Digital Realty Trust, Inc. (DLR, NYSE)
Industry: REIT - Specialty
Annual report, fiscal year 2010


## A YEAR
OF GROWTH

Digital Realty Trust | AR 2010



From our FFO (up 16 percent) to our dividend (up 37 percent). From our adjusted EBITDA (up 35 percent) to our global footprint (up 17 percent by square footage). Almost any way you measure our performance in 2010, "growth" is the word that describes it. Even under challenging business conditions there is no debating that it was, nonetheless, a record year. A milestone year.

TWELVE MONTHS, 52 WEEKS, AND 365 DAYS

of numbers trending steadily, encouragingly, profitably up. We know there's more work to do. But a year like this year warrants acknowledgment, along with a word of thanks to shareholders like you. We grew in large part because you believed in us. We're grateful. We're proud. And we're intensely committed to delivering more growth in the years ahead.




## A YEAR OF EXPANSION

In 2010 we entered the Asia-Pacific market with the acquisition of a 370,500 square-foot datacenter facility in Singapore. It's a strategic move because Singapore is one of the region's key financial and business centers—a market in which many of our customers are looking to deploy critical business applications, and one in which demand for quality datacenters outstrips the supply. Singapore is well positioned to serve as the region's datacenter hub; we're well positioned to lead in this dynamic market.




 \( ^{1} \)  Adjusted EBITDA and FFO are non-GAAP financial measures. For an explanation of how we calculate these measures and reconciliations to net income available to common stockholders, please see the separately included reconciliation sheet.

## DEAR SHAREHOLDERS,

We entered 2010 with the wind at our back. Demand for data center facilities remained strong and we continued to expand our portfolio of properties and new customer leasing in the US, Europe and in Singapore, a new market for the Company and a very strategic location in the Asia Pacific region. Growth via strategic income property investments was substantial. At the beginning of the year, we had a $375 million three-building data center portfolio in New England under contract. Our BBB/Baa2 investment grade debt ratings with a stable outlook from all three major rating agencies provided us access to attractively priced capital and placed us at a significant advantage over unrated public and private equity competitors. We quickly completed the New England portfolio acquisition in January and followed up with our inaugural unsecured bond offering totaling $500 million aggregate principal amount of 5.875% notes due 2020.

Soon thereafter, the strategic, five-property 365 Main/Rockwood portfolio, which we had been tracking for three years, came back on the market. We were able to place the $725 million portfolio under contract, and our strong access to capital delivered efficient financing for this large acquisition. Concurrent with our purchase agreement announcement, we initiated a public offering of our common stock and raised approximately $377 million through the issuance of 6.9 million shares. Upon closing the acquisition, we completed the private placement of $375 million aggregate principal amount of 4.500% notes due 2015, in part, to finance the balance of the purchase price. Although we believe that we were not the highest bidder, the strength of our balance sheet, investment grade debt ratings, and solid reputation as a serious owner and operator made us the buyer of choice for the sellers.

As we continued to pursue investment opportunities and acquire both income producing properties and properties for development in select U.S. markets, after three years of researching the Asia Pacific market, we completed the acquisition of our flagship property in Singapore: a 370,500 square foot, purpose-built datacenter development project. Singapore is one of the most robust global business markets that is significantly underserved from a data center perspective. We expect the facility to be ready for initial occupancy in mid 2011 and have been actively marketing the project to prospects from industry sectors ranging from international financial institutions to global managed service providers and government organizations.



By year end 2010, we invested a record $1.3 billion acquiring fifteen properties, adding approximately 2.3 million square feet to our portfolio. These acquisitions expanded our global footprint by entering the Singapore market and substantially increased our market share in our existing top investment markets.

At the same time, we invested approximately $339 million in our development program that delivered 516,000 square feet of new data center supply. Including this new inventory, Digital Realty Trust signed leases for a record 1.2 million square feet of space during the year and achieved a projected unlevered cash return on invested capital of between 11% and 14%.

While our leasing, acquisitions and development operations continued to capitalize on the favorable market conditions, towards the end of the year we began to face headwinds from the investment community, many of whom were new to our story. This put a considerable amount of pressure on our stock price during the fourth quarter. In an effort to dispel some of the misconceptions being circulated in the market, we hosted our first Investor Day conference that was attended by over 100 top investors and research analysts. From our perspective and the perspective of many of our top investors, the day was very successful. However, skepticism persisted resulting in a less than satisfying stock price performance at the end of the year.

Despite these challenges, our investment and development business model delivered another year of superior earnings growth. Funds from Operations (FFO) was up 16% over 2009 to $3.39 per diluted share and unit. This represents FFO growth of nearly 20% on a compounded annual basis since our first full quarter of operations in 2005. Likewise, Adjusted EBITDA for 2010 was $512 million, up 35% over 2009 Adjusted EBITDA. Since 2005, this represents Adjusted EBITDA growth of 32% on a compounded annual basis.

By the first quarter of 2011, as a result of our growth in taxable income, we raised our quarterly common stock dividend by 28% to $0.68 per share to maintain our practice of distributing 100% of our taxable income, which allows us to eliminate corporate level federal income taxes while retaining additional operating cash flow to reinvest in our business. On an annualized basis, this equates to a common stock dividend of $2.72 per share, up 35% from our 2010 annual dividend of $2.02. Since our first full quarter of operations as a public company in 2005, we have grown our dividend by 18.2% on a compounded annual basis.

Since our IPO in late 2004, our investment and development business model has consistently delivered solid operating results and earnings growth, often in the midst of challenging business conditions. Our exceptional 2010 results are based on the dedication of our talented team of technical, real estate and finance professionals, whose combined efforts are the foundation of our performance. The Digital Realty Trust technical professional platform of over 180 members has enabled us to attain an operating scale far beyond that of our competitors, delivering significant value to our customers in terms of cost effective and highly reliable and secure facilities in multiple markets. These dedicated team members are focused on delivering solutions to the corporate enterprise IT departments as well as companies serving the enterprise customers, such as colocation and managed services providers. As a Company, we remain dedicated to delivering flexible, reliable, and cost effective datacenter facilities for our customers' critical business applications, which, in turn, delivers solid operating results and earnings growth for our shareholders.

We greatly appreciate your continued support and look forward to continuing to enhance shareholder value as we grow the Company.



MICHAEL FOUST
Chief Executive Officer



RICHARD MAGNUSON
Chairman




## A YEAR OF OPPORTUNITIES

Through several acquisitions—including the purchase of two major U.S. portfolios—we increased our square-footage by 2.3 million square feet—or 17%— in 2010. One of our acquisitions dramatically increases our presence in the important New England market; all of our acquisitions are intended to provide our shareholders with attractive, risk-adjusted returns.



## CORPORATE & SHAREHOLDER INFORMATION

## SENIOR MANAGEMENT

Michael F. Foust
Chief Executive Officer

A. William Stein
Chief Financial Officer
and Chief Investment Officer

Scott E. Peterson
Chief Acquisitions Officer

David J. Caron
Senior Vice President, Portfolio Management

James M. Smith
Chief Technology Officer

## BOARD OF DIRECTORS

Richard A. Magnuson
Chairman of the Board

Laurence A. Chapman \( ^{(1)(3)} \) 
Audit Committee Chairman

Kathleen Earley \( ^{(2)(3)} \) 
Nominating & Corporate Governance Committee Chairman

Ruann F. Ernst \( ^{(1)(2)(3)} \) 

Dennis E. Singleton \( ^{(1)(2)} \) 
Compensation Committee Chairman

Robert H. Zerbst \( ^{(2)(3)} \) 

Michael F. Foust
Chief Executive Officer

(1) Audit Committee Member
(2) Compensation Committee Member
(3) Nominating & Corporate Governance Committee Member

## CORPORATE INFORMATION

CORPORATE OFFICE
560 Mission Street, Suite 2900
San Francisco, CA 94105
T. +1.415.738.6500
F. +1.415.738.6501
www.digitalrealtytrust.com

TICKER SYMBOL
NYSE: Common Stock: DLR

STOCK TRANSFER AGENT
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Toll Free T. +1.800.937.5449
www.amstock.com

INVESTOR RELATIONS
Investors seeking additional information about
Digital Realty Trust can visit the Company’s
website at www.digitalrealtytrust.com (click
on “Investors”) or contact us at:

Investor Relations
560 Mission Street, Suite 2900
San Francisco, CA 94105
T. +1.415.738.6500

ANNUAL MEETING
The Company’s annual meeting will be held
at 12:00PM Pacific time on Monday, April 25,
2011 at:

560 Mission Street
Conference Center, 20th Floor
San Francisco, CA 94105



560 Mission Street, Suite 2900 San Francisco, CA 94105 +1.415.738.6500 www.digitalrealtytrust.com



## A YEAR OF CONFIDENCE

The business landscape of the past two years has been challenging to navigate. But with an eye for opportunity, a prudent strategy, and a veteran team with the right expertise, we’ve been able to make extraordinary progress on our journey toward continued growth and profitability. In these strange economic days, we take nothing for granted. But our leadership in the market, our strong balance sheet, and our ready access to capital give us strength and confidence in our ability to consistently deliver growth in both operations and earnings—this year, and in those to come.