Derivative Instruments

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2017 , we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have any fair value measurements on a recurring basis using significant unobservable inputs (Level 3) as of March 31, 2017 or December 31, 2016 .

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements related to the U.S. LIBOR, GBP-LIBOR, SGD-SOR and CDOR-based tranches of the unsecured term loans. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

We record all our interest rate swaps on the consolidated balance sheet at fair value. In determining the fair value of our interest rate swaps, we consider the credit risk of our counterparties. These counterparties are generally larger financial institutions engaged in providing a variety of financial services. These institutions generally face similar risks regarding adverse changes in market and economic conditions, including, but not limited to, fluctuations in interest rates, exchange rates, equity and commodity prices and credit spreads. The recent and pervasive disruptions in the financial markets have heightened the risks to these institutions.

The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended March 31, 2017 and 2016, there were no ineffective portions to our interest rate swaps.

As of March 31, 2017 and December 31, 2016 , we had the following outstanding interest rate derivatives that were designated as effective cash flow hedges of interest rate risk (in thousands):



Notional Amount										Fair Value at Significant Other Observable Inputs (Level 2)
As of March 31, 2017			As of December 31, 2016			Type of Derivative	Strike Rate	Effective Date	Expiration Date	As of March 31, 2017				As of December 31, 2016
Currently-paying contracts
$	206,000	⁽¹⁾	$	206,000	⁽¹⁾	Swap	0.932	Jun 18, 2012	Apr 18, 2017	$	1		⁽⁶⁾	$	(90	)	⁽⁶⁾
54,905		⁽¹⁾	54,905		⁽¹⁾	Swap	0.670	Aug 6, 2012	Apr 6, 2017	1			⁽⁶⁾	16			⁽⁶⁾
75,000		⁽¹⁾	75,000		⁽¹⁾	Swap	1.016	Apr 6, 2016	Jan 6, 2021	2,086			⁽⁶⁾	1,911			⁽⁶⁾
75,000		⁽¹⁾	75,000		⁽¹⁾	Swap	1.164	Jan 15, 2016	Jan 15, 2021	1,688			⁽⁶⁾	1,487			⁽⁶⁾
300,000		⁽²⁾	300,000		⁽²⁾	Swap	1.435	Jan 15, 2016	Jan 15, 2023	9,173			⁽⁶⁾	8,128			⁽⁶⁾
135,663		⁽³⁾	130,850		⁽³⁾	Swap	0.925	Jul 17, 2012	Apr 18, 2017	(5		)	⁽⁶⁾	18			⁽⁶⁾
212,691		⁽⁴⁾	209,132		⁽⁴⁾	Swap	0.792	Jan 15, 2016	Jan 15, 2019	(1,550		)	⁽⁶⁾	(1,818		)	⁽⁶⁾
73,964		⁽⁵⁾	73,294		⁽⁵⁾	Swap	0.779	Jan 15, 2016	Jan 15, 2021	1,414			⁽⁶⁾	1,556			⁽⁶⁾
$	1,133,223		$	1,124,181						$	12,808			$	11,208

Forward-starting contracts
$	206,000		$	—		Forward-starting Swap	1.611	Jun 15, 2017	Jan 15, 2020	$	318			$	—
54,905			—			Forward-starting Swap	1.605	Jun 6, 2017	Jan 6, 2020	77				—
$	260,905		$	—						$	395			$	—


(1)	Represents portions of the U.S. dollar tranche of the 5 -Year Term Loan.


(2)	Represents the U.S. dollar tranche of the 7 -Year Term Loan.


(3)	Represents a portion of the Singapore dollar tranche of the 5 -Year Term Loan. Translation to U.S. dollars is based on exchange rate of $0.72 to 1.00 SGD as of March 31, 2017 and $0.69 to 1.00 SGD as of December 31, 2016 .


(4)	Represents the British pound sterling tranche of the 5 -Year Term Loan. Translation to U.S. dollars is based on exchange rate of $1.26 to £1.00 as of March 31, 2017 and $1.23 to £1.00 as of December 31, 2016 .


(5)	Represents the Canadian dollar tranche of the 5 -Year Term Loan. Translation to U.S. dollars is based on exchange rate of $0.75 to 1.00 CAD as of March 31, 2017 and $0.74 to 1.00 CAD as of December 31, 2016 .


(6)	Balance recorded in other assets in the consolidated balance sheets if positive and recorded in accounts payable and other accrued liabilities in the consolidated balance sheets if negative.

As of March 31, 2017 , we estimate that an additional $3.1 million will be reclassified as an increase to interest expense during the twelve months ended March 31, 2018 , when the hedged forecasted transactions impact earnings.

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DIGITAL REALTY TRUST, INC. AND SUBSIDIARIES

DIGITAL REALTY TRUST, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

Foreign Currency Net Investment Hedges

During the three months ended June 30, 2016, we entered into a series of forward contracts pursuant to which we agreed to sell an amount of foreign currency for an agreed upon amount of USD. These forward contracts were executed to manage foreign currency exposures associated with certain transactions. During the three months ended March 31, 2017 , we terminated three of the four forward contracts with a notional amount of GBP 270.0 million . In connection with the settlement, we received approximately $51.3 million in proceeds and the related amount of accumulated other comprehensive income (AOCI) will remain in AOCI until the Company sells or liquidates its GBP-denominated investments, which has not occurred as of March 31, 2017 .

As of March 31, 2017 , the Company had the following outstanding derivatives that were designated as foreign currency net investment hedges under qualifying hedging relationships (notional and fair value amounts in thousands):



Foreign Currency Derivative	Number of Instruments	Notional Amount Sold	Notional Amount Purchased	Maturity Date	Fair Value
Currency forward contracts	1	GBP 87,299	USD 126,961	12/15/2017	$	16,560

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 March 31, 2017 and December 31, 2016 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 "Derivative Instruments", the interest rate swaps and foreign currency forward contracts are recorded at fair value.

We calculate the fair value of our mortgage loans, unsecured term loan and unsecured senior notes based on currently available market rates assuming the loans are outstanding through maturity and considering the collateral and other loan terms. In determining the current market rate for fixed rate debt, a market spread is added to the quoted yields on federal government treasury securities with similar maturity dates to our debt. The carrying value of our global revolving credit facility approximates fair value, due to the variability of interest rates.

As of March 31, 2017 and December 31, 2016 , the aggregate estimated fair value and carrying value of our global revolving credit facility, unsecured term loans, unsecured senior notes and mortgage loans were as follows (in thousands):



	Categorization under the fair value hierarchy	As of March 31, 2017				As of December 31, 2016
	Categorization under the fair value hierarchy	Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value
Global revolving credit facility ⁽¹⁾⁽⁵⁾	Level 2	$	574,379	$	574,379	$	210,077	$	210,077
Unsecured term loans ⁽²⁾⁽⁶⁾	Level 2	1,511,515		1,511,515		1,488,498		1,488,498
Unsecured senior notes ^(3)(4)(7)	Level 2	4,433,626		4,152,580		4,428,074		4,179,171
Mortgage loans ⁽³⁾⁽⁸⁾	Level 2	3,050		3,095		3,217		3,250
		$	6,522,570	$	6,241,569	$	6,129,866	$	5,880,996


(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 loans approximates estimated fair value, due to the variability of interest rates and the stability of our credit ratings.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016


(3)	Valuations for our unsecured senior notes and mortgage loans are determined based on the expected future payments discounted at risk-adjusted rates. The 5.875% 2020 Notes, 3.400% 2020 Notes, 2021 Notes, 3.950% 2022 Notes, 3.625% 2022 Notes, 2023 Notes, 2024 Notes, 4.750% 2025 Notes and 4.250% 2025 Notes are valued based on quoted market prices.


(4)	The carrying value of the 5.875% 2020 Notes, 3.400% 2020 Notes, 2021 Notes, 3.625% 2022 Notes, 3.950% 2022 Notes, 2023 Notes, 2024 Notes and 4.250% 2025 Notes are net of discount of $15,040 and $15,649 in the aggregate as of March 31, 2017 and December 31, 2016 , respectively.


(5)	The estimated fair value and carrying value are exclusive of deferred financing costs of $9.9 million and $10.9 million as of March 31, 2017 and December 31, 2016 , respectively.


(6)	The estimated fair value and carrying value are exclusive of deferred financing costs of $5.8 million and $6.1 million as of March 31, 2017 and December 31, 2016 , respectively.


(7)	The estimated fair value and carrying value are exclusive of deferred financing costs of $24.5 million and $25.4 million as of March 31, 2017 and December 31, 2016 , respectively.


(8)	The estimated fair value and carrying value are exclusive of deferred financing costs of $0.0 million and $0.0 million as of March 31, 2017 and December 31, 2016 , respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, 2017 and 2016

16. Commitments and Contingencies

(a) Contingent liabilities

One of the customers at our Convergence Business Park property had an option to expand as part of their lease agreement, which expired 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 had the right of first refusal on any third party’s bona fide offer to buy the adjacent land. The tenant did not exercise its option.

We are currently a party to litigation related to the release of a sublease guarantee that was provided by one of our subsidiaries. Certain parties are seeking to invalidate the release, which freed our subsidiary from any further obligations under the sublease guarantee. Our maximum exposure in this matter is estimated to be approximately £20 million . We believe we have strong defenses as well as claims for reimbursement against third parties, which we intend to pursue if necessary. We cannot at this time reliably estimate the likelihood of the outcome.

(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 March 31, 2017 , we had open commitments, including amounts reimbursable of approximately $22.8 million , related to construction contracts of approximately $352.0 million .

Although the Company is involved in legal proceedings arising in the ordinary course of business, as of March 31, 2017 , 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this report. 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, potential litigation matters, portfolio performance, leverage policy, acquisition and capital expenditure plans, capital recycling program, returns on invested capital, supply and demand for data center space, capitalization rates, rents to be received in future periods and expected rental rates on new or renewed data center space, 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 metropolitan areas; 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 customers; bankruptcy or insolvency of a major customer or a significant number of smaller customers; defaults on or non-renewal of leases by customers; 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 and information security infrastructure or services or availability of power; our failure to successfully integrate and operate acquired or developed properties or businesses, including Telx and the European Portfolio; 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; the impact of the United Kingdom’s referendum on withdrawal from the European Union on global financial markets and our business; 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.

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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 data centers. A significant component of our current and future internal growth is anticipated through the development of our existing space held for development, acquisition of land for future development and acquisition of new properties. We target high quality, strategically located properties containing the physical and connectivity infrastructure that supports the applications and operations of data center and technology industry customers and properties that may be developed for such use. Most of our data center properties contain fully redundant electrical supply systems, multiple power feeds, above-standard cooling systems, raised floor areas, extensive in-building communications cabling and high-level security systems. We focus exclusively on owning, acquiring, developing and operating data centers because we believe that the growth in data center demand and the technology-related real estate industry generally will continue to outpace the overall economy.

As of March 31, 2017 , we owned an aggregate of 145 properties, including three properties held-for-sale and 14 properties held as investments in unconsolidated joint ventures, with approximately 25.5 million rentable square feet including approximately 1.5 million square feet of space under active development and approximately 1.7 million square feet of space held for future development. The 14 properties held as investments in unconsolidated joint ventures have an aggregate of approximately 1.9 million rentable square feet. The 15 parcels of developable land we own comprised approximately 421 acres. At March 31, 2017 , approximately 1.5 million square feet was under construction for Turn-Key Flex ^® and Powered Base Building ^® products, all of which are expected to be income producing on or after completion, in five U.S. domestic metropolitan areas, three European metropolitan areas and one Asian metropolitan area, consisting of approximately 0.7 million square feet of base building construction and 0.7 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 part of our growth strategy. We intend to aggressively manage and lease our assets to increase their cash flow. We may continue to build out our development portfolio when justified by anticipated demand and returns.

We may acquire properties subject to existing mortgage financing and other indebtedness or we may incur new indebtedness in connection with acquiring or refinancing these properties. Debt service on such indebtedness will have a priority over any cash dividends with respect to Digital Realty Trust, Inc.’s common stock and preferred stock. We 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 March 31, 2017 of $106.39 , our ratio of debt to total enterprise value was approximately 25% . 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 Amended and Restated 2004 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.

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Revenue base . As of March 31, 2017 , we owned 145 properties through our operating partnership, including three properties held-for-sale and 14 properties held as investments in unconsolidated joint ventures and developable land. These properties are mainly located throughout North America, with 32 properties located in Europe, four properties in Asia and three properties in Australia. 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:	Operating Properties Acquired (1)		Net Rentable Square Feet(2)	Square Feet of Space Under Active Development as of March 31, 2017 (3)	Square Feet of Space Held for Future Development as of March 31, 2017 (4)
2002	4		1,065,389	22,535	51,867
2003	4		821,603	—	—
2004	10	⁽⁵⁾	2,393,931	—	89,923
2005	18	⁽⁵⁾	2,777,191	—	119,779
2006	16		2,195,744	—	340,203
2007	11	⁽⁶⁾	1,378,590	—	—
2008	4		481,575	—	41,539
2009	8	^(7)(9)(10)	1,965,314	56,126	223,531
2010	15		2,562,718	65,680	68,247
2011	11	⁽⁸⁾	1,936,619	232,045	85,590
2012	15		2,870,257	38,561	257,460
2013	10		1,154,436	315,922	108,926
2014	—		—	—	—
2015	10	⁽¹¹⁾	929,100	225,599	276,164
2016	9	⁽¹²⁾	373,064	514,348	68,670
2017	—		—	—	—
Operating properties owned as of March 31, 2017	145		22,905,531	1,470,816	1,731,899

(1)

Excludes properties sold: 114 Rue Ambroise Croizat (August 2016), 210 N. Tucker Boulevard (July 2016), 900 Walnut Street (July 2016), 251 Exchange Place (July 2016), 1807 Michael Faraday Court (July 2016), 47700 Kato Road and 1055 Page Avenue (January 2016), 650 Randolph Road (December 2015), 833 Chestnut Street (April 2015), 3300 East Birch Street (March 2015), 100 Quannapowitt (February 2015), 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 data center 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. Excludes 13 developable land parcels. Includes 12 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), 43915 Devin Shafron Drive (Northern Virginia) and 33 Chun Choi Street (Hong Kong); and two properties held in our non-managed unconsolidated joint ventures consisting of 2001 Sixth Avenue (Seattle) and 2020 Fifth Avenue (Seattle).


(2)	Current net rentable square feet as of March 31, 2017 , 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 customers’ 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)	As of March 31, 2017 , there were three properties held for sale; two were acquired in 2004 and one in 2005.


(6)	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.

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(7)	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.


(8)	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, for which the land parcels were acquired in 2011.


(9)	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.


(10)	43915 Devin Shafron Drive, which was previously included as part of the Devin Shafron buildings, is now separately included in the property count because it was separately contributed to an unconsolidated joint venture in September 2014.

(11)

Includes eight properties that were added as part of the Telx Acquisition, two of which are owned: 56 Marietta Street (Atlanta) and 100 Delawanna Avenue (New York); and six that are leased from third parties: 60 Hudson Street (New York), 32 Avenue of the Americas (New York), 2 Peekay Drive (New York), 2820 Northwestern Parkway (Silicon Valley), 8425 N. Stemmons Freeway (Dallas) and 3433 S. 120th Place (Seattle). Telx also leases space at 111 8th Avenue (New York), which is partially subleased by Telx from our company and partially subleased from third parties.


(12)	Includes eight properties that were added as part of the European Portfolio Acquisition, one of which is owned, with the remaining seven being leased from third parties.

As of March 31, 2017 , the properties in our portfolio, including the 14 properties held as investments in unconsolidated joint ventures, were approximately 89.4% leased excluding approximately 1.5 million square feet of space under active development and approximately 1.7 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 March 31, 2017 , our average remaining lease term is approximately five years remaining. Our scheduled lease expirations through December 31, 2018 are 13.9% of rentable square feet excluding month-to-month leases, space under active development and space held for future development as of March 31, 2017 .

Factors Which May Influence Future Results of Operations

Global market and economic conditions. General economic conditions and the cost and availability of capital may be adversely affected in some or all of the metropolitan areas in which we own properties and conduct our operations. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The terms of any withdrawal are subject to a negotiation period that could last at least two years. Nevertheless, the referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, and has given rise to calls for the governments of other European Union member states to consider withdrawal. Instability in the U.S., European, Asia Pacific and other international financial markets and economies may adversely affect our ability, and the ability of our customers, 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 customers’, 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.

Foreign currency exchange risk. For the three months ended March 31, 2017 and 2016, we had foreign operations in the United Kingdom, Ireland, France, the Netherlands, Germany, Switzerland, Canada, Singapore, Australia, Japan and Hong Kong, 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, Canadian dollar, Singapore dollar, Australian dollar, Japanese Yen and the Hong Kong dollar. Our primary currency exposures are to the British pound sterling, the Euro and the Singapore dollar. The possible exit of the United Kingdom (or any other country) from the European Union, or prolonged periods of uncertainty relating to any of these possibilities, could result in increased foreign currency exchange volatility. We attempt to mitigate a portion of the risk of currency fluctuation by financing our investments in the local currency denominations, although there can be no assurance that this will be effective. As a result, changes in the relation of any such

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foreign currency to U.S. dollars may affect our revenues, operating margins and distributions and may also affect the book value of our assets, the book value of our debt and the amount of stockholders’ equity.

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 1.5 million square feet of space under active development and approximately 1.7 million square feet of space held for future development as of March 31, 2017 , the occupancy rate of the properties in our portfolio, including the 14 properties held as investments in unconsolidated joint ventures, was approximately 89.4% of our net rentable square feet.

As of March 31, 2017 , we had over 2,300 customers in our portfolio, including the 12 properties held in our managed portfolio of unconsolidated joint ventures. As of March 31, 2017 , approximately 92% 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 21.0 million net rentable square feet, excluding space under active development and space held for future development and 14 properties held as investments in unconsolidated joint ventures, at March 31, 2017 is approximately 0.7 million square feet of data center space with extensive installed tenant improvements available for lease. Since our IPO, we have leased over 4.5 million square feet of similar space, including Turn-Key Flex ^® space. Our Turn-Key Flex ^® product is an effective solution for customers who prefer to utilize a partner with the expertise or capital budget to provide extensive data center infrastructure and security. Our expertise in data center construction and operations enables us to lease space to these customers at a premium over other uses. In addition, as of March 31, 2017 , we had approximately 1.5 million square feet of space under active development and approximately 1.7 million square feet of space held for future development, or approximately 13% of the total rentable space in our portfolio, including the 14 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 data center facilities that are ready for use and, in addition, we may require additional time or encounter delays in securing customers 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 customer 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 metropolitan areas 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 customers 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 2.4 million square feet of available space in our portfolio, which excludes approximately 1.5 million square feet of space under active development and approximately 1.7 million square feet of space held for future development as of March 31, 2017 and the two properties held as investments in our non-managed unconsolidated joint ventures, leases representing approximately 3.5% and 10.4% of the net rentable square footage of our portfolio are scheduled to expire during the nine months ending December 31, 2017 and the year ending December 31, 2018, respectively.

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During the three months ended March 31, 2017 , we signed new leases totaling approximately 0.2 million square feet of space and renewal leases totaling approximately 0.3 million square feet of space. The following table summarizes our leasing activity in the three months ended March 31, 2017 :



	Rentable Square Feet ⁽¹⁾	Expiring Rates ⁽²⁾		New Rates ⁽²⁾		Rental Rate Changes		TI’s/Lease Commissions Per Square Foot		Weighted Average Lease Terms (years)
Leasing Activity ⁽³⁾⁽⁴⁾
Renewals Signed
Turn-Key Flex ^®	100,874	$	140.34	$	148.53	5.8	%	$	4.17	3.5
Powered Base Building ^®	81,745	$	22.39	$	28.21	26.0	%	$	3.22	10.3
Colocation	96,350	$	292.88	$	299.98	2.4	%	$	—	1.7
Non-technical	3,290	$	37.22	$	39.06	4.9	%	$	0.64	6.4
New Leases Signed ⁽⁵⁾
Turn-Key Flex ^®	185,062	—		$	164.66	—		$	48.61	6.1
Colocation	38,557	—		$	281.33	—		$	28.08	2.6
Non-technical	9,461	—		$	45.36	—		$	7.90	6.4
Leasing Activity Summary
Turn-Key Flex ^®	285,936	—		$	158.97	—		—
Powered Base Building ^®	81,745	—		$	28.21	—		—
Colocation	134,907	—		$	294.65	—		—
Non-technical	12,751	—		$	43.73	—		—


(1)	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.


(2)	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.


(3)	Excludes short-term leases.


(4)	Commencement dates for the leases signed range from 2017 to 2019.


(5)	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 metropolitan areas for data center space and, subject to the supply of available data center space in these metropolitan areas, expect the rental rates we are likely to achieve on any new, re-leased or renewed data center space leases for 2017 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 up slightly on a cash basis. For the three months ended March 31, 2017 , rents on renewed space increased by an average of 5.8% on a GAAP basis on our Turn-Key Flex ^® space compared to the expiring rents and increased by an average of 26.0% 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 metropolitan area may not be consistent with rental rates across our portfolio as a whole and may fluctuate from one period to another due to a number of factors, including local real estate conditions, local supply and demand for data center space, competition from other data center developers or operators, the condition of the property and whether the property, or space within the property, has been developed.

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Geographic concentration. We depend on the market for technology-based real estate in specific geographic regions and significant changes in these regional metropolitan areas can impact our future results. As of March 31, 2017 , our portfolio, including the 14 properties held as investments in unconsolidated joint ventures, was geographically concentrated in the following metropolitan areas.



Metropolitan Area	Percentage of March 31, 2017 total annualized rent (1)
Northern Virginia	11.8	%
New York	11.8	%
London, United Kingdom	11.2	%
Dallas	10.5	%
Chicago	8.5	%
Silicon Valley	8.5	%
Phoenix	5.8	%
San Francisco	4.5	%
Singapore	3.8	%
Atlanta	3.1	%
Seattle	3.0	%
Boston	2.8	%
Los Angeles	2.4	%
Other	12.3	%
Total	100.0	%


(1)	Annualized rent is monthly contractual rent (defined as cash base rent before abatements) under existing leases as of March 31, 2017 multiplied by 12. The aggregate amount of abatements for the three months ended March 31, 2017 was approximately $4.3 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 data center operations contained in them. Many of our leases contain provisions under which the tenants reimburse us for all or 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, via a cap-and-trade program. 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.

In the absence of comprehensive federal climate change legislation, over the past several years, regulatory agencies, primarily the U.S. Environmental Protection Agency, or EPA, and states took the lead in regulating GHG emissions in the U.S. Under the Obama administration, EPA moved aggressively to regulate GHG emissions from automobiles and large stationary sources, including electricity producers, using its own authority under the Clean Air Act. The Trump administration has signaled that it intends to eliminate or modify certain of the EPA’s GHG emissions regulations and refocus EPA’s mission away from such regulation.

The EPA made an endangerment finding in 2009 that allows it to create regulations imposing emissions 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 fully known until all regulations are finalized and legal challenges are resolved. Under the Obama administration, the EPA finalized rules imposing permitting and control technology requirements upon certain newly-constructed or modified facilities which emit GHGs under the Clean Air

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Act New Source Review Prevention of Significant Deterioration, or NSR PSD, and Title V permitting programs. As a result, newly-issued NSR PSD and Title V permits for new or modified electricity generating units (EGUs) and other facilities may need to address GHG emissions, including by requiring the installation of “Best Available Control Technology.” The EPA implemented in December 2015 the “Clean Power Plan” regulating carbon dioxide (CO2) emissions from new and existing coal-fired and natural gas EGUs. Existing EGUs are subject to statewide CO2 emissions reduction targets, an effort designed to achieve a thirty-two percent reduction in nationwide existing EGU CO2 emissions by 2030 (in comparison to 2005 levels). New, modified, and reconstructed EGUs are subject to “New Source Performance Standards” that include both technological requirements and numeric emission limits. However, twenty-four states and a number of industry groups challenged the Clean Power Plan in federal court, and in February 2016 the U.S. Supreme Court issued a stay of the Clean Power Plan until the legal challenges have been decided. Further, President Trump has voiced opposition to the Clean Power Plan, and he could seek to eliminate it. Separately, the EPA’s GHG “reporting rule” requires that certain emitters, including electricity generators, monitor and report GHG emissions. The Trump administration may seek to revise or reverse these regulations.

As a result, states may drive near-term regulation to reduce GHG emissions in the United States. 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 September 2016, California adopted legislation calling for a further reduction in GHG emissions to 40% below 1990 levels by 2030.

Outside the United States, the European Union, or EU (including the United Kingdom), has been operating since 2005 under a cap-and-trade program, which directly affects the largest emitters of GHGs, including electricity producers from whom we purchase power, and the EU has taken a number of other climate change-related initiatives, including a directive targeted at improving energy efficiency (which introduces energy efficiency auditing requirements). The Paris Agreement, which was adopted by the United States and 194 other countries and looks to prevent global average temperatures from increasing by more than 2 degrees Celsius above preindustrial levels officially went into force on November 4, 2016. However, President Trump has signaled that he may withdraw the United States from the Paris Agreement. National legislation may also be implemented independently by members of the EU. For example, in the United Kingdom, the implementation of the CRC Energy Efficiency Scheme introduced a mandatory reporting and pricing scheme that is designed to incentivize energy efficiency and cut emissions by large energy users. It is not yet clear how Brexit will impact the United Kingdom’s (or the EU’s) approach to climate change regulation. In Canada, the first compliance period under Ontario’s GHG cap-and-trade program began in January 2017. Climate change regulations are in various stages of implementation in other nations as well, including nations where we operate, such as Australia, where a GHG emissions cap was implemented in 2016.

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 legislation or regulations in the EU or other regions where we operate could significantly increase our costs, and we may not be able to effectively pass all of these costs on to our customers. These matters could adversely impact our business, results of operations, or financial condition.

Interest rates . As of March 31, 2017 , we had approximately $1.1 billion of variable rate debt subject to interest rate swap agreements on certain tranches of our 2016 unsecured term loans, along with $574.4 million and $378.3 million of variable rate debt that was outstanding on the global revolving credit facility and the unswapped portion of the 2016 unsecured term loans, respectively. The availability of debt and equity capital may decrease or be on unfavorable terms as a result of the circumstances described above under “Global market and economic conditions” or other factors. 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 data center space . Our portfolio of properties consists primarily of data centers. A decrease in the demand for, or increase in supply of, data center 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 customer base or less specialized use. We have invested in building out additional inventory primarily in what we anticipate will be our active major metropolitan areas prior to having executed leases with respect to this space. We believe that demand in key metropolitan areas such as Northern Virginia, Dallas and Chicago is largely in line with supply. We also continue to see strong demand in other key metropolitan areas across our portfolio. However, until this inventory is leased up, which will depend on a number of factors, including available data center space in these metropolitan areas, our return on invested capital is negatively impacted.

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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 data center, 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 data center space. Reduced demand could also result from business relocations, including to metropolitan areas 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 data center 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 customers’ 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 data center space in our properties, or the rates at which we lease space, may be adversely impacted either across our portfolio or in specific metropolitan areas as a result of an increase in the number of competitors, or the amount of space being offered in our metropolitan areas and other metropolitan areas by our competitors.

Telx Acquisition . We believe that the acquisition of Telx, or the Telx Acquisition, provides a number of strategic and financial benefits, including providing us a leading colocation and interconnection platform, a premium connectivity infrastructure and enhanced growth potential in attractive locations. However, there can be no assurance that we will realize the intended benefits of the Telx Acquisition and it may divert management's attention. In addition, we may be subject to unknown or contingent liabilities related to Telx for which we may have no or limited recourse against the sellers.

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 Item 1, Note 2 “Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements. 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 customers, 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 GAAP guidance have been met.

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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 change in the expected holding period for the property, a significant adverse change in how the property is being used 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.

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. In certain cases, we may supplement this analysis by obtaining outside broker opinions of value.

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

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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, customer concentrations, customer creditworthiness and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on our net revenue because a higher bad debt allowance would result in lower net revenue, and recognizing rental revenue as earned in one period versus another would result in higher or lower net revenue for a particular period.

Recently Issued Accounting Pronouncements

Please refer to Item 1, Note 2(o) “Recent Accounting Pronouncements” in the notes to the condensed consolidated financial statements.

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Results of Operations

The discussion below relates to our financial condition and results of operations for the three months ended March 31, 2017 and 2016 . A summary of our operating results for the three months ended March 31, 2017 and 2016 is as follows (in thousands).



	Three Months Ended March 31,
	2017			2016
Income Statement Data:
Total operating revenues	$	550,569		$	504,199
Total operating expenses	(413,286		)	(386,083		)
Operating income	137,283			118,116
Other expenses, net	(52,720		)	(55,783		)
Net income	$	84,563		$	62,333

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 on a stabilized portfolio basis. Our stabilized portfolio includes properties owned as of December 31, 2015 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 2016 - 2017 and properties sold or contributed to joint ventures.

We acquired the following real estate during the three months ended March 31, 2017 :



Location	Market	Date Acquired	Amount (in millions)
Osaka Phase II ⁽¹⁾	Osaka, Japan	March 15, 2017	$	13.6


(1)	Represents currently vacant land which is not included in our operating property count. Purchase price in U.S. dollars and excludes capitalized closing costs.

Comparison of the Three Months Ended March 31, 2017 to the Three Months Ended March 31, 2016

Portfolio

As of March 31, 2017 , our portfolio consisted of 145 properties, including three properties held-for-sale and 14 properties held as investments in unconsolidated joint ventures, with an aggregate of 25.5 million rentable square feet including 1.5 million square feet of space under active development and 1.7 million square feet of space held for future development compared to a portfolio consisting of 140 properties, including seven properties held-for-sale and 14 properties held as investments in unconsolidated joint ventures, with an aggregate of 25.8 million rentable square feet including 1.8 million square feet of space under active development and 1.2 million square feet of space held for future development as of March 31, 2016 . The changes in our portfolio reflect the acquisition of eight properties and the sale of five properties during the twelve months ended March 31, 2017 . In addition, two properties were placed into service during the twelve months ended March 31, 2017 , developed on land parcels which were acquired prior to April 1, 2016.

Revenues

Total operating revenues for the three months ended March 31, 2017 and 2016 were as follows (in thousands):



	Three Months Ended March 31,
	2017		2016		Change
Rental	$	404,126	$	371,128	$	32,998
Tenant reimbursements	87,288		84,218		3,070
Interconnection and other	57,225		46,963		10,262
Fee income	1,895		1,799		96
Other	35		91		(56		)
Total operating revenues	$	550,569	$	504,199	$	46,370

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The following table shows revenues for the three months ended March 31, 2017 and 2016 for stabilized properties and pre-stabilized properties and other (all other properties) (in thousands). Revenue totals for pre-stabilized and other include: results from properties that have not yet met the definition of stabilized and properties that are classified as held for sale or were sold during the period.



	Stabilized							Pre-Stabilized and Other
	Three Months Ended March 31,							Three Months Ended March 31,
	2017		2016		Change			2017		2016		Change
Rental	$	250,064	$	250,215	$	(151	)	$	154,062	$	120,913	$	33,149
Tenant reimbursements	53,120		52,735		385			34,168		31,483		2,685
Interconnection and other	49,150		43,012		6,138			8,075		3,951		4,124
Operating revenues	$	352,334	$	345,962	$	6,372		$	196,305	$	156,347	$	39,958

Stabilized rental revenues remained flat for the three months ended March 31, 2017 compared to the same period in 2016 primarily as a result of new leasing at our properties during the twelve months ended March 31, 2017 , the largest of which was for space at 200 Paul Avenue and 1-11 Templar Road, offset by expiring leases at certain properties in the stabilized portfolio. Stabilized tenant reimbursement revenue increased for the three months ended March 31, 2017 compared to the same period in 2016 primarily as a result of increased property tax reimbursements due to one-time reductions in 2015-2016 at two properties in the stabilized portfolio offset by lower utility reimbursements due to decreased usage and vacancies at certain properties. Stabilized interconnection and other revenues increased for the three months ended March 31, 2017 compared to the same period in 2016 primarily as a result of increased leasing during the twelve months ended March 31, 2017 in the stabilized portfolio.

Pre-stabilized and other revenue increases were primarily a result of the European Portfolio Acquisition, which contributed approximately $22.5 million and $3.3 million to the rental revenue and interconnection revenue increases, respectively, for the three months ended March 31, 2017 compared to the same period in 2016, along with new leases at our properties during the twelve months ended March 31, 2017 , primarily leases of completed development space, the largest of which were for space at 9355 Grand Avenue, 44100 Digital Loudoun Plaza, 907 Security Row and 1210 Integrity Way and offset partially by a decrease in revenues as a result of properties sold during the twelve months ended March 31, 2017 .

Operating Expenses and Interest Expense

Operating expenses and interest expense during the three months ended March 31, 2017 and 2016 were as follows (in thousands):



	Three Months Ended March 31,
	2017		2016		Change
Rental property operating and maintenance	$	169,339	$	154,168	$	15,171
Property taxes	26,919		27,331		(412		)
Insurance	2,592		2,412		180
Depreciation and amortization	176,466		169,016		7,450
General and administrative	34,647		31,256		3,391
Transactions	3,323		1,900		1,423
Total operating expenses	$	413,286	$	386,083	$	27,203
Interest expense	$	55,450	$	57,261	$	(1,811	)

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The following table shows expenses for the three months ended March 31, 2017 and 2016 for stabilized properties and pre-stabilized properties and other (all other properties) (in thousands). Expense totals for pre-stabilized and other include: results from properties that have not yet met the definition of stabilized and properties that are classified as held for sale or were sold during the period.



	Stabilized							Pre-Stabilized and Other
	Three Months Ended March 31,							Three Months Ended March 31,
	2017		2016		Change			2017		2016		Change
Rental property operating and maintenance	$	100,879	$	99,874	$	1,005		$	68,460	$	54,294	$	14,166
Property taxes	16,055		17,451		(1,396		)	10,864		9,880		984
Insurance	1,991		1,883		108			601		529		72
Operating expenses	$	118,925	$	119,208	$	(283	)	$	79,925	$	64,703	$	15,222

Stabilized rental property operating and maintenance expenses increased approximately $1.0 million in the three months ended March 31, 2017 , compared to the same period in 2016 primarily as a result of slightly higher utility expenses and tax consulting services specific to one property in the stabilized pool.

Stabilized property taxes decreased by approximately $1.4 million in the three months ended March 31, 2017 , compared to the same period in 2016 , primarily as a result of a property tax refund at one property in California in 2017 within the stabilized pool.

Pre-stabilized and other rental property operating and maintenance expenses increased by approximately $14.2 million in the three months ended March 31, 2017 compared to the same period in 2016 primarily as a result of the European Portfolio Acquisition, which contributed approximately $9.0 million to the increase.

Pre-stabilized and other property tax expense increased approximately $1.0 million in the three months ended March 31, 2017 compared to the same period in 2016 , primarily due to additional property tax re-assessments recorded in 2016 and 2017 at one property within the pre-stabilized and other pool.

Depreciation and Amortization

Depreciation and amortization expense increased by approximately $7.5 million in the three months ended March 31, 2017 compared to the same period in 2016 , principally because of the European Portfolio Acquisition, which contributed approximately $11.3 million to the increase, offset by fully depreciated building assets during the twelve months ended March 31, 2017 .

General and Administrative

General and administrative expenses increased by approximately $3.4 million in the three months ended March 31, 2017 compared to the same period in 2016 , primarily due to the Telx Acquisition and European Portfolio Acquisition along with the growth of our company, with an increase in headcount from 2016 to 2017, resulting in additional compensation expense, along with higher professional fees and marketing expenses.

Transactions

Transactions expense increased by approximately $1.4 million in the three months ended March 31, 2017 compared to the same period in 2016 , principally because of integration expenses attributable to the Telx Acquisition, which was completed in October 2015 and the European Portfolio Acquisition, which was completed in July 2016.

Interest Expense

Interest expense decreased by approximately $1.8 million in the three months ended March 31, 2017 compared to the same period in 2016 , primarily due to the paydown of several mortgage loans during the twelve months ended March 31, 2017 and an increase in the level of capitalized interest due to increased spending for ground-up development projects, Turn-Key Flex and base building improvements in the three months ended March 31, 2017 compared to the same period in 2016.

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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 generally 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 stock. 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 20, 2015, which 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’ and affiliates’, 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 material 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 making 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.

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Distribution Agreements will be made in “at the market” offerings as defined in Rule 415 of the Securities Act. Cumulatively through March 31, 2017 , 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 three months ended March 31, 2017 and 2016 . As of March 31, 2017 , shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

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 three months ended March 31, 2017 (in thousands, except per share amounts):



Date dividend declared	Dividend payment date	Series F Preferred Stock ⁽¹⁾		Series G Preferred Stock		Series H Preferred Stock		Series I Preferred Stock		Common Stock
March 1, 2017	March 31, 2017	$	3,023	$	3,672	$	6,730	$	3,969	$	148,358

Annual rate of dividend per share		$	1.656	$	1.469	$	1.844	$	1.588	$	3.720

(1)

Distributions out of our parent company’s current or accumulated earnings and profits are generally classified as dividends 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.

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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 March 31, 2017 , we had $15.0 million of cash and cash equivalents, excluding $10.4 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 January 15, 2016, the operating partnership refinanced its global revolving credit facility and entered into a global senior credit agreement for a $2.0 billion senior unsecured revolving credit facility, which we refer to as the global revolving credit facility which that replaced the $2.0 billion revolving credit facility executed on August 15, 2013, as amended. The global revolving credit facility has an accordion feature that would enable us to increase the borrowing capacity of the credit facility to up to $2.5 billion , subject to the receipt of lender commitments and other conditions precedent. The refinanced facility matures on January 15, 2020 , with two six -month extension options available. The interest rate for borrowings under the global revolving credit facility equals the applicable index plus a margin which is based on the credit ratings of our long-term debt and is currently 100 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 and Japanese yen. As of March 31, 2017 , borrowings under the global revolving credit facility bore interest at an overall blended rate of 1.32% comprised of 1.91% (U.S. dollar), 1.27% (British pound sterling), 0.63% (Euro), 1.45% (Hong Kong dollars), 0.96% (Japanese yen), 1.66% (Singapore dollar) and 1.94% (Canadian dollars). The interest rates are based on 1-month LIBOR, 1-month GBP LIBOR, 1-month EURIBOR, 1-month HIBOR, 1-month JPY LIBOR, 1-month SOR and 1-month CDOR, respectively, plus a margin of 1.00% . The facility also bore a base borrowing rate of 4.00% (USD) which is based on U.S. Prime Rate. We have used and intend to use available borrowings under the global revolving credit facility to acquire additional properties, fund development opportunities and for general working capital and other corporate purposes, including potentially for the repurchase, redemption or retirement of outstanding debt or equity securities. As of March 31, 2017 , we have capitalized approximately $9.9 million of financing costs, net of accumulated amortization, related to the global revolving credit facility. As of March 31, 2017 , approximately $574.4 million was drawn under the global revolving credit facility and $19.1 million of letters of credit were issued, leaving approximately $1.4 billion available for use.

On January 15, 2016, the operating partnership refinanced the senior unsecured multi-currency term loan facility and entered into a term loan agreement, which governs (i) a $1.25 billion 5-year senior unsecured term loan, which we refer to as the 5-Year Term Loan, and (ii) a $300 million 7-year senior unsecured term loan, which we refer to as the 7-Year Term Loan. The 2016 term loan agreement replaced the $1.0 billion term loan agreement executed on April 16, 2012, as amended. The 5-Year Term Loan matures on January 15, 2021 and the 7-Year Term Loan matures on January 15, 2023 . In addition, we have the ability from time to time to increase the aggregate size of lending under the 2016 term loan agreement from $1.55 billion to up to $1.8 billion, subject to receipt of lender commitments and other conditions precedent. Interest rates are based on our senior unsecured debt ratings and are currently 110 basis points and 155 basis points over the applicable index for floating rate advances for the 5-Year Term Loan and the 7-Year Term Loan, respectively. Funds may be drawn in U.S., Canadian, Singapore, Australian and Hong Kong dollars, as well as Euro, British pound sterling and Japanese yen. Based on exchange rates in effect at March 31, 2017 , the balance outstanding is approximately $1.5 billion , excluding deferred financing costs. We have used borrowings under the term loans for acquisitions, repayment of indebtedness, development, working capital and general corporate purposes. As of March 31, 2017 , we have capitalized approximately $5.8 million of financing costs, net of accumulated amortization, related to the 2016 unsecured term loans.

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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 three months ended March 31, 2017 and 2016 . As of March 31, 2017 , shares of common stock having an aggregate offering price of $53.8 million remained available for offer and sale under the program.

The growing acceptance by private institutional investors of the data center asset class has generally pushed capitalization rates lower, as such private investors may often have lower return expectations than us. As a result, we anticipate near-term single asset acquisitions activity to comprise a smaller percentage of our growth while this market dynamic persists.

Construction

The table below summarizes our construction in progress (included in investments in real estate) as of March 31, 2017 and December 31, 2016 :



Development Lifecycle	As of March 31, 2017							As of December 31, 2016
(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 Construction in Progress
Space Held for Development ⁽⁵⁾	1,570,802	$	374,992	$	—	$	374,992	920,232	$	284,234	$	—	$	284,234
Base Building Construction	749,375	74,828		66,671		141,499		1,189,110	116,925		154,248		271,173
Datacenter Construction	721,441	315,308		366,824		682,132		831,706	309,065		447,324		756,389
Equipment Pool & Other Inventory		7,816		—		7,816			9,642		—		9,642
Campus, Tenant Improvements & Other		8,022		11,442		19,464			12,564		22,115		34,679
Total Development Construction in Progress	3,041,618	780,966		444,937		1,225,903		2,941,048	732,430		623,687		1,356,117
Land Inventory	(1)	229,411		—		229,411		(1)	195,525		—		195,525
Enhancement & Other		8,341		11,453		19,794			8,623		8,060		16,683
Recurring		21,079		34,339		55,418			13,983		25,506		39,489
Total Construction in Progress		$	1,039,797	$	490,729	$	1,530,526		$	950,561	$	657,253	$	1,607,814


(1)	Represents approximately 421 acres as of March 31, 2017 and approximately 286 acres as of December 31, 2016 .


(2)	Represents balances incurred through March 31, 2017 and included in land and building and improvements in the condensed consolidated balance sheets.


(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, 2016 and included in land and building and improvements in the condensed consolidated balance sheets.


(5)	Excludes space held for development related to unconsolidated joint ventures and properties held for sale.

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 0.7 million square feet of Turn Key Flex ^® and Powered Base Building ^® product with a cost to date of approximately $315.3 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.

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Future Uses of Cash

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. As of March 31, 2017 , we had approximately 1.5 million square feet of space under active development and approximately 1.7 million square feet of space held for future development and we also owned approximately 0.7 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 March 31, 2017 , the approximate 1.5 million square feet of space under active development was under construction for Turn-Key Flex ^® and Powered Base Building ^® products, all of which are expected to be income producing on or after completion, in five U.S. domestic metropolitan areas, three European metropolitan areas and one Asian metropolitan area, consisting of approximately 0.7 million square feet of base building construction and 0.7 million square feet of data center construction. At March 31, 2017 , we had open commitments, including amounts reimbursable of approximately $22.8 million , related to construction contracts of approximately $352.0 million . We currently expect to incur approximately $600.0 million to $800.0 million of capital expenditures for our development programs during the nine months ending December 31, 2017, 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)

The table below summarizes our capital expenditure activity for the three months March 31, 2017 and 2016 (in thousands):



	Three Months Ended March 31,
	2017		2016
Development projects	$	199,742	$	131,476
Enhancement and improvements	2,816		441
Recurring capital expenditures	29,588		21,064
Total capital expenditures (excluding indirect costs)	$	232,146	$	152,981

For the three months ended March 31, 2017 , total capital expenditures increased $79.2 million to approximately $232.1 million from $153.0 million for the same period in 2016 . Capital expenditures on our development projects plus our enhancement and improvements projects for the three months ended March 31, 2017 were approximately $202.6 million , which reflects an increase of approximately 54% from the same period in 2016 . This increase was primarily due to increased spending for ground-up development 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 three months ended March 31, 2017 and 2016 were $22.2 million and $20.5 million , respectively. Capitalized interest comprised approximately $4.6 million and $3.8 million , respectively, of the total indirect costs capitalized for the three months ended March 31, 2017 and 2016 . Capitalized interest in the three months ended March 31, 2017 increased compared to the same period in 2016 due to an increase in qualifying activities. Excluding capitalized interest, the increase in indirect costs in the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to capitalized amounts relating to compensation expense of employees directly engaged in construction and successful leasing activities. See “—Future Uses of Cash” above for a discussion of the amount of capital expenditures we expect to incur during the year ending December 31, 2017.

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, 2017 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.

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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 three months ended March 31, 2017 , our operating partnership declared and paid the following distributions (in thousands, except per unit amounts):



Date distribution declared	Distribution payment date	Series F Preferred Units ⁽¹⁾		Series G Preferred Units		Series H Preferred Units		Series I Preferred Units		Common Units
March 1, 2017	March 31, 2017	$	3,023	$	3,672	$	6,730	$	3,969	$	150,968

Annual rate of distribution per unit		$	1.656	$	1.469	$	1.844	$	1.588	$	3.720

(1)

Redeemed on April 5, 2017 for $25.01840 per unit, or a redemption price of $25.00 per unit, plus accrued and unpaid distributions up to but not including the redemption date of approximately $0.1 million in the aggregate. In connection with the redemption, the previously incurred offering costs of approximately $6.3 million were deducted in the computation of net income available to common unitholders.

Commitments and Contingencies

As of March 31, 2017 , we were a party to interest rate swap agreements which hedge variability in cash flows related the U.S. LIBOR, SGD-SOR, GBP-LIBOR and CDOR based tranches of the unsecured term loans. 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.”

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Outstanding Consolidated Indebtedness

The table below summarizes our debt, as of March 31, 2017 (in millions):



Debt Summary:
Fixed rate	$	4,170.4
Variable rate debt subject to interest rate swaps	1,133.2
Total fixed rate debt (including interest rate swaps)	5,303.6
Variable rate—unhedged	952.7
Total	$	6,256.3
Percent of Total Debt:
Fixed rate (including swapped debt)	84.8		%
Variable rate	15.2		%
Total	100.0		%
Effective Interest Rate as of March 31, 2017 ⁽¹⁾
Fixed rate (including hedged variable rate debt)	3.79		%
Variable rate	1.65		%
Effective interest rate	3.46		%


(1)	Excludes impact of deferred financing cost amortization.

As of March 31, 2017 , we had approximately $6.3 billion of outstanding consolidated long-term debt as set forth in the table above, which excludes deferred financing costs. Our ratio of debt to total enterprise value was approximately 25% (based on the closing price of Digital Realty Trust, Inc.’s common stock on March 31, 2017 of $106.39 ). 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 Amended and Restated 2004 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, SOR, BBR, HIBOR, JPY LIBOR, CDOR and U.S. Prime rates, depending on the respective agreement governing the debt, including our global revolving credit facility and unsecured term loans. As of March 31, 2017 , our debt had a weighted average term to initial maturity of approximately 5.1 years (or approximately 5.2 years assuming exercise of extension options).

Off-Balance Sheet Arrangements

As of March 31, 2017 , we were party to interest rate swap agreements related to $1.1 billion of outstanding principal on our variable rate debt. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk.”

As of March 31, 2017 , our pro-rata share of debt of unconsolidated joint ventures was approximately $136.0 million , of which $54.5 million is subject to interest rate swap agreements.

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Cash Flows

The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Comparison of Three Months Ended March 31, 2017 to Three Months Ended March 31, 2016

The following table shows cash flows and ending cash and cash equivalent balances for the three months ended March 31, 2017 and 2016 (in thousands).



	Three Months Ended March 31,
	2017			2016			Change
Net cash provided by operating activities	$	219,066		$	180,614		$	38,452
Net cash used in investing activities	(215,568		)	(154,128		)	(61,440		)
Net cash used in financing activities	(2,891		)	(50,815		)	47,924
Net increase (decrease) in cash, cash equivalents and restricted cash	$	607		$	(24,329	)	$	24,936

The increase in net cash provided by operating activities was due to the European Portfolio Acquisition and increased revenues from new leasing at our stabilized properties and completed and leased development space which was partially offset by increased operating expenses and properties sold. Our portfolio consisted of 145 operating properties at March 31, 2017 versus 140 operating properties as of March 31, 2016 .

Net cash used in investing activities increased for the three months ended March 31, 2017 , primarily as a result of an increase in cash paid for capital expenditures for the three months ended March 31, 2017 ( $254.4 million ) as compared to the same period in 2016 ( $183.9 million ).

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



	Three Months Ended March 31,
	2017			2016			Change
Proceeds from borrowings, net of repayments	$	307,029		$	240,386		$	66,643
Net proceeds from issuance of common and preferred stock, including equity plans	2,724			1,942			782
Dividend and distribution payments	(312,498		)	(280,899		)	(31,599		)
Other	(146		)	(12,244		)	12,098
Net cash used in financing activities	$	(2,891	)	$	(50,815	)	$	47,924

The change in cash flows used in financing activities was due to proceeds from borrowings, net of repayments increasing during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016 offset by higher dividend and distribution payments. The increase in dividend and distribution payments for the three months ended March 31, 2017 as compared to the same period in 2016 was due to an increase in the number of shares outstanding and dividend amount per share of common stock in 2017 as compared to 2016 .

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



	Three Months Ended March 31,
	2017			2016			Change
Proceeds from borrowings, net of repayments	$	307,029		$	240,386		$	66,643
General partner contributions, net	2,724			1,942			782
Distribution payments	(312,498		)	(280,899		)	(31,599		)
Other	(146		)	(12,244		)	12,098
Net cash used in financing activities	$	(2,891	)	$	(50,815	)	$	47,924

The change in cash flows used in financing activities was due to proceeds from borrowings, net of repayments increasing during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016 offset by higher distribution payments. The increase in distribution payments for the three months ended March 31, 2017 as compared to the same period in 2016 was due to an increase in the number of units outstanding and distribution amount per unit in 2017 as compared to 2016 .

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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 March 31, 2017 , amounted to 1.6% 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) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, excluding a gain from a pre-existing relationship, impairment charges and 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 and after adjustments for unconsolidated partnerships and joint ventures, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our 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.

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Reconciliation of Net Income Available to Common Stockholders to Funds From Operations (FFO)

(unaudited, in thousands, except per share data)



	Three Months Ended March 31,
	2017			2016
Net income available to common stockholders	$	66,145		$	39,125
Adjustments:
Noncontrolling interests in operating partnership	904			663
Real estate related depreciation and amortization (1)	173,447			166,912
Real estate related depreciation and amortization related to investment in unconsolidated joint ventures	2,757			2,803
(Gain) loss on sale of properties	522			(1,097		)
FFO available to common stockholders and unitholders (2)	$	243,775		$	208,406
Basic FFO per share and unit	$	1.51		$	1.40
Diluted FFO per share and unit (2)	$	1.50		$	1.39
Weighted average common stock and units outstanding
Basic	161,475			149,048
Diluted (2)	162,600			149,915
(1) Real estate related depreciation and amortization was computed as follows:
Depreciation and amortization per income statement	$	176,466		$	169,016
Non-real estate depreciation	(3,019		)	(2,104		)
	$	173,447		$	166,912

(2)

For all periods presented, we have excluded the effect of dilutive series E, series F, series G, series H and series I 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, series H and series I preferred stock, as applicable, which we consider highly improbable.



	Three Months Ended March 31,
	2017	2016
Weighted average common stock and units outstanding	161,475	149,048
Add: Effect of dilutive securities	1,125	867
Weighted average common stock and units outstanding—diluted	162,600	149,915

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments depend upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit 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 March 31, 2017 , our consolidated debt was as follows (in millions):



	Carrying Value		Estimated Fair Value
Fixed rate debt	$	4,170.4	$	4,451.3
Variable rate debt subject to interest rate swaps	1,133.2		1,133.2
Total fixed rate debt (including interest rate swaps)	5,303.6		5,584.5
Variable rate debt	952.7		952.7
Total outstanding debt	$	6,256.3	$	6,537.2

Interest rate derivatives included in this table and their fair values as of March 31, 2017 and December 31, 2016 were as follows (in thousands):



Notional Amount										Fair Value at Significant Other Observable Inputs (Level 2)
As of March 31, 2017			As of December 31, 2016			Type of Derivative	Strike Rate	Effective Date	Expiration Date	As of March 31, 2017			As of December 31, 2016
Currently-paying contracts
$	206,000	⁽¹⁾	$	206,000	⁽¹⁾	Swap	0.932	Jun 18, 2012	Apr 18, 2017	$	1		$	(90	)
54,905		⁽¹⁾	54,905		⁽¹⁾	Swap	0.670	Aug 6, 2012	Apr 6, 2017	1			16
75,000		⁽¹⁾	75,000		⁽¹⁾	Swap	1.016	Apr 6, 2016	Jan 6, 2021	2,086			1,911
75,000		⁽¹⁾	75,000		⁽¹⁾	Swap	1.164	Jan 15, 2016	Jan 15, 2021	1,688			1,487
300,000		⁽²⁾	300,000		⁽²⁾	Swap	1.435	Jan 15, 2016	Jan 15, 2023	9,173			8,128
135,663		⁽³⁾	130,850		⁽³⁾	Swap	0.925	Jul 17, 2012	Apr 18, 2017	(5		)	18
212,691		⁽⁴⁾	209,132		⁽⁴⁾	Swap	0.792	Jan 15, 2016	Jan 15, 2019	(1,550		)	(1,818		)
73,964		⁽⁵⁾	73,294		⁽⁵⁾	Swap	0.779	Jan 15, 2016	Jan 15, 2021	1,414			1,556
$	1,133,223		$	1,124,181						$	12,808		$	11,208

Forward-starting contracts
$	206,000		$	—		Forward-starting Swap	1.611	Jun 15, 2017	Jan 15, 2020	$	318		$	—
54,905			—			Forward-starting Swap	1.605	Jun 6, 2017	Jan 6, 2020	77			—
$	260,905		$	—						$	395		$	—


(1)	Represents portions of the U.S. dollar tranche of the 5 -Year Term Loan.


(2)	Represents the U.S. dollar tranche of the 7 -Year Term Loan.


(3)	Represents a portion of the Singapore dollar tranche of the 5 -Year Term Loan. Translation to U.S. dollars is based on exchange rates of $0.72 to 1.00 SGD as of March 31, 2017 and $0.69 to 1.00 SGD as of December 31, 2016 .


(4)	Represents the British pound sterling tranche of the 5 -Year Term Loan. Translation to U.S. dollars is based on exchange rates of $1.26 to £1.00 as of March 31, 2017 and $1.23 to £1.00 as of December 31, 2016 .


(5)	Represents the Canadian dollar tranche of the 5 -Year Term Loan. Translation to U.S. dollars is based on exchange rates of $0.75 to 1.00 CAD as of March 31, 2017 and $0.74 to 1.00 CAD as of December 31, 2016 .

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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 March 31, 2017 :



Assumed event	Change ($ millions)
Increase in fair value of interest rate swaps following an assumed 10% increase in interest rates	$	4.4
Decrease in fair value of interest rate swaps following an assumed 10% decrease in interest rates	(4.5		)
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	0.7
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	(0.7		)
Increase in fair value of fixed rate debt following a 10% decrease in interest rates	31.1
Decrease in fair value of fixed rate debt following a 10% increase in interest rates	(29.1		)

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 months ended March 31, 2017 and 2016 , we had foreign operations in the United Kingdom, Ireland, France, Germany, the Netherlands, Switzerland, Canada, Singapore, Australia, Japan and Hong Kong, 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, 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 denominations, 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 March 31, 2017 and 2016 , operating revenues from properties outside the United States contributed $121.4 million and $97.9 million , respectively, which represented 22.1% and 19.4% of our total operating revenues, respectively. Net investment in properties outside the United States was $2.7 billion and $2.6 billion as of March 31, 2017 and December 31, 2016 , respectively. Net assets in foreign operations were approximately $0.6 billion and $0.9 billion as of March 31, 2017 and December 31, 2016 , respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures (Digital Realty Trust, Inc.)

The company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and its management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the company has investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As the company does not control or manage these entities, its disclosure controls and procedures with respect to such entities may be substantially more limited than those it maintains with respect to its consolidated subsidiaries.

As required by Rule 13a-15(b) or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, management of the company carried out an evaluation, under the supervision and with participation of its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures that were in effect as of the end of the quarter covered by this report. Based on the foregoing, the company’s chief executive officer and chief financial officer concluded that its disclosure controls and procedures were effective at the reasonable assurance level.

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Evaluation of Disclosure Controls and Procedures (Digital Realty Trust, L.P.)

The operating partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the chief executive officer and chief financial officer of its general partner, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the operating partnership’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and its management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the operating partnership has investments in certain unconsolidated entities, which are accounted for using the equity method of accounting. As the operating partnership does not control or manage these entities, its disclosure controls and procedures with respect to such entities may be substantially more limited than those it maintains with respect to its consolidated subsidiaries.

As required by Rule 13a-15(b) or Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, management of the operating partnership carried out an evaluation, under the supervision and with participation of the chief executive officer and chief financial officer of its general partner, of the effectiveness of the design and operation of its disclosure controls and procedures that were in effect as of the end of the quarter covered by this report. Based on the foregoing, the chief executive officer and chief financial officer of the operating partnership’s general partner concluded that its disclosure controls and procedures were effective at the reasonable assurance level.

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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 for the year ended December 31, 2016 continue to apply to our business.

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

Digital Realty Trust, Inc.

None.

Digital Realty Trust, L.P.

During the three months ended March 31, 2017 , our operating partnership issued partnership units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:

During the three months ended March 31, 2017 , Digital Realty Trust, Inc. issued an aggregate of 17,668 shares of its common stock upon the exercise of stock options. Digital Realty Trust, Inc. contributed the proceeds from the option exercises of approximately $0.7 million to our operating partnership in exchange for an aggregate of 17,668 common units, as required by our operating partnership’s partnership agreement.

During the three months ended March 31, 2017 , Digital Realty Trust, Inc. issued an aggregate of 258,835 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 an award, our operating partnership issued a restricted common unit to Digital Realty Trust, Inc. During the three months ended March 31, 2017 , our operating partnership issued an aggregate of 258,835 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 approximately $12.3 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(a)(2) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.



Exhibit Number		Description

2.1		Agreement and Plan of Merger by and among Telx Holdings, Inc., Digital Realty Trust, Inc., Digital Delta, Inc. and BSR LLC, dated as of July 13, 2015 (incorporated by reference to Exhibit 2.1 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on August 6, 2015).

3.1		Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on August 9, 2016).

3.2		Sixth 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 (File No. 001-32336) filed on November 15, 2016).

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 (File No. 000-54023) filed on June 25, 2010).

3.4		Fourteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as amended (incorporated by reference to Exhibit 3.1 to the Combined Current Report on Form 8-K/A of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on October 19, 2015).

10.1†		Employment Agreement, dated as of November 10, 2015, by and among Digital Realty Trust, Inc., DLR, LLC and Joshua A. Mills.

12.1		Statement of Computation of Ratios.

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

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

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

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

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

32.2		18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, Inc.

32.3		18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, L.P.

32.4		18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, L.P.

101		The following financial statements from Digital Realty Trust, Inc.’s and Digital Realty Trust, L.P.’s Form 10-Q for the quarter ended March 31, 2017, formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016; (ii) Condensed Consolidated Income Statements for the three months ended March 31, 2017 and 2016; (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016; (iv) Condensed Consolidated Statements of Equity/Capital for the three months ended March 31, 2017; (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016; and (vi) Notes to Condensed Consolidated Financial Statements.

† Management contract or compensatory plan or arrangement.

Table of Contents

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.

May 10, 2017			/ S / A. W ILLIAM S TEIN
			A. William Stein Chief Executive Officer (principal executive officer)

May 10, 2017			/ S / A NDREW P. P OWER
			Andrew P. Power Chief Financial Officer (principal financial officer)

May 10, 2017			/ S / E DWARD F. S HAM
			Edward F. Sham Chief Accounting Officer (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:
	By:
May 10, 2017		/ S / A. W ILLIAM S TEIN
		A. William Stein Chief Executive Officer (principal executive officer)

May 10, 2017		/ S / A NDREW P. P OWER
		Andrew P. Power Chief Financial Officer (principal financial officer)

May 10, 2017		/s/ E DWARD F. S HAM
		Edward F. Sham Chief Accounting Officer (principal accounting officer)

Table of Contents

Exhibit Index



Exhibit Number		Description

2.1		Agreement and Plan of Merger by and among Telx Holdings, Inc., Digital Realty Trust, Inc., Digital Delta, Inc. and BSR LLC, dated as of July 13, 2015 (incorporated by reference to Exhibit 2.1 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on August 6, 2015).

3.1		Articles of Amendment and Restatement of Digital Realty Trust, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Combined Quarterly Report on Form 10-Q of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on August 9, 2016).

3.2		Sixth 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 (File No. 001-32336) filed on November 15, 2016).

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 (File No. 000-54023) filed on June 25, 2010).

3.4		Fourteenth Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as amended (incorporated by reference to Exhibit 3.1 to the Combined Current Report on Form 8-K/A of Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (File Nos. 001-32336 and 000-54023) filed on October 19, 2015).

10.1†		Employment Agreement, dated as of November 10, 2015, by and among Digital Realty Trust, Inc., DLR, LLC and Joshua A. Mills.

12.1		Statement of Computation of Ratios.

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

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

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

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

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

32.2		18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, Inc.

32.3		18 U.S.C. § 1350 Certification of Chief Executive Officer for Digital Realty Trust, L.P.

32.4		18 U.S.C. § 1350 Certification of Chief Financial Officer for Digital Realty Trust, L.P.

101		The following financial statements from Digital Realty Trust, Inc.’s and Digital Realty Trust, L.P.’s Form 10-Q for the quarter ended March 31, 2017, formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016; (ii) Condensed Consolidated Income Statements for the three months ended March 31, 2017 and 2016; (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016; (iv) Condensed Consolidated Statements of Equity/Capital for the three months ended March 31, 2017; (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016; and (vi) Notes to Condensed Consolidated Financial Statements.

† Management contract or compensatory plan or arrangement.

DIGITAL REALTY TRUST, INC.
FOUR EMBARCADERO CENTER, SUITE 3200
SAN FRANCISCO, CA 94111

November 10, 2015

Joshua A. Mills

c/o Digital Realty Trust, Inc.

Four Embarcadero Center, Suite 3200

San Francisco, California 94111

Re: AMENDED AND RESTATED EMPLOYMENT TERMS

Dear Mr. Mills:

Digital Realty Trust, Inc. (the “ REIT ”) and DLR, LLC (the “ Employer ” and together with the REIT, the “ Company ”) are pleased to continue your employment with the REIT and the Employer on the terms and conditions set forth in this letter (this “ Agreement ”), effective as of November 10, 2015 (the “ Effective Date ”). This Agreement amends and restates in its entirety that certain employment letter, by and between you and the Company, dated as of August 7, 2008, as amended (the “ Prior Agreement ”).

1. TERM . Subject to the provisions for earlier termination hereinafter provided, your employment hereunder shall be for a term (the “ Term ”) commencing on the Effective Date and ending on the third (3 ^rd ) anniversary of the Effective Date (the “ Initial Termination Date ”). If not previously terminated, the Term shall automatically be extended for one additional year on the Initial Termination Date, unless either you or the Company elect not to so extend the Term by notifying the other party, in writing, of such election not less than sixty (60) days prior to the Initial Termination Date.

2. POSITION, DUTIES AND RESPONSIBILITIES . During the Term, the Company will employ you, and you agree to be employed by the Company, as Senior Vice President, General Counsel and Secretary of the REIT and the Employer. In the capacity of Senior Vice President, General Counsel and Secretary, you will have such duties and responsibilities as are normally associated with such position and will devote your full business time and attention to serving the Company in such position. Your duties may be changed from time to time by the Company, consistent with your position. You will report to the Chief Executive Officer of the Company. You will work full-time at our principal offices located in San Francisco, California (or such other location in the San Francisco greater metropolitan area as the Company may utilize as its principal offices), except for travel to other locations as may be necessary to fulfill your responsibilities. At the Company’s request, you will serve the

Company and/or its subsidiaries and affiliates in other offices and capacities in addition to the foregoing. In the event that you serve in any one or more of such additional capacities, your compensation will not be increased beyond that specified in this Agreement. In addition, in the event your service in one or more of such additional capacities is terminated, your compensation, as specified in this Agreement, will not be diminished or reduced in any manner as a result of such termination for so long as you otherwise remain employed under the terms of this Agreement.

3. BASE COMPENSATION . During the Term, the Company will pay you a base salary of $400,028.25 per year, less payroll deductions and all required withholdings, payable in accordance with the Company’s normal payroll practices and prorated for any partial month of employment. Your annual base salary may be increased, but not decreased, by the Compensation Committee of the Board of Directors of the REIT (the “ Compensation Committee ”) in its discretion pursuant to the Company’s policies as in effect from time to time, and such increased amount thereafter will be your base salary per year for purposes of this Agreement.

4. ANNUAL BONUS . In addition to the base salary set forth above, during the Term, you will be eligible to participate in the Company’s incentive bonus plan applicable to similarly situated executives of the Company. The amount of your annual bonus will be based on the attainment of performance criteria established and evaluated by the Company in accordance with the terms of such bonus plan as in effect from time to time, provided that, subject to the terms of such bonus plan and attainment of performance criteria established by the Company, your target and maximum annual bonus shall be seventy-five percent (75%) and one hundred fifteen percent (115%), respectively, of your base salary for such year. Any annual bonus that becomes payable to you is intended to satisfy the short-term deferral exemption under Treasury Regulation Section 1.409A-1(b)(4) and shall be made not later than the last day of the applicable two and one-half (2 ½) month “short-term deferral period” with respect to such annual bonus, within the meaning of Treasury Regulation Section 1.409A-1(b)(4).

5. BENEFITS AND VACATION . During the Term, you will be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs maintained or sponsored by the Company from time to time which are applicable to other similarly situated executives of the Company, subject to the terms and conditions thereof. During the Term, you will also be eligible for standard benefits, such as medical insurance, paid time-off and holidays to the extent applicable generally to other similarly situated executives of the Company, subject to the terms and conditions of the applicable Company plans or policies.

6. TERMINATION OF EMPLOYMENT .

(a) Without Cause or for Good Reason . Subject to Section 6(g) below, in the event of a termination of your employment during the Term by the Company without Cause or by you for Good Reason (each as defined below), then, in addition to any other accrued amounts payable to you through the date of termination of your employment (such date, or the date of your death if applicable under Section 6(c) below, the “ Termination Date ”), the Company will pay and provide you with the following payments and benefits:

(i) payable within thirty (30) days after your Termination Date (with the exact payment date to be determined by the Company in its discretion), a lump-sum severance payment in an amount equal to the sum of (x) one (1.0) (the “ Severance Multiple ”) times the sum of (A) your annual base salary as in effect on the Termination Date, plus (B) your target annual bonus for the fiscal year in which the Termination Date occurs (in the case of both (A) and (B), without giving effect to any reduction which constitutes Good Reason), (y) the Stub Year Bonus, plus (z) the Prior Year Bonus, if any;

(ii) for a period commencing on the Termination Date and ending on the earlier of (x) the twelve (12)-month anniversary of the Termination Date or (y) the date on which you become eligible to receive comparable group health insurance coverage under a subsequent employer’s plans, the Company shall continue to provide you and your eligible family members with group health insurance coverage at least equal to that which would have been provided to you if your employment had not been terminated (including, in the discretion of the Company, by purchasing COBRA coverage for you and your eligible family members); provided, however , that if (A) any plan pursuant to which the Company is providing such coverage is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code (as defined below) under Treasury Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to continue to cover you under its group health plans or doing so would jeopardize the tax-qualified status of such plans, then, in either case, an amount equal to the monthly plan premium payment shall thereafter be paid to you as currently taxable compensation in substantially equal monthly installments over the continuation period (or the remaining portion thereof);

(iii) for a period commencing on the Termination Date and ending on the twelve (12)-month anniversary of the Termination Date, the Company shall, at its sole expense and on an as-incurred basis, provide you with outplacement counseling services directly related to your termination of employment with the Company, the provider of which shall be selected by the Company; and

(iv) to the extent that any outstanding Company equity-based awards issued to you under the Company’s equity incentive plans are subject to vesting based on continued employment or the lapse of time, such awards shall become vested and exercisable

immediately prior to the Termination Date. The vesting of any awards that are subject to vesting based on the satisfaction of performance goals, including, without limitation, any performance-based profits interest units of Digital Realty Trust, L.P. (the “ Operating Partnership ”) and other “outperformance awards” issued to you, shall be governed by the terms of the award agreements evidencing such awards. For purposes of clarification, except as otherwise provided under any award agreements relating to such awards, the terms set forth in this Agreement, including this Section 6, are intended to be in addition to (and not in lieu of) the vesting and acceleration features related to such stock options and other equity-based awards (including profits interest units of the Operating Partnership and other “outperformance awards”) held by you and included elsewhere, including in any award agreements related to such awards, and the vesting and acceleration terms hereof shall be applicable only to the extent they result in additional acceleration or vesting of such stock options and other equity-based awards held by you.

(b) Change in Control . Subject to Section 6(g) below, in the event that a Change in Control (as defined in the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan or any successor incentive plan) occurs during the Term and, on the date of or within one year after such Change in Control, you incur a termination of employment by the Company without Cause or by you for Good Reason (each as defined below), then, in addition to any other accrued amounts payable to you through the Termination Date, you shall be entitled to the payments and benefits provided in Section 6(a) hereof, subject to the terms and conditions thereof, except that, for purposes of this Section 6(b), the Severance Multiple shall be equal to two (2.0).

(c) Death or Disability . Subject to Section 6(g) below, and notwithstanding anything to the contrary contained herein, in the event of a termination of your employment during the Term by reason of your death or Disability (as defined below), then, in addition to any other accrued amounts payable to you through the Termination Date, the Company will pay and provide you (or your estate or legal representative) with the following payments and benefits:

(i) payable within thirty (30) days after your Termination Date (with the exact payment date to be determined by the Company in its discretion), a lump-sum severance payment in an amount equal to the sum of (w) your annual base salary as in effect on the Termination Date, (x) your target annual bonus for the fiscal year in which the Termination Date occurs, (y) the Stub Year Bonus, plus (z) the Prior Year Bonus, if any; and

(ii) to the extent that any outstanding Company equity-based awards issued to you under the Company’s equity incentive plans are subject to vesting based on continued employment or the lapse of time, such awards shall become vested and exercisable immediately prior to the Termination Date. The vesting of any awards that are subject to vesting based on the satisfaction of performance goals, including, without limitation, any performance-

based profits interest units of the Operating Partnership and other “outperformance awards” issued to you, shall be governed by the terms of the award agreements evidencing such awards.

(d) Expiration; Non-renewal . Notwithstanding anything contained herein, in no event shall the expiration of the Term set forth in Section 1 above or the Company’s election not to renew or extend the Term or your employment with the Company constitute a termination your employment by the Company without Cause.

(e) Termination of Offices and Directorships . Upon a termination of your employment for any reason, except to the extent otherwise determined by the Board of Directors of the REIT (the “ Board ”) in its sole discretion, you shall be deemed to have resigned from all offices, directorships and other employment positions, if any, then held with the Company or any member of the Digital Group (as defined below), and you agree that you shall take all actions reasonably requested by the Company to effectuate the foregoing.

(f) Potential Six-Month Delay . Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any termination payments or benefits payable under this Section 6, shall be paid to you prior to the expiration of the six (6)-month period following your “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “ Code ”)) to the extent that the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of your death), the Company shall pay you a lump-sum amount equal to the cumulative amount that would have otherwise been payable to you during such six (6)-month period, plus interest thereon from the Termination Date through the payment date at a rate equal to the then-current “applicable Federal rate” determined under Section 7872(f)(2)(A) of the Code.

(g) Release; Compliance with Covenants . Notwithstanding anything contained herein, your right to receive the payments and benefits set forth in this Section 6 is conditioned on and subject to (i) your execution within twenty-one (21) days (or, to the extent required by applicable law, forty-five (45) days) following the Termination Date and non-revocation within seven (7) days thereafter of a general release of claims against the Digital Group (as defined below), in a form reasonably acceptable to the Company, (ii) your continued compliance with the restrictive covenants set forth in Section 8 of this Agreement and any similar covenants set forth in any other agreement between you and the Company, and (iii) your compliance with Section 6(e) above.

(h) Definitions . For purposes of this Agreement:

(A) “ Cause ” shall mean (1) your willful and continued failure to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Company, which demand specifically identifies the manner in which the Company believes that you have not substantially performed your duties and which failure is not cured within thirty (30) days of receiving such notice; (2) your willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or its subsidiaries or affiliates; (3) your conviction of, or entry by you of a guilty or no contest plea to, the commission of a felony or a crime involving moral turpitude; (4) a willful breach by you of any fiduciary duty owed to the Company which results in economic or other injury to the Company or its subsidiaries or affiliates; (5) your willful and gross misconduct in the performance of your duties hereunder that results in economic or other injury to the Company or its subsidiaries or affiliates and which breach is not cured within thirty (30) days after written notification is delivered to you by the Company that specifically identifies the manner in which the Company believes that you have breached any such duty; (6) your willful and material breach of your covenants set forth in Section 8 below; or (7) a material breach by you of any of your other obligations under this Agreement after written notice is delivered to you by the Company which specifically identifies such breach. For purposes of this provision, no act or failure to act on your part will be considered “willful” unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Notwithstanding the foregoing, in the event you incur a “separation from service” by reason of a termination of your employment by the Company (other than by reason of your death or Disability or pursuant to clause (3) of this paragraph) on or within one year after a Change in Control or within the six month period immediately preceding a Change in Control in connection with such Change in Control, it shall be presumed for purposes of this Agreement that such termination was effected by the Company other than for Cause unless the contrary is established by the Company.

(B) “ Disability ” shall mean a disability that qualifies or, had you been a participant, would qualify you to receive long-term disability payments under the Company’s group long-term disability insurance plan or program, as it may be amended from time to time.

(C) “ Good Reason ” shall mean the occurrence of any one or more of the following events without your prior written consent, unless the Company fully corrects the circumstances constituting Good Reason (provided such circumstances

are capable of correction) prior to the Termination Date: (1) the Company’s assignment to you of any duties materially inconsistent with your position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 hereof, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company; (2) the Company’s material reduction of your annual base salary or bonus opportunity, each as in effect on the date hereof or as the same may be increased from time to time; (3) the relocation of the Company’s offices at which you are principally employed (the “ Principal Location ”) to a location more than forty-five (45) miles from such location, or the Company’s requiring you to be based at a location more than forty-five (45) miles from the Principal Location, except for required travel on Company business; (4) the Company requiring you to report to an officer other than the Chief Executive Officer of the Employer; or (5) a material breach by the Company of Section 15 of this Agreement. Notwithstanding the foregoing, you will not be deemed to have resigned for Good Reason unless (x) you provide the Company with notice of the circumstances constituting Good Reason within sixty (60) days after the initial occurrence or existence of such circumstances, (y) the Company fails to correct the circumstance so identified within thirty (30) days after the receipt of such notice (if capable of correction), and (z) the Termination Date occurs no later than one hundred eighty (180) days after the initial occurrence of the event constituting Good Reason.

(D) “ Prior Year Bonus ” shall mean, for any Termination Date that occurs between January 1 of any fiscal year and the date that annual bonuses are paid by the Company for the immediately preceding year (the “ Prior Year ”), your target annual bonus (without giving effect to any reduction which constitutes Good Reason) for such Prior Year, unless the Compensation Committee has determined your bonus for such Prior Year, in which case the Prior Year Bonus shall be the bonus determined by the Compensation Committee, if any. The Prior Year Bonus, if any, shall be in lieu of your annual bonus for the Prior Year. There will be no Prior Year Bonus in connection with any Termination Date that occurs on or after the date the Company pays annual bonuses for the Prior Year through the end of the year in which the Termination Date occurs.

(E) “ Stub Year Bonus ” shall mean the product obtained by multiplying (x) your target annual bonus for the fiscal year in which the Termination Date occurs (without giving effect to any reduction which constitutes Good Reason) multiplied by (y) a fraction, the numerator of which is the number of calendar days that have elapsed in the then current fiscal year through the Termination Date and the denominator of which is 365.

7. LIMITATION ON PAYMENTS.

(a) Best Pay Cap . Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by you (including any payment or benefit received in connection with a termination of your employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Section 6 of this Agreement, the “ Total Payments ”) would be subject (in whole or part) to the excise tax imposed under Section 4999 of the Code (the “ Excise Tax ”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, your remaining Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes applicable to such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which you would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The reduction undertaken pursuant to this Section 7(a) shall be accomplished first by reducing or eliminating any cash payments subject to Section 409A of the Code as deferred compensation (with payments to be made furthest in the future being reduced first), then by reducing or eliminating cash payments that are not subject to Section 409A of the Code, then by reducing payments attributable to equity-based compensation (or the accelerated vesting thereof) subject to Section 409A of the Code as deferred compensation (with payments to be made furthest in the future being reduced first), and finally by reducing payments attributable to equity-based compensation (or the accelerated vesting thereof) that is not subject to Section 409A of the Code.

(b) Certain Exclusions . For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments, the receipt or retention of which you have waived at such time and in such manner so as not to constitute a “payment” within the meaning of Section 280G(b) of the Code, will be taken into account; (ii) no portion of the Total Payments will be taken into account which, in the written opinion of an independent, nationally recognized accounting firm (the “ Independent Advisors ”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments will be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in

excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

8. RESTRICTIVE COVENANTS .

(a) You acknowledge and agree that you have previously entered into an agreement with the Company containing certain nondisclosure, intellectual property assignment, non-competition and non-solicitation provisions (the “ Proprietary Information Agreement ”). You hereby reaffirm the covenants, terms and conditions set forth in the Proprietary Information Agreement and acknowledge and agree that the Proprietary Information Agreement will remain in full force and effect in accordance with its terms. Notwithstanding the foregoing, in the event of any inconsistency between the Proprietary Information Agreement and this Agreement, this Agreement shall control.

(b) As a condition of your employment with the Company, you agree that during the Term and thereafter, you will not directly or indirectly disclose or appropriate to your own use, or the use of any third party, any trade secret or confidential information concerning the REIT, the Operating Partnership, the Employer or their respective subsidiaries or affiliates (collectively, the “ Digital Group ”) or their businesses, whether or not developed by you, except as it is required in connection with your services rendered for the Company. You further agree that, upon termination of your employment, you will not receive or remove from the files or offices of the Digital Group any originals or copies of documents or other materials (physical, electronic or otherwise) of the Digital Group, and that you will return any such documents or materials (physical, electronic or otherwise) otherwise in your possession. You further agree that, upon termination of your employment, you will maintain in strict confidence and not disclose the projects in which any member of the Digital Group is involved or contemplating. You agree that, upon termination of your employment, you will maintain in strict confidence and not disclose the projects in which the Digital Group is involved or contemplating.

(c) You further agree that during the Term, you shall not, unless agreed to in writing by the Company, engage in Competition (as defined below). For purposes of this Agreement, “ Competition ” shall mean acquiring or owning interests in, directly or indirectly, including as a principal, partner, stockholder or manager of any partnership, corporation or any other entity, Technology Real Estate located in the United States, Europe or Asia. “ Technology Real Estate ” shall mean commercial real estate buildings that are used principally (i) to provide infrastructure required by companies in the data, voice and wireless communications industry; (ii) to provide the physical environment required for businesses in the disaster recovery, IT outsourcing and collocation industries, (iii) to provide highly specialized manufacturing

environments for manufacturing of technology products or (iv) as headquarter office facilities for technology companies (or any combination of the foregoing). Notwithstanding the foregoing, “Competition” shall not include (x) your activities as an employee, executive, director, principal, partner, stockholder or manager of the Company or any of its subsidiaries or affiliates, or (y) investments in which you own less than a nine and one-half percent (9.5%) beneficial interest and have no active management role; provided, however, that in the case of investments involving Technology Real Estate described in clause (iv) above, investments in which you own more than nine and one-half percent (9.5%) shall be permitted so long as (A) your aggregate capital invested in the investment is less than $500,000, (B) you own less than a fifty percent (50%) beneficial interest, and (C) you have no active management role.

(d) You further agree that during the Term and continuing through the first (1 ^st ) anniversary of the date of termination of your employment, you will not directly or indirectly solicit, induce, or encourage (i) any then-current employee of any member of the Digital Group to terminate their employment with such member of the Digital Group, or (ii) any consultant, agent, customer, vendor, or other parties doing business with any member of the Digital Group to terminate their agency, or other relationship with such member of the Digital Group or to transfer their business from the such member or the Digital Group and you will not initiate discussion with any such person for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

(e) In recognition of the facts that irreparable injury will result to the Company in the event of a breach by you of your obligations under Sections 8(a), (b), (c) or (d) above, that monetary damages for such breach would not be readily calculable, and that the Company would not have an adequate remedy at law therefor, you acknowledge, consent and agree that in the event of such breach, or the threat thereof, the Company shall be entitled, in addition to any other legal remedies and damages available, to specific performance thereof and to temporary and permanent injunctive relief (without the necessity of posting a bond) to restrain the violation or threatened violation of such obligations by you.

9. CODE SECTION 409A .

(a) To the extent applicable, this Agreement shall be interpreted and applied consistent and in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, if at any time you and the Company mutually determine that any compensation or benefits payable under this Agreement may not be compliant with or exempt from Section 409A of the Code and related Department of Treasury guidance, the parties shall work together to adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take such

other actions, as the parties determine are necessary or appropriate to (i) exempt such compensation and benefits from Section 409A of the Code and/or preserve the intended tax treatment of such compensation and benefits, or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance; provided, however, that this Section 9(a) shall not create any obligation on the part of the Company to adopt any such amendment, policy or procedure or take any such other action.

(b) To the extent permitted under Section 409A of the Code, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A of the Code and Section 6(f) hereof to the extent provided in the exceptions in Treasury Regulation Section 1.409A-1(b)(4), Section 1.409A-1(b)(9) or any other applicable exception or provision of Section 409A of the Code.

(c) To the extent that compensation or benefits payable under Section 6 of this Agreement (i) constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code or (ii) are intended to be exempt from Section 409A of the Code under Treasury Regulation Section 1.409A-1(b)(9)(iii), and are designated under this Agreement as payable upon (or within a specified time following) your termination of employment, such compensation or benefits shall, subject to Section 6(f) hereof, be payable only upon (or, as applicable, within the specified time following) your “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Code).

(d) To the extent that any payments or reimbursements provided to you under this Agreement are deemed to constitute compensation to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to you reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and your right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

10. COMPANY RULES AND REGULATIONS . As an employee of the Company, you agree to abide by Company rules and regulations as set forth in the Company’s Employee Handbook, Code of Conduct and Business Ethics, Statement of Policies and Procedures Governing Material Non-Public Information and the Prevention of Insider Trading and as otherwise promulgated.

11. PAYMENT OF FINANCIAL OBLIGATIONS . In the event that your employment or consultancy is shared among the Company and/or its subsidiaries and affiliates, the payment or provision to you by the Company of any remuneration, benefits or other financial

obligations pursuant to this Agreement may be allocated to the Company and, as applicable, its subsidiaries and/or affiliates in accordance with an employee sharing or expense allocation agreement entered into by such parties.

12. WITHHOLDING . The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

13. ARBITRATION . Except as set forth in Section 8(d) above, any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof shall be settled by final and binding arbitration before a single neutral arbitrator. Arbitration shall be administered by JAMS in San Francisco, California in accordance with the then existing JAMS Arbitration Rules and Procedures for Employment Disputes. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Judgment upon the award may be entered in any court having jurisdiction thereof. Each party shall pay his or its own attorneys’ fees and costs of suit associated with such arbitration to the extent permitted by applicable law, and the Company shall pay the administrative fees and all arbitrator fees associated with such arbitration; provided, however, that if you prevail in such arbitration, the Company shall reimburse you for the reasonable attorneys’ fees actually incurred by you in connection with such arbitration.

14. ENTIRE AGREEMENT . As of the Effective Date, this Agreement, together with the Proprietary Information Agreement and any award agreement(s) between you and any member of the Digital Group covering equity-based awards issued to you under the Company’s equity incentive plans that are outstanding as of the Effective Date (as may be modified by Section 6 above), constitutes the final, complete and exclusive agreement between you and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to you by any member of the Digital Group or any entity, or representative thereof, whose business or assets any member of the Digital Group succeeded to in connection with the initial public offering of the REIT’s common stock or the transactions related thereto (including, without limitation, the Prior Agreement). This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

15. ASSUMPTION BY SUCCESSOR . The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

16. ACKNOWLEDGEMENT . You hereby acknowledge (a) that you have consulted with or have had the opportunity to consult with independent counsel of your own choice concerning this Agreement, and have been advised to do so by the Company, and (b) that you have read and understand this Agreement, are fully aware of its legal effect, and have entered into it freely based on your own judgment.

17. GOVERNING LAW . This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of laws principles thereof.

[SIGNATURE PAGE FOLLOWS]

Please confirm your agreement to the foregoing by signing and dating the enclosed duplicate original of this Agreement in the space provided below for your signature and returning it to Cindy Fiedelman. Please retain one fully-executed original for your files.

Sincerely,



Digital Realty Trust, Inc., a Maryland corporation By: /s/ A. William Stein Name: A. William Stein Title: Chief Executive Officer	DLR LLC, a Maryland limited liability company By: Digital Realty Trust, L.P. Its: Managing Member By: Digital Realty Trust, Inc. Its: General Partner By: /s/ A. William Stein Name A. William Stein Title: Chief Executive Officer
Accepted and Agreed, By: /s/ Joshua A. Mills Joshua A. Mills

Exhibit 12.1

Digital Realty Trust, Inc. and Subsidiaries

Statement of Computation of Ratios

(in thousands, except ratios)



	Three Months Ended March 31,						Year Ended December 31,
	2017			2016			2016			2015			2014			2013			2012
Income from continuing operations before noncontrolling interests	$	84,563		$	62,333		$	431,852		$	301,591		$	203,415		$	320,449		$	216,047
Interest expense	55,450			57,261			236,480			201,435			191,085			189,399			157,108
Interest within rental expense ⁽¹⁾	7,215			6,895			27,879			8,208			5,393			7,687			3,410
Noncontrolling interests in consolidated joint ventures	(121		)	(121		)	(367		)	(460		)	(465		)	(595		)	444
Earnings available to cover fixed charges	$	147,107		$	126,368		$	695,844		$	510,774		$	399,428		$	516,940		$	377,009
Fixed charges:
Interest expense	$	55,450		$	57,261		$	236,480		$	201,435		$	191,085		$	189,399		$	157,108
Interest within rental expense ⁽¹⁾	7,215			6,895			27,879			8,208			5,393			7,687			3,410
Capitalized interest	4,614			3,814			16,324			12,851			20,373			26,277			21,456
Total fixed charges	67,279			67,970			280,683			222,494			216,851			223,363			181,974
Preferred stock dividends	17,393			22,424			83,771			79,423			67,465			42,905			38,672
Fixed charges and preferred stock dividends	$	84,672		$	90,394		$	364,454		$	301,917		$	284,316		$	266,268		$	220,646
Ratio of earnings to fixed charges	2.19			1.86			2.48			2.30			1.84			2.31			2.07
Ratio of earnings to fixed charges and preferred stock dividends	1.74			1.40			1.91			1.69			1.40			1.94			1.71


(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)



	Three Months Ended March 31,						Year Ended December 31,
	2017			2016			2016			2015			2014			2013			2012
Income from continuing operations before noncontrolling interests	$	84,563		$	62,333		$	431,852		$	300,226		$	203,415		$	320,449		$	216,047
Interest expense	55,450			57,261			236,480			202,800			191,085			189,399			157,108
Interest within rental expense ⁽¹⁾	7,215			6,895			27,879			8,208			5,393			7,687			3,410
Noncontrolling interests in consolidated joint ventures	(121		)	(121		)	(367		)	(460		)	(465		)	(595		)	444
Earnings available to cover fixed charges	$	147,107		$	126,368		$	695,844		$	510,774		$	399,428		$	516,940		$	377,009
Fixed charges:
Interest expense	$	55,450		$	57,261		$	236,480		$	202,800		$	191,085		$	189,399		$	157,108
Interest within rental expense ⁽¹⁾	7,215			6,895			27,879			8,208			5,393			7,687			3,410
Capitalized interest	4,614			3,814			16,324			12,851			20,373			26,277			21,456
Total fixed charges	67,279			67,970			280,683			223,859			216,851			223,363			181,974
Preferred unit distributions	17,393			22,424			83,771			79,423			67,465			42,905			38,672
Fixed charges and preferred unit distributions	$	84,672		$	90,394		$	364,454		$	303,282		$	284,316		$	266,268		$	220,646
Ratio of earnings to fixed charges	2.19			1.86			2.48			2.28			1.84			2.31			2.07
Ratio of earnings to fixed charges and preferred unit distributions	1.74			1.40			1.91			1.68			1.40			1.94			1.71


(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

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:	May 10, 2017
By:	/s/ A. WILLIAM STEIN
	A. William Stein
	Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Andrew P. Power, 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:	May 10, 2017
By:	/s/ ANDREW P. POWER
	Andrew P. Power
	Chief Financial Officer
	(Principal Financial Officer)

Exhibit 31.3

Certification of Chief Executive 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.;


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:	May 10, 2017
By:	/s/ A. WILLIAM STEIN
	A. William Stein
	Chief Executive Officer
	(Principal Executive Officer)
	Digital Realty Trust, Inc., sole general partner of
	Digital Realty Trust, L.P.

Exhibit 31.4

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Andrew P. Power, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Digital Realty Trust, L.P.;


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:	May 10, 2017
By:	/s/ ANDREW P. POWER
	Andrew P. Power
	Chief Financial Officer
	(Principal Financial Officer)
	Digital Realty Trust, Inc., sole general partner of
	Digital Realty Trust, L.P.

Exhibit 32.1

Certification of Chief Executive 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 March 31, 2017 (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:	May 10, 2017
	/s/ A. WILLIAM STEIN
	A. William Stein
	Chief Executive Officer
	(Principal Executive 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 Financial Officer Pursuant to 18 U.S.C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(i)	the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2017 (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:	May 10, 2017
	/s/ ANDREW P. POWER
	Andrew P. Power
	Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.3

Certification of Chief Executive 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 March 31, 2017 (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:	May 10, 2017
	/s/ A. WILLIAM STEIN
	A. William Stein
	Chief Executive Officer
	(Principal Executive 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.

Exhibit 32.4

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(i)	the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarterly period ended March 31, 2017 (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:	May 10, 2017
	/s/ ANDREW P. POWER
	Andrew P. Power
	Chief Financial Officer
	(Principal Financial Officer)
	Digital Realty Trust, Inc., sole general partner of
	Digital Realty Trust, L.P.