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Incentive Plans | 12 Months Ended
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Dec. 31, 2022
Incentive Plans |
Incentive Plans | ​ ​ ​ 16. Incentive Plans ​ 2014 Incentive Award Plan ​ The Company provides incentive awards in the form of common stock or awards convertible into common stock pursuant to the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2014 Incentive Award Plan, as amended (the “Incentive Plan”). The major categories of awards that can be issued under the Incentive Plan include: ​ Long-Term Incentive Units (“LTIP Units”): LTIP Units, in the form of profits interest units of the Operating Partnership, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. LTIP Units (other than Class D units), whether vested or not, receive the same quarterly per-unit distributions as Operating Partnership common units. Initially, LTIP Units do not have full parity with common units with respect to liquidating distributions. However, if such parity is reached, vested LTIP Units may be converted into an equal number of common units of the Operating Partnership at any time. The awards generally vest over periods between two and four years. ​ Service-Based Restricted Stock Units: Service-based Restricted Stock Units, which vest over periods between two and four years, convert to shares of Digital Realty Trust, Inc.’s common stock upon vesting. ​ Market Performance-Based Awards (“the Performance Awards”): Market performance-based Class D units of the Operating Partnership and market performance-based Restricted Stock Units covering shares of Digital Realty Trust, Inc.’s common stock may be issued to officers and employees of the Company. The Performance Awards include performance-based and time-based vesting criteria. Depending on the type of award, the total number of units that qualify to fully vest is determined based on either a market performance criterion (“Market-Based Performance Awards”) or financial performance criterion (“Financial-Based Performance Awards”) (subject to time-based vesting). ​ Market-Based Performance Awards. The market performance criterion compares the Company’s total shareholder return (“TSR”) relative to the MSCI US REIT Index (“RMS”) over a three-year performance period (“Market Performance Period”), subject to continued service, in order to determine the percentage of the total eligible pool of units that qualifies to be awarded. Following the completion of the Market Performance Period, the awards then have a time-based vesting element that allows for 50% of the performance-vested units to fully vest in the February immediately following the end of the Market Performance Period and 50% of the performance-vested units to fully vest in the subsequent February. Vesting with respect to the market condition is measured based on the difference between Digital Realty Trust, Inc.’s TSR percentage and the TSR percentage of the RMS as is shown in the subsequent table (the “RMS Relative Market Performance”). ​
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Market
​ | ​ | ​ | Performance
​ | RMS Relative | ​ | Vesting
Level | Market Performance | ​ | Percentage
Below Threshold Level | ≤ -500 basis points | ​ | 0 | %
Threshold Level | -500 basis points | ​ | 25 | %
Target Level | 0 basis points | ​ | 50 | %
High Level | ≥ 500 basis points | ​ | 100 | %
​ If the RMS Relative Market Performance falls between the levels specified in the above table, the percentage of the award that will vest with respect to the market condition will be determined using straight-line linear interpolation between such levels. Following the completion of the applicable Market Performance Period, the Compensation Committee made the following determinations regarding the vesting of these awards. ​ 2020 Awards
| ● | In January 2023, the RMS Relative Market Performance fell between the threshold and target level for the 2020 awards and accordingly, 72,230 Class D units and 7,083 Restricted Stock Units performance vested and qualified for time-based vesting.
| ● | The Class D units included 5,841 distribution equivalent units that immediately vested on December 31, 2022.
| ● | On February 27, 2023, 50% of the 2020 awards will vest and the remaining 50% will vest on February 27, 2024, subject to continued employment through the applicable vesting date.
​ 2019 Awards
| ● | In January 2022, the RMS Relative Market Performance fell between the target and high level for the 2019 awards and accordingly, 239,436 Class D units and 70,721 Restricted Stock Units performance vested and qualified for time-based vesting.
| ● | The Class D units included 18,966 distribution equivalent units that immediately vested on December 31, 2021.
| ● | On February 27, 2022, 50% of the 2019 awards vested and the remaining 50% will vest on February 27, 2023, subject to continued employment through the applicable vesting date.
​ 2018 Awards
| ● | In January 2021, the high level of the performance metric was determined to have been achieved and, accordingly, 240,377 Class D units and 63,498 Restricted Stock Units performance vested and qualified for time-based vesting.
| ● | The Class D units included 20,725 distribution equivalent units that immediately vested on December 31, 2020.
| ● | On February 27, 2021, 50% of the 2018 awards vested and the remaining 50% vested on February 27, 2022, subject to continued employment through the applicable vesting date.
​ ​ ​ ​ ​ ​ Financial-Based Performance Awards. ​ On March 4, 2022, the Company granted Financial-Based Performance Awards, based on growth in core funds from operation (“Core FFO”) during the three-year period commencing on January 1, 2022. The awards then have a time-based vesting element consistent with the Market-Based Performance Awards discussed above. For these awards, fair value is based on market value on the date of grant and compensation cost is recognized based on the probable achievement of the performance condition at each reporting period. The grant date fair value of these awards is $12.3 million, based on the Company’s closing stock price at the grant date. ​ Fair Value of Market Performance-Based Awards ​ The fair values of the Performance Awards granted were measured using a Monte Carlo simulation to estimate the probability of the market vesting condition being satisfied. 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 valuations are summarized as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | Expected Stock Price |  | Risk-Free Interest | ​
Award Date |  | Volatility |  | rate | ​
February 19, 2020 | ​ | 22 | % | 1.39 | %
February 20, 2020 | ​ | 22 | % | 1.35 | %
January 1, 2021 | ​ | 27 | % | 0.17 | %
February 25, 2021 | ​ | 26 | % | 0.31 | %
January 1, 2022 | ​ | 26 | % | 0.97 | %
​ The expected stock price volatility assumption is calculated based on our historical volatility, which is calculated over a period of time commensurate with the expected term of the awards being valued. The expected dividend yield assumption used in the Monte Carlo simulation represents the percent of return to a stock that is available to the holder of an award. Because the holders of the awards receive dividend equivalents, an expected dividend yield assumption of 0.00% was used in the valuation. These valuations were performed in a risk-neutral framework, and no assumption was made with respect to an equity risk premium. ​ The grant date fair value of the Performance Awards was approximately $12.3 million, $25.0 million and $17.2 million for the years ended years ended December 31, 2022, 2021 and 2020, respectively. We will recognize compensation expense on a straight-line basis over the expected service period of approximately four years. ​ The aggregate intrinsic value of the Performance Awards that vested in 2022, 2021 and 2020 was $41.2 million, $28.6 million and $24.3 million, respectively. ​ Other Items: In addition to the LTIP Units, service-based Restricted Stock Units and Performance Awards described above, one-time grants of time and/or performance-based Class D units and Restricted Stock Units were issued in connection with the Interxion Combination. These awards vest over a period of two and three years based on continued service and/or the attainment of performance metrics related to successful integration of the Interxion business. ​ As of December 31, 2022, approximately 4.9 million shares of common stock, including awards that can be converted to or exchanged for shares of common stock, remained available for future issuance under the Incentive Plan. Each LTIP unit and each Class D unit issued under the Incentive Plan counts as one share of common stock for purposes of calculating the limit on shares that may be issued under the Incentive Plan and the individual award limits set forth therein. ​ Below is a summary of compensation expense and unearned compensation (in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Expected
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | period to
​ | Deferred Compensation |  | Unearned Compensation |  | recognize
​ | Expensed | ​ | Capitalized | ​ | As of | ​ | As of |  | unearned
​ | Year Ended December 31, | ​ | Year Ended December 31, | ​ | December 31, | ​ | December 31, |  | compensation
Type of incentive award | 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | (in years)
Long-term incentive units | $ | 21.7 | ​ | $ | 15.4 | ​ | $ | 12.8 | ​ | $ | 0.2 | ​ | $ | 0.2 | ​ | $ | 0.2 | ​ | $ | 20.7 | ​ | $ | 19.8 |  | 1.6
Performance-based awards |  | 21.4 | ​ |  | 23.9 | ​ |  | 24.8 | ​ |  | 0.5 | ​ |  | 0.7 | ​ |  | 0.6 | ​ |  | 30.3 | ​ |  | 39.2 |  | 1.6
Service-based restricted stock units |  | 25.9 | ​ |  | 23.2 | ​ |  | 15.1 | ​ |  | 5.4 | ​ |  | 3.3 | ​ |  | 3.2 | ​ |  | 55.4 | ​ |  | 44.5 |  | 2.5
Interxion awards | ​ | 4.7 | ​ | ​ | 17.7 | ​ | ​ | 19.7 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 1.9 | ​ | ​ | 8.5 | ​ | 0.7
The following table sets forth the weighted-average fair value of for each type of incentive award at the date of grant for the years ended December 31, 2022, 2021 and 2020: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Weighted Average Fair Value at Date of Grant
Type of incentive award |  | 2022 |  | 2021 |  | 2020
Long-term incentive units | ​ | $ | 146.37 | ​ | $ | 132.66 | ​ | $ | 134.55
Performance-based awards | ​ | ​ | 154.26 | ​ | ​ | 137.69 | ​ | ​ | 159.34
Restricted stock | ​ | ​ | 131.57 | ​ | ​ | 129.52 | ​ | ​ | 138.82
Interxion awards | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 120.67
​ Activity for LTIP Units and service-based Restricted Stock Units for the year ended December 31, 2022 is shown below. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | Weighted-Average | Weighted-Average | ​ | Aggregate
​ | ​ | ​ |  | Grant Date Fair | Remaining Contractual | ​ | Intrinsic Value (1)
Unvested LTIP Units | ​ | Units |  | Value | Life (Years) | ​ | (in thousands)
Unvested, beginning of period |  | 250,468 | ​ | $ | 132.66 | ​ | ​ | ​ | ​ | ​
Granted |  | 169,663 | ​ |  | 153.67 | ​ | ​ | ​ | ​ | ​
Vested |  | (140,873) | ​ |  | 130.79 | ​ | ​ | ​ | ​ | ​
Cancelled or expired |  | — | ​ |  | — | ​ | ​ | ​ | ​ | ​
Unvested, end of period |  | 279,258 | ​ | $ | 146.37 | ​ | 1.55 | ​ | $ | 28,001
(1) | The intrinsic value is calculated based on the market value of our common stock as of December 31, 2022.
​ ​ 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 between two and four years, the current vesting periods of the long-term incentive units. The aggregate intrinsic value of long-term incentive units that vested in 2022, 2021 and 2020 was $18.1 million, $17.5 million and $11.6 million, respectively. As of December 31, 2022, we had approximately 1.0 million long-term incentive units that were outstanding and exercisable with an aggregate intrinsic value of approximately $102.6 million (based on the market price of our common stock as of December 31, 2022). ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted-Average | Weighted-Average | ​ | Aggregate
​ | ​ | ​ |  | Grant Date Fair | Remaining Contractual | ​ | Intrinsic Value (1)
Unvested Restricted Stock Units |  | Shares |  | Value | Life (Years) | ​ | (in thousands)
Unvested, beginning of period |  | 509,369 | ​ | $ | 129.52 | ​ | ​ | ​ | ​ | ​
Granted |  | 373,953 | ​ |  | 131.69 | ​ | ​ | ​ | ​ | ​
Vested |  | (309,631) | ​ |  | 128.22 | ​ | ​ | ​ | ​ | ​
Cancelled or expired |  | (65,854) | ​ |  | 132.14 | ​ | ​ | ​ | ​ | ​
Unvested, end of period |  | 507,837 | ​ | $ | 131.57 | ​ | 2.36 | $ | ​ | 50,921
(1) | The intrinsic value is calculated based on the market value of our common stock as of December 31, 2022.
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 aggregate intrinsic value of restricted stock that vested in 2022, 2021 and 2020 was $39.5 million, $59.0 million and $53.4 million, respectively. ​ Interxion Equity Plans On March 9, 2020, in connection with the Interxion Combination, certain outstanding awards granted under various Interxion equity plans were assumed by Digital Realty Trust, Inc. and converted into adjusted equity-based awards of Digital Realty Trust, Inc. common stock in accordance with the terms of the Purchase Agreement for the Interxion Combination. All such awards will continue to be governed by the terms of the applicable Interxion equity plan and underlying award agreement evidencing the award. Approximately 0.6 million shares of Digital Realty Trust, Inc. common stock are registered and issuable pursuant to such awards. The impact of these plans is included in the tables above. ​ Defined Contribution Plans We have a 401(k) plan whereby our U.S. employees may contribute a portion of their compensation to their respective retirement accounts, in an amount not to exceed the maximum allowed under the Code. The 401(k) plan complies with Internal Revenue Service requirements as a 401(k) safe harbor plan whereby matching contributions made by us are 100% vested. The aggregate cost of our contributions to the 401(k) plan was approximately $5.9 million, $5.9 million, and $5.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. In addition, Interxion has a defined contribution pension plan for most of its employees. Contributions are made in accordance with the terms of such defined contribution pension plan and are expensed as incurred.

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