Table of Contents
As filed with the Securities and Exchange Commission on October 26, 2004 
Registration No. 333-117865 

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 

 
AMENDMENT NO. 4 
TO 
 
FORM S-11 
 
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES 

 
Digital Realty Trust, Inc. 
 
(Exact Name of Registrant as Specified in Its Governing Instruments) 

 
2730 Sand Hill Road, Suite 280, Menlo Park, California 94025, (650) 233-3600 
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices) 
Michael F. Foust 
Chief Executive Officer 
Digital Realty Trust, Inc. 
2730 Sand Hill Road, Suite 280, Menlo Park, California 94025, (650) 233-3600 
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) 

 
Copies to: 
			
Martha B. Jordan
Julian T.H. Kleindorfer
LATHAM & WATKINS LLP
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234	 	Gilbert G. Menna, P.C.
Ettore A. Santucci, P.C.
GOODWIN PROCTER LLP
Exchange Place, 53 State Street
Boston, Massachusetts 02109
(617) 570-1000	

 
Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective. 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement of the same offering.  ☐ 
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐ 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐ 
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ☐ 

 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 

Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. 
 
SUBJECT TO COMPLETION, DATED OCTOBER 26, 2004 
 
P R O S P E C T U S 
 
20,000,000 Shares 

Common Stock 

 
This is the initial public offering of Digital Realty Trust, Inc. and no public market currently exists for our shares. All of the shares of our common stock offered by this prospectus are being sold by us. We currently expect the initial public offering price of our common stock to be between $14.00 and $16.00 per share. Our common stock has been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol “DLR”. We have granted the underwriters an option to purchase up to 3,000,000 additional shares of our common stock to cover over-allotments. We expect to qualify as a real estate investment trust, or REIT, for federal income tax purposes. 
 
We will receive or purchase from Global Innovation Partners, LLC, or GI Partners, and others contributions of our initial property investments in exchange for aggregate consideration with a value of $1,208.5 million, consisting of $21.4 million in cash, assumption of indebtedness and 38,262,206 limited partnership units in our operating partnership having a total value of $573.9 million based on the midpoint of the pricing range set forth above. Immediately following the completion of this offering, we will purchase 6,810,036 of these units (having an aggregate value of approximately $102.2 million based on the midpoint of the pricing range set forth above) from the investors in GI Partners for a per unit purchase price equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees. If the underwriters exercise their over-allotment option, we will purchase additional units from these investors at the same price. Upon completion of this offering, consummation of the formation transactions and the purchase of units described above, GI Partners and the other third-party contributors, together with our directors and management, will own an approximate 62.8% interest in our company on a fully diluted basis. 

 
See “ Risk Factors” beginning on page 19 for certain risk factors relevant to an investment in our common stock, including, among others: 
 
 	•	 	Our properties depend upon the technology industry and demand for technology-related real estate. A decline in the technology industry could lead to a decrease in the demand for technology-related real estate, which may have a greater adverse effect on our business and financial condition than if we owned a more diversified real estate portfolio. 	
 
 	•	 	We are dependent on significant tenants that may be costly or difficult to replace, and many of our properties are occupied by single tenants. The loss of significant tenants could cause a material decrease in cash available for distribution to you. 	
 
 	•	 	The majority of our initial properties are being contributed to our operating partnership by, or purchased from, GI Partners, an affiliated entity, for aggregate consideration with a value of $1,030.1 million, including $2.4 million in cash, assumption of indebtedness and 31,930,695 limited partnership units, having a total value of $479.0 million based on the midpoint of the pricing range set forth above. Conflicts of interest exist in connection with the transactions in which these properties will be contributed to us. We have not obtained appraisals for the initial properties in connection with the formation transactions and the consideration to be given by us in exchange for them may exceed their aggregate fair market value. 	
 
 	•	 	We have agreed to indemnify certain third-party contributors against adverse tax consequences if we were to sell, in taxable transactions, either of two of our properties that together represented 14.6% of our portfolio’s annualized rent as of June 30, 2004, for a period of up to nine years, and to make up to $20.0 million of indebtedness available for guaranty by these contributors. 	
 
 	•	 	If we fail to qualify as a REIT for federal income tax purposes, we will be taxed as a corporation and our liability for certain federal, state and local income taxes may significantly increase, which could result in a material decrease in cash available for distribution to our stockholders. 	

 
							
 	  	Per Share
	  	Total
	
Public Offering Price	  	$	            	  	$	            	
Underwriting Discount	  	$	 	  	$	 	
Proceeds, before expenses, to us	  	$	 	  	$	 	
 
The underwriters expect to deliver the shares on or about                     . 
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. 

 
			
Citigroup	 	Merrill Lynch & Co.	
Credit Suisse First Boston 
UBS Investment Bank 
RBC Capital Markets 
KeyBanc Capital Markets 
JMP Securities 
 
The date of this prospectus is                      

Table of Contents

Table of Contents
TABLE OF CONTENTS 

 	  	Page
	
PROSPECTUS SUMMARY	  	1	
Digital Realty Trust, Inc.	  	1	
Overview	  	1	
Our Competitive Strengths	  	2	
Business and Growth Strategies	  	3	
Summary Risk Factors	  	4	
The Properties	  	6	
Our Initial Portfolio	  	6	
Right of First Offer Properties 	  	7	
Structure and Formation of Our Company	  	8	
Our Structure	  	10	
Material Benefits to Related Parties	  	11	
Restrictions on Transfer	  	12	
Conflicts of Interest	  	12	
Restrictions on Ownership of our Stock	  	13	
Unsecured Credit Facility	  	13	
This Offering	  	14	
Dividend Policy	  	15	
Our Tax Status	  	15	
Summary Selected Financial Data	  	16	
RISK FACTORS	  	19	
FORWARD-LOOKING STATEMENTS	  	37	
USE OF PROCEEDS	  	38	
DIVIDEND POLICY	  	40	
CAPITALIZATION	  	44	
DILUTION	  	45	
SELECTED FINANCIAL DATA	  	48	
			
 	  	Page
	
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	  	51	
INDUSTRY BACKGROUND/MARKET OPPORTUNITY	  	74	
BUSINESS AND PROPERTIES	  	78	
MANAGEMENT	  	116	
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	  	129	
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES	  	135	
STRUCTURE AND FORMATION OF OUR COMPANY	  	139	
DESCRIPTION OF THE PARTNERSHIP AGREEMENT OF DIGITAL REALTY TRUST, L.P.	  	144	
PRINCIPAL STOCKHOLDERS	  	149	
DESCRIPTION OF SECURITIES	  	150	
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS	  	155	
SHARES ELIGIBLE FOR FUTURE SALE	  	160	
FEDERAL INCOME TAX CONSIDERATIONS	  	163	
ERISA CONSIDERATIONS	  	180	
UNDERWRITING	  	183	
LEGAL MATTERS	  	187	
EXPERTS	  	187	
WHERE YOU CAN FIND MORE INFORMATION	  	188	

 
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front cover of this prospectus. 

 
Dealer Prospectus Delivery Requirement 
 
Until             , 2004 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions. 
 
i 

Table of Contents
PROSPECTUS SUMMARY 
 
You should read the following summary together with the more detailed information regarding our company and the historical and pro forma financial statements appearing elsewhere in this prospectus, including under the caption “Risk Factors.” References in this prospectus to “we,” “our,” “us” and “our company” refer to Digital Realty Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Digital Realty Trust, L.P., a Maryland limited partnership of which we are the sole general partner and which we refer to in this prospectus as our operating partnership. Unless otherwise indicated, the information contained in this prospectus (including debt balances) is as of June 30, 2004, assumes that the underwriters’ over-allotment option is not exercised, gives effect to a 1.61193 for 1.0 stock and unit split immediately prior to the completion of this offering and assumes that the common stock to be sold in this offering is sold at $15.00 per share, which is the midpoint of the pricing range indicated on the front cover of this prospectus. Information related to the consideration to acquire our initial properties and with respect to uses of proceeds is estimated as of the anticipated consummation of this offering and the formation transactions. 
 
Digital Realty Trust, Inc. 
 
Overview 
 
We own, acquire, reposition and manage technology-related real estate. We target high quality, strategically located properties containing applications and operations critical to the day-to-day operations of technology industry tenants. Our tenant base is diversified within the technology industry and reflects a broad spectrum of regional, national and international tenants that are leaders in their respective areas. We expect to qualify as a REIT for federal income tax purposes beginning with our initial taxable year ending December 31, 2004. 
 
Upon completion of this offering and consummation of the formation transactions, we will own 22 properties located throughout the U.S. and one property located in London, England, containing a total of approximately 5.6 million net rentable square feet. Our operations and acquisition activities are focused on a limited number of markets where technology tenants are concentrated, including the Atlanta, Boston, Dallas, Denver, Los Angeles, Miami, New York, Phoenix, Sacramento, San Francisco and Silicon Valley metropolitan areas. As of June 30, 2004, our properties were approximately 87.1% leased at an average annualized rent per leased square foot of $20.01. The property types within our focus include: 
 
 	•	 	telecommunications infrastructure properties, which provide the infrastructure required by companies in the data, voice and wireless communications industries; 	
 
 	•	 	information technology, or IT, infrastructure properties, which provide the physical environment required for disaster recovery, IT outsourcing and collocation; 	
 
 	•	 	technology manufacturing properties, which contain highly specialized manufacturing environments for such purposes as disk drive manufacturing, semiconductor manufacturing and specialty pharmaceutical manufacturing; and 	
 
 	•	 	regional or national headquarters of technology companies that are located in our target markets. 	
 
Many of our properties have extensive tenant improvements that have been installed at our tenants’ expense. Unlike traditional office and flex/research and development space, the location of and improvements to our facilities are generally essential to our tenants’ businesses, which we believe results in high occupancy levels, long lease terms and low tenant turnover. The tenant-installed improvements in our facilities are readily adaptable for use by similar tenants. 
 
We will pay to the entities that will contribute or sell our initial properties aggregate consideration with a value of $1,208.5 million, consisting of $21.4 million in cash, assumption of indebtedness and 38,262,206 units, having a total value of $573.9 million based upon the midpoint of the pricing range set forth on the cover page of 
 
1 

Table of Contents
this prospectus. Of this amount, we will pay consideration with a value of $1,030.1 million to our predecessor, Global Innovation Partners, LLC, or GI Partners, including $2.4 million in cash, assumption of indebtedness and 31,930,695 units. We will use a portion of the proceeds of this offering to purchase 6,810,036 of these units from the investing members of GI Partners. Subsequent to the completion of this offering and the purchase by us of such units, GI Partners will own 25,120,659 units, or an approximate 46.8% interest in our company on a fully diluted basis. 
 
GI Partners is a private equity fund that was formed to pursue investment opportunities that intersect the real estate and technology industries. GI Partners was formed in February 2001 after a competitive six-month selection process conducted by the California Public Employee Retirement System, or CalPERS, the largest U.S. pension fund. Upon GI Partners’ selection, CalPERS provided a $500 million equity commitment to GI Partners to invest in technology-related real estate and technology operating businesses. In addition, CB Richard Ellis Investors, a subsidiary of CB Richard Ellis, or CBRE, the largest global real estate services firm, and members of GI Partners’ management provided a commitment of $26.3 million. 
 
Our Competitive Strengths 
 
We believe we distinguish ourselves from other owners, acquirors and managers of technology-related real estate through our competitive strengths, which include: 
 
 	•	 	High Quality Portfolio.    Our portfolio contains state-of-the-art facilities with extensive tenant improvements. Based on current market rents and estimated costs to construct such properties and their improvements, we believe that they could not be replicated today on a cost-competitive basis. Many of the properties in our portfolio are located on major aggregation points formed by the physical presence of multiple major telecommunications service providers, which reduces our tenants’ costs and operational risks and increases the attractiveness of our buildings. 	
 
 	•	 	Presence in Key Markets.    Our portfolio is primarily located in 11 major metropolitan areas, including the Boston, Dallas, Los Angeles, New York, San Francisco and Silicon Valley metropolitan areas, and is diversified so that no one market represents more than 28.9% of the aggregate annualized rent of our portfolio as of June 30, 2004. 	
 
 	•	 	Long-Term Leases.    We have long-term leases with stable cash flows. As of June 30, 2004, our average lease term was in excess of 12.6 years, with an average of 7.9 years remaining. Through 2007, leases representing only 7.9% of our net rentable square feet, or 7.8% of our aggregate annualized rent are scheduled to expire. Moreover, through 2005, only 1.6% of our net rentable square feet is scheduled to expire. 	
 
 	•	 	Specialized Focus in Dynamic and Growing Industry.    We focus solely on technology-related real estate because we believe that the growth in the technology industry will be superior to that of the overall economy. We believe that our specialized understanding of both real estate and technology gives us a significant competitive advantage over less specialized investors. We use our in-depth knowledge of the technology industry to identify strategically located properties, evaluate tenants’ creditworthiness and business models and assess the long-term value of in-place technical improvements. 	
 
 	•	 	Proven Acquisition Capability.    Since 2002, we have acquired or will acquire upon completion of this offering and consummation of the formation transactions an aggregate of 23 technology-related real estate properties with 5.6 million net rentable square feet. Our acquisition capability is driven by our broad network of contacts within a highly fragmented universe of sellers and brokers of technology-related real estate. We have developed detailed, standardized procedures for evaluating acquisitions to ensure that they meet our financial and other criteria, which allows us to efficiently evaluate investment opportunities and, as appropriate, commit and close quickly. More than half of our acquisitions were acquired before they were broadly marketed by real estate brokers. We intend to continue to acquire additional technology-related real estate as a key component of our growth strategy. 	
 
2 

Table of Contents
 	•	 	Experienced and Committed Management Team.    Our senior management team, including our Executive Chairman, collectively have an average of over 22 years of experience in the technology or real estate industries, including experience as investors in, advisors to and founders of technology companies. We believe that our senior management team’s extensive knowledge of both the real estate and the technology industries provides us with a key competitive advantage. Upon completion of this offering, our senior management team is expected to collectively own an approximate 3.2% equity interest in our company on a fully diluted basis, which aligns management’s interests with those of our stockholders. 	
 
 	•	 	Unique Sourcing Relationships.    Upon completion of this offering, the members of our contributors will hold a substantial indirect investment in our company, and accordingly, we anticipate that they will continue to play an active role. We expect that CBRE will assist us with obtaining property deal flow that has not been widely marketed, and GI Partners’ private equity investment professionals will provide additional technology industry expertise and access to proprietary deal flow. In addition, we expect that CalPERS will provide us with introductions to potential sources of acquisitions and access to its technology industry experts and will be a potential source of co-investment capital. 	
 
Business and Growth Strategies 
 
Our primary business objectives are to maximize sustainable long-term growth in earnings, funds from operations and cash flow per share and to maximize returns to our stockholders. Our business strategies to achieve these objectives are: 
 
 	•	 	Capitalize on Acquisition Opportunities.    We believe that acquisitions enable us to increase cash flow and create long-term stockholder value. Our relationships with technology tenants and real estate brokers who are dedicated to serving these tenants provide us with ongoing access to potential acquisitions and often enable us to avoid competitive bidding situations. Furthermore, technology-related real estate is specialized, which makes it more difficult for traditional real estate investors to understand and fosters reduced competition for acquisitions relative to other property types. We believe this dynamic creates an opportunity for us to obtain better risk-adjusted returns on our capital. 	
 
 	•	 	Maximize the Cash Flow of our Properties.    We aggressively manage and lease our assets to increase their cash flow. We often acquire properties with substantial in-place cash flow and some vacancy, which enables us to create upside through lease-up. Our portfolio was approximately 87.1% leased as of June 30, 2004, leaving approximately 720,000 square feet of net rentable space available for lease-up. Moreover, many of our properties contain extensive in-place infrastructure or buildout which may result in higher rents when leased to tenants seeking these improvements. We have also implemented cost control measures by negotiating expense pass-through provisions in tenant leases for operating expenses and certain capital expenditures. Leases covering more than 95% of the leased net rentable square feet in our portfolio as of June 30, 2004 required tenants to pay all or a portion of increases in operating expenses, including real estate taxes, insurance, common area charges and other expenses. 	
 
 	•	 	Convert Improved Space to Collocation Use.    We own approximately 181,000 net rentable square feet of data center space with extensive installed tenant improvements that is currently, or will shortly be, available for lease. Rather than leasing such space to large single tenants, we have and intend to continue to convert these spaces to multi-tenant collocation use, with each tenant averaging between 100 and 1,000 square feet of net rentable space. Multi-tenant collocation is a cost-effective solution for smaller tenants who cannot afford their own extensive infrastructure and security. Because we can provide such features, we are able to lease space to these smaller tenants at a significant premium to other uses. 	
 
 	•	 	Leverage Strong Industry Relationships.    We use our strong industry relationships with national and regional technology intensive companies to comprehensively identify and respond to their real estate 	
 
3 

Table of Contents
 	needs. Our leasing and sales professionals are real estate and technology industry specialists who can develop complex facility solutions for the most demanding technology tenants. 	
 
 	•	 	Use Capital Efficiently.    We have and will continue to opportunistically sell assets. We believe that we can increase stockholder returns by effectively redeploying asset sales proceeds into new acquisition opportunities. Recently, data centers have been particularly attractive candidates for sale to owner/users, as the cost of acquisition is usually substantially lower than the cost to construct a new facility. We will seek such opportunities to realize profits and re-invest our capital. 	
 
Our principal executive offices are located at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025. Our telephone number at that location is (650) 233-3600. 
 
Summary Risk Factors 
 
You should carefully consider the following important risks as well as the additional risks described in “Risk Factors” beginning on page 19: 
 
 	•	 	Our portfolio of properties consists primarily of technology-related real estate. A decline in the technology industry could lead to a decrease in the demand for technology-related real estate, which may have a greater adverse effect on our business and financial condition than if we owned a more diversified real estate portfolio. 	
 
 	•	 	We are dependent on significant tenants that may be costly or difficult to replace, and many of our properties are occupied by single tenants. The loss of significant tenants could cause a material decrease in cash available for distribution to you. 	
 
 	•	 	The majority of our initial properties are being contributed or sold by GI Partners, an affiliated entity, for aggregate consideration with a value of $1,030.1 million, consisting of $2.4 million in cash, assumption of indebtedness and 31,930,695 units, having a total value of $479.0 million based upon the midpoint of the pricing range set forth on the cover page of this prospectus. Conflicts of interest exist in connection with the contribution of such properties to our operating partnership. We have not obtained appraisals of the properties and other assets to be contributed to our operating partnership. The negotiation with GI Partners of the contribution of the contributed properties and other assets and liabilities was not conducted at arm’s length, and the consideration to be given by us in exchange for them may exceed their aggregate fair market value. 	
 
 	•	 	Under the contribution agreement with the third party contributors who will contribute the direct and indirect interests in the 200 Paul Avenue and 1100 Space Park Drive properties to our operating partnership, we agreed to indemnify them against adverse tax consequences if we were to sell, exchange or otherwise dispose of these properties in a taxable transaction until the earlier of the ninth anniversary of the completion of this offering and the date on which these contributors (or certain transferees) hold less than 25% of the units of our operating partnership issued to them in the formation transactions. These properties represented 14.6% of our portfolio’s annualized rent as of June 30, 2004. In addition, under this contribution agreement, we agreed to make up to $20.0 million of indebtedness available for guaranty by these contributors which will, among other things, allow them to defer the recognition of gain in connection with the formation transactions. 	
 
 	•	 	We have owned our properties for a limited time and therefore our properties may have characteristics or deficiencies unknown to us that could affect such properties’ valuation or revenue potential. 	
 
 	•	 	If we fail to qualify as a REIT for federal income tax purposes, we will be taxed as a corporation and our liability for certain federal, state and local income taxes may significantly increase, which could result in a material decrease in cash available for distribution to you. 	
 
4 

Table of Contents
 	•	 	Potential losses from fires, floods, earthquakes, terrorist attacks or other liabilities, including liabilities for environmental matters, may not be fully covered by our insurance policies or may be subject to significant deductibles. Our tenants generally retain title to the extensive and highly valuable technology-related improvements in many of our buildings, and as such are generally required to insure them. In the event of a casualty or other loss involving one of our buildings with extensive installed tenant improvements, our tenants may have the right to terminate their leases if we do not rebuild the base building within prescribed times. In such cases, the proceeds from the tenant’s insurance will not be available to us to restore the improvements, and our insurance coverage may be insufficient to replicate the technology-related improvements made by such tenant. 	
 
 	•	 	Upon completion of this offering and consummation of the formation transactions, we anticipate that our total consolidated indebtedness will be approximately $478.6 million, and we may incur significant additional debt to finance future acquisition and development activities. Our debt service obligations with respect to such indebtedness will reduce cash available for distribution and expose us to the risk of default. 	
 
 	•	 	Our charter and bylaws, the Maryland General Corporation Law and the partnership agreement of our operating partnership contain provisions that may delay or prevent a change of control transaction or limit the opportunity for stockholders to receive a premium for their common stock in such a transaction, including a 9.8% limit on ownership of our common stock and a 9.8% limit on ownership of the value of our outstanding capital stock. 	
 
 	•	 	Upon completion of this offering, we will repay $243.7 million of a bridge loan made to GI Partners by an affiliate of Citigroup Global Markets Inc., one of the underwriters in this offering, and will assume the remaining $8.0 million outstanding under this loan. Additionally, affiliates of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are joint lead arrangers and joint bookrunning managers of our unsecured credit facility and we expect that affiliates of one or more of our underwriters may participate as agents or lenders under this facility. These transactions create potential conflicts of interest because the underwriters have an interest in the successful completion of this offering beyond the underwriting discounts and commissions and financial advisory fees they will receive. Consequently, the initial public offering price recommended by the underwriters could be higher than if such conflicts of interest did not exist. 	
 
 	•	 	Our performance and value are subject to risks associated with events and conditions generally applicable to owners and operators of real property that are beyond our control. Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to adverse changes in the performance of such properties may be limited, thus harming our financial condition. 	
 
 	•	 	Our estimated initial distributions represent approximately 93.6% of our estimated initial cash available for distribution for the 12 months ending June 30, 2005. We are party to debt agreements that contain lockbox and cash management provisions pursuant to which revenues generated by properties subject to such indebtedness are immediately swept into an account for the benefit of the lenders and are typically available to be distributed to us only after the funding of reserve accounts for, among other things, debt service, taxes, insurance, tenant improvements and leasing commissions. If our properties do not generate sufficient cash flow, we may be required to fund distributions from working capital or borrowings under our new credit facility or reduce such distributions. 	
 
 	•	 	Differences between the book value of properties contributed to our operating partnership and the aggregate price paid for our common stock in this offering will result in an immediate and substantial dilution in the pro forma net tangible book value of our common stock equal to $8.67 per share. 	
 
5 

Table of Contents
The Properties 
 
Our Initial Portfolio 
 
The following table presents an overview of the initial portfolio of properties that we will own upon completion of this offering and consummation of the formation transactions, referred to herein as our portfolio, based on information as of June 30, 2004: 

Property(1)
	 	Metropolitan
Area
	 	Percent
Ownership
	 	 	Year Built/
Renovated
	 	Net Rentable
Square Feet(2)
	 	Percent
Leased
	 	 	Annualized
Rent(3)
	 	Annualized
Rent Per
Leased
Square Foot(4)
	 	Annualized
Net Effective
Rent Per
Leased
Square Foot(5)
	
Telecommunications Infrastructure	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
200 Paul Avenue	 	San Francisco	 	100.0	%	 	1955/1999&2001	 	532,238	 	82.9	%	 	$	10,617,600	 	$	24.05	 	$	28.02	
Univision Tower	 	Dallas	 	100.0	 	 	1983	 	477,107	 	79.7	 	 	 	7,949,798	 	 	20.90	 	 	19.99	
Carrier Center(6)	 	Los Angeles	 	100.0	 	 	1922/1999	 	449,254	 	80.5	 	 	 	7,484,586	 	 	20.70	 	 	24.53	
Camperdown House(7)	 	London, UK	 	100.0	 	 	1983/1999	 	63,233	 	100.0	 	 	 	4,023,972	 	 	63.64	 	 	63.64	
1100 Space Park Drive	 	Silicon Valley	 	100.0	 	 	2001	 	167,951	 	46.6	 	 	 	3,481,041	 	 	44.51	 	 	52.35	
36 Northeast Second Street	 	Miami	 	100.0	 	 	1927/1999	 	162,140	 	81.1	 	 	 	2,986,641	 	 	22.72	 	 	25.69	
VarTec Building	 	Dallas	 	100.0	 	 	1999	 	135,250	 	100.0	 	 	 	1,352,500	 	 	10.00	 	 	10.45	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	1,987,173	 	80.1	 	 	 	37,896,138	 	 	23.81	 	 	26.23	
Information Technology Infrastructure	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
Hudson Corporate Center	 	New York	 	100.0	 	 	1989/2000	 	311,950	 	88.7	 	 	 	6,207,590	 	 	22.43	 	 	24.46	
Savvis Data Center	 	Silicon Valley	 	100.0	 	 	2000	 	300,000	 	100.0	 	 	 	5,580,000	 	 	18.60	 	 	22.07	
AboveNet Data Center	 	Silicon Valley	 	100.0	 	 	1987/1999	 	179,489	 	97.1	 	 	 	4,259,986	 	 	24.45	 	 	35.73	
Webb at LBJ	 	Dallas	 	100.0	 	 	1966/2000	 	365,449	 	78.9	 	 	 	4,176,959	 	 	14.48	 	 	14.75	
NTT/Verio Premier Data Center	 	Silicon Valley	 	100.0	 	 	1982-83/2001	 	130,752	 	100.0	 	 	 	3,781,200	 	 	28.92	 	 	31.11	
eBay Data Center	 	Sacramento	 	75.0(8)	 	 	1983/2000	 	62,957	 	100.0	(9)	 	 	1,133,226	 	 	18.00	 	 	19.20	
Brea Data Center	 	Los Angeles	 	100.0	 	 	1981/2000	 	68,807	 	100.0	 	 	 	1,176,600	 	 	17.10	 	 	19.83	
AT&T Web Hosting Facility	 	Atlanta	 	100.0	 	 	1998	 	250,191	 	50.0	 	 	 	1,098,036	 	 	8.78	 	 	10.59	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	1,669,595	 	85.5	 	 	 	27,413,597	 	 	19.21	 	 	22.31	
Technology Manufacturing	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
Ardenwood Corporate Park	 	Silicon Valley	 	100.0	 	 	1985-86	 	307,657	 	100.0	 	 	 	7,580,645	 	 	24.64	 	 	25.39	
Maxtor Manufacturing Facility	 	Silicon Valley	 	100.0	 	 	1991 & 1997(10)	 	183,050	 	100.0	 	 	 	3,272,934	 	 	17.88	 	 	19.92	
ASM Lithography Facility(11)	 	Phoenix	 	100.0	 	 	2002	 	113,405	 	100.0	 	 	 	2,549,165	 	 	22.48	 	 	25.52	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	604,112	 	100.0	 	 	 	13,402,744	 	 	22.19	 	 	23.75	
Technology Office/Corporate Headquarters	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
Comverse Technology Building	 	Boston	 	100.0	 	 	1957 & 1999(12)	 	388,000	 	99.7	 	 	 	5,891,393	 	 	15.22	 	 	16.11	
Stanford Place II	 	Denver	 	98.0	(13)	 	1982	 	348,573	 	78.4	 	 	 	3,081,267	 	 	11.28	 	 	11.46	
100 Technology Center Drive	 	Boston	 	100.0	 	 	1989/2001	 	197,000	 	100.0	 	 	 	3,743,000	 	 	19.00	 	 	20.20	
Granite Tower	 	Dallas	 	100.0	 	 	1999	 	240,151	 	98.0	 	 	 	3,528,909	 	 	15.00	 	 	15.41	
Siemens Building	 	Dallas	 	100.0	 	 	1999	 	125,538	 	100.0	 	 	 	1,917,505	 	 	15.27	 	 	17.57	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	1,299,262	 	93.7	 	 	 	18,162,074	 	 	14.91	 	 	15.75	

Portfolio Total/Weighted Average	 	 	 	 	 	 	5,560,142	 	87.1	%	 	$	96,874,553	 	$	20.01	 	$	22.13	

(1)	 	We have categorized the properties in our portfolio by their principal use based on annualized rent. However, many of our properties support multiple uses. 	
 
6 

Table of Contents
(2)	 	Net rentable square feet at a building represents the current square feet at that building under lease as specified in the lease agreements plus management’s estimate of space available for lease based on engineering drawings. Net rentable square feet includes tenants’ proportional share of common areas. 	
(3)	 	Annualized rent represents the annualized monthly contractual rent under existing leases as of June 30, 2004. This amount reflects total base rent before any one-time or non-recurring rent abatements but after annually recurring rent credits and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a full gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of June 30, 2004 for the 12 months ending June 30, 2005 were $852,448. 	
(4)	 	Annualized rent per leased square foot represents annualized rent as computed above, divided by the total square footage under lease as of the same date. 	
(5)	 	For properties owned as of June 30, 2004, annualized net effective rent per leased square foot represents the contractual rent for leases in place as of June 30, 2004, calculated on a straight line basis from the date of acquisition by GI Partners or the date the lease commenced, if later. This amount is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a full gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. This amount is further reduced by the annual amortization of any tenant improvement and leasing costs incurred by GI Partners for such leases, and is then divided by the net rentable square footage under lease as of the same date. For properties acquired or to be acquired after June 30, 2004, the same approach is used, except that the straight line rent calculation is as of the acquisition date or the projected acquisition date. 	
(6)	 	We have been granted an option to purchase this property by GI Partners, which we intend to exercise simultaneously with, or shortly after, completion of this offering. 	
(7)	 	Rental amounts for Camperdown House were calculated based on the exchange rate in effect on June 30, 2004 of $1.8126 per £1.00. 	
(8)	 	Upon completion of this offering and consummation of the formation transactions, we will own a 75% tenancy-in-common interest in this property. Beginning in January 2005, we will have the right to acquire the remaining 25% interest in this property from a third party, which we intend to exercise. 	
(9)	 	As of June 30, 2004, the eBay Data Center property was 100% leased to Sprint Communications Company. Commencing October 1, 2004, pursuant to leases entered into on June 1, 2004, the property will be 100% leased by two tenants, eBay and Sprint. 	
(10)	 	This property consists of two buildings: 1055 Page Avenue was built in 1991 and 47700 Kato Road was built in 1997. 	
(11)	 	Upon completion of this offering and consummation of the formation transactions, we will own the subsidiary that is party to a ground sublease covering this property. The term of the ground sublease expires on December 31, 2082. 	
(12)	 	This property consists of two buildings: 100 Quannapowitt was built in 1999 and 200 Quannapowitt was built in 1957 and has subsequently been renovated. 	
(13)	 	Upon completion of this offering and consummation of the formation transactions, we will indirectly own a 98% interest in a subsidiary that holds the fee simple interest in this property. An unrelated third party will continue to hold the remaining 2% interest in this subsidiary. 	
 
Right of First Offer Properties 
 
In addition to its interests in the properties that will comprise a majority of our initial portfolio, including our option property, Carrier Center, GI Partners owns interests in two additional vacant technology-related properties. The first is an 84,000 square foot data center located in Englewood, Colorado (Denver metropolitan area) and the second is a 129,366 square foot data center located in Frankfurt, Germany. We will not acquire either of these properties in the formation transactions and we do not have an option to purchase either of them as of the close of this offering. However, we do have rights of first offer with respect to the sale of either of these properties by GI Partners. 
 
7 

Table of Contents
Structure and Formation of Our Company 
 
Prior to or simultaneously with the completion of this offering, we will engage in formation transactions, which are designed to consolidate the ownership of a portfolio of properties currently owned by GI Partners and private investors who are not affiliated with GI Partners into our operating partnership, facilitate this offering, enable us to raise necessary capital to repay existing indebtedness related to certain of the properties in our portfolio and other obligations, enable us to qualify as a REIT for federal income tax purposes commencing with the taxable year ending December 31, 2004 and preserve the tax position of certain continuing investors. Pursuant to the formation transactions and in conjunction with this offering: 
 
 	•	 	Our operating partnership will receive a contribution of, or purchase, direct and indirect interests in a portfolio of properties owned by GI Partners, including the Carrier Center option property, in exchange for aggregate consideration with a value of $1,030.1 million, consisting of $2.4 million in cash, assumption of indebtedness and 31,930,695 units, having a total value of $479.0 million based upon the midpoint of the pricing range set forth on the cover page of this prospectus. It will also receive a contribution of, or purchase, properties and interests in properties from unaffiliated third parties in exchange for aggregate consideration with a value of $178.4 million, consisting of $19.0 million in cash, assumption of indebtedness and 6,331,511 units, having a total value of $95.0 million based upon the midpoint of the pricing range set forth on the cover page of this prospectus. 	
 
 	•	 	We will sell 20,000,000 shares of our common stock in this offering and an additional 3,000,000 shares if the underwriters exercise their over-allotment option in full. 	
 
 	•	 	Immediately following the completion of this offering, GI Partners will make a pro rata allocation, in accordance with their respective interests and its constitutive documents, to its investors, CalPERS and Global Innovation Contributors, LLC, or GI Contributors, of 6,810,036 of the operating partnership units received by GI Partners in the formation transactions (having an aggregate value of approximately $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus). Immediately thereafter, as part of the formation transactions, we will purchase from CalPERS and GI Contributors these operating partnership units at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees. If the underwriters exercise their over-allotment option, GI Partners will make an additional pro rata allocation to CalPERS and GI Contributors of an aggregate number of operating partnership units equal to the number of shares sold pursuant to such exercise, and we will purchase such operating partnership units from CalPERS and GI Contributors at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees. The units purchased by us from CalPERS and GI Contributors will automatically convert from limited partner interests to general partner interests upon purchase. We structured the transaction in this manner because certain of GI Partners’ members, CalPERS and GI Contributors, wished to receive cash in connection with the formation transactions, while its other member did not. This structure is also consistent with the intent of GI Partners and its other member to not recognize taxable gain in connection with the formation transactions. 	
 
 	•	 	Upon consummation of the offering or shortly thereafter, our operating partnership or the property-owning entities will use certain of the properties to be contributed by GI Partners to secure approximately $215.0 million of new mortgage loans and will enter into a $200 million unsecured credit facility. 	
 
 	•	 	Our operating partnership will use a portion of the net proceeds of this offering and the new mortgage loans to repay approximately $354.0 million of indebtedness and prepayment penalties, including amounts to be repaid to an affiliate of Citigroup Global Markets Inc., and will use $4.7 million to purchase the remaining 25% interest in the eBay Data Center property in early 2005. In addition, we 	
 
8 

Table of Contents
 	will repay GI Partners for approximately $4.5 million loaned to us to pay costs related to this offering and the formation transactions. 	
 
 	•	 	Richard A. Magnuson, the chief executive officer of the advisor to GI Partners, and Michael F. Foust and Scott E. Peterson, both managing directors of GI Partners, will become executives of our company and our operating partnership. Additional professionals and consultants dedicated to GI Partners’ real estate business will become employees of our company and our operating partnership. 	
 
 	•	 	We will issue an aggregate of 1,490,561 vested long-term incentive units and unvested options to purchase 783,902 shares of our common stock with an exercise price equal to the public offering price to the Executive Chairman of our board of directors and our officers and certain key employees. These long-term incentive units will not be transferable for a period of three years from the date of grant and will receive the same quarterly per unit distributions as common units in our operating partnership, which equal per share distributions on our common stock. Initially, long-term incentive units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in our operating partnership for all purposes, and therefore accrete to an economic value equivalent to our common stock on a one-for-one basis. 	
 
 	•	 	The number of units to be issued by our operating partnership in exchange for the initial properties was determined through negotiations among us and the contributors, based on the historical performance, growth prospects, leverage and other factors relating to the properties contributed by the various contributors. The value of the units that we issue in exchange for contributed property interests and other assets will increase or decrease if our common stock is priced above or below the midpoint of the range of prices shown on the front cover of this prospectus, and if the initial public offering price of our common stock is outside of the range set forth on the cover page of this prospectus, we may increase or decrease the number of shares in the offering. We have not obtained any recent third-party appraisals of the properties and other assets to be contributed to our operating partnership or purchased by our operating partnership for cash in the formation transactions, or any other independent third-party valuations or fairness opinions in connection with the formation transactions. As a result, the consideration to be given by us for these properties and other assets in the formation transactions may exceed their fair market value. 	
 
Upon completion of this offering and consummation of the formation transactions: 
 
 	•	 	Purchasers of our common stock in this offering will own 100% of our outstanding common stock, or approximately 37.2% of our common stock on a fully diluted basis, and we will be the sole general partner of our operating partnership and will own approximately 37.8% of the outstanding units therein. 	
 
 	•	 	We expect to have total consolidated indebtedness of approximately $478.6 million. 	
 
9 

Table of Contents
Our Structure 
 
The following diagram depicts our ownership structure upon completion of this offering, consummation of the formation transactions and exercise of the Carrier Center option. Our operating partnership will own the various properties depicted below directly or indirectly, and in some cases through special purpose entities that were created in connection with various financings. 

 

(1)	 	Reflects the purchase by us of 6,810,036 units from the investors in GI Partners immediately following completion of this offering as part of the formation transactions. 	
(2)	 	Excludes shares issuable with respect to stock options that have been granted but are not yet exercisable. 	
(3)	 	Reflects limited partnership interests held by our officers and directors in the form of vested long-term incentive units that will be issued in connection with this offering and the formation transactions. 	
(4)	 	This property will be held through a taxable REIT subsidiary. 	
(5)	 	Upon completion of this offering and consummation of the formation transactions, we will own a 75% tenancy-in-common interest in this property. Beginning in January 2005, we will have the right to acquire the remaining 25% interest in this property from a third party, which we intend to exercise. 	
(6)	 	Upon completion of this offering and consummation of the formation transactions, we will indirectly own a 98% interest in a subsidiary that holds the fee simple interest in this property. An unrelated third party holds the remaining 2% interest in this subsidiary. 	
 
10 

Table of Contents
Material Benefits to Related Parties 
 
Upon completion of this offering or in connection with the formation transactions, GI Partners and other related persons or entities will receive material benefits, including the following: 
 
 	•	 	Aggregate consideration with a value of $1,030.1 million, consisting of $2.4 million in cash, assumption of indebtedness and 31,930,695 units (with a total value of $479.0 million based on the midpoint of the pricing range indicated on the front cover of this prospectus), in exchange for the contribution or sale of its interests in the property entities and other assets (including the Carrier Center option property). The aggregate historical combined net tangible book value of the interests to be contributed to us by GI Partners was approximately $114.6 million as of June 30, 2004. 	
 
 	•	 	The release of recourse carve-out guarantees and environmental indemnities by GI Partners related to approximately $463.1 million of indebtedness that will be repaid or assumed by us upon completion of this offering and consummation of the formation transactions. 	
 
 	•	 	In connection with this offering, GI Partners will cause the property entities to make distributions to GI Partners in an aggregate amount that we currently anticipate to be no greater than $10.0 million. These distributions are intended to approximate customary commercial real estate prorations, whereby the buyer and seller apportion rents, taxes, utilities, escrowed or restricted funds and other operating expenses. 	
 
 	•	 	Immediately following the completion of this offering, GI Partners will make a pro rata allocation, in accordance with their respective interests and with terms of its constitutive documents, to its investors, CalPERS and GI Contributors, of 6,810,036 of the operating partnership units received by GI Partners in the formation transactions (having a total value of approximately $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus), and immediately thereafter, as part of the formation transactions, we will purchase from these investors the operating partnership units allocated to them at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters. If the underwriters exercise their over-allotment option, GI Partners will make an additional pro rata allocation to CalPERS and GI Contributors of an aggregate number of operating partnership units equal to the number of shares sold pursuant to such exercise, and we will purchase such operating partnership units from CalPERS and GI Contributors at a price per unit equal to the per share public offering price, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters. The units purchased by us from CalPERS and GI Contributors will automatically convert from limited partner interests to general partner interests upon purchase by us. 	
 
Our senior officers will receive material benefits, including the following: 
 
 	•	 	Richard A. Magnuson will serve as Executive Chairman of our board. Michael F. Foust will serve as our Chief Executive Officer. A. William Stein will serve as our Chief Financial Officer and Chief Investment Officer. Scott E. Peterson will serve as our Senior Vice President, Acquisitions. John O. Wilson will serve as our Executive Vice President, Technology Infrastructure. Each will be party to an employment agreement providing for salary, bonus and other benefits, including the grant of long-term incentive units of our operating partnership and stock options, and potentially, severance upon a termination of employment under certain circumstances, and indemnification by us for certain liabilities and expenses incurred as a result of actions brought, or threatened to be brought, against them as officers. 	
 
11 

Table of Contents
Restrictions on Transfer 
 
Under the partnership agreement of our operating partnership, except under certain circumstances, holders of operating partnership units do not have redemption or exchange rights for a period of 14 months and may not otherwise transfer their units for a period of 12 months following completion of this offering. In addition, our senior officers and directors have agreed not to sell or otherwise transfer or encumber any shares of our common stock or securities convertible or exchangeable into our common stock (including units) owned by them at the completion of this offering or thereafter acquired by them for a period of one year after the completion of this offering without the consent of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Furthermore, our officers and directors have agreed not to sell or otherwise transfer any long-term incentive units granted to them under our incentive award plan for a period of three years from the date of grant. 
 
Conflicts of Interest 
 
Following the completion of this offering, there will be conflicts of interest with respect to certain transactions between the holders of units in our operating partnership, including GI Partners and certain executive officers, on the one hand, and us and our stockholders, on the other. 
 
GI Partners and certain other contributors have ownership interests in the properties and in the other assets and liabilities to be contributed to our operating partnership in the formation transactions, including the property subject to the Carrier Center option, and in the properties on which we have rights of first offer. Following the completion of this offering and the consummation of the formation transactions, we, under the agreements relating to the contribution of such interests, will have contractual rights to indemnification in the event of breaches of representations or warranties made by GI Partners and other contributors. In addition, GI Partners will enter into a non-competition agreement with us pursuant to which it will agree, among other things, not to engage in certain business activities in competition with us. Richard Magnuson, the Executive Chairman of our board of directors, is also, and will continue to be, the chief executive officer of the advisor to GI Partners. He, as well as certain of our other senior executives, have entered into employment agreements with us containing non-competition provisions. None of these contribution, option, right of first offer, employment and non-competition agreements was negotiated on an arm’s-length basis. We may choose not to enforce, or to enforce less vigorously, our rights under these contribution, option, right of first offer, employment and non-competition agreements because of our desire to maintain our ongoing relationship with GI Partners and the other individuals involved. 
 
GI Partners will also have a conflict of interest because our operating partnership executed the Carrier Center option and two right of first offer agreements with entities directly or indirectly owned by GI Partners and it could be economically beneficial to GI Partners if the operating partnership exercised this option or such rights of first offer. 
 
An affiliate of Citigroup Global Markets Inc., one of our underwriters, is the lender under a bridge loan facility that has been made to GI Partners prior to this offering and will in its capacity as a lender receive a significant portion of the proceeds of this offering in addition to the underwriting discounts and commissions and financial advisory fees, reimbursement of some expenses and indemnification for some liabilities that may result from this offering. Additionally, affiliates of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are joint lead arrangers and joint bookrunning managers of our unsecured credit facility and we expect that affiliates of one or more of our underwriters may participate as agents or lenders under this facility. These transactions create potential conflicts of interest because the underwriters have an interest in the successful completion of this offering beyond the underwriting discounts and commissions and financial advisory fees they will receive. 
 
12 

Table of Contents
We have adopted policies that are designed to eliminate or minimize certain potential conflicts of interest and the limited partners of our operating partnership have agreed that if there is a conflict between the interests of our stockholders on the one hand and the limited partners on the other, we, as general partner of our operating partnership, will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or the limited partners; provided, however, that for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders. In addition, we have adopted a policy requiring that any decision to acquire the right of first offer properties requires the consent of a majority of our independent directors. 
 
Restrictions on Ownership of our Stock 
 
Due to limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended, or the Code, our charter documents generally prohibit any person from actually or constructively owning more than 9.8% of the outstanding shares of our common stock and 9.8% of the value of our outstanding capital stock. Our charter documents, however, do permit exceptions to be made for stockholders provided our board of directors determines such exceptions will not jeopardize our tax status as a REIT. 
 
Unsecured Credit Facility 
 
We will enter into a $200 million unsecured revolving credit facility with affiliates of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, our joint bookrunning managers for this offering, as joint lead arrangers and joint bookrunning managers. We also expect several of the underwriters to be lenders under this facility. We expect that a portion of this credit facility will be available to us pursuant to the terms of this facility upon the closing of this offering and the consummation of the formation transactions. We expect that this credit facility may be guaranteed by certain of our subsidiaries whose governance agreements and loan documents do not otherwise prohibit such guarantees. We expect that the unsecured credit facility will have a one-year extension option. We intend to use the credit facility, among other things, to finance the acquisition of properties (potentially including the right of first offer properties, although the acquisition of the right of first offer properties is not currently probable), provide funds for tenant improvements and capital expenditures, and provide for working capital and other corporate purposes. We anticipate that the credit facility will contain customary covenants for credit facilities of this type. We intend to enter into the credit facility prior to or contemporaneously with this offering. 
 
13 

Table of Contents
This Offering 
 
Common stock offered by us 	20,000,000 shares 	
 
Common stock to be outstanding after this offering 	20,000,000 shares(1) 	
 
Common stock and operating partnership units to be outstanding after this offering 	52,942,731 shares/units(1)(2) 	
 
Use of proceeds 	We intend to use the net proceeds of this offering and borrowings under new mortgage loans incurred contemporaneously with or shortly after this offering to: 	
 
 	•	 	repay approximately $354.0 million of existing indebtedness, including prepayment penalties; 	
 
 	•	 	purchase operating partnership units issued in connection with the formation transactions (having an aggregate value of approximately $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus) from the investors in GI Partners at a price per unit equal to the per share initial public offering price, net of underwriting discounts and commissions and financial advisory fees, or $95.0 million in the aggregate, based on the midpoint of the pricing range indicated on the front cover of this prospectus; 	
 
 	•	 	acquire the 75% and 25% interests in the eBay Data Center property for a total purchase price of $14.3 million; 	
 
 	•	 	pay $15.0 million of the consideration to acquire the 200 Paul Avenue and 1100 Space Park Drive properties; 	
 
 	•	 	repay GI Partners for approximately $4.5 million loaned to us for transaction expenses related to this offering and the formation transactions; and 	
 
 	•	 	fund general working capital and potentially to fund future acquisitions. 	
 
If the underwriters exercise their over-allotment option, we will purchase additional units from the investors in GI Partners in an amount equal to the number of shares sold pursuant to such exercise, at a price per unit equal to the per share public offering price, net of underwriting discounts and commissions and financial advisory fees, for an aggregate of $41.9 million, based on the midpoint of the pricing range set forth on the front cover of this prospectus and assuming exercise of the underwriters’ over-allotment option in full. 
 
New York Stock Exchange symbol 	DLR 	

(1)	 	Excludes 3,000,000 shares issuable upon exercise of the underwriters’ over-allotment option, 2,199,639 shares available for future issuance under our incentive award plan and 783,902 shares underlying options granted under our incentive award plan. 	
(2)	 	Includes 31,452,170 units held by limited partners expected to be outstanding following consummation of the formation transactions and 1,490,561 vested long-term incentive units to be granted under our incentive award plan that in each case may, subject to limits in the partnership agreement for our operating partnership, be exchanged for cash or, at our option, shares of our common stock on a one-for-one basis generally commencing 14 months after the date of this prospectus. 	
 
14 

Table of Contents
Dividend Policy 
 
We intend to pay regular quarterly dividends to holders of our common stock. We intend to pay a pro rata dividend with respect to the period commencing on the completion of this offering and ending December 31, 2004, based on $0.24375 per share for a full quarter. On an annualized basis, this would be $0.975 per share, or an annual distribution rate of approximately 6.5% based on the midpoint of the pricing range indicated on the front cover of this prospectus. We expect to pay our first dividend in 2005; accordingly, none of these distributions will represent a return of capital for the tax period ending December 31, 2004. We estimate that our initial annual distribution rate will represent approximately 93.6% of estimated cash available for distribution for the 12 months ending June 30, 2005. We established this distribution rate based upon an estimate of cash available for distribution after this offering, which we have calculated based on adjustments to our pro forma net income before minority interests for the year ended December 31, 2003. We have estimated cash available for distribution for the sole purpose of determining our initial distribution amount. Our estimate of cash available for distribution should not be considered as an alternative to cash flow from operating activities (determined in accordance with accounting principles generally accepted in the United States of America, or GAAP) as an indicator of our liquidity or our ability to pay dividends or make other distributions. We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in our estimate. Dividends and other distributions made by us will be authorized and determined by our board of directors in its sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including restrictions under applicable law and the capital requirements of our company. We believe that our estimate of cash available for distribution constitutes a reasonable basis for setting the initial dividend; however, we cannot assure you that the estimate will prove accurate, and actual distributions may therefore be significantly different from the expected distributions. If we have underestimated our cash available for distribution, we may need to increase our borrowings in order to fund our intended distributions. We expect our distributions to be greater than net income under GAAP because of non-cash expenses included in net income. We do not intend to reduce the expected distribution per share if the underwriters exercise their over-allotment option. 
 
Our Tax Status 
 
We intend to elect to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ending December 31, 2004. We believe that our organization and proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT for federal income tax purposes. To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our net taxable income to our stockholders, excluding net capital gains. As a REIT, we generally will not be subject to federal income tax on REIT taxable income we currently distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income or property and the income of our taxable REIT subsidiaries will be subject to taxation at normal corporate rates. 
 
15 

Table of Contents
Summary Selected Financial Data 
 
The following table sets forth summary selected financial and operating data on a combined historical basis for the “Digital Realty Predecessor.” The Digital Realty Predecessor is comprised of the real estate activities and holdings of GI Partners related to the properties in our portfolio. We have not presented historical information for Digital Realty Trust, Inc. because we have not had any corporate activity since our formation other than the issuance of 200 shares of common stock in connection with the initial capitalization of our company and because we believe that a discussion of the results of Digital Realty Trust, Inc. would not be meaningful. The Digital Realty Predecessor combined historical financial information includes: 
 
 	•	 	the wholly owned real estate subsidiaries and majority-owned real estate joint ventures that GI Partners intends to contribute to our operating partnership in connection with this offering; 	
 
 	•	 	an allocation of GI Partners’ line of credit to the extent that borrowings and related interest expense relate to (1) borrowings to partially fund acquisitions of the properties in our portfolio and (2) borrowings to pay asset management fees paid by GI Partners that were allocated to the properties in our portfolio; and 	
 
 	•	 	an allocation of the asset management fees paid to a related party and incurred by GI Partners, along with an allocation of the liability for any such fees that are unpaid as of the date of the financial statements and an allocation of GI Partners’ general and administrative expenses. 	
 
You should read the following summary selected financial data in conjunction with our combined historical consolidated financial statements and the related notes and with “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” which are included elsewhere in this prospectus. 
 
The historical combined balance sheet information as of December 31, 2003 and 2002 of the Digital Realty Predecessor and the combined statements of operations information for the years then ended and for the period from February 28, 2001 (inception) through December 31, 2001 of the Digital Realty Predecessor have been derived from the historical combined financial statements audited by KPMG LLP, independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The historical combined balance sheet information as of June 30, 2004 and December 31, 2001 and the combined statements of operations information for the six months ended June 30, 2004 and 2003 have been derived from the unaudited combined financial statements of the Digital Realty Predecessor. In the opinion of the management of our company, the historical combined balance sheet information as of June 30, 2004 and the historical combined statements of operations for the six months ended June 30, 2004 and 2003 include all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. Our results of operations for the interim period ended June 30, 2004 are not necessarily indicative of the results to be obtained for the full fiscal year. 
 
Our unaudited summary selected pro forma consolidated financial statements and operating information as of and for the six months ended June 30, 2004 and for the year ended December 31, 2003 assume completion of this offering and consummation of the formation transactions as of the beginning of the periods presented for the operating data and as of the stated date for the balance sheet data. Our pro forma consolidated financial statements include the effects of the acquisition by us of the properties acquired or expected to be acquired subsequent to June 30, 2004 along with the related financing transactions as if those acquisitions and financing transactions had occurred as of the beginning of the period presented for the operating data and as of the stated date for the balance sheet data. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations. 
 
16 

Table of Contents
The Company and the Digital Realty Predecessor 
(Amounts in thousands, except per share data) 

 	 	Six Months Ended June 30,
	 	 	Year Ended December 31,
	 	 	Period from
February 28,
2001
(inception)
through
December 31,
	 	
 	 	Pro Forma
Consolidated
	 	 	Historical Combined
	 	 	Pro Forma
Consolidated
	 	Historical Combined
	 	 	Historical
Combined
	 	
 	 	2004
	 	 	2004
	 	 	2003
	 	 	2003
	 	2003
	 	 	2002
	 	 	2001
	 	
 	 	(Unaudited)	 	 	(Unaudited)	 	 	(Unaudited)	 	 	 	 	 	 	 	 	 	
Statement of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental revenues	 	$	60,548	 	 	$	34,461	 	 	$	22,298	 	 	$	118,881	 	$	50,099	 	 	$	21,203	 	 	$	—  	 	
Tenant reimbursements	 	 	11,180	 	 	 	5,397	 	 	 	4,317	 	 	 	22,288	 	 	8,661	 	 	 	3,894	 	 	 	—  	 	
Other revenues	 	 	2,320	 	 	 	1,712	 	 	 	4,222	 	 	 	6,016	 	 	4,328	 	 	 	458	 	 	 	12	 	
 	 				 				 				 			 				 				 				
Total revenues	 	 	74,048	 	 	 	41,570	 	 	 	30,837	 	 	 	147,185	 	 	63,088	 	 	 	25,555	 	 	 	12	 	
 	 				 				 				 			 				 				 				
Rental property operating and maintenance expenses	 	 	12,427	 	 	 	6,289	 	 	 	3,638	 	 	 	22,954	 	 	8,624	 	 	 	4,997	 	 	 	—  	 	
Property taxes	 	 	5,835	 	 	 	3,833	 	 	 	2,416	 	 	 	11,013	 	 	4,688	 	 	 	2,755	 	 	 	—  	 	
Insurance	 	 	1,230	 	 	 	562	 	 	 	208	 	 	 	2,278	 	 	626	 	 	 	83	 	 	 	—  	 	
Interest expense	 	 	14,365	 	 	 	7,878	 	 	 	4,099	 	 	 	28,723	 	 	10,091	 	 	 	5,249	 	 	 	—  	 	
Asset management fees to related party	 	 	—  	 	 	 	1,592	 	 	 	1,592	 	 	 	—  	 	 	3,185	 	 	 	3,185	 	 	 	2,663	 	
Depreciation and amortization expense	 	 	22,375	 	 	 	12,218	 	 	 	7,187	 	 	 	44,088	 	 	16,295	 	 	 	7,659	 	 	 	—  	 	
General and administrative expenses	 	 	24,731	 	 	 	157	 	 	 	43	 	 	 	27,060	 	 	329	 	 	 	249	 	 	 	—  	 	
Other expenses	 	 	2,588	 	 	 	2,540	 	 	 	2,480	 	 	 	2,698	 	 	2,459	 	 	 	1,249	 	 	 	107	 	
 	 				 				 				 			 				 				 				
Total expenses	 	 	83,551	 	 	 	35,069	 	 	 	21,663	 	 	 	138,814	 	 	46,297	 	 	 	25,426	 	 	 	2,770	 	
 	 				 				 				 			 				 				 				
Income (loss) before minority interests (deficit)	 	 	(9,503	)	 	 	6,501	 	 	 	9,174	 	 	 	8,371	 	 	16,791	 	 	 	129	 	 	 	(2,758	)	
Minority interests (deficit)	 	 	(5,918	)	 	 	(56	)	 	 	73	 	 	 	5,208	 	 	149	 	 	 	190	 	 	 	—  	 	
 	 				 				 				 			 				 				 				
Net income (loss)	 	$	(3,585	)	 	$	6,557	 	 	$	9,101	 	 	$	3,163	 	$	16,642	 	 	$	(61	)	 	$	(2,758	)	
 	 				 				 				 			 				 				 				
Balance Sheet Data (at period end)(1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments in real estate, after accumulated depreciation and amortization	 	$	797,624	 	 	$	582,737	 	 	$	—  	 	 	$	—  	 	$	391,737	 	 	$	212,009	 	 	$	—  	 	
Total assets	 	 	1,022,826	 	 	 	731,237	 	 	 	—  	 	 	 	—  	 	 	479,698	 	 	 	269,836	 	 	 	1,893	 	
Notes payable under line of credit	 	 	—  	 	 	 	75,317	 	 	 	—  	 	 	 	—  	 	 	44,436	 	 	 	53,000	 	 	 	—  	 	
Notes payable under bridge loan	 	 	7,950	 	 	 	99,500	 	 	 	—  	 	 	 	—  	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Mortgages and other secured loans	 	 	470,628	 	 	 	299,079	 	 	 	—  	 	 	 	—  	 	 	253,429	 	 	 	103,560	 	 	 	—  	 	
Total liabilities	 	 	528,431	 	 	 	509,684	 	 	 	—  	 	 	 	—  	 	 	328,303	 	 	 	183,524	 	 	 	903	 	
Minority interests	 	 	307,676	 	 	 	3,250	 	 	 	—  	 	 	 	—  	 	 	3,444	 	 	 	3,135	 	 	 	—  	 	
Stockholders’/owner’s equity	 	 	186,719	 	 	 	218,303	 	 	 	—  	 	 	 	—  	 	 	147,951	 	 	 	83,177	 	 	 	990	 	
Total liabilities and stockholders’/owner’s equity	 	 	1,022,826	 	 	 	731,237	 	 	 	—  	 	 	 	—  	 	 	479,698	 	 	 	269,836	 	 	 	1,893	 	
Per Share Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pro forma earnings (loss) per share—basic and diluted	 	$	(0.18	)	 	 	—  	 	 	 	—  	 	 	$	0.16	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Pro forma weighted average common shares outstanding—basic and diluted	 	 	20,000	 	 	 	—  	 	 	 	—  	 	 	 	20,000	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Other Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from operations(2)	 	$	12,886	 	 	 	—  	 	 	 	—  	 	 	$	52,459	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Cash flows from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating activities	 	 	—  	 	 	$	15,008	 	 	$	13,343	 	 	 	—  	 	$	28,986	 	 	$	9,645	 	 	$	(1,867	)	
Investing activities	 	 	—  	 	 	 	(227,747	)	 	 	(107,130	)	 	 	—  	 	 	(215,263	)	 	 	(164,755	)	 	 	(1,881	)	
Financing activities	 	 	—  	 	 	 	211,833	 	 	 	92,225	 	 	 	—  	 	 	187,873	 	 	 	158,688	 	 	 	3,748	 	

(1)	 	Balance sheet data as of December 31, 2001 is unaudited. 	
(2)	 	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 accounting principles generally accepted in the United States of America, or GAAP), excluding gains (or losses) from sales of property, 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 	
 
17 

Table of Contents
 	amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity 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 as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. FFO also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. The following table sets forth a reconciliation of our pro forma funds from operations for the periods presented (in thousands): 	

 	  	Pro Forma
	
 	  	Six Months
Ended
June 30, 2004
	 	  	Year
Ended
December 31, 2003
	
Pro forma income (loss) before minority interest in operating partnership but after minority interest in consolidated joint ventures	  	$	(9,489	)	  	$	8,371	
Plus: pro forma real estate depreciation and amortization	  	 	22,375	 	  	 	44,088	
 	  				  			
Pro forma funds from operations(a)	  	$	12,886	 	  	$	52,459	

 	(a)	 	Pro forma funds from operations as set forth above includes $22.4 million of compensation expense related to fully-vested long-term incentive units granted in connection with this offering and the formation transactions for the periods presented. 	
 
18 

Table of Contents
RISK FACTORS 
 
Investment in our common stock involves risks. In addition to other information contained in this prospectus, you should carefully consider the following factors before acquiring shares of our common stock offered by this prospectus. The occurrence of any of the following risks might cause you to lose all or a part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward looking statements. Please refer to the section entitled “Forward Looking Statements.” 
 
Risks Related to Our Business and Operations 
 
Our properties depend upon the technology industry and the demand for technology-related real estate. 
 
Our portfolio of properties consists primarily of technology-related real estate. A decline in the technology industry could lead to a decrease in the demand for technology-related real estate, which may have a greater adverse effect on our business and financial condition than if we owned a more diversified real estate portfolio. We are susceptible to adverse developments in the technology industry (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, costs of complying with government regulations or increased regulation and other factors) and the technology-related real estate market (such as oversupply of or reduced demand for space). In addition, the rapid development of new technologies or adoption of new industry standards could render many of our tenants’ current products and services obsolete or unmarketable and contribute to a downturn in their businesses, increasing the likelihood of a default under their leases or that they become insolvent or file for bankruptcy. 
 
We depend on significant tenants, and many of our properties are single-tenant properties or are currently occupied by single tenants. 
 
As of June 30, 2004, the 20 largest tenants in our property portfolio represented approximately 74.1% of the total annualized rent generated by our properties. Our largest tenants by annualized rent are Savvis Communications and Qwest Communications. Savvis Communications leased 588,359 square feet of net rentable space as of June 30, 2004, representing approximately 12.6% of the total annualized rent generated by our properties. Qwest Communications leased 260,442 square feet of net rentable space as of June 30, 2004, representing approximately 7.9% of the total annualized rent generated by our properties. In addition, ten of our properties are occupied by single tenants. Our tenants may experience a downturn in their businesses, which may weaken their financial condition and result in their failure to make timely rental payments or their default under their leases. In the event of any tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment. 
 
The bankruptcy or insolvency of a major tenant also may adversely affect the income produced by our properties. If any tenant becomes a debtor in a case under the federal Bankruptcy Code, we cannot evict the tenant solely because of the bankruptcy. In addition, the bankruptcy court might authorize the tenant to reject and terminate its lease with us. Our claim against the tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease. In either case, our claim for unpaid rent would likely not be paid in full. Currently, one tenant, Universal Access Global Holdings Inc., leasing approximately 22,562 square feet of net rentable space, is in bankruptcy. Since we acquired our first building in January 2002, 14 tenants in our buildings leasing approximately 474,000 square feet of net rentable space concluded bankruptcy proceedings. Of the 14 tenants, 8 tenants leasing approximately 370,000 square feet of net rentable space paid rent to us on an uninterrupted basis and affirmed their leases. Of the approximately 104,000 square feet of net rentable space that was rejected and terminated, we had re-leased approximately 21,000 square feet as of the date of this prospectus. 
 
Our revenue and cash available for distribution to you could be materially adversely affected if any of our significant tenants were to become bankrupt or insolvent, or suffer a downturn in their business, or fail to renew their leases at all or renew on terms less favorable to us than their current terms. 
 
19 

Table of Contents
Our portfolio of properties depends upon local economic conditions and is geographically concentrated in certain locations. 
 
Our properties are located only in the Atlanta, Boston, Dallas, Denver, London, Los Angeles, Miami, New York, Phoenix, Sacramento, San Francisco and Silicon Valley metropolitan areas. We are dependent upon the local economic conditions in these markets, including local real estate conditions. Many of these markets have experienced downturns during the recent recession. Our operations may also be affected if too many competing properties are built in any of these markets. If there is a downturn in the economy in any of these markets, our operations and our revenue and cash available for distribution to you could be materially adversely affected. We cannot assure you that these markets will grow or will remain favorable to the technology industry. 
 
In addition, our initial portfolio is geographically concentrated in the Boston, Dallas, Los Angeles, New York, San Francisco and Silicon Valley metropolitan markets. These markets comprised 9.9%, 19.5%, 8.9%, 6.4%, 11.0% and 28.9%, respectively, of annualized rent as of June 30, 2004 of the properties comprising our initial portfolio. As such, positive or negative changes in conditions in these markets in particular will impact our overall performance. 
 
We have not obtained appraisals of the properties in connection with this offering and the consideration given by us in exchange for them may exceed their fair market value. 
 
The majority of our initial properties (including the Carrier Center option property) are being contributed or sold by GI Partners, an affiliated entity, for aggregate consideration with a value of $1,030.1 million, consisting of $2.4 million in cash, assumption of indebtedness and 31,930,695 units, having a total value of $479.0 based upon the midpoint of the pricing range set forth on the cover page of this prospectus. Conflicts of interest exist in connection with the transactions in which these properties are being contributed to our operating partnership. We have not obtained appraisals of the properties and other assets to be contributed to our operating partnership, nor any independent third-party valuations or fairness opinions in connection with the formation transactions. The negotiation with GI Partners of the contributions of the contributed properties was not conducted at arm’s length. The value of the units that we will give in exchange for contributed property interests and other assets and liabilities will increase or decrease if our common stock is priced above or below the midpoint of the pricing range indicated on the front cover of this prospectus. The initial public offering price of our common stock will be determined in consultation with the underwriters. Among the factors that will be considered are our record of operations, our management, our estimated net income, our estimated funds from operations, our estimated cash available for distribution to you, our anticipated dividend yield, our growth prospects, the current market valuations, financial performance and dividend yields of publicly traded companies considered by us and the underwriters to be comparable to us and the current state of the commercial real estate industry and the economy as a whole. The initial public offering price does not necessarily bear any relationship to our book value or the fair market value of our assets. As a result, the consideration to be given by us in exchange for the contribution of properties and other assets and liabilities in the formation transactions may exceed the fair market value of these properties and assets and liabilities. 
 
The terms of the Carrier Center option agreement and the terms of the right of first offer agreements related to the Denver and Frankfurt properties also were not determined by arm’s-length negotiations, and such terms may be less favorable to us than those that may have been obtained through negotiations with third parties. It may never become economically attractive to exercise our operating partnership’s rights of first offer with respect to GI Partners’ Denver and Frankfurt properties based upon the price formulas set forth in such agreements. Our operating partnership’s rights of first offer on the Denver and Frankfurt properties expire on the date that is the earlier of five years following completion of this offering, the completion of the dissolution and winding up of GI Partners and the time GI Partners no longer owns the subject property. Thereafter, GI Partners could manage, own and operate such properties in competition with us or sell them to a competitor without restriction. In addition, the rights of first offer on the Denver and Frankfurt properties expire if our operating partnership declines to exercise its respective right and the property is sold to a third party within 180 days. 
 
20 

Table of Contents
We have owned our properties for a limited time. 
 
Upon completion of this offering and consummation of the formation transactions, we will own 22 properties located throughout the U.S. and one property located in London, England, containing a total of approximately 5.6 million net rentable square feet. All the properties have been under our management for less than three years, and 12 of the properties have been owned for less than one year. The properties may have characteristics or deficiencies unknown to us that could affect such properties’ valuation or revenue potential. There can be no assurance that the operating performance of the properties will not decline under our management. 
 
We may have difficulty internalizing our asset management and accounting functions. 
 
A significant portion of the asset management and general and administrative functions of our predecessor were performed by GI Partners’ related-party asset manager, an affiliate of CB Richard Ellis Investors. Such affiliate currently also provides all of our accounting and financial reporting services. In the months following completion of this offering and consummation of the formation transactions, our asset management function will be internalized and we will undertake accounting and financial reporting obligations and carry out the majority of our general and administrative functions directly. We cannot assure you that we will successfully internalize these functions on the anticipated timetable or without incurring unanticipated costs. We have entered into a transition services agreement with CB Richard Ellis Investors, pursuant to which CB Richard Ellis Investors will provide us with transitional accounting and other services for an interim period that we anticipate will last through the first fiscal quarter of 2005. 
 
We have no operating history as a REIT or a public company. 
 
We were formed in March 2004 and have no operating history as a REIT or a public company. We cannot assure you that our past experience will be sufficient to successfully operate our company as a REIT or a public company. Failure to maintain REIT status would have an adverse effect on our cash available for distribution to you. 
 
Tax protection provisions on certain properties could limit our operating flexibility. 
 
In connection with the formation transactions, we have agreed with the third-party contributors who will contribute the direct and indirect interests in the 200 Paul Avenue and 1100 Space Park Drive properties to indemnify them against adverse tax consequences if we were to sell, convey, transfer or otherwise dispose of all or any portion of these interests, in a taxable transaction, in these properties. However, we can sell these properties in a taxable transaction if we pay the contributors cash in the amount of their tax liabilities arising from the transaction and tax payments. The 200 Paul Avenue and 1100 Space Park Drive properties represented 14.6% of our portfolio’s annualized rent as of June 30, 2004. These tax protection provisions apply for a period expiring on the earlier of the ninth anniversary of the completion of this offering and the date on which these contributors (or certain transferees) hold less than 25% of the units issued to them in the formation transactions. Although it may be in our stockholders’ best interest that we sell a property, it may be economically disadvantageous for us to do so because of these obligations. We have also agreed to make up to $20.0 million of debt available for these contributors to guarantee. We agreed to these provisions in order to assist these contributors in preserving their tax position after their contributions. 
 
Potential losses may not be covered by insurance. 
 
Upon completion of this offering, we plan to carry comprehensive liability, fire, extended coverage, earthquake, business interruption and rental loss insurance covering all of the properties in our portfolio under a blanket policy. We will select policy specifications and insured limits which we believe to be appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We will not carry 
 
21 

Table of Contents
insurance for generally uninsured losses such as loss from riots, war, terrorist attacks or acts of God. Some of our policies, like those covering losses due to floods, will be insured subject to limitations involving large deductibles or co-payments and policy limits which may not be sufficient to cover losses. Some of the properties we will own are located in California, an area especially subject to earthquakes. Together, these properties represented approximately 50.0% of our portfolio’s annualized rent as of June 30, 2004. While we will carry earthquake insurance on our properties, the amount of our earthquake insurance coverage may not be sufficient to fully cover losses from earthquakes. In addition, we may discontinue earthquake or other insurance on some or all of our properties in the future if the cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage relative to the risk of loss. 
 
In addition, many of our buildings contain extensive and highly valuable technology-related improvements. Under the terms of our leases, tenants generally retain title to such improvements and are obligated to maintain adequate insurance coverage applicable to such improvements and under most circumstances use their insurance proceeds to restore such improvements after a casualty. In the event of a casualty or other loss involving one of our buildings with extensive installed tenant improvements, our tenants may have the right to terminate their leases if we do not rebuild the base building within prescribed times. In such cases, the proceeds from the tenant’s insurance will not be available to us to restore the improvements, and our insurance coverage may be insufficient to replicate the technology-related improvements made by such tenant. 
 
If we or one or more of our tenants experiences a loss which is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged. 
 
Payments on our debt reduce cash available for distribution to you and may expose us to the risk of default under our debt obligations. 
 
Upon completion of this offering and consummation of the formation transactions, we anticipate that our total consolidated indebtedness will be approximately $478.6 million, and we may incur significant additional debt to finance future acquisition and development activities. Prior to or concurrently with the completion of this offering, we intend to enter into an unsecured credit facility. In addition, under our contribution agreement with respect to the 200 Paul Avenue and 1100 Space Park Drive properties, we have agreed to make available for guarantee up to $20.0 million of indebtedness and may enter into similar agreements in the future. 
 
Payments of principal and interest on borrowings may leave us with insufficient cash resources to operate our properties or to pay the dividends currently contemplated or necessary to maintain our REIT qualification. Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following: 
 
 	•	 	our cash flow may be insufficient to meet our required principal and interest payments; 	
 
 	•	 	we may be unable to borrow additional funds as needed or on favorable terms; 	
 
 	•	 	we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; 	
 
 	•	 	because a significant portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense; 	
 
 	•	 	we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms; 	
 
 	•	 	we may default on our obligations and the lenders or mortgagees may foreclose on our properties or our interests in the entities that own the properties that secure their loans and receive an assignment of rents and leases; 	
 
 	•	 	we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations; and 	
 
22 

Table of Contents
 	•	 	our default under any one of our mortgage loans with cross default provisions could result in a default on other indebtedness. 	
 
If any one of these events were to occur, our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and our ability to satisfy our debt service obligations could be materially adversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, a circumstance which could hinder our ability to meet the REIT distribution requirements imposed by the Code. 
 
We may be unable to identify and complete acquisitions and successfully operate acquired properties. 
 
We continually evaluate the market of available properties and may acquire technology-related real estate when opportunities exist. Our ability to acquire properties on favorable terms and successfully operate them may be exposed to the following significant risks: 
 
 	•	 	potential inability to acquire a desired property because of competition from other real estate investors with significant capital, including both publicly traded REITs and institutional investment funds; 	
 
 	•	 	even if we are able to acquire a desired property, competition from other potential acquirors may significantly increase the purchase price; 	
 
 	•	 	even if we enter into agreements for the acquisition of technology-related real estate, these agreements are subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction; 	
 
 	•	 	we may be unable to finance the acquisition on favorable terms or at all; 	
 
 	•	 	we may spend more than budgeted amounts to make necessary improvements or renovations to acquired properties; 	
 
 	•	 	we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and as a result our results of operations and financial condition could be adversely affected; 	
 
 	•	 	acquired properties may be subject to reassessment, which may result in higher than expected tax payments; 	
 
 	•	 	market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and 	
 
 	•	 	we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities such as liabilities for clean-up of undisclosed environmental contamination, claims by tenants, vendors or other persons dealing with the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. 	
 
If we cannot finance property acquisitions on favorable terms, or operate acquired properties to meet our financial expectations, our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and ability to satisfy our debt service obligations could be materially adversely affected. 
 
We may be unable to source off-market deal flow in the future. 
 
A key component of our growth strategy is to continue to acquire additional technology-related real estate. To date, more than half of our acquisitions were acquired before they were widely marketed by real estate brokers, or “off-market.” Properties that are acquired off-market are typically more attractive to us as a purchaser because of the absence of a competitive bidding environment, which could potentially lead to higher prices. We obtain access to off-market deal flow from numerous sources, including CalPERS and CBRE. CBRE has assisted us in acquiring three of our properties in off-market transactions. CalPERS and CBRE will reduce their indirect 
 
23 

Table of Contents
interests in us in connection with this offering, and CalPERs and/or CBRE may further dispose of their interests in us in the future. We cannot assure you that CalPERs or CBRE will continue to assist us with obtaining off-market deal flow in the future. If we cannot obtain off-market deal flow in the future, our ability to locate and acquire additional properties at attractive prices could be adversely affected. 
 
We face significant competition, which may decrease or prevent increases of the occupancy and rental rates of our properties. 
 
We compete with numerous developers, owners and operators of real estate, many of which own properties similar to ours in the same submarkets in which our properties are located. If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire. As a result, our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and ability to satisfy our debt service obligations could be materially adversely affected. 
 
We may be unable to renew leases, lease vacant space or re-lease space as leases expire. 
 
As of June 30, 2004, leases representing 0.9% and 0.7% of the square footage of the properties in our portfolio were scheduled to expire in the remainder of 2004 and 2005, respectively, and an additional 12.9% of the square footage of the properties in our portfolio was available. We cannot assure you that leases will be renewed or that our properties will be re-leased at net effective rental rates equal to or above the current average net effective rental rates. If the rental rates for our properties decrease, our existing tenants do not renew their leases or we do not re-lease a significant portion of our available space and space for which leases are scheduled to expire, our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and our ability to satisfy our debt service obligations could be materially adversely affected. 
 
Our growth depends on external sources of capital which are outside of our control. 
 
In order to maintain our qualification as a REIT, we are required under the Code to annually distribute at least 90% of our net taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we rely on third-party sources to fund our capital needs. We may not be able to obtain the financing on favorable terms or at all. Any additional debt we incur will increase our leverage. Our access to third-party sources of capital depends, in part, on: 
 
 	•	 	general market conditions; 	
 
 	•	 	the market’s perception of our growth potential; 	
 
 	•	 	our current debt levels; 	
 
 	•	 	our current and expected future earnings; 	
 
 	•	 	our cash flow and cash distributions; and 	
 
 	•	 	the market price per share of our common stock. 	
 
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 make the cash distributions to our stockholders necessary to maintain our qualification as a REIT. 
 
24 

Table of Contents
Our unsecured credit facility will restrict our ability to engage in some business activities. 
 
We anticipate that our unsecured credit facility will contain customary negative covenants and other financial and operating covenants that, among other things: 
 
 	•	 	restrict our and our subsidiaries’ ability to incur additional indebtedness; 	
 
 	•	 	restrict our and our subsidiaries’ ability to make certain investments; 	
 
 	•	 	restrict our and our subsidiaries’ ability to merge with another company; 	
 
 	•	 	restrict our and our subsidiaries’ ability to create, incur or assume liens; 	
 
 	•	 	restrict our ability to make distributions to our stockholders; 	
 
 	•	 	require us to maintain financial coverage ratios; and 	
 
 	•	 	require us to maintain a pool of unencumbered assets approved by the lenders. 	
 
These restrictions could cause us to default on our unsecured credit facility or negatively affect our operations and our ability to make distributions to our stockholders. 
 
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers. 
 
We may co-invest in the future with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a property, partnership, joint venture or other entity. In such event, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity. Investments in partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers. We will seek to maintain sufficient control of such entities to permit them to achieve our business objectives. 
 
Upon completion of this offering, we will own a 75% tenancy-in-common interest in the eBay Data Center property and an unrelated third party will hold the remaining 25% of the tenancy-in-common. Although we have the right to manage and direct the eBay Data Center property’s operations, including financing, sale or exchange, our rights to incur indebtedness or sell the property under the co-tenancy agreement are limited in certain circumstances. 
 
Our success depends on key personnel whose continued service is not guaranteed. 
 
We depend on the efforts of key personnel, particularly Michael Foust, our Chief Executive Officer, A. William Stein, our Chief Financial Officer and Chief Investment Officer, and Scott Peterson, our Senior Vice President, Acquisitions. Among the reasons that they are important to our success is that each has a national or regional industry reputation that attracts business and investment opportunities and assists us in negotiations with lenders, existing and potential tenants and industry personnel. If we lost their services, our business and investment opportunities and our relationships with lenders, existing and prospective tenants and industry personnel could diminish. 
 
25 

Table of Contents
Many of our other senior executives also have strong technology and real estate industry reputations, which aid us in identifying opportunities, having opportunities brought to us, and negotiating with tenants and build-to-suit prospects. While we believe that we could find replacements for all of these key personnel, the loss of their services could materially and adversely affect our operations because of diminished relationships with lenders, existing and prospective tenants and industry personnel. 
 
Failure to hedge effectively against interest rate changes may adversely affect results of operations. 
 
We seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as interest cap agreements and interest rate swap agreements. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that a court could rule that such an agreement is not legally enforceable. We have adopted a policy relating to the use of derivative financial instruments to hedge interest rate risks related to our borrowings. This policy governs our use of derivative financial instruments to manage the interest rates on our variable rate borrowings. Our policy states that we will not use derivatives for speculative or trading purposes and intend only to enter into contracts with major financial institutions based on their credit rating and other factors, but we may choose to change these policies in the future. Upon completion of this offering, we expect to enter into interest rate swap agreements for $140.3 million of our variable rate debt. As a result, we expect that upon completion of this offering, approximately 84.5% of our total indebtedness will be subject to fixed interest rates. Hedging may reduce the overall returns on our investments. Failure to hedge effectively against interest rate changes may materially adversely affect our results of operations. 
 
Our properties may not be suitable for lease to traditional office tenants without significant expenditures or renovations. 
 
Because many of our properties contain extensive tenant improvements installed at our tenants’ expense, they may be better suited for a specific technology industry tenant and could require modification in order for us to re-lease vacant space to another technology industry tenant. Generally, our properties also may not be suitable for lease to traditional office tenants without significant expenditures or renovations. 
 
Ownership of properties located outside of the United States subjects us to foreign currency and other risks which may adversely impact our ability to make distributions. 
 
Upon completion of this offering, we will own one property located outside of the U.S. and we will have a right of first offer with respect to a second property. The ownership of properties located outside of the U.S. subjects us to foreign currency risk from potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. We expect that our principal foreign currency exposures will be to the Pound Sterling (U.K.). As a result, changes in the relation of any such foreign currency to U.S. dollars will affect our revenues and operating margins, may materially adversely impact our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and ability to satisfy our debt obligations. 
 
We intend to attempt to mitigate the risk of currency fluctuation by financing our properties in the local currency denominations, although we cannot assure you that this will be effective. We may also engage in direct hedging activities to mitigate the risks of exchange rate fluctuations. If we do engage in foreign currency exchange rate hedging activities, any income recognized with respect to these hedges (as well as any foreign currency gain recognized with respect to changes in exchange rates) may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT. 
 
26 

Table of Contents
Foreign real estate investments also involve certain risks not generally associated with investments in the United States. These risks include unexpected changes in regulatory requirements, political and economic instability in certain geographic locations, potential imposition of adverse or confiscatory taxes, possible currency transfer restrictions, expropriation, difficulty in enforcing obligations in other countries and the burden of complying with a wide variety of foreign laws. 
 
Risks Related to the Real Estate Industry 
 
Our performance and value are subject to risks associated with real estate assets and with the real estate industry. 
 
Our ability to pay expected dividends to our stockholders depends on our ability to generate revenues in excess of expenses, scheduled principal payments on debt and capital expenditure requirements. Events and conditions generally applicable to owners and operators of real property that are beyond our control may decrease cash available for distribution to you and the value of our properties. These events include: 
 
 	•	 	local oversupply, increased competition or reduction in demand for technology-related space; 	
 
 	•	 	inability to collect rent from tenants; 	
 
 	•	 	vacancies or our inability to rent space on favorable terms; 	
 
 	•	 	inability to finance property development and acquisitions on favorable terms; 	
 
 	•	 	increased operating costs, including insurance premiums, utilities and real estate taxes; 	
 
 	•	 	costs of complying with changes in governmental regulations; 	
 
 	•	 	the relative illiquidity of real estate investments; and 	
 
 	•	 	changing submarket demographics. 	
 
In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases, which would materially adversely affect our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and ability to satisfy our debt service obligations. 
 
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition. 
 
Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to adverse changes in the performance of such properties may be limited, thus harming our financial condition. The real estate market is affected by many factors that are beyond our control, including: 
 
 	•	 	adverse changes in national and local economic and market conditions; 	
 
 	•	 	changes in interest rates and in the availability, cost and terms of debt financing; 	
 
 	•	 	changes in governmental laws and regulations, fiscal policies and zoning ordinances and costs of compliance with laws and regulations, fiscal policies and ordinances; 	
 
 	•	 	the ongoing need for capital improvements, particularly in older structures; 	
 
 	•	 	changes in operating expenses; and 	
 
 	•	 	civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses. 	
 
27 

Table of Contents
We could incur significant costs related to government regulation and private litigation over environmental matters. 
 
Under various laws relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances at that property, and may be required to investigate and clean up such contamination at that property or emanating from that property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. Previous owners used some of our properties for industrial and retail purposes, so those properties may contain some level of environmental contamination. The presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability or materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. 
 
Some of the properties may contain asbestos-containing building materials. Environmental laws require that asbestos-containing building materials be properly managed and maintained, and may impose fines and penalties on building owners or operators for failure to comply with these requirements. These laws may also allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials. 
 
In addition, some of our tenants, particularly those in the biotechnology and life sciences industry and those in the technology manufacturing industry, routinely handle hazardous substances and wastes as part of their operations at our properties. Environmental laws and regulations subject our tenants, and potentially us, to liability resulting from these activities or from previous industrial or retail uses of those properties. Environmental liabilities could also affect a tenant’s ability to make rental payments to us. We require our tenants to comply with these environmental laws and regulations and to indemnify us for any related liabilities. 
 
Existing conditions at some of our properties may expose us to liability related to environmental matters. 
 
Independent environmental consultants have conducted Phase I or similar environmental site assessments on all of the properties in our initial portfolio. Each of the site assessments has been either completed or updated since January 1, 2002, except 36 Northeast Second Street and Univision Tower. Site assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties. These assessments do not generally include soil samplings, subsurface investigations or an asbestos survey. None of the recent site assessments revealed any past or present environmental liability that we believe would have a material adverse effect on our business, assets or results of operations. However, the assessments may have failed to reveal all environmental conditions, liabilities or compliance concerns. Material environmental conditions, liabilities or compliance concerns may have arisen after the review was completed or may arise in the future; and future laws, ordinances or regulations may impose material additional environmental liability. 
 
We cannot assure you that costs of future environmental compliance will not affect our ability to make distributions to you or that such costs or other remedial measures will not have a material adverse effect on our business, assets or results of operations. 
 
Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediating the problem. 
 
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety 
 
28 

Table of Contents
of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants and others if property damage or health concerns arise. 
 
We may incur significant costs complying with the Americans with Disabilities Act and similar laws. 
 
Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. Although we believe that the properties in our portfolio substantially comply with present requirements of the ADA, we have not conducted an audit or investigation of all of our properties to determine our compliance. If one or more of the properties in our portfolio is not in compliance with the ADA, then we would be required to incur additional costs to bring the property into compliance. Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties. We cannot predict the ultimate amount of the cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA and any other similar legislation, our financial condition, results of operations, cash flow, cash available for distribution to you, per share trading price of our common stock and our ability to satisfy our debt service obligations could be materially adversely affected. 
 
We may incur significant costs complying with other regulations. 
 
The properties in our portfolio are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these various requirements, we might incur governmental fines or private damage awards. We believe that the properties in our portfolio are currently in material compliance with all applicable regulatory requirements. However, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will materially adversely impact our financial condition, results of operations, cash flow, cash available for distribution to you, the per share trading price of our common stock and our ability to satisfy our debt service obligations. 
 
Risks Related to Our Organizational Structure 
 
Conflicts of interest exist or could arise in the future with holders of units in our operating partnership. 
 
Conflicts of interest exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our directors and officers have duties to our company and our stockholders under applicable Maryland law in connection with their management of our company. At the same time, we, as general partner, have fiduciary duties to our operating partnership and to the limited partners under Maryland law in connection with the management of our operating partnership. Our duties as general partner to our operating partnership and its partners may come into conflict with the duties of our directors and officers to our company and our stockholders. The partnership agreement of our operating partnership provides that for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders. 
 
Unless otherwise provided for in the relevant partnership agreement, Maryland law generally requires a general partner of a Maryland limited partnership to adhere to fiduciary duty standards under which it owes its limited partners the duties of good faith, fairness and loyalty. 
 
29 

Table of Contents
Additionally, the partnership agreement expressly limits our liability by providing that we and our officers, directors, agents and employees, will not be liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived if we, or such officer, director, agent or employee acted in good faith. In addition, our operating partnership is required to indemnify us, and our officers, directors, employees, agents and designees to the extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that (1) the act or omission was committed in bad faith, was fraudulent or was the result of active and deliberate dishonesty, (2) the indemnified party received an improper personal benefit in money, property or services or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful. 
 
The provisions of Maryland law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been resolved in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties that would be in effect were it not for the partnership agreement. 
 
We are also subject to the following additional conflicts of interest with holders of units in our operating partnership: 
 
We may pursue less vigorous enforcement of terms of contribution and other agreements because of conflicts of interest with GI Partners and certain of our officers.    GI Partners and certain other contributors have ownership interests in the properties and in the other assets and liabilities to be contributed to our operating partnership in the formation transactions, including the properties subject to the Carrier Center option, and in the properties on which we have rights of first offer. Following the completion of this offering and the consummation of the formation transactions, we, under the agreements relating to the contribution of such interests, will have contractual rights to indemnification in the event of breaches of representations or warranties made by GI Partners and other contributors. In addition, GI Partners will enter into a non-competition agreement with us pursuant to which it will agree, among other things, not to engage in certain business activities in competition with us. Richard Magnuson, the Executive Chairman of our board of directors, is also, and will continue to be, the chief executive officer of the advisor to GI Partners. He, as well as certain of our other senior executives, have entered into employment agreements with us containing non-competition provisions. None of these contribution, option, right of first offer, employment and non-competition agreements was negotiated on an arm’s-length basis. We may choose not to enforce, or to enforce less vigorously, our rights under these contribution, option, right of first offer, employment and non-competition agreements because of our desire to maintain our ongoing relationship with GI Partners and the other individuals involved. 
 
Tax consequences upon sale or refinancing.    Sales of properties and repayment of related indebtedness will have different effects on holders of units in our operating partnership than on our stockholders. The parties contributing the 200 Paul Avenue and 1100 Space Park Drive properties to our operating partnership would incur adverse tax consequences upon the sale of these properties and on the repayment of related debt which differ from the tax consequences to us and our stockholders. Consequently, these holders of units in our operating partnership, including John O. Wilson, our Executive Vice President, Technology Infrastructure, may have different objectives regarding the appropriate pricing and timing of any such sale or repayment of debt. While we have exclusive authority under the limited partnership agreement of our operating partnership to determine when to refinance or repay debt or whether, when, and on what terms to sell a property, any such decision would require the approval of our board of directors. Certain of our directors and executive officers could exercise their influence in a manner inconsistent with the interests of some, or a majority, of our stockholders, including in a manner which could prevent completion of a sale of a property or the repayment of indebtedness. 
 
Our charter and Maryland law contain provisions that may delay, defer or prevent a change of control transaction. 
 
Our charter contains a 9.8% ownership limit.    Our charter, subject to certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT and to limit 
 
30 

Table of Contents
any person to actual or constructive ownership of no more than 9.8% of the outstanding shares of our common stock and 9.8% of the value of our outstanding capital stock. Our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limit. However, our board of directors may not grant an exemption from the ownership limit to any proposed transferee whose direct or indirect ownership of in excess of 9.8% of the outstanding shares of our common stock or in excess of 9.8% of the value of our outstanding capital stock could jeopardize our status as a REIT. These restrictions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. The ownership limit may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. 
 
We could increase the number of authorized shares of stock and issue stock without stockholder approval.    Our charter authorizes our board of directors, without stockholder approval, to increase the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series, to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of such classified or unclassified shares. Although our board of directors has no such intention at the present time, it could establish a series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. 
 
Certain provisions of Maryland law could inhibit changes in control.    Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: 
 
 	•	 	“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting shares) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and 	
 
 	•	 	“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. 	
 
We have opted out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL by resolution of our board of directors, and in the case of the control share provisions of the MGCL pursuant to a provision in our bylaws. However, our board of directors may by resolution elect to opt in to the business combination provisions of the MGCL and we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL in the future. 
 
The provisions of our charter on removal of directors and the advance notice provisions of the bylaws could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interest. Likewise, if our company’s board of directors were to opt in to the business combination provisions of the MGCL or the provisions of Title 3, Subtitle 8 of the MGCL, or if the provision in our bylaws opting out of the control share acquisition provisions of the MGCL were rescinded, these provisions of the MGCL could have similar anti-takeover effects. Further, our 
 
31 

Table of Contents
partnership agreement provides that our company may not engage in any merger, consolidation or other combination with or into another person, sale of all or substantially all of our assets or any reclassification or any recapitalization or change in outstanding shares of our common stock, unless in connection with such transaction we obtain the consent of at least 35% of the partners of our operating partnership (including units held by us), and certain other conditions are met. 
 
Our board of directors may change our investment and financing policies without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations. 
 
Our board of directors adopted a policy of limiting our indebtedness to 60% of our total market capitalization. Our total market capitalization is defined as the sum of the market value of our outstanding common stock (which may decrease, thereby increasing our debt to total capitalization ratio), excluding options issued under our incentive award plan, plus the aggregate value of the units not held by us, plus the book value of our total consolidated indebtedness. However, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged which could result in an increase in our debt service and which could materially adversely affect our cash flow and our ability to make expected distributions to you. Higher leverage also increases the risk of default on our obligations. 
 
Our rights and the rights of our stockholders to take action against our directors and officers are limited. 
 
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Upon completion of this offering, as permitted by the MGCL, our charter will limit the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: 
 
 	•	 	actual receipt of an improper benefit or profit in money, property or services; or 	
 
 	•	 	a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated. 	
 
In addition, our charter will authorize us to obligate our company, and our bylaws will require us, to indemnify our directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited. 
 
Risks Related to Our Status as a REIT 
 
Failure to qualify as a REIT would have significant adverse consequences to us and the value of our stock. 
 
We intend to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes under the Code. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in the prospectus are not binding on the IRS or any court. If we lose our REIT status, we will face serious tax consequences that would substantially reduce our cash available for distribution to you for each of the years involved because: 
 
 	•	 	we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to federal income tax at regular corporate rates; 	
 
32 

Table of Contents
 	•	 	we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and 	
 
 	•	 	unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified. 	
 
In addition, if we fail to qualify as a REIT, we will not be required to make distributions to stockholders, and all distributions to stockholders will be subject to tax as ordinary dividend income to the extent of our current and accumulated earnings and profits. As a result of all these factors, our failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and would materially adversely affect the value of our common stock. 
 
Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the Code is greater in the case of a REIT that, like us, holds its assets through a partnership. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets and a requirement that at least 95% of our gross income in any year must be derived from qualifying sources, such as “rents from real property.” Also, we must make distributions to stockholders aggregating annually at least 90% of our net taxable income, excluding net capital gains. In addition, legislation, new regulations, administrative interpretations or court decisions may materially adversely affect our investors, our ability to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments. 
 
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer. In addition, our taxable REIT subsidiaries will be subject to tax as regular corporations in the jurisdictions in which they operate, including, in the case of the entity holding Camperdown House, the United Kingdom. 
 
To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions. 
 
To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding capital gains, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. In order to maintain our REIT status and avoid the payment of income and excise taxes, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. 
 
Risks Related to this Offering 
 
Affiliates of our underwriters will receive benefits in connection with this offering and the formation transactions. 
 
An affiliate of Citigroup Global Markets Inc., one of our underwriters, will receive benefits from this offering and the formation transactions in addition to customary underwriting discounts and commissions and financial advisory fees, reimbursement of some expenses and indemnification for some liabilities that may result 
 
33 

Table of Contents
from this offering. These benefits consist of the repayment of $243.7 million of a bridge loan made by an affiliate of Citigroup Global Markets Inc. prior to this offering and the assumption of the remaining $8.0 million outstanding under this loan, which is scheduled to mature in 2005. Additionally, affiliates of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are joint lead arrangers and joint bookrunning managers of our unsecured credit facility and we expect that affiliates of one or more of our underwriters may participate as agents or lenders under this facility. These transactions create potential conflicts of interest because the underwriters have an interest in the successful completion of this offering beyond the underwriting discounts and commissions and financial advisory fees they will receive. Consequently, the initial public offering price recommended by the underwriters could be higher than if such conflicts of interest did not exist. 
 
Estimated initial cash available for distribution to you may not be sufficient to pay dividends at expected levels. 
 
Our estimated initial annual distributions represent approximately 93.6% of our estimated initial cash available for distribution to you for the 12 months ending June 30, 2005 as calculated in “Dividend Policy.” We are party to debt agreements that contain lockbox and cash management provisions, pursuant to which revenues generated by properties subject to such indebtedness are immediately swept into an account for the benefit of the lenders and are typically available to be distributed to us only after the funding of reserve accounts for, among other things, debt service, taxes, insurance, tenant improvements and leasing commissions. If our properties do not generate sufficient cash flow, we may be required to fund distributions from working capital or borrowings under our new credit facility or reduce such distributions. If sufficient cash is not available for distribution from our operations, we may have to fund distributions from working capital, borrow to provide funds for such distributions or reduce the amount of such distributions. 
 
Differences between the book value of contributed properties and the price paid for our common stock will result in an immediate and material dilution of the book value of our common stock. 
 
As of June 30, 2004, the aggregate historical combined net tangible book value of the interests and assets to be transferred to our operating partnership was approximately $114.6 million, or $4.56 per share of our common stock held by GI Partners, assuming the exchange of units into shares of our common stock on a one-for-one basis. As a result, the pro forma net tangible book value per share of our common stock after the completion of this offering and consummation of the formation transactions will be less than the initial public offering price. The purchasers of our common stock offered hereby will experience immediate and substantial dilution of $8.67 per share in the pro forma net tangible book value per share of our common stock. 
 
Market interest rates may have an effect on the value of our common stock. 
 
One of the factors that may influence the price of our common stock will be the dividend yield on the common stock (as a percentage of the price of our common stock) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our common stock to expect a higher dividend yield. Higher interest rates would likely increase our borrowing costs and potentially decrease cash available for distribution. Thus, higher market interest rates could cause the market price of our common stock to go down. 
 
The number of shares available for future sale could adversely affect the market price of our common stock. 
 
We cannot predict whether future issuances of shares of our common stock or the availability of shares for resale in the open market will decrease the market price per share of our common stock. Sales of a substantial number of shares of our common stock in the public market, or upon exchange of units, or the perception that such sales might occur could materially adversely affect the market price of the shares of our common stock. 
 
34 

Table of Contents
All holders of the 31,452,170 units issued to the contributors in the formation transactions have the right to require us to register their common stock with the SEC. The holders of these units are restricted, except under limited circumstances, from exercising their redemption rights for a period of 14 months and may not otherwise transfer their units for a period of 12 months. Our officers and directors have agreed not to sell or otherwise transfer any of the 1,490,561 long-term incentive units granted to them for a period of three years from the date of grant. In addition, after completion of this offering, we intend to register the 2,199,639 remaining shares of common stock that we have reserved for issuance under our 2004 equity incentive plan, and once we register these shares they can generally be freely sold in the public market after issuance. Our directors and executive officers have agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of any shares of common stock or other securities convertible or exchangeable into our common stock for a period of one year after the date of this prospectus. If any or all of these holders cause a large number of their shares to be sold in the public market, the sales could reduce the trading price of our common stock and could impede our ability to raise future capital. 
 
The exercise of the underwriters’ over-allotment option, the exchange of units for common stock, the exercise of any options granted to certain directors, executive officers and other employees under our incentive award plan, the issuance of our common stock or units in connection with property, portfolio or business acquisitions and other issuances of our common stock could have an adverse effect on the market price of the shares of our common stock, and the existence of units, options, shares of our common stock reserved for issuance as restricted shares of our common stock or upon exchange of units may materially adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. In addition, future sales of shares of our common stock may be dilutive to existing stockholders. 
 
There is currently no public market for our common stock. An active trading market for our common stock may not develop following this offering. 
 
There has not been any public market for our common stock prior to this offering. We have applied to have our common stock listed on the NYSE following the completion of this offering. We cannot assure you, however, that an active trading market for our common stock will develop after this offering or, if one develops, that it will be sustained. In the absence of a public market, you may be unable to liquidate an investment in our common stock. We and our underwriters will determine the initial public offering price. The price at which shares of our common stock trade after the completion of this offering may be lower than the price at which the underwriters sell them in this offering. 
 
The market price and trading volume of our common stock may be volatile following this offering. 
 
Even if an active trading market develops for our common stock, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the public offering price. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. 
 
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: 
 
 	•	 	actual or anticipated variations in our quarterly operating results or dividends; 	
 
 	•	 	changes in our funds from operations or earnings estimates; 	
 
 	•	 	publication of research reports about us, the real estate industry or the technology industry; 	
 
 	•	 	increases in market interest rates that lead purchasers of our shares to demand a higher yield; 	
 
 	•	 	changes in market valuations of similar companies; 	
 
35 

Table of Contents
 	•	 	adverse market reaction to any additional debt we incur in the future; 	
 
 	•	 	additions or departures of key management personnel; 	
 
 	•	 	actions by institutional stockholders; 	
 
 	•	 	speculation in the press or investment community; 	
 
 	•	 	the realization of any of the other risk factors presented in this prospectus; and 	
 
 	•	 	general market and economic conditions. 	
 
Future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities which may be senior to our common stock for purposes of dividend distributions or upon liquidation, may adversely affect the market price of our common stock. 
 
In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities, including medium-term notes, trust preferred securities, senior or subordinated notes and preferred stock. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to pay a dividend or make another distribution to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us. 
 
36 

Table of Contents
FORWARD-LOOKING STATEMENTS 
 
We make statements in this prospectus that are forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, our pro forma financial statements and all of our statements regarding anticipated growth in our funds from operations and 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 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 which may be incorrect or imprecise and we may not be able to realize them. 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: 
 
 	•	 	adverse economic or real estate developments in our markets or the technology industry; 	
 
 	•	 	general economic conditions; 	
 
 	•	 	defaults on or non-renewal of leases by tenants; 	
 
 	•	 	increased interest rates and operating costs; 	
 
 	•	 	our failure to obtain necessary outside financing; 	
 
 	•	 	decreased rental rates or increased vacancy rates; 	
 
 	•	 	difficulties in identifying properties to acquire and completing acquisitions; 	
 
 	•	 	our failure to successfully operate acquired properties and operations; 	
 
 	•	 	our failure to maintain our status as a REIT; 	
 
 	•	 	environmental uncertainties and risks related to natural disasters; 	
 
 	•	 	financial market fluctuations; 	
 
 	•	 	changes in foreign currency exchange rates; and 	
 
 	•	 	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 guaranties of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section above entitled “Risk Factors.” 
 
37 

Table of Contents
USE OF PROCEEDS 
 
We estimate we will receive gross proceeds from this offering of $300.0 million, or approximately $345.0 million if the underwriters exercise their over-allotment option in full. After deducting the underwriting discounts and commissions, financial advisory fees and estimated expenses of this offering (including approximately $4.5 million loaned to us by GI Partners to pay costs related to this offering and the formation transactions), we expect net proceeds from this offering of approximately $270.0 million, or approximately $311.9 million if the underwriters exercise their over-allotment option in full. 
 
In addition, concurrently with or shortly after the completion of this offering, our operating partnership or the property-owning entities will use the fee simple interests in seven properties to secure approximately $215.0 million of new mortgage loans. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering” for a description of the indebtedness we will incur. 
 
We will use the net proceeds from this offering and the new mortgage loans to: 
 
 	•	 	purchase 6,810,036 operating partnership units issued in connection with the formation transactions (having an aggregate value of approximately $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus) from the investors in GI Partners at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters, or $95.0 million in the aggregate, based on the midpoint of the pricing range indicated on the front cover of this prospectus; 	
 
 	•	 	pay the $15.0 million cash portion of the consideration to acquire the 200 Paul Avenue and 1100 Space Park Drive properties. See “Certain Relationships and Related Transactions—200 Paul Avenue and 1100 Space Park Drive Contribution Agreement”; 	
 
 	•	 	acquire the 75% interest in the eBay Data Center property upon consummation of this offering and the remaining 25% interest therein in early 2005 for a total of $14.3 million; 	
 
 	•	 	repay approximately $243.7 million under a bridge loan facility with an affiliate of Citigroup Global Markets Inc.; and 	
 
 	•	 	repay an aggregate of approximately $110.3 million of mortgage loans, other secured loans and notes payable under GI Partners’ line of credit, including prepayment penalties, as more fully described below. 	
 
In addition, if the underwriters exercise their over-allotment option, we will purchase additional units from the investors in GI Partners in an amount equal to the number of shares sold pursuant to such exercise at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters, for an aggregate of $41.9 million, based on the midpoint of the pricing range set forth on the front cover of this prospectus and assuming exercise of the underwriters’ over-allotment option in full. 
 
Any net proceeds remaining after the uses set forth above will be used to fund general working capital and potentially to fund future acquisitions. Pending application of cash proceeds, we will invest the net proceeds in interest-bearing accounts and short-term, interest-bearing securities, which are consistent with our intention to qualify for taxation as a REIT. 
 
If the initial public offering price of our common stock is at the low end of the pricing range indicated on the front cover of this prospectus, our operating partnership intends to borrow funds under our unsecured credit facility and use these funds, in addition to the net proceeds of this offering and the new mortgage loans, to make the payments set forth above. 
 
38 

Table of Contents
A tabular presentation of our estimated use of proceeds from this offering is as follows: 

 	  	Dollar
Amount
	  	Percentage of
Gross Proceeds
	 	
 	  	(In thousands)	  	 	 	
Gross offering proceeds	  	$	300,000	  	100.0	%	
Underwriting discounts and commissions and financial advisory fees	  	 	21,000	  	7.0	 	
Other expenses of the offering(1)	  	 	9,000	  	3.0	 	
 	  			  			
Net offering proceeds	  	$	270,000	  	90.0	%	
 	  			  			
Purchase operating partnership units issued in connection with the formation transactions from investors in GI Partners	  	$	95,000	  	31.7	%	
Repay amounts under the bridge loan facility	  	 	175,000	  	58.3	 	
 	  			  			
Total net offering proceeds used	  	$	270,000	  	90.0	%	

(1)	 	Includes repayment of approximately $4.5 million loaned to us by GI Partners to pay costs related to this offering and the formation transactions. 	
 
The remaining funds necessary to consummate the formation transactions will be borrowed under the new mortgages or, if necessary, our unsecured credit facility. 
 
In connection with the formation transactions, we intend to repay to an affiliate of Citigroup Global Markets Inc. $243.7 million of the $251.7 million secured bridge loan obtained for purposes of providing temporary financing for the acquisition of AboveNet Data Center, Brea Data Center, Comverse Technology Building, Hudson Corporate Center, Savvis Data Center, Siemens Building, Webb at LBJ and Carrier Center. As summarized above, a portion of the proceeds from the offering, totaling $175.0 million, will be used to partially fund this repayment. The remaining amount of the repayment will be funded through proceeds from the $215.0 million in new mortgage loans that are expected to close concurrently with, or shortly after completion of this offering. The interest rate on the secured bridge loan is LIBOR plus 2.0% and it matures in August 2005, except that if we consummate this offering prior to December 31, 2004, then this loan will mature on December 31, 2004. If this offering is consummated after December 31, 2004, then the maturity of this loan will accelerate to the closing date of this offering, subject to a three-month extension option in the event the closing of this offering occurs before September 30, 2005. 
 
In connection with the formation transactions, we intend to repay an approximate $13.9 million loan, including prepayment penalties, secured by our interest in the ASM Lithography Facility, which bears interest at a rate of LIBOR plus 2.75% (but at least 4.75%) per annum, that was incurred on June 30, 2003 and matures on June 30, 2006, with two one-year extensions available. 
 
In addition, in connection with the formation transactions, we intend to repay an aggregate of $96.4 million of mortgage, mezzanine and revolving indebtedness, including prepayment penalties, with a weighted average interest rate of approximately 6.3% and an average remaining term to maturity of approximately 0.8 years upon consummation of this offering. The amounts loaned to us by GI Partners to pay costs related to this offering and the formation transactions that we will repay do not bear interest and are payable upon 10 days’ notice. 
 
Exact payment amounts with respect to indebtedness may differ from estimates due to amortization of principal, accrual of additional interest or prepayment fees and incurrence of additional transaction expenses. 
 
39 

Table of Contents
DIVIDEND POLICY 
 
We intend to pay regular quarterly dividends to holders of our common stock. We intend to pay a pro rata initial dividend with respect to the period commencing on the completion of this offering and ending December 31, 2004, based on $0.24375 per share for a full quarter. On an annualized basis, this would be $0.975 per share, or an annual distribution rate of approximately 6.5% based on an estimated initial public offering price at the midpoint of the pricing range indicated on the front cover of this prospectus. We estimate that this initial annual distribution rate will represent approximately 93.6% of estimated cash available for distribution for the 12 months ending June 30, 2005. Our intended initial annual distribution rate has been established based on our estimate of cash available for distribution for the 12 months ending June 30, 2005, which we have calculated based on adjustments to our pro forma income before minority interests for the year ended December 31, 2003. This estimate was based on our predecessor’s historical operating results and does not take into account our growth strategy. In estimating our cash available for distribution for the 12 months ending June 30, 2005, we have made certain assumptions as reflected in the table and footnotes below. 
 
Our estimate of cash available for distribution does not include the effect of any changes in our working capital resulting from changes in our working capital accounts. Our estimate also does not reflect the amount of cash estimated to be used for investing activities for acquisition and other activities, other than a provision for recurring capital expenditures, and amounts estimated for leasing commissions and tenant improvements for renewing space. It also does not reflect the amount of cash estimated to be used for financing activities, other than scheduled loan principal payments on mortgage and other indebtedness that will be outstanding upon completion of this offering. Any such investing and/or financing activities may have a material effect on our estimate of cash available for distribution. Because we have made the assumptions set forth above in estimating cash available for distribution, we do not intend this estimate to be a projection or forecast of our actual results of operations or our liquidity, and have estimated cash available for distribution for the sole purpose of determining the amount of our initial annual distribution rate. Our estimate of cash available for distribution should not be considered as an alternative to cash flow from operating activities (computed in accordance with GAAP) or as an indicator of our liquidity or our ability to pay dividends or make other distributions. In addition, the methodology upon which we made the adjustments described below is not necessarily intended to be a basis for determining future dividends or other distributions. 
 
We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in our estimate. Dividends and other distributions made by us will be authorized and determined by our board of directors in its sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including restrictions under applicable law and other factors described below. We believe that our estimate of cash available for distribution constitutes a reasonable basis for setting the initial distribution rate; however, we cannot assure you that the estimate will prove accurate, and actual distributions may therefore be significantly different from the expected distributions. We do not intend to reduce the expected dividends per share if the underwriters exercise their over-allotment option; however, this could require us to borrow under our unsecured credit facility to pay dividends. 
 
We anticipate that, at least initially, our distributions will exceed our then current and then accumulated earnings and profits as determined for U.S. federal income tax purposes due to the write-off of prepayment fees paid with offering proceeds and non-cash expenses, primarily depreciation and amortization charges that we expect to incur. Therefore, a portion of these distributions may represent a return of capital for federal income tax purposes. Distributions in excess of our current and accumulated earnings and profits will not be taxable to a taxable U.S. stockholder under current U.S. federal income tax law to the extent those distributions do not exceed the stockholder’s adjusted tax basis in his or her common stock, but rather will reduce the adjusted basis of the common stock. In that case, the gain (or loss) recognized on the sale of that common stock or upon our liquidation will be increased (or decreased) accordingly. To the extent those distributions exceed a taxable U.S. stockholder’s adjusted tax basis in his or her common stock, they generally will be treated as a capital gain 
 
40 

Table of Contents
realized from the taxable disposition of those shares. We expect to pay our first dividend in 2005; accordingly, none of our estimated initial annual distribution will represent a return of capital for the tax period ending December 31, 2004. The percentage of our stockholder distributions that exceeds our current and accumulated earnings and profits may vary substantially from year to year. For a more complete discussion of the tax treatment of distributions to holders of our common stock, see “Federal Income Tax Considerations.” 
 
We cannot assure you that our estimated dividends will be made or sustained or that our board of directors will not change our dividend policy in the future. Any dividends or other distributions we pay in the future will depend upon our actual results of operations, economic conditions, debt service requirements and other factors that could differ materially from our current expectations. Our actual results of operations will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see “Risk Factors.” 
 
U.S. Federal income tax law requires that a REIT distribute annually at least 90% of its net taxable income excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income including capital gains. For more information, please see “Federal Income Tax Considerations.” We anticipate that our estimated cash available for distribution will exceed the annual distribution requirements applicable to REITs. However, under some circumstances, we may be required to pay distributions in excess of cash available for distribution in order to meet these distribution requirements and we may need to borrow funds to make some distributions. 
 
The following table describes our pro forma income before minority interests for the year ended December 31, 2003, and the adjustments we have made thereto in order to estimate our initial cash available for distribution for the 12 months ending June 30, 2005 (amounts in thousands except share data, per share data, square footage data and percentages): 

Pro forma income before minority interests for the year ended December 31, 2003	  	$	8,371	 	
Less: pro forma loss before minority interests for the six months ended June 30, 2003	  	 	6,323	 	
Add: pro forma loss before minority interests for the six months ended June 30, 2004	  	 	(9,503	)	
 	  				
Pro forma income before minority interests for the 12 months ended June 30, 2004	  	 	5,191	 	
Add: pro forma real estate depreciation and amortization(1)	  	 	44,419	 	
Add: non-cash expense related to lease terminations	  	 	2,370	 	
Add: net increases in contractual rent income(2)	  	 	4,034	 	
Less: net decreases in contractual rent income due to lease expirations, assuming no renewals(3)	  	 	(3,069	)	
Less: increased interest expense due to interest rate swaps(4)	  	 	(1,623	)	
Less: net effect of straight line rents and acquired lease obligations(5)	  	 	(12,038	)	
Add: non-cash compensation expense(6)	  	 	22,676	 	
Add: financing costs(7)	  	 	2,830	 	
 	  				
Estimated cash flow from operating activities for the 12 months ending June 30, 2005	  	 	64,790	 	
Estimated cash flows used in investing activities:	  	 	 	 	
Less: estimated annual provision for recurring tenant improvements and leasing commissions(8)	  	 	(1,077	)	
Less: estimated annual provision for recurring capital expenditures(9)	  	 	(890	)	
 	  				
Total estimated cash flows used in investing activities	  	 	(1,967	)	
 	  				
Estimated cash flows used in financing activities—scheduled mortgage loan principal payments(10)	  	 	(7,693	)	
 	  				
Estimated cash flow available for distribution for the 12 months ending June 30, 2005	  	 	55,130	 	
 	  				
Our share of estimated cash available for distribution(11)	  	$	20,826	 	
 	  				
Minority interests’ share of estimated cash available for distribution	  	$	34,304	 	
 	  				
Total estimated initial annual distributions to stockholders	  	$	19,500	 	
 	  				
Estimated initial annual distribution per share(12)	  	$	0.975	 	
 	  				
Payout ratio based on our share of estimated cash available for distribution(13)	  	 	93.6	%	

41 

Table of Contents

(1)	  	Pro forma real estate depreciation and amortization for the 12 months ended December 31, 2003	  	$	44,088	 	
 	  	Less: Pro forma real estate depreciation and amortization for the six months ended June 30, 2003	  	 	(22,044	)	
 	  	Add: Pro forma real estate depreciation and amortization for the six months ended June 30, 2004	  	 	22,375	 	
 	  	 	  	 	  	 	  	 	  				
 	  	 	  	$	44,419	 	
 	  	 	  	 	  	 	  	 	  				
(2)	  	Represents the net increases in contractual rental income net of expenses and contractual rent abatements from existing leases and from new leases and renewals that were not in effect for the entire 12-month period ended June 30, 2004 or that will go into effect during the 12 months ending June 30, 2005 based upon leases entered into between July 1, 2004 and October 1, 2004.	    	
(3)	  	Assumes no lease renewals or new leases (other than month-to-month leases) for leases expiring after June 30, 2004 unless a new or renewal lease had been entered into by October 1, 2004.	  	
(4)	  	Represents additional interest expense due to interest swap agreements to be entered into upon completion of this offering.	  	
(5)	  	Represents the conversion of estimated rental revenues on in-place leases for the 12 months ending June 30, 2005 from GAAP basis to a cash basis of recognition. The adjustment has been computed as follows:	  	
			
 	  	Reverse pro forma straight line rent adjustment for the 12 months ended June 30, 2004	  	$	(12,895	)	
 	  	Less: Amortization of above market leases, net of amortization of below market leases	  	 	(328	)	
 	  	Add: Contractual rent increases during the 12 months ending June 30, 2005	  	 	2,184	 	
 	  	Less: Contractual rent abatements during the 12 months ending June 30, 2005	  	 	(999	)	
 	  	 	  	 	  	 	  	 	  				
 	  	 	  	$	(12,038	)	
 	  	 	  	 	  	 	  	 	  				
(6)	  	Pro forma compensation expense related to awards of fully-vested long-term incentive units and stock options that vest over a four year period.	  	
(7)	  	Pro forma amortization of financing costs for the 12 months ended June 30, 2004.	 	
(8)	  	Reflects estimated provision for tenant improvement costs and lease commissions for the 12 months ending June 30, 2005 based on the weighted average tenant improvement costs and leasing commissions expenditures for renewed and retenanted space at the properties in our portfolio incurred during the 12 months ended December 31, 2002 and 2003 and for the six months ended June 30, 2004, multiplied by the number of rentable square feet of leased space for which leases expire in our portfolio during the 12 months ending June 30, 2005. The weighted average annual per square foot cost of tenant improvements and leasing commissions expenditures at the properties in our portfolio is presented below:	      	

 	  	 	  	Year Ended
December 31,
	  	Six Months
Ended
June 30,
2004
	  	Weighted Average
January 1, 2002-
June 30, 2004
	
 	  	 	  	2002
	  	2003
	  		  		
 	  	Average tenant improvement costs and lease commissions per square foot	  	$	18.84	  	$	13.07	  	$	26.71	  	$	17.13	
 	  	Square feet for which leases expire during the 12 months ending June 30, 2005	  	 	 	  	 	 	  	 	 	  	 	62,865	
 	  	 	  	 	 	  	 	 	  	 	 	  			
 	  	Total estimated tenant improvement costs and leasing commissions for the 12 months ending June 30, 2005	  	 	 	  	 	 	  	 	 	  	$	1,077	

 	  	We have commitments under leases in effect as of June 30, 2004 for $2.2 million of tenant improvement costs and leasing commissions to be incurred during the twelve months ending June 30, 2005. We have an existing reserve of $2.2 million from cash on-hand that we expect to cover the entire amount of these commitments.	
 
42 

Table of Contents
															
(9)	  	For the 12 months ending June 30, 2005, the estimated cost of recurring building improvements (excluding costs of tenant improvements) at the properties in our portfolio is approximately $889,623, based on the weighted average annual capital expenditures cost of $0.16 per square foot at the properties in our portfolio incurred during the 12 months ended December 31, 2002 and 2003 and the six months ended June 30, 2004 multiplied by 5,560,142 net rentable square feet in our portfolio. The following table sets forth certain information regarding historical recurring capital expenditures at the properties in our portfolio through June 30, 2004.	
					
 	  	 	  	Year Ended December 31,
	  	Six Months
Ended
June 30,
2004
	  	Weighted Average
January 1, 2002-
June 30, 2004
	
 	  	 	  	2002
	  	2003
	  		  		
 	  	Recurring capital expenditures	  	$	208,758	  	$	388,636	  	$	397,606	  	 	 	
 	  	Total square feet	  	 	1,145,182	  	 	2,792,266	  	 	5,560,142	  	 	 	
 	  	Recurring capital expenditure per square foot	  	$	0.18	  	$	0.14	  	$	0.07	  	$	0.16	
		
 	  	We currently do not have any contractual commitments with respect to nonrecurring capital expenditures.	
(10)	  	Represents scheduled amortization payments of mortgage loan principal due during the 12 months ending June 30, 2005.	
(11)	  	Our share of estimated cash available for distribution and estimated initial annual cash distributions to our stockholders is based on an estimated approximate 37.8% aggregate partnership interest in our operating partnership.	
(12)	  	Based on a total of 20,000,000 shares of our common stock to be outstanding after this offering.	
(13)	  	Calculated as estimated initial annual distribution per share divided by our share of estimated cash available for distribution per share for the twelve months ending June 30, 2005.	
 
43 

Table of Contents
CAPITALIZATION 
 
The following table sets forth the historical combined capitalization of the Digital Realty Predecessor as of June 30, 2004 and our consolidated capitalization as of June 30, 2004, pro forma for the formation transactions and before and after giving effect to this offering and use of the net proceeds from this offering as set forth in “Use of Proceeds.” You should read this table in conjunction with “Use of Proceeds,” “Selected Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and our consolidated financial statements and the notes to our financial statements appearing elsewhere in this prospectus. 

 	  	Historical
Combined
	  	Pro Forma Consolidated
	
 	  		  	Before
Offering
	  	After
Offering
	
 	  	(In thousands)	
Mortgages and other loans	  	$	473,896	  	$	653,578	  	$	478,578	
Minority interests in our operating partnership	  	 	—  	  	 	94,973	  	 	307,507	
Stockholders’ equity:	  	 	 	  	 	 	  	 	 	
Preferred stock, $.01 par value per share, 20,000,000 shares
authorized, none issued or outstanding	  	 	—  	  	 	—  	  	 	—  	
Common stock, $.01 par value per share, 100,000,000 shares
authorized, 20,000,000 shares issued and outstanding on a
pro forma basis(1)	  	 	—  	  	 	—  	  	 	200	
Additional paid in capital	  	 	—  	  	 	—  	  	 	186,209	
Accumulated other comprehensive income	  	 	—  	  	 	—  	  	 	310	
Owner’s equity, including accumulated other comprehensive income	  	 	218,303	  	 	224,253	  	 	—  	
 	  			  			  			
Total stockholders’/owner’s equity 	  	 	218,303	  	 	224,253	  	 	186,719	
 	  			  			  			
Total capitalization	  	$	692,199	  	$	972,804	  	$	972,804	

(1)	 	The common stock outstanding as shown includes common stock to be issued in this offering and excludes (i) 3,000,000 shares issuable upon exercise of the underwriters’ over-allotment option, (ii) 2,199,639 additional shares available for future issuance under our incentive award plan, (iii) 783,902 shares issuable under options expected to be granted under our incentive award plan, (iv) 1,490,561 shares reserved for long-term incentive units expected to be granted under our incentive award plan that may, subject to limits in the partnership agreement of our operating partnership, be exchanged for cash or, at our option, shares of our common stock on a one-for-one basis generally commencing 14 months after the completion of this offering, and (v) 31,452,170 shares reserved for issuance with respect to units held by limited partners expected to be outstanding subsequent to the formation transactions that may, subject to limits in the partnership agreement of our operating partnership, be exchanged for cash or, at our option, shares of our common stock on a one-for-one basis generally commencing 14 months after the completion of this offering. 	
 
44 

Table of Contents
DILUTION 
 
Purchasers of our common stock offered in this prospectus will experience an immediate and substantial dilution of the net tangible book value of our common stock from the initial public offering price. At June 30, 2004, we had a combined net tangible book value of approximately $114.6 million, or $4.56 per share of our common stock to be held by GI Partners after this offering, assuming the exchange of units into shares of our common stock on a one-for-one basis. After giving effect to the sale of the shares of our common stock offered hereby and the formation transactions, the deduction of underwriting discounts and commissions and financial advisory fees and estimated offering and formation expenses, the pro forma net tangible book value at June 30, 2004 attributable to common stockholders would have been $126.7 million, or $6.33 per share of our common stock. This amount represents an immediate increase in net tangible book value of $1.77 per share to GI Partners and an immediate dilution in pro forma net tangible book value of $8.67 per share from the assumed public offering price of $15.00 per share of our common stock to new public investors. The following table illustrates this per share dilution: 

Assumed initial public offering price per share	  	 	 	 	 	  	$	15.00	
Net tangible book value per share before the formation
transactions and this offering(1)	  	 	 	 	4.56	  	 	 	
Decrease in net tangible book value per share attributable to the formation transactions, but before this offering(2)	  	(1.96	)	 	 	  	 	 	
Increase in net tangible book value per share attributable to this offering(3)	  	3.73	 	 	 	  	 	 	
 	  			 	 	  	 	 	
Net increase in net tangible book value per
share attributable to the formation transactions and this offering 	  	 	 	 	1.77	  	 	 	
 	  	 	 	 		  	 	 	
Pro forma net tangible book value per share after the formation
transactions and this offering(4)	  	 	 	 	 	  	 	6.33	
 	  	 	 	 	 	  			
Dilution in net tangible book value per share to new investors(5)	  	 	 	 	 	  	$	8.67	

(1)	 	Net tangible book value per share of our common stock before the formation transactions and this offering is determined by dividing net tangible book value (consisting of owner’s equity minus intangible assets, which are comprised of deferred financing costs, acquired above market leases net of acquired below market leases, acquired in place lease value and deferred leasing costs) as of June 30, 2004 of the Digital Realty Predecessor by the number of shares of our common stock to be held by GI Partners after this offering, assuming the exchange in full of the units to be held by GI Partners. The following table sets forth the calculation of net tangible book value per share before the formation transactions and the offering: 	

Owner’s equity	  	 	 	 	$	218,303,000	
Minus net intangible assets:	  	 	 	 	 	 	
Deferred financing costs, net	  	4,237,000	 	 	 	 	
Acquired above market leases, net	  	18,953,000	 	 	 	 	
Acquired below market leases, net	  	(23,761,000	)	 	 	 	
Acquired in place lease value and deferred leasing costs, net	  	104,290,000	 	 	 	 	
 	  			 	 	 	
 	  	 	 	 	 	103,719,000	
 	  	 	 	 			
Net tangible book value of the Digital Reality Predecessor	  	 	 	 	$	114,584,000	
Divided by GI Partners’ units	  	 	 	 	 	25,120,659	
 	  	 	 	 			
 	  	 	 	 	$	4.56	
 	  	 	 	 			
(2)	 	Decrease in net tangible book value per share attributable to the formation transactions, but before this offering, is determined by dividing the difference between the June 30, 2004 pro forma net tangible book value, excluding net offering proceeds, and the June 30, 2004 net tangible book value of the Digital Realty Predecessor by the number of shares of our common stock to be held by GI Partners 	
 
45 

Table of Contents
 	after this offering, assuming the exchange in full of the units to be held by GI Partners. The following table sets forth the calculation of the decrease in net tangible book value per share attributable to the formation transactions, but before this offering: 	

Pro forma stockholders’ equity	  	 	 	 	$	186,719,000	 	
Plus pro forma minority interests in operating partnership	  	 	 	 	 	307,507,000	 	
Minus pro forma net intangible assets:	  	 	 	 	 	 	 	
Pro forma deferred financing costs, net	  	8,556,000	 	 	 	 	 	
Pro forma acquired above market leases, net	  	46,155,000	 	 	 	 	 	
Pro forma acquired below market leases, net	  	(38,288,000	)	 	 	 	 	
Pro forma acquired in place lease value and deferred leasing costs, net	  	142,571,000	 	 	 	 	 	
 	  			 	 	 	 	
 	  	 	 	 	 	158,994,000	 	
 	  	 	 	 				
Pro forma net tangible book value allocable to common stockholders and unit holders	  	 	 	 	 	335,232,000	 	
Minus pro forma net offering proceeds	  	 	 	 	 	270,000,000	 	
Minus net tangible book value of the Digital Realty Predecessor	  	 	 	 	 	114,584,000	 	
 	  	 	 	 				
 	  	 	 	 	$	(49,352,000	)	
Divided by GI Partners’ units	  	 	 	 	 	25,120,659	 	
 	  	 	 	 				
 	  	 	 	 	$	(1.96	)	
 	  	 	 	 				
(3)	 	Increase in net tangible book value per share of our common stock attributable to this offering is calculated after deducting the underwriters’ discounts and commissions, financial advisory fees and estimated expenses of this offering. 	
(4)	 	Based on pro forma net tangible book value of approximately $126.7 million divided by 20,000,000 shares of our common stock to be outstanding, not including 783,902 shares of common stock issuable upon exercise of outstanding stock options, 31,452,170 operating partnership units expected to be issued in connection with the formation transactions that may, subject to limits in the partnership agreement of our operating partnership, be exchanged for cash or, at our option, shares of our common stock on a one-for-one basis generally commencing 14 months after the completion of this offering and 1,490,561 long-term incentive units to be expected to be granted under our incentive award plan that may, subject to limits in the partnership agreement of our operating partnership, be exchanged for cash or, at our option, shares of our common stock on a one-for-one basis generally commencing 14 months after the completion of this offering. There is no further impact on book value dilution attributable to the exchange of units to be issued to the continuing investors in the formation transactions due to the effect of minority interests. The following table sets forth the calculation of pro forma net tangible book value per share after the formation transactions and the offering: 	

Pro forma stockholders’ equity	  	 	 	 	$	186,719,000	
Minus pro forma net intangible assets:	  	 	 	 	 	 	
Pro forma deferred financing costs, net	  	8,556,000	 	 	 	 	
Pro forma acquired above market leases, net	  	46,155,000	 	 	 	 	
Pro forma acquired below market leases, net	  	(38,288,000	)	 	 	 	
Pro forma acquired in place lease value and deferred leasing costs, net	  	142,571,000	 	 	 	 	
 	  			 	 	 	
 	  	158,994,000	 	 	 	 	
Percentage allocable to common stockholders	  	37.78	%	 	 	 	
 	  			 	 	 	
 	  	 	 	 	 	60,068,000	
 	  	 	 	 			
Pro forma net tangible book value allocable to common stockholders	  	 	 	 	 	126,651,000	
Divided by shares of common stock	  	 	 	 	 	20,000,000	
 	  	 	 	 			
 	  	 	 	 	$	6.33	
 	  	 	 	 			
(5)	 	Dilution is determined by subtracting pro forma net tangible book value per share of our common stock after giving effect to the formation transactions and this offering from the initial public offering price paid by a new investor for a share of our common stock. 	
 
The following table sets forth, on a pro forma basis giving effect to this offering and the formation transactions: (i) the number of units issued to GI Partners and the third parties that are contributing investments in real estate in exchange for units in connection with the formation transactions, the number of long-term incentive units to be issued to our directors, officers and other employees in connection with the formation transactions and the number of shares of our common stock to be sold by us in this offering; (ii) the net tangible book value as of June 30, 2004 of the assets contributed to our operating partnership in the formation transactions, which reflects the effects of the formation transactions, but not the effects of this offering and the cash from new investors before deducting underwriters’ discounts and commissions, financial advisory fees and other estimated expenses of this offering; and (iii) the net tangible book value of the average contribution per share/unit based on total contributions. See “Risk Factors—Risks Related to this Offering—Differences between 
 
46 

Table of Contents
the book value of contributed properties and the price paid for our common stock will result in an immediate and material dilution of the book value of our common stock.” 

 	  	Shares/Units Issued(1)
	 	 	Cash/Net Tangible
Book Value(2) of
Contributions
	 	 	Purchase Price/
Net Tangible
Book Value of
Average
Contribution
Per Share/Unit
	 	
 	  	Number
	  	Percent
	 	 	Amount
	 	 	Percent
	 	 			
 	  	 	  	 	 	 	(In thousands)	 	 	 	 	 	 	 	
Units issued in connection with the formation transactions	  	31,452,170	  	59.4	%	 	$	65,232	(3)	 	17.9	%	 	$	2.60	 	
Vested long-term incentive units to be issued to directors, officers and other employees in connection with the formation transactions(4)	  	1,490,561	  	2.8	 	 	 	—  	 	 	—  	 	 	 	—  	 	
New investors in the offering	  	20,000,000	  	37.8	 	 	 	300,000	 	 	82.1	 	 	 	15.00	(5)	
 	  		  			 				 			 	 	 	 	
Total	  	52,942,731	  	100.0	%	 	$	365,232	 	 	100.0	%	 	 	 	 	

(1)	 	Does not include 783,902 shares issuable upon the exercise of unvested stock options. 	
(2)	 	Based on the June 30, 2004 pro forma net tangible book value (consisting of owner’s equity minus intangible assets, which are comprised of deferred financing costs, acquired above market leases net of acquired below market leases, acquired in place lease value and deferred leasing costs) of the assets to be contributed to our operating partnership in connection with the formation transactions. 	
(3)	 	Represents pro forma net tangible book value as of June 30, 2004 of the assets contributed to our operating partnership in the formation transactions, giving effect to the formation transactions, but not to the effects of this offering (in thousands): 	

Pro forma stockholders’ equity	  	$	186,719	 	
Plus pro forma minority interest in operating partnership	  	 	307,507	 	
Minus net proceeds in this offering	  	 	(270,000	)	
Minus pro forma intangible assets:	  	 	 	 	
Deferred financing costs	  	 	(8,556	)	
Acquired above market leases of $46,155 net of acquired below market leases of $38,288	  	 	(7,867	)	
Acquired in place lease value and deferred leasing costs	  	 	(142,571	)	
 	  				
 	  	$	65,232	 	

(4)	 	The long-term incentive units will not be transferable for a period of three years from the date of grant and will receive the same quarterly per unit distributions as common units in our operating partnership, which equal per share distributions on our common stock. Initially, long-term incentive units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in our operating partnership for all purposes, and therefore accrete to an economic value equivalent to our common stock on a one-for-one basis. If such parity is reached, long-term incentive units may be converted into an equal number of common units of our operating partnership at any time, and thereafter enjoy all the rights of common units of our operating partnership. However, there are circumstances under which the long-term incentive units will not achieve full parity with common units of our operating partnership. 	
(5)	 	Before deducting underwriters’ discounts and commissions, financial advisory fees and other estimated expenses of this offering and the formation transactions. 	
 
47 

Table of Contents
SELECTED FINANCIAL DATA 
 
The following table sets forth selected financial and operating data on a combined historical basis for the “Digital Realty Predecessor.” The Digital Realty Predecessor is comprised of the real estate activities and holdings of GI Partners related to the properties in our portfolio. We have not presented historical information for Digital Realty Trust, Inc. because we have not had any corporate activity since our formation other than the issuance of 200 shares of common stock in connection with the initial capitalization of our company and because we believe that a discussion of the results of Digital Realty Trust, Inc. would not be meaningful. The Digital Realty Predecessor combined historical financial information includes: 
 
 	•	 	the wholly owned real estate subsidiaries and majority-owned real estate joint ventures that GI Partners intends to contribute to our operating partnership in connection with this offering; 	
 
 	•	 	an allocation of GI Partners’ line of credit to the extent that borrowings and related interest expense relate to (1) borrowings to fund acquisitions of the properties in our portfolio and (2) borrowings to pay asset management fees paid by GI Partners that were allocated to the properties in our portfolio; and 	
 
 	•	 	an allocation of the asset management fees paid to a related party and incurred by GI Partners, along with an allocation of the liability for any such fees that are unpaid as of the date of the financial statements and an allocation of GI Partners’ general and administrative expenses. 	
 
You should read the following selected financial data in conjunction with our combined historical consolidated financial statements and the related notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this prospectus. 
 
The historical combined balance sheet information as of December 31, 2003 and 2002 of the Digital Realty Predecessor and the combined statements of operations information for the years then ended and for the period from February 28, 2001 (inception) through December 31, 2001 of the Digital Realty Predecessor have been derived from the historical combined financial statements audited by KPMG LLP, independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The historical combined balance sheet information as of June 30, 2004 and December 31, 2001 and the combined statements of operations information for the six months ended June 30, 2004 and 2003 have been derived from the unaudited combined financial statements of the Digital Realty Predecessor. In the opinion of the management of our company, the historical combined balance sheet information as of June 30, 2004 and the historical combined statements of operations for the six months ended June 30, 2004 and 2003 include all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. Our results of operations for the interim period ended June 30, 2004 are not necessarily indicative of the result to be obtained for the full fiscal year. 
 
Our unaudited selected pro forma consolidated financial statements and operating information as of and for the six months ended June 30, 2004 and for the year ended December 31, 2003 assumes completion of this offering and consumation of the formation transactions as of the beginning of the period presented for the operating data and as of the stated date for the balance sheet data. Our pro forma consolidated financial statements include the effects of the acquisition by us of all of the ownership interests owned by third parties in the properties acquired or expected to be acquired subsequent to June 30, 2004 along with the related financing transactions, as if those acquisitions and financing transactions had occurred as of the beginning of the period presented for the operating data and as of the stated date for the balance sheet data. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations. 
 
48 

Table of Contents
The Company and the Digital Realty Predecessor 
(Amounts in thousands, except per share data) 

 	 	Six Months Ended June 30,
	 	 	Year ended December 31,
	 	 	Period from
February 28,
2001
(inception)
through
December 31,
	 	
 	 	Pro Forma
Consolidated
	 	 	Historical Combined
	 	 	Pro Forma
Consolidated
	 	Historical Combined
	 	 	Historical
Combined
	 	
 	 	2004
	 	 	2004
	 	 	2003
	 	 	2003
	 	2003
	 	 	2002
	 	 	2001
	 	
 	 	(Unaudited)	 	 	(Unaudited)	 	 	(Unaudited)	 	 	 	 	 	 	 	 	 	
Statement of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental revenues	 	$	60,548	 	 	$	34,461	 	 	$	22,298	 	 	$	118,881	 	$	50,099	 	 	$	21,203	 	 	$	      —  	 	
Tenant reimbursements	 	 	11,180	 	 	 	5,397	 	 	 	4,317	 	 	 	22,288	 	 	8,661	 	 	 	3,894	 	 	 	—  	 	
Other revenues	 	 	2,320	 	 	 	1,712	 	 	 	4,222	 	 	 	6,016	 	 	4,328	 	 	 	458	 	 	 	12	 	
 	 				 				 				 			 				 				 				
Total revenues	 	 	74,048	 	 	 	41,570	 	 	 	30,837	 	 	 	147,185	 	 	63,088	 	 	 	25,555	 	 	 	12	 	
 	 				 				 				 			 				 				 				
Rental property operating and maintenance expenses	 	 	12,427	 	 	 	6,289	 	 	 	3,638	 	 	 	22,954	 	 	8,624	 	 	 	4,997	 	 	 	—  	 	
Property taxes	 	 	5,835	 	 	 	3,833	 	 	 	2,416	 	 	 	11,013	 	 	4,688	 	 	 	2,755	 	 	 	—  	 	
Insurance	 	 	1,230	 	 	 	562	 	 	 	208	 	 	 	2,278	 	 	626	 	 	 	83	 	 	 	—  	 	
Interest expense	 	 	14,365	 	 	 	7,878	 	 	 	4,099	 	 	 	28,723	 	 	10,091	 	 	 	5,249	 	 	 	—  	 	
Asset management fees to related party	 	 	—  	 	 	 	1,592	 	 	 	1,592	 	 	 	—  	 	 	3,185	 	 	 	3,185	 	 	 	2,663	 	
Depreciation and amortization expense	 	 	22,375	 	 	 	12,218	 	 	 	7,187	 	 	 	44,088	 	 	16,295	 	 	 	7,659	 	 	 	—  	 	
General and administrative expenses	 	 	24,731	 	 	 	157	 	 	 	43	 	 	 	27,060	 	 	329	 	 	 	249	 	 	 	—  	 	
Other expenses	 	 	2,588	 	 	 	2,540	 	 	 	2,480	 	 	 	2,698	 	 	2,459	 	 	 	1,249	 	 	 	107	 	
 	 				 				 				 			 				 				 				
Total expenses	 	 	83,551	 	 	 	35,069	 	 	 	21,663	 	 	 	138,814	 	 	46,297	 	 	 	25,426	 	 	 	2,770	 	
 	 				 				 				 			 				 				 				
Income (loss) before minority interests (deficit)	 	 	(9,503	)	 	 	6,501	 	 	 	9,174	 	 	 	8,371	 	 	16,791	 	 	 	129	 	 	 	(2,758	)	
Minority interests (deficits)	 	 	(5,918	)	 	 	(56	)	 	 	73	 	 	 	5,208	 	 	149	 	 	 	190	 	 	 	—  	 	
 	 				 				 				 			 				 				 				
Net income (loss)	 	$	(3,585	)	 	$	6,557	 	 	$	9,101	 	 	$	3,163	 	$	16,642	 	 	$	(61	)	 	$	(2,758	)	
 	 				 				 				 			 				 				 				
Balance Sheet Data (at period end)(1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments in real estate, after accumulated depreciation and amortization	 	$	797,624	 	 	$	582,737	 	 	$	—  	 	 	$	—  	 	$	391,737	 	 	$	212,009	 	 	$	—  	 	
Total assets	 	 	1,022,826	 	 	 	731,237	 	 	 	—  	 	 	 	—  	 	 	479,698	 	 	 	269,836	 	 	 	1,893	 	
Notes payable under line of credit	 	 	—  	 	 	 	75,317	 	 	 	—  	 	 	 	—  	 	 	44,436	 	 	 	53,000	 	 	 	—  	 	
Notes payable under bridge loan	 	 	7,950	 	 	 	99,500	 	 	 	—  	 	 	 	—  	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Mortgages and other secured loans	 	 	470,628	 	 	 	299,079	 	 	 	—  	 	 	 	—  	 	 	253,429	 	 	 	103,560	 	 	 	—  	 	
Total liabilities	 	 	528,431	 	 	 	509,684	 	 	 	—  	 	 	 	—  	 	 	328,303	 	 	 	183,524	 	 	 	903	 	
Minority interests	 	 	307,676	 	 	 	3,250	 	 	 	—  	 	 	 	—  	 	 	3,444	 	 	 	3,135	 	 	 	—  	 	
Stockholders’/owner’s equity	 	 	186,719	 	 	 	218,303	 	 	 	—  	 	 	 	—  	 	 	147,951	 	 	 	83,177	 	 	 	990	 	
Total liabilities and stockholders’/owner’s equity	 	 	1,022,826	 	 	 	731,237	 	 	 	—  	 	 	 	—  	 	 	479,698	 	 	 	269,836	 	 	 	1,893	 	
Per Share Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—  	 	 	 	 	 	 	 	 	 	 	 	 	
Pro forma earnings (loss) per share—basic and diluted	 	$	(0.18	)	 	 	—  	 	 	 	—  	 	 	$	0.16	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Pro forma weighted average common shares outstanding—basic and diluted	 	 	20,000	 	 	 	—  	 	 	 	—  	 	 	 	20,000	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Other Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from operations(2)	 	$	12,886	 	 	 	—  	 	 	 	—  	 	 	$	52,459	 	 	—  	 	 	 	—  	 	 	 	—  	 	
Cash flows from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating activities	 	 	—  	 	 	$	15,008	 	 	$	13,343	 	 	 	—  	 	$	28,986	 	 	$	9,645	 	 	$	(1,867	)	
Investing activities	 	 	—  	 	 	 	(227,747	)	 	 	(107,120	)	 	 	—  	 	 	(215,263	)	 	 	(164,755	)	 	 	(1,881	)	
Financing activities	 	 	—  	 	 	 	211,833	 	 	 	92,225	 	 	 	—  	 	 	187,873	 	 	 	158,688	 	 	 	3,748	 	

(1)	 	Balance sheet data as of December 31, 2001 is unaudited. 	
(2)	 	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, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after 	
 
49 

Table of Contents
 	adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity 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 as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. FFO also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. The following table sets forth a reconciliation of our pro forma funds from operations for the periods presented (in thousands): 	

 	  	Pro Forma
	
 	  	Six Months
Ended
June 30, 2004
	 	  	Year
Ended
December 31, 2003
	
Pro forma income (loss) before minority interest in operating partnership but after minority interest in consolidated joint ventures	  	$	(9,489	)	  	$	8,371	
Plus: pro forma real estate depreciation and amortization	  	 	22,375	 	  	 	44,088	
 	  				  			
Pro forma funds from operations(a)	  	$	12,886	 	  	$	52,459	

 	(a)	 	Pro forma funds from operations as set forth above includes approximately $22.4 million of compensation expense related to fully-vested long-term incentive units granted in connection with this offering and the formation transactions for the periods presented. 	
 
50 

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 
The following discussion should be read in conjunction with “Selected Financial Data,” the audited combined financial statements of the Digital Realty Predecessor as of December 31, 2003 and 2002 and for the years then ended and for the period from February 28, 2001 (inception) through December 31, 2001 and the unaudited combined financial statements of the Digital Realty Predecessor as of and for the six months ended June 30, 2004 and for the six months ended June 30, 2003 appearing elsewhere in this prospectus. Where appropriate, the following discussion includes analysis of the effects of the formation transactions, certain other transactions and this offering. These effects are reflected in the pro forma combined financial statements located elsewhere in this prospectus. 
 
Overview 
 
Our company.    We own, acquire, reposition and manage technology-related real estate. We expect to qualify as a REIT for federal income tax purposes beginning with our initial taxable year ending December 31, 2004. Our company was formed on March 9, 2004. Since our formation, we have not had any corporate activity other than the issuance of 200 shares of common stock in connection with the initial capitalization of our company. Because we believe that a discussion of the results of Digital Realty Trust, Inc. would not be meaningful, we have set forth below a discussion of the historical operations of the Digital Realty Predecessor, and as such, any reference to “our,” “we” and “us” includes the Digital Realty Predecessor. The Digital Realty Predecessor is comprised of the real estate activities and holdings of GI Partners related to the properties in our portfolio. The Digital Realty Predecessor is engaged in the business of acquiring, owning, operating, repositioning and eventually selling real estate in the United States and internationally. The consolidated pro forma financial information includes financial information related to (1) the Digital Realty Predecessor, (2) our option property, Carrier Center, as we currently anticipate exercising this option simultaneously with the completion of this offering, or shortly thereafter and (3) properties in our portfolio acquired by us after June 30, 2004 or to be acquired by us upon completion of this offering and consummation of the formation transactions. 
 
Business and strategy.    Our primary business objectives are to maximize sustainable long-term growth in earnings, funds from operations and cash flow per share and maximize returns to our stockholders. We expect to achieve our objectives by focusing on our core business of investing in technology-related real estate. We target high quality, strategically located properties containing applications and operations critical to the day-to-day operations of technology industry tenants. The Digital Realty Predecessor in the past has, and we intend in the future to, focus on regional, national and international tenants within the technology industry that are leaders in their respective areas. Most of our properties contain fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, raised floor areas to accommodate computer cables and below-floor cooling systems, extensive in-building communications cabling and high-level security systems. We focus solely on technology-related real estate because we believe that the growth in the technology industry will be superior to that of the overall economy. 
 
Since the acquisition of our first property in 2002, we have acquired or will acquire upon completion of this offering and consummation of the formation transactions an aggregate of 23 technology-related real estate properties with 5.6 million net rentable square feet. We have developed detailed, standardized procedures for evaluating acquisitions to ensure that they meet our financial and other criteria. We expect to continue to acquire additional assets as a key part of our growth strategy. We intend to aggressively manage and lease our assets to increase their cash flow. We often acquire properties with substantial in-place cash flow and some vacancy, which enables us to create upside through lease-up. See “Business and Properties.” 
 
We may acquire properties subject to existing mortgage financing and other indebtedness or to new indebtedness which may be incurred in connection with acquiring or refinancing these investments. Debt service on such indebtedness will have a priority over any dividends with respect to our common stock. We intend to 
 
51 

Table of Contents
limit our indebtedness to 60% of our total market capitalization and expect that our ratio of debt to total market capitalization upon completion of this offering will be approximately 37.6%. 
 
Revenue base.    Upon completion of this offering and consummation of the formation transactions, we will own 22 properties located throughout the U.S. and one property located in London, England, containing a total of approximately 5.6 million net rentable square feet. We acquired our first portfolio property in January 2002, an additional four properties through December 31, 2002, eight properties during the year ended December 31, 2003 and ten properties that we have acquired or plan to acquire during the current fiscal year, assuming exercise of the Carrier Center option. As of June 30, 2004, the properties that will comprise our initial portfolio were approximately 87.1% leased at an average annualized rent per leased square foot of $20.01. Since our tenants generally fund capital improvements, our lease terms are generally longer than standard commercial leases. Our average lease term is 12.6 years, with an average of 7.9 years remaining, and lease expirations through 2007 are only 7.9% of net rentable square feet or 7.8% of aggregate annualized rent as of June 30, 2004. 
 
Operating expenses.    Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs, as well as rental expenses on our ground lease. For the Digital Realty Predecessor, a significant portion of the general and administrative type expenses have been reflected in the asset management fees that we pay to GI Partners’ related-party asset manager. The asset management fees have been based on a fixed percentage of capital commitments made by the investors in GI Partners, a portion of which have been allocated to the Digital Realty Predecessor. In the months following completion of this offering and consummation of the formation transactions, our asset management function will be internalized and we will incur the majority of our general and administrative expenses directly. We have entered into a transition services agreement with CB Richard Ellis Investors with respect to transitional accounting and other services. See “Certain Relationships and Related Transactions—Transition Services Agreement with CB Richard Ellis Investors.” In addition, as a public company, we will incur significant legal, accounting and other expenses related to corporate governance, Securities and Exchange Commission reporting and compliance with the various provisions of the Sarbanes-Oxley Act of 2002. 
 
Formation transactions.    Pursuant to contribution agreements, our operating partnership will receive contributions of direct and indirect interests in the properties in our initial portfolio in exchange for consideration that includes cash, assumption of debt and an aggregate of 38,262,206 units in our operating partnership (with an aggregate value of $1,208.5 million based on the midpoint of the pricing range indicated on the front cover of this prospectus). The value of the units that we will exchange for the contributed property interests and other assets will increase or decrease if our common stock is priced above or below the midpoint of the pricing range indicated on the front cover of this prospectus. The initial public offering price of our common stock will be determined in consultation with the underwriters. Among the factors that will be considered are our record of operations, our management, our estimated net income, our estimated funds from operations, our estimated cash available for distribution, our anticipated dividend yield, our growth prospects, the current market valuations, financial performance and dividend yields of publicly traded companies considered by us and the underwriters to be comparable to us and the current state of the commercial real estate industry and the economy as a whole. The initial public offering price does not necessarily bear any relationship to the historical book value or fair market value of our assets. We have not obtained appraisals of the properties and other assets to be contributed to our operating partnership or purchased by our operating partnership for cash. As a result, the consideration to be given in exchange by us for our properties and other assets may exceed their fair market value. 
 
We will account for the ownership interests contributed to us by GI Partners in exchange for a partnership interest in our operating partnership as a reorganization of entities under common control in a manner similar to a pooling of interests. Accordingly, the assets and liabilities contributed by GI Partners will be accounted for by the operating partnership at GI Partners’ historical cost. See “Structure and Formation of Our Company—Formation Transactions.” We will account for the ownership interests in 200 Paul Avenue and 1100 Space Park Drive contributed to us by third parties and the 10% minority ownership interest in Univision Tower contributed to us by our joint venture partner under the purchase method of accounting. Accordingly, the purchase price for 
 
52 

Table of Contents
these interests, which are equal to the value of the operating partnership units that we will issue in exchange, will be allocated to the assets acquired and liabilities assumed based on the fair value of the assets and liabilities. 
 
Factors Which May Influence Future Results of Operations 
 
Rental income.    The amount of net rental income generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from lease terminations. As of June 30, 2004, the occupancy rate in the properties that will comprise our initial portfolio was approximately 87.1% of our rentable square feet. The amount of rental income generated by us also depends on our ability to maintain or increase rental rates at our properties. In addition, one of our strategies is to convert approximately 181,000 net rentable square feet of data center space with extensive installed tenant improvements that is, or shortly will be, available for lease to multi-tenant collocation use in order to allow us to lease small spaces at rates that are significantly higher than prevailing market rates for other uses. Negative trends in one or more of these factors could adversely affect our rental income in future periods. Future economic downturns or regional downturns affecting our submarkets or downturns in the technology industry that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental income will also partially depend on our ability to acquire additional technology-related real estate that meets our investment criteria. 
 
Scheduled lease expirations.    Our ability to re-lease expiring space will impact our results of operations. In addition to approximately 720,000 square feet of currently available space in our portfolio as of June 30, 2004, leases representing approximately 1.3% and 0.7% of the square footage of our portfolio are scheduled to expire during the 12-month periods ending June 30, 2005 and 2006, respectively. The leases scheduled to expire in the 12-month periods ending June 30, 2005 and 2006 represent approximately 1.2% and 0.7%, respectively, of our total annualized base rent. 
 
Conditions in significant markets.    Our portfolio is geographically concentrated in the Boston, Dallas, Los Angeles, New York, San Francisco and Silicon Valley metropolitan markets. These markets comprised 9.9%, 19.5%, 8.9%, 6.4%, 11.0% and 28.9%, respectively, of annualized rent as of June 30, 2004 of the properties comprising our initial portfolio. Positive or negative changes in conditions in our significant markets will impact our overall performance. The Dallas, San Francisco and Silicon Valley metropolitan real estate markets were adversely affected by the recent downturn in the technology industry and continue to stabilize as the technology industry and broader economy rebound. Of the 2.0% of the net rentable square feet of our portfolio subject to expiration in the 24 months ending June 30, 2006, the majority of the space is in Denver. The Denver metropolitan real estate market was also adversely affected by the recent downturn in the technology industry. We believe that the Denver leasing market appears to be stabilizing, with recent positive absorption of space. 
 
Operating expenses.    Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs, as well as rental expenses on our ground lease. We also will incur general and administrative expenses, including expenses relating to the internalization of our asset management function, as well as significant legal, accounting and other expenses related to corporate governance, Securities and Exchange Commission reporting and compliance with the various provisions of the Sarbanes-Oxley Act. Increases or decreases in such operating expenses will impact our overall performance. As a new company, we may experience a substantial short term increase in operating expenses as we internalize our asset management function and begin to incur the majority of our expenses directly. 
 
Critical Accounting Policies 
 
Our discussion and analysis of financial condition and results of operations are based upon our combined financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (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 
 
53 

Table of Contents
and the reported amount of revenues and expenses in the reporting period. Our actual results may differ from these estimates. We have provided a summary of our significant accounting policies in Note 2 to our combined financial statements included elsewhere in this prospectus. 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 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 prospectus. 
 
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 buildings and improvements, the occupancy of the building, the existence of above and below market tenant leases, the creditworthiness of the tenants, favorable or unfavorable financing, above or below market ground leases and numerous other factors. Accordingly, we are required to make subjective assessments to allocate the purchase price paid to acquire investments in real estate among the assets acquired and liabilities assumed based on our estimate of the fair values of such assets and liabilities. This includes determining the value of the buildings and improvements, land, any ground leases, tenant improvements, in-place tenant leases, tenant relationships, the value (or negative value) of above (or below) market leases and any debt assumed from the seller or loans made by the seller to us. Each of these estimates requires a great deal of judgment and some of the estimates involve complex calculations. Our calculation methodology is summarized in Note 2 to our combined financial statements. These allocation assessments have a direct impact on our results of operations because if we were to allocate more value to land there would be no depreciation with respect to such amount or if we were to allocate more value to the buildings as opposed to allocating to the value of tenant leases, this amount would be recognized as an expense over a much longer period of time, since the amounts allocated to buildings are depreciated over the estimated lives of the buildings whereas amounts allocated to tenant leases are amortized over the terms of the leases. Additionally, the amortization of 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 leases and tenant relationships, which is included in depreciation and amortization in our combined statements of operations. 
 
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 valuation.    We review the carrying value of our properties when circumstances, such as adverse market conditions, indicate potential impairment may exist. We base our review on an estimate of the future cash flows (excluding interest charges) expected to result from the real estate investment’s use and eventual disposition. 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 evaluation indicates that we may be 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 an asset has been impaired, our strategy of holding properties over the long-term directly decreases the likelihood of recording 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 impairment has occurred, the affected assets must be reduced to their fair value. No such impairment losses have been recognized to date. 
 
54 

Table of Contents
We estimate the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs, similar to the income approach that is commonly utilized by appraisers. 
 
Revenue Recognition 
 
Rental income is recognized using the straight line method over the terms of the tenant leases. Deferred rents included in our combined balance sheets represent the aggregate excess of rental revenue recognized on a straight line basis over the rental revenue that would be recognized under the terms of the leases. Our leases generally contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by us. Such reimbursements are recognized in the period that the expenses are incurred. Lease termination fees are recognized when the related leases are canceled and we have no continuing obligation to provide services to such former tenants. As discussed above, we recognize amortization of the value of acquired above or below market tenant leases as a reduction of rental income in the case of above market leases or an increase to rental revenue in the case of below market leases. 
 
We must make subjective estimates as to when our revenue is earned and the collectibility of our accounts receivable related to minimum rent, deferred rent, expense reimbursements, lease termination fees and other income. We specifically analyze accounts receivable and historical bad debts, tenant concentrations, tenant creditworthiness, and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on our net income because a higher bad debt allowance would result in lower net income, and recognizing rental revenue as earned in one period versus another would result in higher or lower net income for a particular period. 
 
55 

Table of Contents
Results of Operations 
 
The discussion below relates to our financial condition and results of operations for the six months ending June 30, 2004 and 2003, for the years ending December 31, 2003 and 2002 and for the period from the formation of the Digital Realty Predecessor on February 28, 2001 through December 31, 2001. 
 
The following table identifies each of the properties in our portfolio acquired through June 30, 2004. Our property portfolio has experienced consistent and significant growth since the first property acquisition in January 2002. As a result of such growth, a period-to-period comparison of the Digital Realty Predecessor’s financial performance focuses primarily on the impact on our revenues and expenses resulting from the new property additions to our portfolio. On an existing property basis, our revenues and expenses have remained substantially stable as a result of the generally consistent occupancy rates at our properties. 

 	 	 	 	 	 	Occupancy Rate
	 	
Acquired Properties
	 	Acquisition
Date
	 	Net Rentable
Square Feet
	 	June 30,
2004
	 	 	December 31,
2003
	 	 	December 31,
2002
	 	
Year Ended December 31, 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	
36 Northeast Second Street	 	Jan. 2002	 	162,140	 	81.1	%	 	95.7	%	 	95.7	%	
Univision Tower	 	Jan. 2002	 	477,107	 	79.7	 	 	84.1	 	 	82.2	 	
Camperdown House	 	July 2002	 	63,233	 	100.0	 	 	100.0	 	 	100.0	 	
Hudson Corporate Center	 	Nov. 2002	 	311,950	 	88.7	 	 	88.7	 	 	100.0	 	
NTT/Verio Premier Data Center	 	Dec. 2002	 	130,752	 	100.0	 	 	100.0	 	 	100.0	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	
Subtotal	 	 	 	1,145,182	 	 	 	 	 	 	 	 	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2003	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ardenwood Corporate Park	 	Jan. 2003	 	307,657	 	100.0	 	 	80.7	 	 	—  	 	
VarTec Building	 	Jan. 2003	 	135,250	 	100.0	 	 	100.0	 	 	—  	 	
ASM Lithography Facility	 	May 2003	 	113,405	 	100.0	 	 	100.0	 	 	—  	 	
AT&T Web Hosting Facility	 	June 2003	 	250,191	 	50.0	 	 	50.0	 	 	—  	 	
Brea Data Center	 	Aug. 2003	 	68,807	 	100.0	 	 	100.0	 	 	—  	 	
Granite Tower	 	Sept. 2003	 	240,151	 	98.0	 	 	98.9	 	 	—  	 	
Maxtor Manufacturing Facility	 	Sept. 2003	 	183,050	 	100.0	 	 	100.0	 	 	—  	 	
Stanford Place II	 	Oct. 2003	 	348,573	 	78.4	 	 	79.8	 	 	—  	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	
Subtotal	 	 	 	1,647,084	 	 	 	 	 	 	 	 	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	
Six Months Ended June 30, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	
100 Technology Center Drive	 	Feb. 2004	 	197,000	 	100.0	 	 	—  	 	 	—  	 	
Siemens Building	 	April 2004	 	125,538	 	100.0	 	 	—  	 	 	—  	 	
Carrier Center	 	May 2004	 	449,254	 	80.5	 	 	—  	 	 	—  	 	
Savvis Data Center	 	May 2004	 	300,000	 	100.0	 	 	—  	 	 	—  	 	
Comverse Technologies Building	 	June 2004	 	388,000	 	99.7	 	 	—  	 	 	—  	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	
Subtotal	 	 	 	1,459,792	 	 	 	 	 	 	 	 	 	
 	 	 	 		 	 	 	 	 	 	 	 	 	
Total	 	 	 	4,252,058	 	 	 	 	 	 	 	 	 	

Comparison of Six Months ended June 30, 2004 to Six Months ended June 30, 2003 
 
As of June 30, 2004, our portfolio was comprised of 18 properties with an aggregate of approximately 4.3 million net rentable square feet compared to a portfolio comprised of nine properties with an aggregate of approximately 2.0 million net rentable square feet as of June 30, 2003. The increase in our portfolio reflects the acquisition of nine properties with an aggregate of approximately 2.3 million net rentable square feet. 
 
Total revenues increased $10,733,000, or 34.8%, to $41,570,000 for the six months ended June 30, 2004 compared to $30,837,000 for the six months ended June 30, 2003. Rental revenue increased $12,163,000, or 54.5%, to $34,461,000 for the six months ended June 30, 2004 compared to $22,298,000 for the six months 
 
56 

Table of Contents
ended June 30, 2003. Revenues from tenant reimbursements increased $1,080,000, or 25.0%, to $5,397,000 for the six months ended June 30, 2004 compared to $4,317,000 for the six months ended June 30, 2003. The increase in rental and tenant reimbursement revenues was primarily due to the properties added to our portfolio since June 30, 2003. The decrease in other revenue of $2,510,000, or 59.5%, to $1,712,000 for the six months ended June 30, 2004 compared to $4,222,000 for the six months ended June 30, 2003 was primarily due to a decrease in early lease termination fees. 
 
Total expenses increased $13,406,000, or 61.9%, to $35,069,000 for the six months ended June 30, 2004 compared to $21,663,000 for the six months ended June 30, 2003. The increase in total expenses was primarily due to the properties added to our portfolio since June 30, 2003. The increase in total expenses includes an increase in interest expense of $3,779,000 to $7,878,000 for the six months ended June 30, 2004 compared to $4,099,000 for the six months ended June 30, 2003 associated with new mortgage and other secured debt incurred in connection with the properties added to our portfolio. The increase in total expenses also includes an increase in other expenses of $60,000, or 2.4%, to $2,540,000 for the six months ended June 30, 2004 compared to $2,480,000 for the six months ended June 30, 2003. Other expenses are primarily comprised of write-offs of the carrying amounts for deferred tenant improvements, acquired in place lease value and acquired above and below market lease values as a result of the early termination of tenant leases. The total amount of such write-offs for the six months ended June 30, 2004 is comparable to the total for the six months ended June 30, 2003 despite the decrease in lease termination revenue primarily due to the termination of a lease during the six months ended June 30, 2004 for which there were no termination fees. During the six months ended June 30, 2004 and 2003, the asset management fee to a related party remained constant as this fee was based on a fixed percentage of capital commitments by the investors in GI Partners, a portion of which have been allocated to the Digital Realty Predecessor. 
 
Comparison of Year ended December 31, 2003 to Year ended December 31, 2002 
 
As of December 31, 2003, our portfolio was comprised of 13 properties with an aggregate of approximately 2.8 million net rentable square feet compared to a portfolio comprised of five properties with an aggregate of approximately 1.1 million net rentable square feet as of December 31, 2002. The increase in our portfolio reflects the acquisition of eight properties with an aggregate of approximately 1.6 million net rentable square feet. 
 
Total revenue increased $37,533,000, or 146.9%, to $63,088,000 for the year ended December 31, 2003 compared to $25,555,000 for the year ended December 31, 2002. Rental revenue increased $28,896,000, or 136.3%, to $50,099,000 for the year ended December 31, 2003 compared to $21,203,000 for the year ended December 31, 2002. Revenues from tenant reimbursements increased $4,767,000, or 122.4%, to $8,661,000 for the year ended December 31, 2003 compared to $3,894,000 for the year ended December 31, 2002. The increase in rental and tenant reimbursement revenues was primarily due to the properties added to our portfolio during the latter part of 2002 and the year ended December 31, 2003. Other revenues increased $3,870,000 to $4,328,000 for the year ended December 31, 2003 compared to $458,000 for the year ended December 31, 2002. This increase was primarily due to an early lease termination fee recognized during the year ended December 31, 2003. 
 
Total expenses increased $20,871,000, or 82.1%, to $46,297,000 for the year ended December 31, 2003 compared to $25,426,000 for the year ended December 31, 2002. The increase was primarily due to the increase in expenses related to properties added to our portfolio during the latter part of 2002 and the year ended December 31, 2003. The increase in total expenses includes an increase in interest expense of $4,842,000 to $10,091,000 for the year ended December 31, 2003 compared to $5,249,000 for the year ended December 31, 2002 associated with new mortgage and other secured debt incurred in connection with the properties in our portfolio. Other expenses of $2,459,000 and $1,249,000 for the years ended December 31, 2003 and 2002, respectively, primarily consist of write-offs of the carrying amounts for deferred tenant improvements, acquired in place lease value and acquired above and below market lease values as a result of the early termination of tenant leases in each year. During the year ended December 31, 2003 and 2002, the asset management fee to a 
 
57 

Table of Contents
related party remained constant as this fee was based on a fixed percentage of capital commitments by the investors in GI Partners, a portion of which have been allocated to the Digital Realty Predecessor. 
 
Comparison of Year Ended December 31, 2002 to the Period from February 28, 2001 (inception) through December 31, 2001 
 
Our predecessor acquired the first property in our portfolio in January 2002. As of December 31, 2002, our portfolio was comprised of five properties generating total revenues of $25,555,000 for the year then ended. Our revenues of $12,000 for the year ended December 31, 2001 consisted of interest income. 
 
Total expenses increased $22,656,000 to $25,426,000 for the year ended December 31, 2002 primarily due to the expenses incurred in connection with the new properties added to our portfolio. Total expenses of $2,770,000 for the period from February 28, 2001 (inception) through December 31, 2001 primarily consisted of the asset management fee to a related party that were based on a fixed percentage of capital commitments of the investors in GI Partners, a portion of which have been allocated to the Digital Realty Predecessor. 
 
Pro Forma Operating Results 
 
Our pro forma condensed consolidated statements of operations reflect the real estate, other assets and liabilities contributed to us by GI Partners in exchange for limited partnership units in our operating partnership, which will be accounted for as a reorganization of entities under common control. Accordingly, the assets and liabilities assumed will be recorded at the Digital Realty Predecessor’s historical cost. Expenses such as depreciation and amortization included in our pro forma operating results are based on the Digital Realty Predecessor’s historical costs of the related contributed assets. In addition, the ownership interests in 200 Paul Avenue and 1100 Space Park Drive to be contributed to us by third parties and the 10% minority interest in Univision Tower to be contributed to us by our joint venture partner will be accounted for under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed. 
 
The pro forma adjustments reflect a reclassification of asset management fees to general and administrative expenses and removal of the asset manager’s estimated profit included in these fees. This adjustment reflects that asset management fees will not be payable subsequent to the completion of this offering and the asset management fees incurred historically will be replaced with direct payments of compensation expense, rent and other general and administrative expenses. 
 
Comparison of Pro Forma Six Months Ended June 30, 2004 to Historical Six Months Ended June 30, 2004 
 
The pro forma condensed consolidated statement of operations for the six months ended June 30, 2004 is presented as if this offering, the formation transactions, the exercise of our option to acquire Carrier Center, the acquisitions of 100 Technology Center Drive, Siemens Building, Savvis Data Center, Comverse Technology Building, AboveNet Data Center, Webb at LBJ, 200 Paul Avenue, 1100 Space Park Drive and the acquisition of a 75% interest in the eBay Data Center, which along with Carrier Center are collectively referred to below as the 2004 properties, and the purchase of the remaining 25% interest in the eBay Data Center from a third party, all had occurred on January 1, 2004. In addition, the pro forma statement reflects the effects of acquisition of the all of the minority interests in Univision Tower held by a joint venture partner in exchange for units in our operating partnership upon completion of this offering. 
 
The consolidation of the operating results of the 2004 properties in our pro forma income statement for the six months ended June 30, 2004 resulted in significant increases in various components of our statement of operations. In addition, our pro forma adjustments also reflect significant increases in general and administrative expenses largely as a result of compensation expense related to awards of fully-vested long-term incentive units to be granted in connection with this offering and the formation transactions to certain employees and our Executive Chairman. See “Management—2004 Incentive Award Plan” and “—Employment Agreements.” This 
 
58 

Table of Contents
increase is partially offset by a significant increase in net income related to acquisitions of the 2004 properties. The net effect of all of our pro forma adjustments is a reduction in our net income to a net loss on a pro forma basis. 
 
The components of the significant changes that would have been reflected in our financial statements on a pro forma basis for the six months ended June 30, 2004 compared to the historical results are as follows: 
 
On a pro forma basis, total revenues would have increased $32,478,000, or 78.1%, to $74,048,000 for the six months ended June 30, 2004 compared to $41,570,000 reported historically for the same period. This increase is primarily the result of increases in rental revenue and tenant reimbursements resulting from the consolidation of the 2004 properties. 
 
On a pro forma basis, total expenses would have increased $48,482,000, or 138.3%, to $83,551,000 for the six months ended June 30, 2004 compared to $35,069,000 reported historically for the same period. The increase in pro forma total expenses reflects significant increases resulting from acquiring the 2004 properties. Pro forma interest expense reflects a net increase of $6,487,000, or 82.3%, resulting from increases in indebtedness resulting from acquisition of the 2004 properties and borrowings under our new secured debt partially offset by decreases resulting from repayment of mortgage, mezzanine and bridge loans and advances allocated to us under GI Partners’ line of credit. Pro forma total expenses also reflect $22,517,000 of additional general and administrative expenses that is comprised of increases in compensation expense resulting from awards of stock options which vest over a four-year period and fully-vested long-term incentive units, to be granted in connection with this offering and the formation transactions to certain employees and our Executive Chairman. 
 
On a pro forma basis, minority interests for the six months ended June 30, 2004 decreased to a minority deficit of $(5,918,000) compared to a deficit of $(56,000) of minority interests reported historically for the same period. The pro forma minority interests primarily consist of an allocation of the pro forma loss before minority interests of our operating partnership as a result of issuing limited partnership units in our operating partnership to GI Partners and the third parties, and the historical minority interests related to our joint venture partners’ share of our historical net income. 
 
Comparison of Pro Forma Year Ended December 31, 2003 to Historical Year Ended December 31, 2003 
 
The pro forma condensed consolidated statement of operations for the year ended December 31, 2003 is presented as if this offering, the formation transactions, the acquisitions of the 2004 properties, the purchase of the remaining 25% interest in the eBay Data Center property from a third party and the acquisitions of Ardenwood Corporate Park, VarTec Building, ASM Lithography Facility, AT&T Web Hosting Facility, Brea Data Center, Granite Tower, Maxtor Manufacturing Facility and Stanford Place II, which are collectively referred to as the 2003 properties, all had occurred on January 1, 2003. In addition, the pro forma statement reflects the effects of acquisition of the all of the minority interests in Univision Tower held by a joint venture partner in exchange for units in our operating partnership upon completion of this offering. 
 
The consolidation of the operating results of the 2003 properties and the 2004 properties in our pro forma income statement for the year ended December 31, 2003 resulted in significant increases in various components of our statement of operations. In addition, our pro forma adjustments also reflect significant increases in general and administrative expenses largely as a result of increased compensation expense related to awards of fully-vested long-term incentive units to be granted in connection with this offering and the formation transactions to certain employees and our Executive Chairman. See “Management—2004 Incentive Award Plan” and “—Employment Agreements.” The net effect of all of our pro forma adjustments is a reduction in our net income, primarily as a result of additional pro forma general and administrative expenses, which is partially offset by a significant increase in net income related to acquisitions of the 2003 properties and the 2004 properties. 
 
59 

Table of Contents
The components of the significant changes that would have been reflected in our financial statements on a pro forma basis for the year ended December 31, 2003 compared to the historical results are as follows: 
 
On a pro forma basis, total revenues would have increased $84,097,000, or 133.3%, to $147,185,000 for the year ended December 31, 2003 compared to $63,088,000 reported historically for the same period. This increase is primarily the result of increases in rental revenue and tenant reimbursements resulting from the consolidation of the 2003 properties and the 2004 properties. 
 
On a pro forma basis, total expenses would have increased $92,517,000, or 199.8%, to $138,814,000 for the year ended December 31, 2003 compared to $46,297,000 reported historically for the same period. The increase in pro forma total expenses reflects significant increases resulting from the consolidation of the 2003 properties and the 2004 properties. Pro forma interest expense reflects a net increase of $18,632,000, or 184.6%, resulting from increases in indebtedness resulting from the acquisition of the 2004 properties and borrowings under our new secured debt and a full year of interest related to indebtedness for the 2003 properties partially offset by decreases in indebtedness resulting from repayment of mortgage and mezzanine loans and advances allocated to us under GI Partners’ line of credit. Pro forma total expenses also reflect $22,676,000 of additional general and administrative expenses that is comprised of increases in compensation expense resulting from awards of stock options which vest over a four-year period, and fully-vested long-term incentive units, to be granted in connection with this offering and the formation transactions to certain employees and our Executive Chairman. 
 
On a pro forma basis, minority interests for the year ended December 31, 2003 increased to $5,208,000 compared to $149,000 of minority interests reported historically for the same period. The pro forma minority interests consist of an allocation of the pro forma loss before minority interests of our operating partnership as a result of issuing limited partnership units in our operating partnership to GI Partners and the third parties, and the historical minority interests related to our joint venture partners’ share of our historical net income. 
 
Liquidity and Capital Resources 
 
Analysis of Liquidity and Capital Resources 
 
We believe that this offering and the formation transactions will improve our financial performance through changes in our capital structure, including a reduction in our leverage. After completion of this offering and consummation of the formation transactions, we expect our ratio of debt to total market capitalization to be approximately 37.6%. We intend to use the unsecured credit facility to, among other things, finance the acquisition of other properties (including the right of first offer properties, although we do not presently anticipate exercising these rights in the near future based on current market and property conditions), to provide funds for tenant improvements and capital expenditures, and to provide for working capital and other corporate purposes. 
 
Our short term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, dividend payments to our stockholders required to maintain our REIT status, capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash, the proceeds of this offering and, if necessary, by drawing upon our unsecured credit facility. 
 
Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. For the years ended December 31, 2002 and December 31, 2003 and for the six months ended June 30, 2004, our weighted average annual tenant improvement and leasing commission costs were $17.13 per square foot of leased space. As of June 30, 2004, we have commitments under leases in effect for $2.7 million of tenant improvement costs and leasing commissions, including $2.2 million during the remainder of 2004, $250,000 in 2005 and $250,000 in 2006. We expect the cost of recurring capital improvements for our properties to be approximately $890,000 annually, based in part upon the weighted average annual capital expenditure of $0.16 per square foot for the years ended December 31, 2002 and December 31, 2003 and the six 
 
60 

Table of Contents
months ended June 30, 2004. Our nonrecurring capital expenditures are discretionary and vary substantially from period to period. Although we currently have no contractual commitments for the remainder of 2004, we expect nonrecurring capital expenditures at our properties will be approximately $1.0 million. We currently own approximately 181,000 net rentable square feet of data center space with extensive installed tenant improvements that we may convert to multi-tenant collocation use during the next two years rather than lease such space to large single tenants. We estimate that the cost to convert this space will be approximately $10 per square foot, on average. We may also spend additional amounts in the next two years related to the build-out of unimproved space for collocation use, depending on tenant demand; however, we currently have no commitments to do so. The cost to build out such unimproved space will vary based on the size and condition of the space. 
 
We expect to meet our long-term liquidity requirements to pay for scheduled debt maturities and to fund property acquisitions and non-recurring capital improvements with net cash from operations, long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property acquisitions and non-recurring capital improvements using our unsecured credit facility pending permanent financing. 
 
Although we do not presently intend to meet our long-term or short-term liquidity needs through the sale of properties, were we to dispose of the 200 Paul Avenue and 1100 Space Park Drive properties we would be required to indemnify the contributing parties against adverse tax consequences until the earlier of the ninth anniversary of the completion of this offering and the date on which these contributors hold less than 25% of the units issued to them in the formation transactions. See “Certain Relationships and Related Transactions—200 Paul Avenue and 1100 Space Park Drive Contribution Agreement.” 
 
If the initial public offering price is at the low end of the pricing range indicated on the front cover of this prospectus, we intend to use remaining proceeds from our secured indebtedness and borrow approximately an additional $10.6 million under our unsecured credit facility. 
 
Commitments and Contingencies 
 
Upon completion of this offering and consummation of the formation transactions, we will have long-term indebtedness totaling $478.6 million. The following table summarizes our contractual obligations as of June 30, 2004, including the maturities and scheduled principal repayments of our pro forma secured debt, and provides information about the commitments due in connection with our ground lease, tenant improvement and leasing commission obligations during the remainder of 2004 and for each of the five years thereafter (in thousands): 
 
The following table outlines the timing of required payments related to our commitments as of June 30, 2004 (in thousands): 

Obligation
	 	Through
Remainder of
2004
	 	2005
	 	2006
	 	2007
	 	2008
	 	2009
	 	Thereafter
	 	Total
	
Long-term debt	 	$	1,799	 	$	16,176	 	$	142,425	 	$	30,200	 	$	6,150	 	$	138,621	 	$	143,207	 	$	478,578	
Ground lease(1)	 	 	121	 	 	241	 	 	241	 	 	241	 	 	241	 	 	241	 	 	9,581	 	 	10,907	
Tenant improvements and leasing commissions	 	 	2,214	 	 	250	 	 	250	 	 	—  	 	 	—  	 	 	—  	 	 	—  	 	 	2,714	
 	 			 			 			 			 			 			 			 			
Total	 	$	4,134	 	$	16,667	 	$	142,916	 	$	30,441	 	$	6,391	 	$	138,862	 	$	152,788	 	$	492,199	

(1)	 	After February 2036, rent for the remaining term of the ASM Lithography ground lease will be determined based on a fair market value appraisal of the asset and, as a result, is excluded from the above information. 	
 
61 

Table of Contents
Consolidated Indebtedness to be Outstanding After this Offering 
 
Upon completion of this offering and consummation of the formation transactions, we expect to have approximately $478.6 million of outstanding consolidated long-term debt as set forth in the table below. A total of $1.5 million of scheduled loan principal payments will be due on this indebtedness from the estimated completion date of this offering through December 31, 2004. We expect our ratio of debt to total market capitalization to be approximately 37.6%. Upon completion of this offering, we expect that approximately $214.5 million of our outstanding long-term debt will be variable rate debt, however, we expect to enter into interest rate swap agreements for $140.3 million of our variable rate debt. As a result, we expect that approximately 84.5% of our total indebtedness, upon completion of the offering, will be subject to fixed interest rates. 
 
The following table sets forth information with respect to the indebtedness that we expect will be outstanding after this offering and the formation transactions on a pro forma basis as of June 30, 2004, but does not give effect to interest rate swap agreements that we expect to enter into in connection with this offering (in thousands). 

Properties
	 	Interest Rate
	 	Principal
Amount
	 	 	Annual
Debt
Service(1)
	 	Maturity Date
	 	Balance at
Maturity(2)
	
100 Technology Center Drive—Mortgage	 	LIBOR + 1.70%   	 	$	20,000	 	 	$	746	 	Apr. 1, 2009	 	$	20,000	
200 Paul Avenue—Mortgage	 	LIBOR + 3.18%(3)	 	 	46,908	 	 	 	4,196	 	Jul. 1, 2006(4)	 	 	43,794	
Ardenwood Corporate Park, NTT/Verio Premier Data Center, VarTec Building—Mortgage Note	 	LIBOR + 1.59%   	 	 	43,000	 	 	 	1,476	 	Aug. 9, 2006(5)	 	 	43,000	
Ardenwood Corporate Park, NTT/Verio Premier Data Center, VarTec Building—Mezzanine	 	LIBOR + 5.75%   	 	 	22,000	 	 	 	1,670	 	Aug. 9, 2006(5)	 	 	22,000	
AT&T Web Hosting Facility—Mortgage	 	LIBOR + 1.85%   	 	 	8,775	 	 	 	340	 	Dec. 1, 2006(4)	 	 	8,775	
Camperdown House—Mortgage	 	6.85%   	 	 	23,079	(6)	 	 	3,130	 	Oct. 31, 2009	 	 	14,040	
Carrier Center—Mortgage(7)	 	LIBOR + 4.25%(8)	 	 	26,221	 	 	 	2,449	 	Oct. 4, 2007	 	 	24,057	
Granite Tower—Mortgage	 	LIBOR + 1.20%   	 	 	21,645	 	 	 	922	 	Jan. 1, 2009	 	 	19,530	
Maxtor Manufacturing Facility—Mortgage	 	LIBOR + 2.25%   	 	 	18,000	 	 	 	1,011	 	Dec. 31, 2006(4)	 	 	17,186	
Stanford Place II—Mortgage	 	5.14%   	 	 	26,000	 	 	 	1,336	 	Jan. 10, 2009	 	 	26,000	
Univision Tower—Mortgage(9)	 	6.09%   	 	 	60,000	 	 	 	3,995	 	Nov. 4, 2009	 	 	55,973	
eBay Bridge Loan	 	LIBOR + 2.00%   	 	 	7,950	 	 	 	305	 	Aug. 11, 2005	 	 	7,950	
New Mortgage Debt(10)	 	5.79%   	 	 	155,000	 	 	 	10,902	 	Nov. 30, 2014	 	 	129,263	
New Unsecured Credit Facility(11)	 	LIBOR + 1.75%   	 	 	—  	 	 	 	—  	 	Nov. 30, 2007	 	 	—  	
 	 	 	 				 			 	 	 			
Total	 	 	 	$	478,578	 	 	$	32,478	 	 	 	$	431,568	

  (1)	 	Annual debt service for floating rate loans is calculated based on the 1-month, 3-month and 6-month LIBOR rates at October 1, 2004, which were 1.84%, 2.03% and 2.20%, respectively. 	
  (2)	 	Assuming no payment has been made on the principal in advance of its due date. 	
  (3)	 	Reflects the weighted average interest rate as of the expected assumption date. 	
  (4)	 	Two one-year extensions are available. 	
  (5)	 	A 13-month extension and a one-year extension are available. 	
  (6)	 	Based on our hedged exchange rate of $1.6083 to £1.00. 	
  (7)	 	Assuming the refinancing of the outstanding balances of a mortgage loan and a mezzanine loan pursuant to a letter of commitment from the lender under these loans. The letter of commitment provides for a 3-year term and an interest rate based on LIBOR (subject to a 2.5% floor) plus 4.25% per annum, and a one-year extension. 	
  (8)	 	Subject to a 2.5% LIBOR floor. 	
  (9)	 	Assuming the refinancing of the outstanding balances of a mortgage loan and a mezzanine loan pursuant to a letter of commitment from a lender. 	
(10)	 	This amount represents new mortgage debt that we intend to incur in connection with this offering. We will use our fee simple interests in 36 Northeast Second Street, Brea Data Center, Comverse Technology Building, Hudson Corporate Center, Siemens Building, and Webb at LBJ to secure new mortgage loans. 	
(11)	 	The interest rate under our new unsecured credit facility will equal LIBOR plus a margin of between 1.375% to 1.750% based on our leverage ratio. 	
 
62 

Table of Contents
Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering 
 
100 Technology Center Drive—Mortgage Indebtedness.    The subsidiary that directly holds the fee interests in 100 Technology Center Drive is the borrower under a $20.0 million mortgage loan with Transamerica Occidental Life Insurance Company, as lender. The loan is required to be secured by: 
 
 	•	 	a mortgage, security agreement and fixture filing conveying 100 Technology Center and granting a security interest in certain fixtures and personal property; and 	
 
 	•	 	an absolute assignment of leases and rents, assigning any interest in all present and future leases of all or any portion of the property encumbered by the mortgage and all of its right and title to, and interest in, the leases, including all rights under the leases, all benefits to be derived from them and all rents. 	
 
The maturity date for this mortgage loan is April 1, 2009. The mortgage loan bears interest at a rate of 3-month LIBOR plus 1.70% per annum and requires monthly interest-only payments until the maturity date. During the first 24 full months of the loan, which will expire on March 31, 2006, the borrower may not prepay the loan. Thereafter the borrower may prepay the loan upon not less than sixty days’ prior written notice. Any such voluntary prepayments must be for at least $500,000. The term loan contains affirmative covenants such as financial reporting, and negative covenants, including, among others, certain restrictions or prohibitions on the borrower’s ability to merge into or consolidate with any other person, dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets, change its legal structure or organizational documents, own any subsidiary, sell or transfer any interest in the borrower or the property, modify or terminate any leases, commingle its assets, or create or incur additional liens or indebtedness. A one-time transfer or sale of the property is allowed upon the lender’s review and approval of customary information regarding the transaction and the transferee, assumption of the loan by the transferee, and payment of the lender’s expenses and an assumption fee of 1% of the outstanding balance of the loan. The loan is nonrecourse to the borrower, subject to certain customary recourse carveouts. Upon completion of this offering, our operating partnership will provide an unsecured environmental indemnity and guarantee the recourse carveouts under this loan. 
 
200 Paul Avenue—Mortgage Indebtedness.    The subsidiary that directly holds the fee interests in 200 Paul Avenue is the borrower under a $46.9 million mortgage loan comprised of two notes with Greenwich Capital Financial Products, Inc., as lender. The mortgage loan is required to be secured by: 
 
 	•	 	a first priority deed of trust, assignment of rents and security agreement on 200 Paul Avenue, all buildings and improvements, water, water rights, all fixtures, machinery, equipment and other assets, rights to insurance proceeds, together with all interest in any leases and all rents and profits arising from the property, reserve, deposit or escrow accounts, and contracts and agreements, intellectual property, and any and all proceeds from any of the foregoing; and 	
 
 	•	 	an absolute assignment of leases and rents, assigning any interest in all present and future leases of all or any portion of the property encumbered by the mortgage and all of its right and title to, and interest in, the leases, including all rights under the leases, all benefits to be derived from them and all rents. 	
 
The maturity date for this mortgage loan is July 1, 2006, which date may be extended for up to two additional 12 month periods upon the request of the borrower and satisfaction of certain requirements. The first note, with a balance of $45.0 million, bears interest at a rate of 1-month LIBOR plus 3% during the current term and the second note, with an estimated $1.9 million balance upon completion of this offering, bears interest at a rate of 1-month LIBOR plus 7% during the current term. The first note requires monthly payments of principal and interest commencing in November 2005. The second note requires monthly payments of principal and interest until the maturity date. The loan may be repaid in whole or in part at any time upon 30 to 60 days’ prior written notice. Prepayment of the $45.0 million note is subject to a prepayment penalty of 1% of the outstanding principal balance (unless prepaid or repaid in full with loan proceeds from a loan made by the lender during the final 90 days of the initial term, plus the actual costs and expenses of the lender incurred in liquidating or reducing any Eurodollar or LIBOR based investment or obligation entered into by the lender to fund all or any 
 
63 

Table of Contents
portion of the loan or to provide for or protect the interest rate of the loan. Prepayment of the second note is subject to a prepayment penalty equaling the actual costs and expenses of the lender incurred in liquidating or reducing any Eurodollar or LIBOR based investment or obligation entered into by the lender to fund any or all portion of the loan or to provide for or protect the interest rate of the loan. If the loan is repaid or prepaid in full during the final 30 days of the initial term (with other than lender-loaned funds provided to refinance the loan), the prepayment penalty on the first note is reduced to 0.375% of the outstanding principal balance plus the aforementioned lender costs. The mortgage loan contains affirmative covenants such as financial reporting and maintenance of reserve accounts, and negative covenants, including, among others, limitations on changes to legal structure or organizational documents, ownership of subsidiaries, or creation or incurrence of additional liens or indebtedness. The loan is nonrecourse to the borrower, subject to certain customary recourse carveouts. Upon completion of this offering, our operating partnership will provide an unsecured environmental indemnity and guarantee the recourse carveouts under this loan. The borrower was required to enter into an interest rate cap agreement pursuant to the loan that limits the interest rate to 7.25% per annum during the term of this loan. 
 
Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building—Mortgage Indebtedness.    The subsidiary that directly holds the fee interests in Ardenwood Corporate Park, the NTT/Verio Premier Data Center and the VarTec Building is the borrower under a $43.0 million mortgage loan with German American Capital Corporation as lender. The mortgage loan is required to be secured by: 
 
 	•	 	a first mortgage lien on Ardenwood Corporate Park, the NTT/Verio Premier Data Center and the VarTec Building and related improvements, fixtures and real property rights; 	
 
 	•	 	a general first lien on all related personal property; 	
 
 	•	 	a general first lien on all related accounts and intangibles; 	
 
 	•	 	an assignment of leases, rents, security deposits and management agreements for such properties; and 	
 
 	•	 	all proceeds, products and profits from the foregoing. 	
 
The maturity date of the mortgage loan is August 9, 2006 with one 13 month and one one-year extension option. The mortgage loan bears interest at a rate of 1-month LIBOR plus approximately 1.59% per annum. The mortgage loan requires monthly interest-only payments until the maturity date. The borrower may not prepay the loan during a “lockout period” that ends on October 8, 2005. The borrower may prepay the loan without penalty on any monthly payment date after this lockout period with notice to lender of not less than 30 days and not more than 60 days. The loan contains affirmative covenants such as financial reporting and standard lease requirements and negative covenants, including, among others, certain restrictions on the borrower’s ability to create or incur additional liens or indebtedness or transfer the property or an interest in the property. In connection with the mortgage loan, the borrower is subject to a lockbox agreement and cash management provisions of the loan pursuant to which all income generated by the Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building properties is deposited directly into lockbox accounts and then swept into a cash management account for the benefit of the lender from which cash is distributed to us only after funding of tax, insurance, debt service, tenant improvement and leasing, and structural improvement reserve accounts and any payments then due under the Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building mezzanine loan. The loan is nonrecourse to the borrower, subject to certain customary recourse carveouts. Upon completion of this offering, we anticipate that our operating partnership will provide an unsecured environmental indemnity and guarantee the recourse carveouts under the loan. The borrower was required to enter into an interest rate cap agreement pursuant to the loan that limits the interest rate to 7.5% per annum in the term of this loan. 
 
Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building—Mezzanine Indebtedness.    The subsidiaries that directly hold the fee interests in Ardenwood Corporate Park, the NTT/Verio Premier Data Center and the VarTec Building are the borrowers under a $22.0 million mezzanine loan with German American Capital Corporation (c/o Deutsche Bank Securities, Inc.) as lender. The mezzanine loan is required to be secured by a first priority pledge of the direct and indirect beneficial interests in our subsidiary that 
 
64 

Table of Contents
is the mortgage borrower. The maturity date of the mezzanine loan is August 9, 2006 with one 13 month and one one-year extension option. The mezzanine loan bears interest at a rate of 1-month LIBOR plus 5.75% per annum. The mezzanine loan requires monthly interest-only payments until the maturity date. The borrower may not prepay the mezzanine loan during a “lockout period” that ends on October 8, 2005. The borrower may prepay the mezzanine loan without penalty on any monthly payment date after this lockout period with notice to lender of no less than 30 days and no more than 60 days. The mezzanine loan contains affirmative covenants such as financial reporting and standard lease requirements and negative covenants, including, among others, certain restrictions on the borrowers’ ability to create or incur additional liens or indebtedness or transfer the property or an interest in the property. In connection with the mezzanine loan, we are subject to a lockbox agreement and cash management provisions which operate in connection with the lockbox and cash management provisions under the Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building mortgage loan. Upon completion of this offering, we anticipate that our operating partnership will provide an unsecured environmental indemnity and guarantee the recourse carveouts under the loan. The borrower was required to enter into an interest rate cap agreement pursuant to the mezzanine loan that limits the interest rate to 7.5% per annum in the term of the mezzanine loan. 
 
AT&T Web Hosting Facility—Mortgage Indebtedness.    The subsidiary that directly holds the fee interests in the AT&T Web Hosting Facility is the borrower under an $8.8 million loan agreement with Jackson National Life Insurance Company, as lender. The loan is required to be secured by: 
 
 	•	 	a first mortgage deed to secure debt on the AT&T Web Hosting Facility; 	
 
 	•	 	a first priority assignment of all present and future leases, all guaranties thereof and all rents and other sums payable thereunder; and 	
 
 	•	 	a security interest in all related personal property, tangible and intangible, including bank accounts, accounts receivable, all escrow, impound or reserve accounts, and other intangible property. 	
 
The maturity date for this loan is December 1, 2006. The loan bears interest at a rate of 3-month LIBOR plus 1.85% per annum and requires monthly interest-only payments until the maturity date. The loan has two one-year extensions at our option, subject to meeting certain conditions and accepting a new floating interest rate based upon a spread to be determined at the time of the extension. During the first 12 months of the term, which will expire in November 2004, the borrower may not prepay the loan. During the second 12 months of the term, the borrower may prepay the loan, in full but not in part, upon 30 days’ written notice, with payment of a yield maintenance premium equal to 1% of the outstanding principal balance. During the third 12 months of the term and any extension periods, the borrower may prepay the loan, in full but not in part, without premium or penalty upon 30 days’ written notice. The loan contains affirmative covenants such as financial reporting and maintenance of certain escrow accounts, and negative covenants, including, among others, certain restrictions or prohibitions on the borrower’s ability to make cash distributions, sell or transfer an interest in the borrower, create or incur additional liens or indebtedness, and assign the loan. The loan is nonrecourse to the borrower, subject to certain recourse carveouts. 
 
Camperdown House—Mortgage Indebtedness.    The subsidiary that holds the fee interests in Camperdown House is the borrower under a £14.4 million (pound) mortgage loan with the Bank of Scotland as lender. 
 
The mortgage loan is required to be secured by: 
 
 	•	 	a first mortgage debenture on Camperdown House and related improvements, fixtures (including trade and tenant’s fixtures), plant and machinery and real property rights; 	
 
 	•	 	a general first lien on all belonging to the borrower; 	
 
 	•	 	a general first lien on all related accounts and intangibles; and 	
 
 	•	 	an assignment of all rental income for the property. 	
 
65 

Table of Contents
The maturity date of the mortgage loan is October 31, 2009. The mortgage loan bears interest at a rate of 6.845% per annum. The borrower bases quarterly principal and interest payments on a 10-year amortization schedule. The borrower may prepay the loan upon 10 days’ notice to the lender, subject to a prepayment penalty of one month’s interest until July 31, 2005 and without penalty thereafter. The loan contains affirmative covenants such as financial reporting and maintenance of certain coverage ratios, and negative covenants, including, among others, certain restrictions on the borrower’s ability to create or incur additional liens or indebtedness or transfer the property or an interest in the property. The borrower provides an environmental indemnity. 
 
Carrier Center—Letter of Commitment—Mortgage Indebtedness. Upon the exercise of the option to acquire the Carrier Center property, we will own the subsidiary that directly holds the fee interest in Carrier Center. We expect that upon the exercise of the option and pursuant to the terms of a letter of commitment with iStar Financial Inc., through which we intend to refinance the existing Carrier Center senior and mezzanine indebtedness, our wholly owned subsidiary will be the borrower under a new single mortgage loan in an original principal amount of approximately $26.2 million. The new mortgage loan will be required to be secured by a first mortgage deed of trust on Carrier Center and a first priority security interest in all of the ownership interest in the borrower and in all assets of the borrower. The letter of commitment provides for a three-year term and an interest rate based on LIBOR (subject to a 2.5% LIBOR floor) plus 4.25% per annum. The borrower will have the option of extending the term of the loan by one year subject to a fee equal to 0.50% of the then outstanding principal balance. The mortgage loan will not be prepayable until after the first anniversary of its closing and thereafter will be prepayable in whole or in part with not less that 30 days’ notice. The loan will require monthly interest and principal payments until the maturity date with a balloon payment due at maturity. The loan will be subject to affirmative covenants such as financial reporting and negative covenants, including, among others, certain restrictions on the borrower’s ability to create or incur additional liens or indebtedness or transfer the property or any interest in the property. In connection with the mortgage loan, the borrower will be subject to a lockbox arrangement and cash management provisions of the loan pursuant to which income generated by the Carrier Center property will be swept into a cash management account for the benefit of the lender from which cash will be distributed to us only after satisfying debt, operating and other reserve cash requirements. The loan will be subject to an unsecured environmental indemnity and a guaranty of certain of the obligations of the borrower. The borrower will be required to enter into an interest rate cap agreement if the LIBOR rate is at any time equal to or greater than 4.5%. 
 
Granite Tower—Mortgage Indebtedness.    The subsidiary that directly holds the fee interests in the Granite Tower is the borrower under a $21.6 million mortgage note issued to Allstate Life Insurance Company, as lender. The mortgage loan is required to be secured by: 
 
 	•	 	a first mortgage lien on Granite Tower and related improvements, fixtures and real property rights; 	
 
 	•	 	a general first lien on all related personal property; 	
 
 	•	 	a general first lien on all related accounts, books and records and intangibles; 	
 
 	•	 	an assignment of leases, rents, security deposits and contracts for such properties; and 	
 
 	•	 	all proceeds, products and profits from the foregoing. 	
 
The maturity date of the mortgage note is January 1, 2009. The mortgage note bears interest at a rate of 3-month LIBOR plus 1.20% per annum. Beginning on January 1, 2006 with 60 days’ prior notice to the lender, the borrower has the option of converting the variable rate into a fixed rate determined by the lender subject to a conversion fee of 1% of the outstanding principal balance. The mortgage note requires monthly interest-only payments until February 1, 2005 when principal and interest will be due monthly until the maturity date. The borrower may not prepay the loan during a “lockout period” that ends on January 1, 2006. The borrower may prepay the loan in full on any quarterly payment date after this lockout period with notice to lender of not less than 30 days subject to a prepayment penalty of 1% of the outstanding principal balance, or if the loan has been 
 
66 

Table of Contents
converted to a fixed rate, the greater of 1% of the outstanding principal balance or a yield maintenance payment. The loan contains affirmative covenants such as financial reporting requirements and negative covenants, including, among others, certain prohibitions or restrictions on the borrower’s ability to create or incur additional liens or indebtedness or transfer the property or an interest in the property. The loan is nonrecourse to the borrower, subject to certain recourse carveouts. Upon completion of this offering, the borrower and one of our subsidiaries that indirectly owns an interest in the property entity will continue to provide an unsecured environmental indemnity and the subsidiary will guarantee recourse carveouts under the loan. 
 
Maxtor Manufacturing Facility—Mortgage Indebtedness.    Our subsidiary that will own the fee interest in the Maxtor Manufacturing Facility is the borrower under an $18.0 million mortgage loan agreement with Fleet National Bank, as agent and lender. The mortgage loan is required to be secured by: 
 
 	•	 	a first priority deed of trust, security agreement and fixture filing on the Maxtor Manufacturing Facility, all land, improvements, furniture, fixtures, goods, equipment and other assets, all insurance proceeds and other proceeds therefrom and all other assets of the borrower; 	
 
 	•	 	a first priority assignment of leases and rents, and all income and profits to be derived from the operation and leasing of the property; 	
 
 	•	 	a first priority security interest in all tax, collateral and reserve accounts and all tenant letters of credit; and 	
 
 	•	 	a first priority assignment of any interest rate protection agreements entered into by the borrower. 	
 
The maturity date for this mortgage loan is December 31, 2006. The mortgage loan bears interest at a rate of 6-month LIBOR plus 2.25% per annum and requires monthly interest-only payments through December 31, 2004, and thereafter also requires monthly payments of principal. In the event that LIBOR rate loans are not available, interest will be calculated at the lender’s prime rate. The mortgage loan has two one-year extensions at our option, subject to meeting certain conditions and the payment of an extension fee in the amount of 0.35% of the then outstanding loan balance. The borrower may prepay the mortgage loan upon three business days’ notice, provided that we will be required to pay a yield maintenance fee to reimburse the lender for any losses or expenses. The mortgage loan contains affirmative covenants such as financial reporting and maintenance of certain coverage ratios, and negative covenants, including, among others, certain restrictions or prohibitions on the borrower’s ability to create or incur additional liens or indebtedness, transfer the property or an interest in the property and merge or consolidate with or into, convey, transfer or dispose of all or substantially all of its assets to or in favor of any other person. In the event that the debt service coverage ratio falls below certain thresholds, the borrower may be required to either pay down the loan or fund a cash reserve account. 
 
Stanford Place II—Mortgage Indebtedness.    The subsidiary holding a fee interest in Stanford Place II is the borrower under a $23.4 million mortgage note issued to Principal Life Insurance Company, as lender, and a $2.6 million mortgage note issued to PFG CTL Mortgage, LLC, as lender. The mortgage loans are required to be secured by: 
 
 	•	 	a first priority deed of trust and security agreement on Stanford Place II and any right, title and interest therein and to the land, real property rights, buildings and improvements including their names and the right to manage and operate them, fixtures, personal property of the borrower used in the operation of the premises, insurance proceeds, settlement awards and damage claims, and any rights to strips of land adjacent to and used in connection with the premises and adjoining ways, streets, sidewalks and alleys; 	
 
 	•	 	an assignment of leases and rents; and 	
 
 	•	 	a $450,000 letter of credit issued pursuant to a property reserves agreement. 	
 
The maturity date for these mortgage notes is January 10, 2009. These notes bear interest at a rate of 5.14% per annum and require monthly interest-only payments. The borrower has the right upon 30 days’ written notice 
 
67 

Table of Contents
to each lender to pay both loans in full with a prepayment fee equal to the greater of 1% of the principal amount or an amount resulting from a reinvestment yield analysis. The note may be prepaid without such prepayment fee during the last 90 days prior to the maturity date. The security agreement contains negative covenants, including, among others, certain restrictions or prohibitions on the borrower’s ability to create or incur additional liens or indebtedness, transfer the property or an interest in the property and merge or consolidate with or into, convey, transfer or dispose of all or substantially all of its assets to or in favor of any other person. The loan is nonrecourse to the borrower, subject to certain recourse carveouts. The subsidiary borrower provides an unsecured environmental indemnity. Upon completion of this offering, we anticipate that our operating partnership will guarantee the subsidiary borrower’s obligations under the environmental indemnity and the recourse carveouts under the loan. 
 
Univision Tower—Letter of Commitment—Mortgage Indebtedness.    The subsidiary that directly holds the fee interests in Univision Tower has entered into a letter of commitment with Countrywide Commercial Real Estate Finance, Inc., pursuant to which we intend to refinance the existing mortgage indebtedness securing the Univision Tower, with a new single mortgage in an original principal amount of approximately $60.0 million. The new mortgage loan will be required to be secured by a first priority mortgage/deed of trust on Univision Tower, a first priority assignment of leases and rents with respect to Univision Tower and a first priority security interest in all other property and assets of the borrower. The letter of commitment provides for a five-year term and a fixed interest rate equal to 265 basis points over the most comparable U.S. Treasury rate. The mortgage loan will not be prepayable in whole or in part until any time during the final three months of the term of the loan. The loan will require monthly payments calculated using the interest rate and a 30-year amortization schedule. The loan will be subject to affirmative covenants such as financial reporting and negative covenants, including, among others, certain restrictions on the borrower’s ability to create or incur additional liens or indebtedness or transfer the property or any interest in the property. In the event of a default or a decline in the debt service ratio below a specified level, income generated by the Univision Tower property will be swept into a cash management account for the benefit of the lender from which cash will be distributed to us only after satisfying debt, operating and other reserve cash requirements. The loan will be nonrecourse to the borrower, subject to certain recourse carveouts. The subsidiary borrower under this loan will be subject to an unsecured environmental indemnity. We anticipate that our operating partnership will guarantee the subsidiary borrower’s obligations under the environmental indemnity and the recourse obligations under the loan. 
 
Comverse Technology Building, Hudson Corporate Center, Webb at LBJ, 36 Northeast Second Street, Siemens Building and Brea Data Center—Mortgage Indebtedness.    The subsidiaries that directly hold the fee interests in Comverse Technology Building, Hudson Corporate Center, Webb at LBJ, 36 Northeast Second Street, Siemens Building and Brea Data Center will be borrowers under six separate loans in an aggregate principal amount up to $155 million with Citigroup Global Markets Realty Corp. as lender. The loans will be cross-defaulted and cross-collateralized. The mortgage loans will be required to be secured by: 
 
 	•	 	a first mortgage lien on Comverse Technology Building, Hudson Corporate Center, Webb at LBJ, 36 Northeast Second Street, Siemens Building and Brea Data Center and related improvements, fixtures and real property rights; 	
 
 	•	 	a general first lien on all related personal property; 	
 
 	•	 	a general first lien on all related accounts and intangibles; 	
 
 	•	 	an assignment of leases, rents, security deposits and contracts; and 	
 
 	•	 	all proceeds, products and profits from the foregoing. 	
 
Each of the mortgage loans will be for a ten-year term with an expected to maturity in November 2014. The mortgage loans are expected to bear an interest rate at a fixed rate based on the 10-year Treasury plus 1.05% per annum. The borrower may not prepay the mortgage loans until 60 days prior to the maturity date of such loan. Each mortgage loan will contain affirmative covenants, such as financial reporting and maintenance of the 
 
68 

Table of Contents
property, and negative covenants, including, among others, certain restrictions on the borrower’s ability to create or incur additional liens or indebtedness or transfer the property or interest in the property. In connection with the mortgage loans, the borrower will be subject to a lockbox arrangement and cash management provisions pursuant to which all income generated by the Comverse Technology Building, Hudson Corporate Center, Webb at LBJ, 36 Northeast Second Street, Siemens Building and Brea Data Center properties will be deposited directly into lockbox accounts and then swept into a cash management account for the benefit of the lender for which cash is distributed to us only after funding of debt service, taxes, insurance, tenant improvement and leasing, capital improvement, and maintenance reserve accounts. The loans are nonrecourse to the borrowers, subject to recourse carveouts. Upon completion of this offering, we anticipate that we and our operating partnership will provide on a joint and several basis unsecured environmental indemnity and guaranty of recourse carveouts under the loans. In addition, each borrower shall guaranty the obligations of our other borrowing subsidiaries under the mortgage loans. The mortgage loans may be securitized by the lender at its option. 
 
eBay Data Center—Bridge Loan.    The eBay Data Center will be subject to an $8.0 million secured bridge loan with Citigroup Global Markets Realty Corp. as lender and agent to certain other lenders. The bridge loan is required to be secured by: 
 
 	•	 	a first mortgage lien on eBay Data Center and related improvements, fixtures and real property rights; 	
 
 	•	 	a general first lien on all related personal property; 	
 
 	•	 	a general first lien on all related accounts and intangibles; 	
 
 	•	 	an assignment of leases, rents and contracts; and 	
 
 	•	 	all proceeds, products and profits from the foregoing. 	
 
Assuming the expected closing of our initial public offering in 2004, the maturity date of the loan will be August 11, 2005. The loan will bear interest at the one-month LIBOR plus 2.00% per annum. 
 
Unsecured Credit Facility.    We will enter into a three-year, $200 million unsecured revolving credit facility with affiliates of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, our joint bookrunning managers for this offering, as joint lead arrangers and joint bookrunning managers. We also expect several of the underwriters to be lenders under this facility. Upon completion of this offering, we expect a portion of this credit facility to be available to us pursuant to the terms of this facility. We expect that this credit facility may be guaranteed by certain of our subsidiaries whose governance agreements and loan documents do not otherwise prohibit such guarantees. We expect that the unsecured credit facility will have a one-year extension option. We intend to use the credit facility, among other things, to finance the acquisition of properties (potentially including the right of first offer properties, although the acquisition of the right of first offer properties is not currently probable), provide funds for tenant improvements and capital expenditures, and provide for working capital and other corporate purposes. We anticipate that the credit facility will contain covenants common for credit facilities of this type, including limitations on our and our subsidiaries ability to incur additional indebtedness, make certain investments or merge with another company, limitations on our ability to make distributions to our stockholders, and requirements for us to maintain financial coverage ratios and maintain a pool of unencumbered assets. We intend to enter into the credit facility prior to or contemporaneously with this offering. 
 
Off-Balance Sheet Arrangements 
 
Our off-balance sheet arrangements consist of interest rate cap agreements in connection with certain of our indebtedness and a currency fluctuation hedge arrangement in connection with our ownership of the Camperdown House property in London, England. We currently have no other off-balance sheet arrangements. See “—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
69 

Table of Contents
Upon completion of this offering, we expect to enter into interest rate swap agreements for $140.3 million of our variable rate debt. As a result, we expect that 84.5% of our total indebtedness, upon completion of this offering, will be subject to fixed interest rates. See “—Quantitative and Qualitative Disclosure about Market Risk.” 
 
Cash Flows 
 
Comparison of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003 
 
Cash and cash equivalents were $4,268,000 and $2,026,000, respectively, at June 30, 2004 and 2003. 
 
Net cash provided by operating activities increased $1,665,000 to $15,008,000 for the six months ended June 30, 2004 compared to $13,343,000 for the six months ended June 30, 2003. The increase was primarily due to the properties added to our portfolio since June 30, 2003 which was partially offset by the increased interest expense incurred on the mortgage and other secured debt related to the acquired properties. 
 
Net cash used in investing activities increased $120,627,000 to $227,747,000 for the six months ended June 30, 2004 compared to $107,120,000 for the six months ended June 30, 2003. The increase was primarily the result of the acquisition of five properties during the six months ended June 30, 2004, which required a larger investment than the acquisitions of four properties during the six months ended June 30, 2003. 
 
Net cash provided by financing activities increased $119,608,000 to $211,833,000 for the six months ended June 30, 2004 compared to $92,225,000 for the six months ended June 30, 2003. The increase was primarily due to increased capital contributions, net of distributions, and borrowings made in connection with the acquisition of the five properties during the six months ended June 30, 2004 than the capital contributions and debt required for the acquisitions of four properties during six months ended June 30, 2003. 
 
Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002 
 
Cash and cash equivalents were $5,174,000 and $3,578,000, respectively, at December 31, 2003 and 2002. 
 
Net cash provided by operating activities increased $19,341,000 to $28,986,000 for the year ended December 31, 2003 compared to $9,645,000 for the year ended December 31, 2002. The increase was primarily due to the properties added to our portfolio during the year ended December 31, 2003 and the receipt of a $4,200,000 early lease termination fee in April 2003 related to a lease termination that occurred in March 2003. This increase was partially offset by the increased interest expense incurred on the mortgage and other secured debt related to the acquired properties. 
 
Net cash used in investing activities increased $50,508,000 to $215,263,000 for the year ended December 31, 2003 compared to $164,755,000 for the year ended December 31, 2002. The increase was primarily the result of the amount of cash used to acquire the portfolio properties acquired during the year ended December 31, 2003 compared to the amount of cash used to acquire the properties acquired during the year ended December 31, 2002. Approximately $78,648,000 of the acquisition costs of the properties acquired during the year ended December 31, 2002 is attributable to the assumption of existing mortgage loans on the property and to seller financing of a portion of the property purchase price. There were no such debt assumptions or seller financings for the properties acquired in the year ended December 31, 2003. 
 
Net cash provided by financing activities increased $29,185,000 to $187,873,000 for the year ended December 31, 2003 compared to $158,688,000 for the year ended December 31, 2002. The increase was partially the result of the higher level of debt financing obtained from non-seller lenders for the properties acquired during the year ended December 31, 2003 compared to the properties acquired during the year ended December 31, 2002. Approximately $78,648,000 of the acquisition costs of the properties acquired during the year ended December 31, 2002 is attributable to the assumption of existing mortgage loans on the property and to seller 
 
70 

Table of Contents
financing of a portion of the property purchase price. The increase in cash flows from debt obtained was partially offset by the decrease in net capital contributions received from owner during the year ended December 31, 2003. The amount of capital versus debt used to acquire our properties is discretionary. 
 
Comparison of Year Ended December 31, 2002 to the Period from February 28, 2001 (inception) through December 31, 2001 
 
Cash and cash equivalents were $3,578,000 and $0, respectively, at December 31, 2002 and 2001. 
 
The net cash provided by (used in) operating activities, used in investing activities and provided by financing activities for the year ended December 31, 2002 increased compared to the period from February 28, 2001 (inception) through December 31, 2001 as a result of the acquisition of properties in our portfolio during the year ended December 31, 2002. We acquired our first portfolio property in January 2002 and had limited activity during the period from February 28, 2001 (inception) through December 31, 2001. 
 
Funds From Operations 
 
We calculate FFO in accordance with the standards established by NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. 
 
Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. 
 
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity 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 as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. FFO also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP. 
 
The following table sets forth a reconciliation of our pro forma funds from operations for the periods presented (in thousands): 

 	  	Pro Forma
	
 	  	Six Months
Ended
June 30, 2004
	 	 	Year
Ended
December 31, 2003
	
Pro forma income (loss) before minority interest in operating partnership but after minority interest in consolidated joint ventures	  	$	(9,489	)	 	$	8,371	
Plus: pro forma real estate depreciation and amortization	  	 	22,375	 	 	 	44,088	
 	  				 			
Pro forma funds from operations(1)	  	$	12,886	 	 	$	52,459	

(1)	 	Pro forma funds from operations as set forth above includes $22.4 million of compensation expense related to fully-vested long-term incentive units granted in connection with this offering and the formation transactions for the periods presented. 	
 
71 

Table of Contents
Inflation 
 
Substantially all 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. 
 
New Accounting Pronouncements 
 
On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies the accounting guidance on (1) derivative instruments (including certain derivative instruments embedded in other contracts) and (2) hedging activities that fall within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 also amends certain other existing pronouncements, which will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective (1) for contracts entered into or modified after June 30, 2003, with certain exceptions, and (2) for hedging relationships designated after June 30, 2003. The guidance is to be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on our financial position or results of operations or cash flows. 
 
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures in its balance sheet certain financial instruments with characteristics of both liabilities and equity. In accordance with the standard, financial instruments that embody obligations for the issuer require classification as liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after September 15, 2003. On November 7, 2003, the FASB deferred the effective date of paragraphs 9 and 10 of SFAS No. 150 as they apply to mandatorily redeemable non-controlling interests in order to address a number of interpretation and implementation issues. The adoption of SFAS No. 150 did not have any impact on our financial position or results of operations or cash flows. 
 
In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation expands the disclosures to be made by a guarantor in its financial statements about its obligations under certain guaranties and requires the guarantor to recognize a liability for the fair value of an obligation assumed under a guaranty. FIN 45 clarifies the requirements of SFAS No. 5, “Accounting for Contingencies,” relating to guaranties. In general, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or equity security of the guaranteed party. The adoption of FIN 45 did not have any impact on our financial position or results of operations or cash flows. 
 
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” FIN 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements” and provides guidance on the identification of entities for which control is achieved through means other than through voting rights and how to determine when and which business enterprise should consolidate such an entity. This new model for consolidation applies to an entity which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. Certain provisions of this interpretation are effective for 2003. The adoption of the provisions of this statement did not have any impact on our financial position or results of operations or cash flows. 
 
72 

Table of Contents
Quantitative and Qualitative Disclosures About Market Risk 
 
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use some derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. 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. 
 
Upon completion of this offering, we expect to enter into interest rate swap agreements for approximately $140.3 million of our variable rate debt. As a result, we expect that approximately 84.5% of our total indebtedness, upon completion of this offering, will be subject to fixed interest rates. 
 
If, after consideration of the interest rate swaps described above, LIBOR were to increase by 10%, or approximately 18.4 basis points, the increase in interest expense on the unhedged variable rate debt would decrease future earnings and cash flows by approximately $160,000 annually. If LIBOR were to increase by 10%, the fair value of our $264.1 million principal amount of outstanding fixed rate debt would decrease by approximately $2.8 million. If LIBOR were to decrease by 10%, or approximately 18.4 basis points, the decrease in interest expense on the unhedged variable rate debt would be approximately $160,000 annually. If LIBOR were to decrease by 10%, the fair value of our $264.1 million principal amount of outstanding fixed rate debt would increase by approximately $2.8 million. 
 
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. 
 
As of June 30, 2004, our total outstanding debt was approximately $473.9 million, which was comprised of $247.2 million of mortgage loans, $99.5 million of notes payable under a bridge loan, $51.9 million of other secured loans and an allocation to us of $75.3 million of amounts outstanding under the GI Partners line of credit. Approximately $366.3 million, or 77.3%, of our total outstanding debt was variable rate debt. As of June 30, 2004, the fair value of our outstanding fixed-rate debt approximated $108.1 million compared to the carrying value of $106.5 million. 
 
We are also party to a foreign currency hedging contract with a notional value of £7,850,000, which was used to convert the balance of our investment in the Camperdown House property into U.S. dollars. The fair value of this forward contract was $(1,796,042) as of June 30, 2004, using the currency exchange rate in effect as of that date. If the exchange rate of United States Dollars to Great Britain Pounds were to increase by 10%, the fair value of our forward contract would decrease by $1,411,901 to $(3,207,943). If the exchange rate of United States Dollars to Great Britain Pounds were to decrease by 10%, the fair value of our forward contract would increase by $1,411,901 to $(384,141).
 
73 

Table of Contents
INDUSTRY BACKGROUND/MARKET OPPORTUNITY 
 
The technology industry has played a prominent role in the development of the global economy. Technological innovations, such as the Internet, have led to dramatic improvements in the ability to communicate and transact business worldwide, expanded the reach of products and services and created electronic bonds that enhance the ability of businesses to interact with customers. As a result, the technology industry has achieved extraordinary growth. According to Forrester Research, Inc., a leading technology research firm, between 1996 and 2000, technology expenditures in the U.S. grew from $397.3 billion to $709.8 billion, representing a 15.6% annualized growth rate, which was more than double the growth rate of the overall economy over the same period, as measured by GDP.(1) 
 
This rapid growth in technology expenditures was followed by an overall reduction in sector spending from 2001 through 2003. Despite this reduction in spending, however, technology usage continued to expand during the same period, as evidenced by the increase in electronic commerce which grew from $598.0 billion in 2001 to $1.6 trillion in 2003 (or 64.6% compounded annual growth), and the increase in worldwide Internet users which grew from 506.6 million in 2001 to 702.4 million in 2003 (or 17.7% compounded annual growth), both according to IDC Research Inc., a leading IT and telecommunications market intelligence firm.(2) U.S. technology spending has now stabilized and, according to Forrester Research, Inc., is expected to increase by 6.9% annually from $763.1 billion in 2004 to $995.5 billion in 2008.(1) 
 
As technology has become a more significant component of the overall economy, the importance of high quality, strategically located, technology-related real estate has grown. During the growth of the 1990’s, the investment opportunity in technology-related real estate was fueled by heavy tenant demand. From 2001 through 2003, investment in technology-related real estate became more opportunistic as a result of the disequilibrium in the overall technology industry. Now, in light of improving trends in the technology industry, we believe demand for technology-related real estate is increasing, as technology companies require more space and complex infrastructure to support their growth. 
 
Within technology-related real estate, we focus on technology industry facilities that are difficult to replicate and critical to the operations of tenants, which we believe represent the best long-term real estate investment opportunities. Many of these facilities have fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, raised-floor areas that accommodate computer cables and below-floor cooling systems, extensive in-building communications cabling, and high level security systems. Since inception, our predecessor has made selective acquisitions of these types of facilities at prices which are at or below the replacement cost. Our ability to do so has been driven by our capacity to fully assess the strategic value of specific properties, the creditworthiness and business potential of technology tenants and local market conditions. Going forward, our in depth knowledge of the technology industry, acquisition experience and specialist focus position us to benefit from continued growth in the technology industry. The property types within our focus include: 
 
 	•	 	telecommunications infrastructure properties, which provide the infrastructure required by companies in the data, voice, and wireless communication industries; 	
 
 	•	 	information technology, or IT, infrastructure properties, which provide the physical environment required for disaster recovery, IT outsourcing and collocation; 	
 
 	•	 	technology manufacturing properties, which contain highly specialized manufacturing environments for such purposes as disk drive manufacturing, semiconductor manufacturing and specialty pharmaceutical manufacturing; and 	
 
 	•	 	regional or national headquarters of technology companies that are located in our target markets. 	

(1)	 	IT Spending Outlook: 2004-2008 and Beyond, Forrester Research, Inc., July 2004 	
(2)	 	Worldwide Internet Usage & Commerce 2004-2007 Forecast (#30949), IDC Research, Inc., March 2004 	
 
74 

Table of Contents
Telecommunications Infrastructure 
 
Our telecommunications infrastructure buildings serve as access and interconnection points for the voice and data networks of telecommunications companies. From our buildings, our telecommunications tenants provide services which include transporting wireline and wireless voice communications, transmitting data in multiple protocols (including the Internet protocol), and providing services that optimize communications applications to meet specific business and technical requirements. Many of these services are considered critical to our tenants’ and their customers’ operations.
 
As participants in the global economy have become increasingly dependent on networks such as the Internet in order to reliably and efficiently transfer data over long distances, the need for an organized approach to network interconnection that can support the rapid growth of data traffic has grown. As a result, the industry has constructed telecommunications network facilities that accommodate increased rates of data flow over networks, or bandwidth. These facilities are typically characterized by the physical presence of Internet service providers, regional incumbent phone companies and media providers, all of whom interconnect within our buildings by placing private connections between each other. In our target metropolitan markets, we believe that there are typically only a few buildings that have the sufficient critical mass of multiple high-speed optical connections to major network carriers to be characterized as network access points. These network access points are critical to telecommunications infrastructure tenants because they provide secure, direct access to the point at which traffic is exchanged. This reduces their costs by eliminating local access charges, reduces their points of failure and increases their efficiency. According to PriMetrica, Inc., an independent research firm which tracks Internet service providers and facilities, there are 340 Internet gateway and collocation facilities comprising 38 million square feet located in ten major U.S. cities.(3) 
 
Upon completion of this offering, we will own approximately 2.0 million square feet of net rentable space in seven facilities that principally provide the real estate infrastructure for tenants in the telecommunications infrastructure services sector. Our telecommunications tenants include AT&T, Cingular, Level 3, Qwest, SBC, Sprint, T-Mobile, Verizon, XO Communications and 360 Networks. 
 
Since telecommunications infrastructure tenants provide services critical to the day-to-day operations of their customers on a continuous basis, these tenants require buildings which have fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, raised floor areas to accommodate computer cables and below-floor cooling systems, extensive in-building communications cabling and high-level security systems. According to research published in 2002 by Gartner Inc., construction costs to build these high quality, specialized properties ranged from $300 to $1,000 per square foot of raised floor area.(4) Our tenants have generally funded capital improvements themselves. As such, leases for our telecommunications infrastructure properties are typically longer in duration than standard commercial leases, with an average term of 13.7 years. Tenant-installed improvements generally remain at our property after termination of the lease. As many such tenant improvements are readily adaptable to similar types of uses, we expect to benefit from these improvements by reducing our re-tenanting costs. We have historically had success in re-tenanting vacant telecommunications space with minimal additional tenant improvement expenditures by us. 
 
Information Technology Infrastructure 
 
Tenants in our IT infrastructure buildings provide IT outsourcing, data storage and management, business continuance, disaster recovery, web hosting, and collocation. Trends that are fueling the growth of the IT services sector include recent regulatory requirements for financial services companies to maintain dual data production environments (where two geographically separated systems process simultaneously the same data to provide complete redundancy), increased demand for business continuance and disaster recovery solutions which enable 

(3)	 	Colocation 2004, Telegeography, a division of PriMetrica, Inc. 	
(4)	 	Data Center Opportunities Abound in Real Estate Market, Decision Framework (DP 18-7980) by M. Bell, L. Leong Research Note December 11, 2002 	

75 

Table of Contents
companies to recover from unplanned service interruptions, and the sustained trend of businesses outsourcing their business processes and IT operations. Fueled by these positive trends, U.S. IT services spending reached $369.4 billion in 2003 and is expected to increase 4.3% in 2004 to approximately $385.3 billion, according to Forrester Research, 
Inc.(5) Forrester Research, Inc. also expects U.S. IT services spending to grow 4.6% annually through 2008.(6) 
 
Upon completion of this offering, we will own approximately 1.7 million square feet of net rentable space in eight facilities which principally provide the real estate infrastructure for tenants in the IT services sector. Several of our IT infrastructure buildings are occupied by tenants that provide web hosting and other collocation services to numerous customers whose computer equipment is installed in the buildings. Our web hosting tenants include AT&T, Equinix, Layer One, Level 3, NTT/Verio, Savvis and SBC Services. Our web hosting tenants facilitate the delivery of content and services via the Internet by providing customers with physical space for their technical equipment, network connectivity and onsite systems management. Our webhosting tenants’ customers span a wide variety of industries and include AOL, IBM, Major League Baseball, Microsoft, NASA and Southwest Airlines. 
 
In addition, we are pursuing the opportunity to lease collocation space in four of our buildings. Collocation facilities provide customers with the opportunity to lease a small footprint of space in secure and reliable operating environments that allows our customers’ Internet and telecommunications equipment to run 24 hours a day, seven days a week. This is a cost-effective solution for the tenants, and allows for the leasing of small spaces at significant premiums to prevailing market rents. According to Tier1 Research, an independent research firm which regularly tracks statistics on multi-tenant data centers, there are 511 multi-tenant data centers in the United States, which comprise a total of 23 million gross square feet. Tier1 Research estimates that the average annual rent charged to customers within these data centers is approximately $300 per square foot, or more depending on the quality of the data center. At our Univision Tower property collocation space, we have achieved rental rates as high as $200 per net rentable square foot for smaller spaces of 50 to 200 square feet and rents of approximately $50 to $100 per net rentable square foot for 500 to 1,000 square feet spaces. At our 36 Northeast Second Street collocation space, we have achieved rents of over $40 per net rentable square foot for large spaces of over 5,000 square feet. 
 
IT infrastructure tenants seek to operate in secure, operationally resilient, continuous service data centers. These data centers must offer fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, raised floor areas to accommodate computer cables and below-floor cooling systems, extensive in-building communications cabling, high-level security systems and redundant ingress and egress Internet and data access across multiple providers. Similar to telecommunications infrastructure properties, we believe construction costs to build a combination of these physical requirements can range from $300 to $1,000 per square foot of raised floor area. As such, leases of our IT infrastructure properties are typically longer than standard commercial leases, with an average term of 12.9 years. Our tenants have generally funded capital improvements themselves. Tenant-installed improvements generally remain at our property after termination of the lease. As many such improvements are readily adaptable for similar types of uses, we expect to benefit from these improvements by reducing our re-tenanting costs. We have historically had success in re-tenanting vacant data center space with minimal additional tenant improvement expenditures by us. 
 
Technology Manufacturing Infrastructure 
 
Technology manufacturing properties are broadly characterized as those having tenants that require domestic, “on-shore” operations due to the highly technical nature of their activities. New products and advanced engineering techniques often require the close proximity of engineering and research to the manufacturing processes. As a result, companies seek to couple manufacturing programs directly with R&D/engineering 

(5)	 	Projected 2004 US IT Growth Edges Up To 6%, Forrester Research, Inc., June 2004 	
(6)	 	IT Spending Outlook: 2004-2008, and Beyond, Forrester Research, Inc., July 2004 	
 
76 

Table of Contents
activities that reside domestically, often in the same facility. Technology manufacturing tenants include manufacturers of specialized equipment and materials for such industries as computer hardware, semiconductors, life sciences, electronics and telecommunications. 
 
Upon completion of this offering, we will own approximately 604,000 square feet of net rentable space in three facilities that provide the real estate infrastructure primarily for tenants in technology manufacturing sectors. Our technology manufacturing tenants include Abgenix, ASM Lithography and Maxtor Corporation. 
 
Technology manufacturing infrastructure tenants typically require facilities that contain both general office space and specialized space such as clean room assembly and electronic labs, biotechnology/life sciences labs and associated clean room facilities and technical equipment manufacturing facilities. Specialized spaces are extensively improved by tenants to include the addition of robust and redundant electrical distribution, above standard HVAC systems, clean room facilities, electronics assembly facilities, super-cold storage for biotechnology products and “wet-lab” research and testing areas. Specialized building improvements are made at costs which are many times greater than standard improvements to office space. As such, leases of our technology manufacturing properties are typically longer than standard commercial leases, with an average lease term of 10.3 years. Our tenants have generally funded capital improvements themselves. Tenant-installed improvements generally remain our property after termination of the lease. As many such improvements are readily adaptable for similar types of uses, we expect to benefit from these improvements by reducing our re-tenanting costs. We have historically had success in re-tenanting vacant manufacturing space with minimal additional tenant improvement expenditures by us. 
 
Technology Office/Corporate Headquarters 
 
Technology office/corporate headquarters buildings typically consist of general-purpose office and R&D/flex spaces in “tech-centric” markets. These properties often include facilities with extensive installed tenant improvements that are critical for the technology tenant’s business such as data centers, telecommunications, and electronics assembly and testing spaces. Properties are typically located in markets that are home to a variety of technology industry sectors and companies. The most attractive markets are characterized by an ample, well-educated technology workforce, proximity to major universities and a critical mass of technology industry firms active in the area. Metropolitan markets currently represented in our portfolio for headquarter assets include the San Francisco Bay area, Dallas, Denver and Boston. 
 
Upon completion of this offering, we will own approximately 1.3 million square feet of net rentable space in five properties that serve as regional or national headquarters facilities for technology industry tenants. Our corporate headquarters tenants include Comverse Technology, Carreker Software, Siemens Subscriber Networks and Stone & Webster. 
 
77 

Table of Contents
BUSINESS AND PROPERTIES 
 
Overview 
 
We own, acquire, reposition and manage technology-related real estate. We target high quality, strategically located properties containing applications and operations critical to the day-to-day operations of technology industry tenants. Our tenant base is diversified within the technology industry and reflects a broad spectrum of regional, national and international tenants that are leaders in their respective areas. We expect to qualify as a REIT for federal income tax purposes beginning with our initial taxable year ending December 31, 2004. 
 
Upon completion of this offering and consummation of the formation transactions, we will own 22 properties located throughout the U.S. and one property located in London, England, containing a total of approximately 5.6 million net rentable square feet. To facilitate research and development, technology transfer and recruitment of technology professionals, companies in the technology industry often cluster near major scientific research institutions, universities and government agencies, all of which drive demand for properties combining office, communications infrastructure and data center space. Our operations and acquisition activities are focused on a limited number of markets where technology tenants are concentrated, including the Atlanta, Boston, Dallas, Denver, Los Angeles, Miami, New York, Phoenix, Sacramento, San Francisco and Silicon Valley metropolitan areas. As of June 30, 2004, our properties were approximately 87.1% leased at an average annualized rent per leased square foot of $20.01. 
 
Our senior management team and Executive Chairman have an average of over 22 years of experience in the technology or real estate industries, including experience as investors in, advisors to and founders of technology companies. Under our senior management team’s direction, we focus on technology industry facilities that are difficult to replicate and critical to the operations of tenants, which we believe to be the best long-term real estate investment opportunities. The property types within our focus include: 
 
 	•	 	telecommunications infrastructure properties, which provide the infrastructure required by companies in the data, voice and wireless communications industries; 	
 
 	•	 	information technology, or IT, infrastructure properties, which provide the physical environment required for disaster recovery, IT outsourcing and collocation; 	
 
 	•	 	technology manufacturing properties, which contain highly specialized manufacturing environments for such purposes as disk drive manufacturing, semiconductor manufacturing and specialty pharmaceutical manufacturing; and 	
 
 	•	 	regional or national headquarters of technology companies that are located in our target markets. 	
 
Many of our properties have extensive tenant improvements that have been installed at our tenants’ expense. Unlike traditional office and flex/R&D space, the location of and improvements to our facilities are generally essential to our tenants’ businesses, which we believe results in high occupancy levels, long lease terms and low tenant turnover. Based on our experience, properties leased to tenants in the communications and information technology industries typically offer fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, raised floor areas to accommodate computer cables and below-floor cooling systems, extensive in-building communications cabling and high-level security systems, while properties leased to technology manufacturing companies typically offer fully redundant electrical supply systems, multiple power feeds, above-standard electrical HVAC systems, high-level security systems and clean room space. The tenant-installed improvements in our facilities are readily adaptable for use by similar tenants. 
 
Our predecessor, GI Partners, is a private equity fund that was formed to pursue investment opportunities that intersect the real estate and technology industries. GI Partners was formed in February 2001 after a competitive six-month selection process conducted by the California Public Employee Retirement System, or CalPERS, the largest U.S. pension fund. Upon GI Partners’ selection, CalPERS provided a $500 million equity 
 
78 

Table of Contents
commitment to GI Partners to invest in technology-related real estate and technology operating businesses. In addition, CB Richard Ellis Investors, a subsidiary of CB Richard Ellis, or CBRE, the largest global real estate services firm, and members of GI Partners’ management provided a commitment of $26.3 million. Upon completion of this offering and consummation of the formation transactions, GI Partners will contribute substantially all of its technology-related real estate investments to our operating partnership. Thereafter, pursuant to our non-competition agreement with GI Partners, GI Partners will continue to manage its investments in other existing businesses, but will not, subject to limited exceptions, pursue new investments in technology-related real estate. After completion of this offering and the formation transactions, CalPERS and CB Richard Ellis Investors, through their ownership of GI Partners, will together have an approximate 47.4% interest in our operating partnership, which would equal an approximate 46.8% beneficial interest in us, on a fully diluted basis, and will remain valuable partners. See “—Our Competitive Strengths.” 
 
We were formed in March 2004 by Digital Properties Holdings LLC. The sole members of Digital Properties Holdings are Richard A. Magnuson, the Executive Chairman of our board of directors, and Michael F. Foust, our Chief Executive Officer. In April 2004, Digital Properties Holdings sold its interest in us to GI Partners for $2,000. Upon completion of this offering and consummation of the formation transactions, we expect to have 20 employees. In addition, we engage CBRE and other experienced property management companies to provide on-site property management services. We intend to pay regular quarterly dividends to our stockholders, beginning with a dividend for the period commencing on the completion of this offering and ending on December 31, 2004. See “Dividend Policy.” Upon completion of this offering and consummation of the formation transactions, substantially all of our business will be conducted through Digital Realty Trust, L.P., our operating partnership. 
 
Our Competitive Strengths 
 
We believe we distinguish ourselves from other owners, acquirors and managers of technology-related real estate through our competitive strengths, which include: 
 
 	•	 	High Quality Portfolio.    Our portfolio contains state-of-the-art facilities with extensive tenant improvements. Based on current market rents and estimated costs to construct such properties and their improvements, we believe that they could not be replicated today on a cost-competitive basis. Many of the properties in our portfolio are located on major aggregation points formed by the physical presence of multiple major telecommunications service providers, which reduces our tenants’ costs and operational risks and increases the attractiveness of our buildings. 	
 
 	•	 	Presence in Key Markets.    Our portfolio is primarily located in 11 major metropolitan areas, including the Boston, Dallas, Los Angeles, New York, San Francisco and Silicon Valley metropolitan areas, and is diversified so that no one market represents more than 28.9% of the aggregate annualized rent of our portfolio as of June 30, 2004. We believe these markets are among the areas of major technology-related activities in the U.S. The following chart illustrates the geographic distribution of our tenants by annualized rent: 	

 
79 

Table of Contents
 	•	 	Long-Term Leases.    We have long-term leases with stable cash flows. As of June 30, 2004, our average lease term was in excess of 12.6 years, with an average of 7.9 years remaining. Through 2007, leases representing only 7.9% of our net rentable square feet, or 7.8% of our aggregate annualized rent is scheduled to expire. Moreover, through 2005, only 1.6% of our net rentable square feet is scheduled to expire. 	
 
 	•	 	Specialized Focus in Dynamic and Growing Industry.    We focus solely on technology-related real estate because we believe that the growth in the technology industry will be superior to that of the overall economy. We believe that our specialized understanding of both real estate and technology gives us a significant competitive advantage over less specialized investors. We use our in-depth knowledge of the technology industry to identify strategically located properties, evaluate tenants’ creditworthiness and business models and assess the long-term value of in-place technical improvements. 	
 
 	•	 	Proven Acquisition Capability.    Since 2002, we have acquired or will acquire upon completion of this offering and consummation of the formation transactions an aggregate of 23 technology-related real estate properties with 5.6 million net rentable square feet. Our acquisition capability is driven by our broad network of contacts within a highly fragmented universe of sellers and brokers of technology-related real estate. We have developed detailed, standardized procedures for evaluating acquisitions to ensure that they meet our financial and other criteria, which allows us to efficiently evaluate investment opportunities and, as appropriate, commit and close quickly. More than half of our acquisitions were acquired before they were broadly marketed by real estate brokers. We intend to continue to acquire additional technology-related real estate as a key component of our growth strategy. 	
 
 	•	 	Experienced and Committed Management Team.    Our senior management team, including our Executive Chairman, collectively have an average of over 22 years of experience in the technology or real estate industries, including experience as investors in, advisors to and founders of technology companies. We believe that our senior management team’s extensive knowledge of both the real estate and the technology industries provides us with a key competitive advantage. Upon completion of this offering, our senior management team is expected to collectively own an approximate 3.2% equity interest in our company on a fully diluted basis, which aligns management’s interests with those of our stockholders. 	
 
 	•	 	Unique Sourcing Relationships.    Upon completion of this offering, the members of our contributors will hold a substantial indirect investment in our company, and accordingly, we anticipate that they will continue to play an active role. We expect that CBRE will assist us with obtaining property deal flow that has not been widely marketed, and GI Partners’ private equity investment professionals will provide additional technology industry expertise and access to proprietary deal flow. In addition, we expect that CalPERS will provide us with introductions to potential sources of acquisitions and access to its technology industry experts and will be a potential source of co-investment capital. 	
 
Business and Growth Strategies 
 
Our primary business objectives are to maximize sustainable long-term growth in earnings, funds from operations and cash flow per share and to maximize returns to our stockholders. Our business strategies to achieve these objectives are: 
 
 	•	 	Capitalize on Acquisition Opportunities.    We believe that acquisitions enable us to increase cash flow and create long-term stockholder value. Our relationships with technology tenants and real estate brokers who are dedicated to serving these tenants provide us with ongoing access to potential acquisitions and often enable us to avoid competitive bidding situations. Furthermore, technology-related real estate is specialized, which makes it more difficult for traditional real estate investors to understand and fosters reduced competition for acquisitions relative to other property types. We believe this dynamic creates an opportunity for us to obtain better risk-adjusted returns on our capital. 	
 
80 

Table of Contents
 	•	 	Maximize the Cash Flow of our Properties.    We aggressively manage and lease our assets to increase their cash flow. We often acquire properties with substantial in-place cash flow and some vacancy, which enables us to create upside through lease-up. Our portfolio was approximately 87.1% leased as of June 30, 2004, leaving approximately 720,000 square feet of net rentable space available for lease-up. Moreover, many of our properties contain extensive in-place infrastructure or buildout which may result in higher rents when leased to tenants seeking these improvements. We have also implemented cost control measures by negotiating expense pass-through provisions in tenant leases for operating expenses and certain capital expenditures. Leases covering more than 95% of the leased net rentable square feet in our portfolio as of June 30, 2004 required tenants to pay all or a portion of increases in operating expenses, including real estate taxes, insurance, common area charges and other expenses. 	
 
 	•	 	Convert Improved Space to Collocation Use.    We own approximately 181,000 net rentable square feet of data center space with extensive installed tenant improvements that is currently, or will shortly be, available for lease. Rather than leasing such space to large single tenants, we have and intend to continue to convert these spaces to multi-tenant collocation use, with each tenant averaging between 100 and 1,000 square feet of net rentable space. Multi-tenant collocation is a cost-effective solution for smaller tenants who cannot afford their own extensive infrastructure and security. Because we can provide such features, we are able to lease space to these smaller tenants at a significant premium to other uses. 	
 
 	•	 	Leverage Strong Industry Relationships.    We use our strong industry relationships with national and regional technology intensive companies to comprehensively identify and respond to their real estate needs. Our leasing and sales professionals are real estate and technology industry specialists who can develop complex facility solutions for the most demanding technology tenants. 	
 
 	•	 	Use Capital Efficiently.    We have and will continue to opportunistically sell assets. We believe that we can increase stockholder returns by effectively redeploying asset sales proceeds into new acquisition opportunities. Recently, data centers have been particularly attractive candidates for sale to owner/users, as the cost of acquisition is usually substantially lower than the construction of a new facility. We will seek such opportunities to realize profits and re-invest our capital. 	
 
81 

Table of Contents
Our Initial Portfolio 
 
The following table presents an overview of the initial portfolio of properties that we will own upon completion of this offering and consummation of the formation transactions, referred to herein as our portfolio, based on information as of June 30, 2004: 

Property(1)
	 	Metropolitan
Area
	 	Percent
Ownership
	 	 	Year Built/
Renovated
	 	Net Rentable
Square Feet(2)
	 	Percent
Leased
	 	 	Annualized
Rent(3)
	 	Annualized
Rent Per
Leased
Square Foot(4)
	 	Annualized
Net Effective
Rent Per
Leased
Square Foot(5)
	
Telecommunications Infrastructure	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
200 Paul Avenue	 	San Francisco	 	100.0	%	 	1955/1999&2001	 	532,238	 	82.9	%	 	$	10,617,600	 	$	24.05	 	$	28.02	
Univision Tower	 	Dallas	 	100.0	 	 	1983	 	477,107	 	79.7	 	 	 	7,949,798	 	 	20.90	 	 	19.99	
Carrier Center(6)	 	Los Angeles	 	100.0	 	 	1922/1999	 	449,254	 	80.5	 	 	 	7,484,586	 	 	20.70	 	 	24.53	
Camperdown House(7)	 	London, UK	 	100.0	 	 	1983/1999	 	63,233	 	100.0	 	 	 	4,023,972	 	 	63.64	 	 	63.64	
1100 Space Park Drive	 	Silicon Valley	 	100.0	 	 	2001	 	167,951	 	46.6	 	 	 	3,481,041	 	 	44.51	 	 	52.35	
36 Northeast Second Street	 	Miami	 	100.0	 	 	1927/1999	 	162,140	 	81.1	 	 	 	2,986,641	 	 	22.72	 	 	25.69	
VarTec Building	 	Dallas	 	100.0	 	 	1999	 	135,250	 	100.0	 	 	 	1,352,500	 	 	10.00	 	 	10.45	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	1,987,173	 	80.1	 	 	 	37,896,138	 	 	23.81	 	 	26.23	
Information Technology Infrastructure	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
Hudson Corporate Center	 	New York	 	100.0	 	 	1989/2000	 	311,950	 	88.7	 	 	 	6,207,590	 	 	22.43	 	 	24.46	
Savvis Data Center	 	Silicon Valley	 	100.0	 	 	2000	 	300,000	 	100.0	 	 	 	5,580,000	 	 	18.60	 	 	22.07	
AboveNet Data Center	 	Silicon Valley	 	100.0	 	 	1987/1999	 	179,489	 	97.1	 	 	 	4,259,986	 	 	24.45	 	 	35.73	
Webb at LBJ	 	Dallas	 	100.0	 	 	1966/2000	 	365,449	 	78.9	 	 	 	4,176,959	 	 	14.48	 	 	14.75	
NTT/Verio Premier Data Center	 	Silicon Valley	 	100.0	 	 	1982-83/ 2001	 	130,752	 	100.0	 	 	 	3,781,200	 	 	28.92	 	 	31.11	
eBay Data Center	 	Sacramento	 	75.0(8)	 	 	1983/2000	 	62,957	 	100.0(9)	 	 	 	1,133,226	 	 	18.00	 	 	19.20	
Brea Data Center	 	Los Angeles	 	100.0	 	 	1981/2000	 	68,807	 	100.0	 	 	 	1,176,600	 	 	17.10	 	 	19.83	
AT&T Web Hosting Facility	 	Atlanta	 	100.0	 	 	1998	 	250,191	 	50.0	 	 	 	1,098,036	 	 	8.78	 	 	10.59	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	1,669,595	 	85.5	 	 	 	27,413,597	 	 	19.21	 	 	22.31	
Technology Manufacturing	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
Ardenwood Corporate Park	 	Silicon Valley	 	100.0	 	 	1985-86	 	307,657	 	100.0	 	 	 	7,580,645	 	 	24.64	 	 	25.39	
Maxtor Manufacturing Facility	 	Silicon Valley	 	100.0	 	 	1991 & 1997(10)	 	183,050	 	100.0	 	 	 	3,272,934	 	 	17.88	 	 	19.92	
ASM Lithography Facility(11)	 	Phoenix	 	100.0	 	 	2002	 	113,405	 	100.0	 	 	 	2,549,165	 	 	22.48	 	 	25.52	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	604,112	 	100.0	 	 	 	13,402,744	 	 	22.19	 	 	23.75	
Technology Office/Corporate Headquarters	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
									
Comverse Technology Building	 	Boston	 	100.0	 	 	1957 & 1999(12)	 	388,000	 	99.7	 	 	 	5,891,393	 	 	15.22	 	 	16.11	
Stanford Place II	 	Denver	 	98.0	(13)	 	1982	 	348,573	 	78.4	 	 	 	3,081,267	 	 	11.28	 	 	11.46	
100 Technology Center Drive	 	Boston	 	100.0	 	 	1989/2001	 	197,000	 	100.0	 	 	 	3,743,000	 	 	19.00	 	 	20.20	
Granite Tower	 	Dallas	 	100.0	 	 	1999	 	240,151	 	98.0	 	 	 	3,528,909	 	 	15.00	 	 	15.41	
Siemens Building	 	Dallas	 	100.0	 	 	1999	 	125,538	 	100.0	 	 	 	1,917,505	 	 	15.27	 	 	17.57	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	1,299,262	 	93.7	 	 	 	18,162,074	 	 	14.91	 	 	15.75	
 	 	 	 	 	 	 	 	 		 	 	 	 			 	 	 	 	 	 	
Portfolio Total/ Weighted Average	 	 	 	 	 	 	 	 	5,560,142	 	87.1	%	 	$	96,874,553	 	$	20.01	 	$	22.13	

(1)	 	We have categorized the properties in our portfolio by their principal use based on annualized rent. However, many of our properties support multiple uses. 	
(2)	 	Net rentable square feet at a building represents the current square feet at that building under lease as specified in the lease agreements plus management’s estimate of space available for lease based on engineering drawings. Net rentable square feet includes tenants’ proportional share of common areas. 	
 
82 

Table of Contents
(3)	 	Annualized rent represents the annualized monthly contractual rent under existing leases as of June 30, 2004. This amount reflects total base rent before any one-time or non-recurring rent abatements but after annually recurring rent credits and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a full gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of June 30, 2004 for the 12 months ending June 30, 2005 were $852,448. 	
(4)	 	Annualized rent per leased square foot represents annualized rent as computed above, divided by the total square footage under lease as of the same date. 	
(5)	 	For properties owned as of June 30, 2004, annualized net effective rent per leased square foot represents the contractual rent for leases in place as of June 30, 2004, calculated on a straight line basis from the date of acquisition by GI Partners or the date the lease commenced, if later. This amount is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a full gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. This amount is further reduced by the annual amortization of any tenant improvement and leasing costs incurred by GI Partners for such leases, and is then divided by the net rentable square footage under lease as of the same date. For properties acquired or to be acquired after June 30, 2004, the same approach is used, except that the straight line rent calculation is as of the acquisition date or the projected acquisition date. 	
(6)	 	We have been granted an option to purchase this property by GI Partners, which we intend to exercise simultaneously with, or shortly after, completion of this offering. See “—Description of Initial Portfolio—Telecommunications Infrastructure Properties—Carrier Center.” 	
(7)	 	Rental amounts for Camperdown House were calculated based on the exchange rate in effect on June 30, 2004 of 1.8126 per £1.00. 	
(8)	 	Upon completion of this offering and consummation of the formation transactions, we will own a 75% tenancy-in-common interest in this property. Beginning in January 2005, we will have the right to acquire the remaining 25% interest in this property from a third party, which we intend to exercise. 	
(9)	 	As of June 30, 2004, the eBay Data Center property was 100% leased to Sprint Communications Company. Commencing October 1, 2004, pursuant to leases entered into on June 1, 2004, the property will be 100% leased by two tenants, eBay and Sprint. 	
(10)	 	This property consists of two buildings: 1055 Page Avenue was built in 1991 and 47700 Kato Road was built in 1997. 	
(11)	 	Upon completion of this offering and consummation of the formation transactions, we will own the subsidiary that is party to a ground sublease covering this property. The term of the ground sublease expires on December 31, 2082. See “—Description of Initial Portfolio—Technology Manufacturing Properties—ASM Lithography Facility.” 	
(12)	 	This property consists of two buildings: 100 Quannapowitt was built in 1999 and 200 Quannapowitt was built in 1957 and has subsequently been renovated. 	
(13)	 	Upon completion of this offering and consummation of the formation transactions, we will indirectly own a 98% interest in a subsidiary that holds the fee simple interest in this property. An unrelated third party will continue to hold the remaining 2% interest in this subsidiary. See “—Description of Initial Portfolio—Technology Office/Corporate Headquarters Properties—Stanford Place II.” 	
 
83 

Table of Contents
Tenant Diversification 
 
Our portfolio is currently leased to more than 155 companies, many of which are nationally recognized firms in the technology industry. The following table sets forth information regarding the 20 largest tenants in our portfolio based on annualized rent as of June 30, 2004: 

Tenant
	 	Property
	 	Lease
Expiration(1)
	 	 	Total
Leased
Square
Feet
	 	 	Percentage
of Portfolio
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Portfolio
Annualized
Rent
	 	
Savvis Communications	 	 	 	 	 	 	588,359	 	 	10.5	%	 	$	12,129,681	 	12.6	%	
 	 	Savvis Data Center(2)	 	Sep. 2015	 	 	300,000	 	 	5.4	 	 	 	5,580,000	 	5.8	 	
 	 	Hudson Corporate Center	 	Sep. 2011	 	 	234,570	 	 	4.2	 	 	 	5,395,110	 	5.6	 	
 	 	36 Northeast Second Street	 	Aug. 2009	 	 	23,805	 	 	0.4	 	 	 	589,834	 	0.6	 	
 	 	Univision Tower	 	Sep. 2009	(3)	 	29,984	 	 	0.5	 	 	 	564,737	 	0.6	 	
Qwest Communications	 	 	 	 	 	 	260,442	 	 	4.6	 	 	 	7,701,059	 	7.9	 	
 	 	200 Paul Avenue	 	Aug. 2015	 	 	89,827	 	 	1.6	 	 	 	3,787,871	 	3.9	 	
 	 	36 Northeast Second Street	 	Jan. 2014	 	 	78,540	 	 	1.4	 	 	 	1,586,153	 	1.6	 	
 	 	Carrier Center	 	Jan. 2020	 	 	68,000	 	 	1.2	 	 	 	1,429,855	 	1.5	 	
 	 	Univision Tower	 	Apr. 2008	 	 	23,785	 	 	0.4	 	 	 	717,007	 	0.7	 	
 	 	Carrier Center	 	Jul. 2005	 	 	280	(4)	 	0.0	 	 	 	160,631	 	0.2	 	
 	 	1100 Space Park	 	Aug. 2011	 	 	10(4)	 	 	0.0	 	 	 	19,542	 	0.0	 	
Comverse Technology	 	Comverse Technology Building	 	Feb. 2011	 	 	367,033	 	 	6.6	 	 	 	5,592,548	 	5.8	 	
Abgenix	 	Ardenwood Corporate Park	 	Apr. 2011	 	 	131,386	 	 	2.4	 	 	 	4,925,265	 	5.1	 	
Leslie & Godwin(5)(6)	 	Camperdown House	 	Dec. 2009	 	 	63,233	 	 	1.1	 	 	 	4,023,972	 	4.2	(7)	
Verio, Inc.(8)	 	NTT/Verio Premier Data Center	 	May 2010	 	 	130,752	 	 	2.4	 	 	 	3,781,200	 	3.9	 	
Stone & Webster, Inc.(9)	 	100 Technology Center Drive	 	Mar. 2013	 	 	197,000	 	 	3.5	 	 	 	3,743,000	 	3.9	 	
AboveNet	 	 	 	 	 	 	131,556	 	 	2.4	 	 	 	3,499,536	 	3.6	 	
 	 	AboveNet Data Center	 	Nov. 2019	 	 	128,184	 	 	2.3	 	 	 	3,435,187	 	3.5	 	
 	 	Univision Tower	 	Apr. 2014	 	 	3,372	 	 	0.1	 	 	 	64,349	 	0.1	 	
Maxtor Corporation	 	Maxtor Manufacturing Facility	 	Sep. 2011	 	 	183,050	 	 	3.3	 	 	 	3,272,934	 	3.4	 	
SBC Communications	 	Webb at LBJ	 	Nov. 2010	 	 	141,663	 	 	2.5	 	 	 	2,773,762	 	2.9	 	
Tyco Networks, Inc.	 	1100 Space Park Drive	 	Jun. 2016	 	 	59,289	 	 	1.1	 	 	 	2,721,041	 	2.8	 	
ASM Lithography	 	ASM Lithography Facility	 	Feb. 2017	 	 	113,405	 	 	2.0	 	 	 	2,549,165	 	2.6	 	
XO Communications	 	 	 	 	 	 	96,546	 	 	1.7	 	 	 	2,457,344	 	2.5	 	
 	 	200 Paul Avenue	 	Mar. 2015	 	 	64,907	 	 	1.2	 	 	 	1,852,634	 	1.9	 	
 	 	Carrier Center	 	Aug. 2015	 	 	29,000	 	 	0.5	 	 	 	467,981	 	0.5	 	
 	 	Univision Tower	 	Oct. 2008	 	 	2,559	 	 	0.0	 	 	 	92,171	 	0.1	 	
 	 	Carrier Center	 	Sep. 2010	 	 	80(4)	 	 	0.0	 	 	 	44,558	 	0.0	 	
Logitech	 	Ardenwood Corporate Park	 	Mar. 2013	 	 	144,271	 	 	2.6	 	 	 	2,263,700	 	2.3	 	
Equinix, Inc.	 	Carrier Center	 	Oct. 2015	 	 	129,254	 	 	2.3	 	 	 	2,257,142	 	2.3	 	
AT&T	 	 	 	 	 	 	168,123	 	 	3.0	 	 	 	2,240,192	 	2.3	 	
 	 	AT&T Web Hosting Facility	 	Mar. 2016	 	 	125,000	 	 	2.2	 	 	 	1,098,036	 	1.1	 	
 	 	1100 Space Park Drive	 	Jul. 2011	 	 	14,035	 	 	0.3	 	 	 	603,556	 	0.6	 	
 	 	Stanford Place II	 	Sep. 2004	 	 	26,811(10)	 	 	0.5	 	 	 	437,260	 	0.5	 	
 	 	Carrier Center	 	Jan. 2006	 	 	80	(4)	 	0.0	 	 	 	39,338	 	0.0	 	
 	 	Univision Tower	 	Sep. 2006	 	 	2,197	 	 	0.0	 	 	 	62,002	 	0.1	 	
Siemens Subscriber Networks	 	Siemens Building	 	May 2010	 	 	125,538	 	 	2.3	 	 	 	1,917,505	 	2.0	 	
VarTec Telecom, Inc.	 	VarTec Building	 	Jan. 2014	 	 	135,250	 	 	2.4	 	 	 	1,352,500	 	1.4	 	
RCN Telecom Services of Ca. Inc.	 	200 Paul Avenue	 	Aug. 2014	 	 	57,121	 	 	1.0	 	 	 	1,287,964	 	1.3	 	
360 Networks (USA), Inc.	 	Carrier Center	 	Oct. 2007	 	 	68,120	 	 	1.2	 	 	 	1,249,602	 	1.3	 	
 	 	 	 	 	 	 			 			 			 			
Total	 	 	 	 	 	 	3,291,391	 	 	58.9	%	 	$	71,739,112	 	74.1	%	

(1)	 	Assumes the exercise of no renewal options and the exercise of all early termination options. 	
(2)	 	Microsoft Corporation subleases a portion of Savvis’ space in this building. 	
(3)	 	We negotiated an early termination of this lease for October 2004. In connection with the early termination, Savvis executed a new lease for 1,008 net rentable square feet of collocation space at Univision Tower for a 10-year term commencing October 2004 at an annualized rent of $384,000 for the first four years and then increases to $403,200 in years five through seven and $423,360 in years eight through ten. 	
(4)	 	Telecommunications collocation space. 	
 
84 

Table of Contents
(5)	 	Leslie & Godwin is a United Kingdom subsidiary of AON Corporation. 	
(6)	 	100% of the Camperdown House property is subleased by Level 3 Communications from Leslie & Godwin through December 2009. Leslie & Godwin remains liable to us for rents under its lease. Subject to a payment by Level 3 Communications, which we can waive, Level 3 Communications is obligated to take a further lease of this property for a term expiring in 2015, subject to one five-year extension option. Including the Camperdown House sublease, Level 3 Communications occupies a total of 104,676 square feet of net rentable space in our buildings. 	
(7)	 	Rental amounts for Camperdown House were calculated based on the exchange rate in effect on June 30, 2004 at $1.8126 per £1.00. 	
(8)	 	Verio, Inc. is a wholly owned subsidiary of Nippon Telegraph & Telephone. 	
(9)	 	Stone & Webster, Inc. is the primary operating unit of the Engineering, Construction and Maintenance segment of The Shaw Group Inc. 	
(10)	 	Subsequent to September 2004, we released approximately 16,700 rentable square feet of this space to a new tenant. 	
 
Lease Distribution 
 
The following table sets forth information relating to the distribution of leases in the properties in our portfolio, based on net rentable square feet under lease as of June 30, 2004: 

Square Feet Under Lease
	  	Number
of
Leases
	  	Percentage
of All
Leases
	 	 	Total
Leased
Square
Feet
	  	Percentage
of Portfolio
Leased
Square Feet
	 	 	Annualized
Rent
	  	Percentage
of Portfolio
Annualized
Rent
	 	
Available	  	—  	  	—  	%	 	719,785	  	12.9	%	 	$	—  	  	—  	%	
2,500 or less	  	74	  	33.8	 	 	64,207	  	1.2	 	 	 	2,722,212	  	2.8	 	
2,501-10,000	  	64	  	29.2	 	 	326,154	  	5.9	 	 	 	6,079,582	  	6.3	 	
10,001-20,000	  	23	  	10.5	 	 	347,863	  	6.3	 	 	 	7,364,994	  	7.6	 	
20,001-40,000	  	29	  	13.2	 	 	748,503	  	13.5	 	 	 	11,967,842	  	12.4	 	
40,001-100,000	  	15	  	6.9	 	 	1,044,822	  	18.8	 	 	 	26,012,163	  	26.9	 	
Greater than 100,000	  	14	  	6.4	 	 	2,308,808	  	41.4	 	 	 	42,727,760	  	44.0	 	
 	  		  			 		  			 			  			
Portfolio Total	  	219	  	100.0	%	 	5,560,142	  	100.0	%	 	$	96,874,553	  	100.0	%	

Lease Expirations 
 
The following table sets forth a summary schedule of the lease expirations for leases in place as of June 30, 2004 plus available space, for each of the ten full calendar years and the partial year beginning April 1, 2004, at the properties in our portfolio. Unless otherwise stated in the footnotes, the information set forth in the table assumes that tenants exercise no renewal options and all early termination rights. 

Year of Lease
Expiration
	  	Number
of
Leases
Expiring
	  	Square
Footage
of
Expiring
Leases
	  	Percentage
of Portfolio
Square Feet
	 	 	Annualized
Rent
	  	Percentage
of Portfolio
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square
Foot
	  	Annualized
Rent Per
Leased
Square
Foot at
Expiration
	  	Annualized
Rent at
Expiration
	
Available	  	—  	  	719,785	  	12.9	%	 	$	—  	  	—  	%	 	$	—  	  	$	—  	  	$	—  	
2004	  	10	  	49,527	  	0.9	 	 	 	783,653	  	0.8	 	 	 	15.82	  	 	16.18	  	 	801,150	
2005	  	14	  	39,785	  	0.7	 	 	 	848,894	  	0.9	 	 	 	21.34	  	 	22.83	  	 	908,223	
2006	  	26	  	106,766	  	1.9	 	 	 	1,880,495	  	1.9	 	 	 	17.61	  	 	18.37	  	 	1,960,868	
2007	  	27	  	245,775	  	4.4	 	 	 	4,043,277	  	4.2	 	 	 	16.45	  	 	18.32	  	 	4,502,711	
2008	  	23	  	216,035	  	3.9	 	 	 	3,533,711	  	3.6	 	 	 	16.36	  	 	18.17	  	 	3,925,130	
2009(1)	  	24	  	382,421	  	6.9	 	 	 	8,940,100	  	9.2	 	 	 	23.38	  	 	26.53	  	 	10,144,291	
2010	  	22	  	708,452	  	12.8	 	 	 	12,776,597	  	13.2	 	 	 	18.03	  	 	20.64	  	 	14,622,057	
2011	  	19	  	978,141	  	17.6	 	 	 	20,781,218	  	21.5	 	 	 	21.25	  	 	25.10	  	 	24,554,771	
2012	  	3	  	28,190	  	0.5	 	 	 	663,683	  	0.7	 	 	 	23.54	  	 	25.81	  	 	727,647	
2013	  	11	  	427,954	  	7.7	 	 	 	7,444,711	  	7.7	 	 	 	17.40	  	 	20.15	  	 	8,621,662	
Thereafter(2)	  	40	  	1,657,311	  	29.8	 	 	 	35,178,214	  	36.3	 	 	 	21.23	  	 	30.07	  	 	49,835,436	
 	  		  		  			 			  			 	 	 	  	 	 	  			
Portfolio Total	  	219	  	5,560,142	  	100.0	%	 	$	96,874,553	  	100.0	%	 	$	20.01	  	$	24.92	  	$	120,603,946	

(1)	 	Includes 29,984 square feet of net rentable space leased to Savvis Communications in the Univision Tower that we agreed to terminate as of October 2004. In connection with the early termination, Savvis executed a new lease for 1,008 net rentable square feet of collocation 	
 
85 

Table of Contents
 	space at Univision Tower for a 10-year term commencing October 2004 at an annualized annual rent of $384,000 for the first four years and then increases to $403,200 in years five through seven and $423,360 in years eight through ten. 	
(2)	 	Includes 63,233 square feet of net rentable space in Camperdown House. Property is subleased by Level 3 Communications from Leslie & Godwin, a U.K. subsidiary of AON Corporation, through December 2009. Level 3 Communications has executed a lease that will commence upon expiration of the Leslie & Godwin lease and continue through December 2014. Leslie & Godwin remains liable to us for rents under its lease. 	
 
Historical Tenant Improvements and Leasing Commissions 
 
The following table sets forth certain historical information regarding tenant improvement and leasing commission costs per square foot for tenants at the properties in our portfolio from the date of acquisition by GI Partners through June 30, 2004: 

 	  	Year Ended December 31,
	  	Six Months
Ended
June 30, 2004(3)
	  	Annual Weighted
Average 2002–
June 30, 2004
	
 	  	    2002(1)    
	  	2003(2)
	  		  		
Expirations	  	 	 	  	 	 	  	 	 	  	 	 	
Number of leases expired during year	  	 	7	  	 	18	  	 	5	  	 	12	
Aggregate net rentable square footage of expiring leases	  	 	32,870	  	 	216,659	  	 	84,573	  	 	133,641	
Renewals(4)	  	 	 	  	 	 	  	 	 	  	 	 	
Number of leases/renewals	  	 	5	  	 	10	  	 	2	  	 	7	
Square Feet	  	 	28,418	  	 	78,172	  	 	8,112	  	 	45,881	
Tenant improvement costs per square foot(5)	  	$	4.12	  	$	1.83	  	$	5.99	  	$	2.69	
Leasing commission costs per square foot(5)	  	 	5.08	  	 	6.09	  	 	4.61	  	 	5.73	
Total tenant improvement and leasing commission costs per square foot(5)	  	$	9.20	  	$	7.92	  	$	10.60	  	$	8.42	
New leases(6)	  	 	 	  	 	 	  	 	 	  	 	 	
Number of leases	  	 	4	  	 	18	  	 	19	  	 	16	
Square Feet	  	 	37,794	  	 	229,211	  	 	111,058	  	 	150,025	
Tenant improvement costs per square foot(5)	  	$	14.34	  	$	2.27	  	$	15.51	  	$	7.31	
Leasing commission costs per square foot(5)	  	 	12.37	  	 	12.55	  	 	12.36	  	 	12.48	
Total tenant improvement and leasing commission costs per square foot(5)	  	$	26.71	  	$	14.82	  	$	27.87	  	$	19.79	
Total	  	 	 	  	 	 	  	 	 	  	 	 	
Number of leases	  	 	9	  	 	28	  	 	21	  	 	23	
Square Feet	  	 	63,212	  	 	307,383	  	 	119,170	  	 	195,906	
Tenant improvement costs per square foot(5)	  	$	9.75	  	$	2.16	  	$	14.87	  	$	6.23	
Leasing commission costs per square foot(5)	  	 	9.09	  	 	10.91	  	 	11.84	  	 	10.90	
Total tenant improvement and leasing commission costs per square foot(5)	  	$	18.84	  	$	13.07	  	$	26.71	  	$	17.13	

(1)	 	Includes the following properties acquired in 2002: 36 Northeast Second Street (from January 2002); Univision Tower (from January 2002); Camperdown House (from July 2002); Hudson Corporate Center (from November 2002); and NTT/Verio Premier Data Center (from December 2002). 	
(2)	 	Includes the properties listed in footnote 1 above, and the following additional properties acquired in 2003: VarTec Building (from January 2003); Ardenwood Corporate Park (from January 2003); ASM Lithography Facility (from May 2003); AT&T Web Hosting Facility (from June 2003); Brea Data Center (from August 2003); Granite Tower (from September 2003); Maxtor Manufacturing Facility (from September 2003); and Stanford Place II (from October 2003). 	
(3)	 	Includes properties listed in footnotes 1 and 2 above and 100 Technology Center Drive (from February 2004), Siemens Building (from April 2004), Carrier Center (from May 2004), Savvis Data Center (from May 2004), and Comverse Technologies Building (from June 2004). 	
(4)	 	Does not include retained tenants that have relocated to new space or expanded into new space. 	
(5)	 	Assumes all tenant improvement and leasing commissions are paid in the calendar year in which the lease commences, which may be different than the year in which they were actually paid. 	
(6)	 	Includes retained tenants that have relocated or expanded into new space within our portfolio. 	
 
86 

Table of Contents
Historical Capital Expenditures 
 
The following table sets forth certain information regarding historical recurring capital expenditures (excluding tenant improvements) at the properties in our portfolio from the date of acquisition by GI Partners through June 30, 2004: 

 	  	Year Ended December 31
	  	Six Months
Ended
June 30, 2004(4)
	  	Annual Weighted
Average 2002–
June 30, 2004
	
 	  	2002(1)(2)
	  	2003(2)(3)
	  		  		
Recurring capital expenditures	  	$	208,758	  	$	388,636	  	$	397,606	  	 	 	
Total square feet at period end	  	 	1,145,182	  	 	2,792,266	  	 	5,560,142	  	 	 	
Recurring capital expenditures per square foot	  	$	0.18	  	$	0.14	  	$	0.07	  	$	0.16	

(1)	 	Includes the following properties acquired in 2002: 36 Northeast Second Street (from January 2002); Univision Tower (from January 2002); Camperdown House (from July 2002); Hudson Corporate Center (from November 2002); and NTT/Verio Premier Data Center (from December 2002). 	
(2)	 	Recurring capital expenditures for properties acquired during the period are annualized. 	
(3)	 	Includes the properties listed in footnote 1 above, and the following additional properties acquired in 2003: VarTec Building (from January 2003), Ardenwood Corporate Park (from January 2003); ASM Lithography Facility (from May 2003); AT&T Web Hosting Facility (from June 2003); Brea Data Center (from August 2003); Granite Tower (from September 2003); Maxtor Manufacturing Facility (from September 2003); and Stanford Place II (from October 2003). 	
(4)	 	Includes properties listed in footnotes 1 and 3 above and 100 Technology Center Drive (from February 2004), Siemens Building (from April 2004), Carrier Center (from May 2004), Savvis Data Center (from May 2004), and Comverse Technologies Building (from June 2004). 	
 
For the 2004 fiscal year, we expect the cost of recurring building improvements at the properties in our initial portfolio (excluding the cost of tenant improvements) will be approximately $890,000 ($0.16 per square foot). 
 
For the years ended December 31, 2002 and 2003 and the six months ended June 30, 2004, nonrecurring capital expenditures for our properties, primarily for Univision Tower, were $430,183, $765,587 and $430,356, respectively. Nonrecurring capital expenditures are discretionary and vary substantially from period to period, based on management’s view as to whether the incurrence of such expenses is merited by future income generation. Although we currently have no contractual commitments for the remainder of 2004, we expect nonrecurring capital expenditures at our properties will be approximately $1.0 million, due to the increase in size of our portfolio. We may spend additional amounts related to the build-out of unimproved space for collocation use, depending on tenant-demand; however, we currently have no commitments to do so. 
 
Description of Initial Portfolio 
 
Upon completion of this offering and consummation of the formation transactions, we will own 22 properties located throughout the U.S. and one property located in London, England, containing a total of approximately 5.6 million net rentable square feet. We are presenting additional data below for each property that comprises 10% or more of our total consolidated assets as of December 31, 2003 or that had gross revenues that amounted to 10% or more of our consolidated gross revenues for the year ended December 31, 2003. 
 
87 

Table of Contents
Telecommunications Infrastructure Properties.    The following seven properties are occupied primarily by tenants that focus on telecommunications infrastructure services. 
 
200 Paul Avenue, San Francisco, California 
 
The 200 Paul Avenue property consists of 532,238 square feet of net rentable space in four buildings on a 7.35-acre site located approximately four miles south of downtown San Francisco. Two interconnected buildings totaling 405,254 square feet are dedicated to telecommunications network and data center use. Over 40 telecommunications carriers plus other hosting and Internet companies providers are located in the 200 Paul Avenue property, including SBC, Verizon, Qwest, Level 3, MCI, Cingular, AboveNet, Time Warner Telecom, Global Crossing, XO Communications and WilTel Communications. Most of these tenants and licensees have invested significant amounts of their own capital to improve their spaces for telecommunications use. 
 
This aggregation of service providers in the 200 Paul Avenue property creates a cost effective operating environment for cross connections and passing traffic (voice, data and Internet) between networks without incurring costly local access charges. Both long-haul, backbone networks and local/regional metropolitan area networks operate in these buildings, all of whom have a point-of-presence in the building-managed collocation facility. 
 
The facility offers tenants superior electrical and mechanical systems infrastructure, including abundant available electrical power and UPS/backup power generation, carrier-quality HVAC capacity and distribution, ample telecommunications and electrical riser and conduit capacity, and numerous telecommunications networks that provide service to, and interconnect within, the buildings. Both buildings comply with or exceed the city’s seismic criteria in effect at the time of the 1999 renovation. The annex building exceeds the seismic design criteria in effect at the time of the 2001 construction, an important attribute for mission-critical facilities in this part of the country. 
 
The main 200 Paul Avenue building was constructed in phases starting in 1955 and completed in 1962. The large floor plates, high ceilings and robust concrete frame structure are ideal for telecommunications and data center use. This building was substantially re-developed in 1999 by the current owner as a multi-tenant facility to house numerous carrier networks, its own collocation operations, web hosting and data center operations. The annex building was completed in 2001. 
 
We will acquire a fee simple interest in this property upon completion of this offering from San Francisco Wave eXchange, LLC, an unrelated third party. 
 
As of June 30, 2004, the 200 Paul Avenue property was approximately 82.9% leased to 16 tenants, primarily in the telecommunications network business. The following table summarizes information regarding the primary tenants of the 200 Paul Avenue property as of June 30, 2004: 

Tenant
	 	Principal
Nature of
Business
	 	Lease
Expiration
	 	Renewal
Options
	 	Total Leased
Square Feet
	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	
Qwest Communications	 	Telecommunications	 	Aug. 2015	 	2 x 5 yrs	 	89,827	 	16.9	%	 	$	3,787,871	 	35.7	%	 	$	42.17	
XO Communications	 	Telecommunications	 	Mar. 2015	 	2 x 5 yrs	 	64,907	 	12.2	 	 	 	1,852,634	 	17.4	 	 	 	28.54	
RCN Telecom Services of Ca., Inc.	 	Telecommunications	 	Aug. 2014	 	3 x 5 yrs	 	57,121	 	10.7	 	 	 	1,287,964	 	12.1	 	 	 	22.55	
Williams Communications	 	Telecommunications	 	Jun. 2009	 	3 x 5 yrs	 	84,690	 	15.9	 	 	 	1,102,970	 	10.4	 	 	 	13.02	
 	 	 	 	 	 	 	 		 			 			 			 	 	 	
Total/Weighted Average	 	 	 	 	 	 	 	296,545	 	55.7	%	 	$	8,031,439	 	75.6	%	 	$	27.08	

88 

Table of Contents
The following table sets forth the lease expirations for leases in place at the 200 Paul Avenue property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 8.2 years. 

Year of Lease Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	90,751	 	17.1	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	1	 	10	 	—  	 	 	 	29,504	 	0.3	 	 	 	2,950.36	 	 	3,038.87	
2006	 	1	 	10	 	—  	 	 	 	54,704	 	0.5	 	 	 	5,470.43	 	 	5,803.57	
2007	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2008	 	3	 	68,982	 	13.0	 	 	 	480,266	 	4.5	 	 	 	6.96	 	 	7.84	
2009	 	4	 	132,720	 	24.9	 	 	 	2,264,367	 	21.3	 	 	 	17.06	 	 	19.64	
2010	 	1	 	10	 	—  	 	 	 	32,782	 	0.3	 	 	 	3,278.18	 	 	3,914.32	
2011	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	6	 	239,755	 	45.0	 	 	 	7,755,977	 	73.1	 	 	 	32.35	 	 	44.53	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	16	 	532,238	 	100.0	%	 	$	10,617,600	 	100.0	%	 	$	24.05	 	$	31.60	

The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the 200 Paul Avenue property as of the indicated date: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004	  	82.9	%	 	$	24.05	  	$	28.02	

(1)	 	Because neither we nor GI Partners owned this property prior to 2004, we are unable to present information for years prior to 2004. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the 200 Paul Avenue property. 
 
Upon contribution of this property at the time of this offering, the 200 Paul Avenue property will be subject to a $46.9 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
The current real estate tax rate for 200 Paul Avenue is $11.07 per $1,000 of assessed value. The total annual tax for 200 Paul Avenue at this rate for the 2003 tax year is $284,823 (at a taxable assessed value of $25,723,555). There were no direct assessments imposed on 200 Paul Avenue by the City and County of San Francisco for the 2003 tax year. 
 
Univision Tower, Dallas, Texas 
 
The Univision Tower is a 26-story, 477,107 square foot telecommunications carrier facility and office building located in downtown Dallas, Texas. Based on data from PriMetrica, Inc., we believe that the Dallas central business district, where this property is located, contains one of the largest aggregations of telecommunications carriers in the Southwest. The building is an important network site, located near both the SBC local central office and the regional AT&T long distance switch facility. Over 35 networks along with other 
 
89 

Table of Contents
collocation and web hosting providers, and over 70 service providers in total, are located in the building, including Verizon, AT&T, SBC, XO Communications, MCI, Telefonica, Qwest, Level 3 and Time Warner Communications. Most of these tenants have invested significant amounts of their own capital to improve their spaces for telecommunications use. 
 
The aggregation of service providers in this building creates a cost effective operating environment for cross connections and passing traffic (voice, data and Internet) between networks without incurring costly local access charges. Both long-haul, backbone networks and local/regional metro area networks operate in the building, several of which have a point-of-presence in the building-managed collocation facility. In addition, the building contains the regional headquarters and production studios for Univision, the largest Spanish language television broadcaster in the United States. 
 
The facility offers tenants superior electrical and mechanical systems infrastructure, including abundant available electrical power and UPS/backup power generation, telecommunications quality HVAC capacity and distribution, ample telecommunications and electrical riser and conduit capacity, and multiple telecommunications networks that provide service to, and interconnect within, the building. The building structure has been enhanced to accommodate heavier floor loads and power availability and distribution for the telecommunications/collocation tenants. Electric power is provided by two independent grids operated by TXU Energy, ensuring a high degree of availability to the building. This level of electrical service is a significant benefit for our telecommunications tenants, all of which are heavy power consumers. 
 
The Univision Tower property was acquired by GI Partners in January 2002. Upon completion of this offering, we will be the fee simple owner of this property. 
 
As of June 30, 2004, the Univision Tower property was approximately 79.7% leased to 48 tenants. Approximately 68.1% of the property is leased to telecommunications service providers and to Univision. The balance of the tenancy represents typical office users ranging in size from a few thousand square feet up to a full floor (20,000 square feet). No single tenant occupies more than 7.5% of the square footage. The following table summarizes information regarding the primary tenants of the Univision Tower property as of June 30, 2004: 

Tenant
	 	Principal
Nature of
Business
	 	Lease
Expiration
	 	 	Renewal
Options
	 	Total Leased
Square Feet
	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	
Qwest Communications	 	Telecommunications	 	 	 	 	 	 	23,785	 	5.0	%	 	$	717,007	 	9.0	%	 	$	30.15	
 	 	 	 	Apr. 2008	 	 	2 x 5 yrs	 	20,135	 	4.2	 	 	 	635,595	 	8.0	 	 	 	31.57	
 	 	 	 	Apr. 2008	 	 	None	 	3,650	 	0.8	 	 	 	81,412	 	1.0	 	 	 	22.30	
LayerOne, Inc.	 	Telecommunications	 	Nov. 2015	 	 	3 x 5 yrs	 	16,557	 	3.5	 	 	 	648,596	 	8.1	 	 	 	39.17	
Univision Television Group	 	Media/	 	 	 	 	 	 	35,917	 	7.5	 	 	 	640,324	 	8.1	 	 	 	17.83	
 	 	Telecommunications	 	Apr. 2017	 	 	2 x 5 yrs	 	20,254	 	4.2	 	 	 	357,976	 	4.5	 	 	 	17.67	
 	 	 	 	Apr. 2017	 	 	None	 	15,663	 	3.3	 	 	 	282,348	 	3.6	 	 	 	18.03	
Savvis Communications	 	IT Services	 	Sep. 2009	(1)	 	None	 	29,984	 	6.3	 	 	 	564,737	 	7.1	 	 	 	18.83	
Global Crossing	 	Telecommunications	 	 	 	 	 	 	33,467	 	7.0	 	 	 	539,469	 	6.8	 	 	 	16.12	
 	 	 	 	Feb. 2007	 	 	1 x 5 yrs	 	13,854	 	2.9	 	 	 	189,705	 	2.4	 	 	 	13.69	
 	 	 	 	Feb. 2007	 	 	None	 	19,613	 	4.1	 	 	 	349,764	 	4.4	 	 	 	17.83	
 	 	 	 	 	 	 	 	 		 			 			 			 	 	 	
Total/Weighted Average	 	 	 	 	 	 	 	 	139,710	 	29.3	%	 	$	3,110,133	 	39.1	%	 	$	22.26	

(1)	 	We negotiated an early termination of this lease for October 2004. In connection with the early termination, Savvis executed a new lease for 1,008 net rentable square feet of collocation space at Univision Tower for a 10-year term commencing October 2004 at an annualized rent of $384,000 for the first four years and then increases to $403,200 in years five through seven and $423,360 in years eight through ten. 	
 
90 

Table of Contents
The following table sets forth the lease expirations for leases in place at the Univision Tower property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 5.7 years. 

Year of Lease Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	96,802	 	20.3	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	1	 	167	 	0.1	 	 	 	51,791	 	0.6	 	 	 	310.12	 	 	310.12	
2005	 	2	 	4,125	 	0.9	 	 	 	86,265	 	1.1	 	 	 	20.91	 	 	20.91	
2006	 	8	 	17,629	 	3.7	 	 	 	383,042	 	4.8	 	 	 	21.73	 	 	21.79	
2007	 	15	 	110,217	 	23.1	 	 	 	1,788,797	 	22.5	 	 	 	16.23	 	 	17.49	
2008	 	13	 	64,359	 	13.5	 	 	 	1,628,840	 	20.5	 	 	 	25.31	 	 	26.53	
2009(1)	 	9	 	59,872	 	12.6	 	 	 	1,406,363	 	17.7	 	 	 	23.49	 	 	34.57	
2010	 	3	 	4,042	 	0.8	 	 	 	163,724	 	2.1	 	 	 	40.51	 	 	40.51	
2011	 	4	 	4,971	 	1.0	 	 	 	138,421	 	1.7	 	 	 	27.85	 	 	50.55	
2012	 	1	 	19,780	 	4.1	 	 	 	364,990	 	4.6	 	 	 	18.45	 	 	18.45	
2013	 	2	 	30,114	 	6.3	 	 	 	366,237	 	4.6	 	 	 	12.16	 	 	16.71	
Thereafter	 	9	 	65,029	 	13.6	 	 	 	1,571,328	 	19.8	 	 	 	24.16	 	 	26.76	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	67	 	477,107	 	100.0	%	 	$	7,949,798	 	100.0	%	 	$	20.90	 	$	24.32	

(1)	 	Includes the 29,984 square feet of net rentable space leased to Savvis Communications in the Univision Tower that we agreed to terminate as of October 2004. 	
 
The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the Univision Tower property as of the indicated dates: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004	  	79.7	%	 	$	20.90	  	$	19.99	
December 31, 2003	  	84.1	 	 	 	20.41	  	 	20.47	
December 31, 2002(1)	  	82.2	 	 	 	19.86	  	 	21.03	

(1)	 	Because neither we nor GI Partners owned this property prior to 2002, we are unable to present information for years prior to 2002. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Univision Tower property. 
 
We have entered into a commitment letter with respect to Univision Tower for a $60.0 million mortgage loan, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
The current real estate tax rate for the Univision Tower property is $29.76 per $1,000 of assessed value. The total annual tax for the Univision Tower property at this rate for the 2003 tax year is $1,637,023 (at a taxable assessed value of $55,012,340). There were no direct assessments imposed on the Univision Tower property by the City of Dallas for the 2003 tax year. 
 
Carrier Center, Los Angeles, California 
 
The Carrier Center property is a seven-story, 449,254 square foot telecommunications network carrier and data center facility located in downtown Los Angeles, California. Based on data from PriMetrica, Inc., we 
 
91 

Table of Contents
believe that the central business district of Los Angeles, where the Carrier Center building is located, contains one of the largest aggregations of telecommunications carriers on the West Coast. Over 25 carriers, collocation and web hosting providers are located in the building, including AT&T, SBC, XO Communications, Deutsche Telecom, Qwest, Level 3 Communications, and Equinix and its collocation customers. Most of these tenants have invested significant amounts of their own capital to improve their spaces for telecommunications use. 
 
This aggregation of service providers in this building creates a cost effective operating environment for cross connections and passing traffic (voice, data and Internet) between networks without incurring costly local access charges. Both long haul, backbone networks and local/regional metropolitan area networks operate in the building, several of which have a point-of-presence in the building-managed collocation facility. 
 
The facility offers tenants superior electrical and mechanical systems infrastructure, including abundant available electrical power and UPS/backup power generation, telecommunications quality HVAC capacity and distribution, ample telecommunications and electrical riser and conduit capacity, and multiple telecommunications networks that provide service to, and interconnect within, the building. The building has high seismic integrity, an important attribute for mission-critical facilities in California. Electrical power is provided by the Los Angeles Department of Water and Power, or DWP, a significant benefit for our tenants, all of which are heavy power consumers. DWP electricity rates have historically been lower than the regional utility and its track record for power availability is superior. DWP did not suffer the “brown-outs” of the recent past and potential tenants at the property consider DWP to be a significant factor in their site selection process. 
 
The Carrier Center building was originally completed in 1922, with periodic refurbishments thereafter. Its large floor plates and robust concrete frame engineering made the structure ideal for adaptation to data center usage. The Carrier Center was substantially re-developed in 1999 by 360 Networks as a multi-tenant facility to house its own operations along with numerous other network collocation, web hosting and data center operations. 
 
GI Partners acquired the property in May 2004. GI Partners has granted us an option to acquire this property, which we intend to exercise simultaneously with, or shortly after, completion of this offering. Upon exercise of this option, we will be fee simple owner of this property. 
 
As of June 30, 2004, the Carrier Center property was approximately 80.5% leased to 18 tenants, primarily in the telecommunications network and collocation businesses. The following table summarizes information regarding the primary tenants of the Carrier Center property as of June 30, 2004: 

Tenant
	 	Principal Nature of Business
	 	Lease
Expiration
	 	Renewal
Options
	 	Total
Leased
Square
Feet
	 	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	
Equinix, Inc.	 	Data centers	 	Oct. 2015	 	2 x 5 yrs	 	129,254	 	 	28.8	%	 	$	2,257,142	 	30.2	%	 	$	17.46	
Qwest Communications	 	Telecommunications	 	 	 	 	 	68,280	 	 	15.2	 	 	 	1,590,486	 	21.2	 	 	 	23.29	
 	 	 	 	Jan. 2020	 	2 x 5 yrs	 	68,000	 	 	15.1	 	 	 	1,429,855	 	19.1	 	 	 	21.03	
 	 	 	 	Jul. 2005	 	2 x 5 yrs	 	280	(1)	 	0.1	 	 	 	160,631	 	2.1	 	 	 	573.68	
360 Networks (USA), Inc.	 	Web hosting and collocation	 	Oct. 2007	 	4 x 5 yrs	 	68,120	 	 	15.1	 	 	 	1,249,602	 	16.7	 	 	 	18.34	
 	 	 	 	 	 	 	 			 			 			 			 	 	 	
Total/Weighted Average	 	 	 	 	 	 	 	265,654	 	 	59.1	%	 	$	5,097,230	 	68.1	%	 	$	19.19	

(1)	 	Indicates telecommunications collocation space. 	
 
92 

Table of Contents
The following table sets forth the lease expirations for leases in place at the Carrier Center property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 10.4 years. 

Year of Lease
  Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage of
Property
Annualized
Rent
	 	 	Annualized Rent
Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	87,760	 	19.5	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	1	 	40	 	0.0	 	 	 	18,000	 	0.2	 	 	 	450.00	 	 	450.00	
2005	 	3	 	353	 	0.1	 	 	 	187,710	 	2.5	 	 	 	531.76	 	 	672.65	
2006	 	2	 	120	 	0.0	 	 	 	62,285	 	0.8	 	 	 	519.05	 	 	737.59	
2007	 	2	 	68,120	 	15.2	 	 	 	1,249,602	 	16.7	 	 	 	18.34	 	 	20.53	
2008	 	1	 	80	 	0.0	 	 	 	49,440	 	0.7	 	 	 	618.00	 	 	1,081.80	
2009	 	1	 	40	 	—  	 	 	 	24,000	 	0.3	 	 	 	600.00	 	 	701.91	
2010	 	3	 	400	 	0.1	 	 	 	228,136	 	3.0	 	 	 	570.34	 	 	809.43	
2011	 	1	 	4,750	 	1.1	 	 	 	52,058	 	0.7	 	 	 	10.96	 	 	13.83	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	1	 	6,552	 	1.5	 	 	 	71,807	 	1.0	 	 	 	10.96	 	 	16.45	
Thereafter	 	9	 	281,039	 	62.5	 	 	 	5,541,548	 	74.1	 	 	 	19.72	 	 	29.64	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	24	 	449,254	 	100.0	%	 	$	7,484,586	 	100.0	%	 	$	20.70	 	$	29.55	

The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the Carrier Center property as of the indicated date: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004(1)	  	80.5	%	 	$	20.70	  	$	24.53	

(1)	 	Because neither we nor GI Partners owned this property prior to 2004, we are unable to present information for years prior to 2004. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Carrier Center property. 
 
Upon exercise of our option and pursuant to a commitment letter, the Carrier Center property will be subject to a $26.2 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
The current real estate tax rate for the Carrier Center property is $19.62 per $1,000 of assessed value. The total annual tax for the Carrier Center property at this rate for the 2003 tax year is $529,699 (at a taxable assessed value of $27,000,000). There were no direct assessments imposed on the Carrier Center property by the City of Los Angeles for the 2003 tax year. 
 
Camperdown House, London, United Kingdom 
 
The Camperdown House is a six-story building located in the insurance district in the City of London (Central London), containing a total of 63,233 square feet of net rentable space. In addition to its history as the center of the financial industry in the United Kingdom and Europe, the area where this building is located is a major aggregation point for telecommunications networks. The building is an important network collocation and switching facility for Level 3 Communications, where it interconnects its trans-Atlantic and European networks and distributes traffic to other carriers. Approximately 46,233 square feet is improved telecommunications/data 
 
93 

Table of Contents
center space featuring enhanced and redundant electrical capacity and backup power generation, specialized HVAC systems, customized fire suppression equipment and raised data center flooring to accommodate cabling and air flow distribution. The remaining 17,000 square feet is utilized as office space for network engineers and administrative staff. The property was originally constructed in 1983 as an office building and was substantially redeveloped by Level 3 in the late 1990’s. GI Partners acquired the Camperdown House property in July 2002. Upon completion of this offering, we will be the fee simple owner of this property. 
 
As of June 30, 2004, the Camperdown House was 100% leased to Leslie & Godwin, a United Kingdom subsidiary of the AON Corporation, at an annualized rent of $4,023,972, or $63.64 per leased square foot. The lease expires in December 2009 and has one five-year renewal option. Leslie & Godwin is no longer in occupation but still has an obligation to pay rent for the term of the lease. Leslie & Godwin has subleased its entire space to Level 3 Communications. Level 3 is obligated, subject to a payment which we can waive, to take a further lease of this property for a term expiring in 2015, subject to one five-year extension option. The annualized rent under this new lease will be $5,165,910, or $81.70 per leased square foot at commencement in December 2009 subject to annual increases of 3% commencing in December 2010. Annualized rents for the Camperdown House were calculated using the exchange rate in effect on June 30, 2004 of $1.8126 per £1.00. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Camperdown House property. 
 
The Camperdown House is subject to a £14.4 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
The Camperdown House is currently owned by Asbury Park Holdings Limited (U.K.), a Jersey company. A transfer of Camperdown House by Asbury Park Holdings Limited could result in the imposition of a substantial tax in the United Kingdom. In order to avoid this tax, our operating partnership will indirectly acquire 100% of the interests in Asbury Park Holdings Limited in the formation transactions, and the Camperdown House property will continue to be owned by Asbury Park Holdings Limited. Asbury Park Holdings Limited is presently classified as a corporation for United States federal income tax purposes, and the requirements for qualification as a REIT limit our ability to own stock of a corporation, subject to certain exceptions. One such exception relates to stock of a taxable REIT subsidiary. As a result, we and Asbury Park Holdings Limited plan to make an election for Asbury Park Holdings Limited to be treated as a taxable REIT subsidiary. 
 
1100 Space Park Drive, Santa Clara, California (Silicon Valley metropolitan area) 
 
The 1100 Space Park Drive property consists of 167,951 square feet of net rentable space in one three-story building on a 3.34-acre site strategically located near many of Santa Clara’s telecommunications network gateways, including SBC’s main central office, WilTel Communications, Qwest and Equinix. Built in 2001, the 1100 Space Park Drive structure consists of a cast-in-place concrete frame with concrete exterior walls. The building was specifically built to house telecommunications networks and data center operations and is therefore designed with many pre-installed features to allow tenants to quickly and economically install their improvements. We estimate that one tenant, Tyco Networks, invested over $20 million in improvements to its premises. 
 
The Santa Clara location is attractive because it is in the heart of the Silicon Valley technology and telecommunications markets and because users benefit by using Silicon Valley Power for electrical service. Similar to DWP in Los Angeles, Silicon Valley Power is generally less expensive and more reliable than the regional utility. Silicon Valley Power is the local, municipal utility for the City of Santa Clara and has two separate substations and a major power generation plant situated within one-quarter mile of 1100 Space Park Drive. 
 
94 

Table of Contents
There are nine telecommunications carriers located in the 1100 Space Park Drive property, including SBC, Verizon, Qwest, Tyco, and AT&T and another seven carriers have extensive fiber networks within two blocks of the property. 
 
The aggregation of service providers at 1100 Space Park Drive creates a cost effective operating environment for cross connections and passing traffic (voice, data and Internet) between networks without incurring costly local access charges. Both long-haul, backbone networks and local/regional metropolitan area networks operate in the 1100 Space Park Drive property, all of whom have a point-of-presence in the building managed collocation facility. 
 
The facility offers tenants superior electrical and mechanical systems infrastructure, including abundant available electrical power and UPS/backup power generation, carrier-quality HVAC capacity and distribution, ample telecommunications and electrical riser and conduit capacity, and numerous telecommunications networks that provide service to, and interconnect within, the building. The building exceeds the seismic design criteria in effect at the time of the 2001 construction, an important attribute for mission-critical facilities in California. 
 
We will acquire this property upon completion of this offering from Santa Clara Wave eXchange, LLC, an unrelated third party. 
 
As of June 30, 2004, the 1100 Space Park Drive property was 46.6% leased to three telecommunications tenants and holds license agreements with another six carriers to occupy space in the building’s collocation space. 
 
The following table sets forth the lease expirations for leases in place at the 1100 Space Park Drive property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 11.6 years. 

Year of Lease
  Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	89,742	 	53.4	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2006	 	2	 	20	 	0.0	 	 	 	13,650	 	0.4	 	 	 	682.50	 	 	682.50	
2007	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2008	 	1	 	10	 	0.0	 	 	 	11,124	 	0.3	 	 	 	1,112.40	 	 	1,215.55	
2009	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2010	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2011	 	2	 	14,045	 	8.4	 	 	 	623,098	 	17.9	 	 	 	44.36	 	 	58.27	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	2	 	64,134	 	38.2	 	 	 	2,833,169	 	81.4	 	 	 	44.18	 	 	60.97	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	7	 	167,951	 	100.0	%	 	$	3,481,041	 	100.0	%	 	$	44.51	 	$	60.79	

Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the 1100 Space Park Drive property. 
 
Upon completion of this offering, the 1100 Space Park Drive property will not be subject to any debt. However, our ability to incur debt secured by the 1100 Space Park Drive property will be limited by the terms of our unsecured credit facility, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
95 

Table of Contents
36 Northeast Second Street, Miami, Florida 
 
The 36 Northeast Second Street property, a 162,140 square foot telecommunications network facility located in the Miami central business district is one of the most significant telecommunications properties in the region. This central business district location is the main aggregation point of various telecommunications carriers in South Florida and is the gateway to Central and South American networks. The seven-story, poured in place concrete building was originally constructed in 1927 as the central office for the predecessor to BellSouth and was completely re-developed in 1999 to meet the high engineering standards required for telecommunications and data center operations. The building shell is engineered to withstand severe weather conditions providing a secure environment for critical telecommunications network operations. The facility offers tenants superior electrical and mechanical systems infrastructure including abundant available electrical power and full uninterruptible power supply, or UPS/backup power generation, telecommunications quality HVAC capacity and distribution, ample telecommunications and electrical riser and conduit capacity, and multiple telecommunications networks that provide service to, and interconnect within, the building. In the aggregate, including tenants, customers of tenants, and services providers, over 60 carriers and ISPs are located in the building including over 25 carrier networks such as AT&T, Verizon, Qwest, BellSouth, Telefonica, Savvis and Level 3. Most of our tenants invest significant amounts of their own capital to improve their spaces for telecommunications use. 
 
This aggregation of carriers in our building creates a cost effective operating environment for cross connections and passing traffic (voice, data and Internet) between networks without incurring costly local access charges. This property is strategically located for many service providers who either lease space directly from the building or are customers of our tenants. GI Partners acquired this facility in January 2002. Upon completion of this offering, we will be the fee simple owner of the 36 Northeast Second Street property. 
 
The 36 Northeast Second Street property is approximately 81.1% leased to seven tenants, the majority of which are telecommunications infrastructure network providers. The following table summarizes information regarding the primary tenants of the 36 Northeast Second Street property as of June 30, 2004: 

Tenant
	 	Principal
Nature Of Business
	 	Lease
Expiration
	 	Renewal
Options
	 	Total
Leased
Square
Feet
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased Square
Foot
	
Qwest Communications	 	Telecommunications	 	Jan. 2014	 	2 x 5 yrs	 	78,540	 	48.4	%	 	$	1,586,153	 	53.1	%	 	$	20.20	
Savvis Communications	 	IT Services	 	Aug. 2009	 	2 x 5 yrs	 	23,805	 	14.7	 	 	 	589,834	 	19.8	 	 	 	24.78	
LayerOne Miami, Inc.	 	Telecommunications	 	 	 	 	 	17,359	 	10.7	 	 	 	421,685	 	14.1	 	 	 	24.29	
 	 	 	 	Sep. 2011	 	3 x 5 yrs	 	5,359	 	3.3	 	 	 	176,297	 	5.9	 	 	 	32.90	
 	 	 	 	Nov. 2013	 	3 x 5 yrs	 	12,000	 	7.4	 	 	 	245,388	 	8.2	 	 	 	20.45	
 	 	 	 	 	 	 	 		 			 			 			 	 	 	
Total/Weighted Average	 	 	 	 	 	 	 	119,704	 	73.8	%	 	$	2,597,672	 	87.0	%	 	$	21.70	

96 

Table of Contents
The following table schedules the lease expirations for leases in place at the 36 Northeast Second Street property as of June 30, 2004 plus available space for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 8.6 years. 

Year of Lease
  Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	30,714	 	18.9	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2006	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2007	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2008	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2009	 	2	 	24,859	 	15.4	 	 	 	619,305	 	20.8	 	 	 	24.91	 	 	29.09	
2010	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2011	 	1	 	5,359	 	3.3	 	 	 	176,297	 	5.9	 	 	 	32.90	 	 	41.61	
2012	 	1	 	5,226	 	3.2	 	 	 	215,909	 	7.2	 	 	 	41.31	 	 	52.34	
2013	 	1	 	12,000	 	7.4	 	 	 	245,388	 	8.2	 	 	 	20.45	 	 	39.07	
Thereafter	 	3	 	83,982	 	51.8	 	 	 	1,729,742	 	57.9	 	 	 	20.60	 	 	27.71	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	8	 	162,140	 	100.0	%	 	$	2,986,641	 	100.0	%	 	$	    22.72	 	$	    30.56	

The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the 36 Northeast Second Street property as of the indicated dates: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004	  	81.1	%	 	$	22.72	  	$	25.69	
December 31, 2003	  	95.7	 	 	 	21.63	  	 	24.86	
December 31, 2002(1)	  	95.7	 	 	 	22.46	  	 	25.62	

(1)	 	Because neither we nor GI Partners owned this property prior to 2002, we are unable to present information for years prior to 2002. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to significant renovation, improvement or redevelopment of the 36 Northeast Second Street property. 
 
Upon completion of this offering, the 36 Northeast Second Street property will be one of the properties that secures the $155.0 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
The current real estate tax rate for the 36 Northeast Second Street property is $29.46 per $1,000 of assessed value. The total annual tax for the 36 Northeast Second Street property at this rate for the 2003 tax year is $291,779 (at a taxable assessed value of $9,903,002). There were no direct assessments imposed on the 36 Northeast Second Street property by the City of Miami for the 2003 tax year. 
 
VarTec Building, Carrollton, Texas (Dallas metropolitan area) 
 
The VarTec Building is a 135,250 square foot single story office property developed in 1999. Well-located in suburban Dallas, the building has an attractive brick and glass façade and features five distinct “pods,” each with its own common area and restrooms, that can be readily divided. This property was acquired by GI Partners in January 2003. Upon completion of this offering, we will be the fee simple owner of this property. 
 
97 

Table of Contents
The property is 100% leased to VarTec Telecom, Inc. through January 2014 at an annualized rent of $1,352,500, or $10.00 per leased square foot. There is one five-year renewal option. The company provides voice and data services to business and residential customers. The facility houses the network operations center that manages VarTec’s nationwide network, their corporate data center operations including customer billing, and administrative offices. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the VarTec Building. 
 
The VarTec Building is one of three properties that secures a $43.0 million securitized first mortgage and a $22.0 million securitized mezzanine mortgage described in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding after the completion of this offering. 
 
Information Technology Infrastructure Properties.    The following seven properties are occupied primarily by tenants that focus on information technology infrastructure services. 
 
Hudson Corporate Center, Weehawken, New Jersey (New York City metropolitan area) 
 
The Hudson Corporate Center is a three-story, 311,950 square foot data center and back office facility located directly across the Hudson River from midtown Manhattan in Weehawken, New Jersey. This location is attractive to a wide variety of users as it is easily accessed via light rail and Hudson River ferries, and is adjacent to the Lincoln Tunnel. The New York City metropolitan location is the source of a large number of financial industry and other enterprise customers for our tenants, in addition to telecommunications collocation opportunities. The property was re-developed in 1989 as a back office bank operations center and was substantially improved to data center and telecommunications use in the late 1990’s. A large investment was made to improve the property by Exodus Communications, the predecessor to Savvis, and by Level 3 Communications, to satisfy their data center requirements. We estimate that existing tenants have invested over $100 million in this building and improvements. Improvements to the property include redundant power, extensive HVAC systems, backup UPS/generator power and specialized fire suppression systems. In addition, large flexible floor plates, high floor load capacity and ample floor-to-ceiling slab heights make the facility attractive to tenants such as Savvis and Level 3 Communications. A number of carrier networks serve the property providing attractive collocation opportunities. Carriers include Verizon, AT&T, MCI, Level 3, and ConEd Communications, a metropolitan area fiber network. 
 
The property was acquired by GI Partners in November 2002. Upon completion of this offering, we will be the fee simple owner of the Hudson Corporate Center property. 
 
As of June 30, 2004, the Hudson Corporate Center property was 88.7% leased to three tenants in the telecommunications and IT services businesses, including Savvis’ web hosting and managed services operations and Level 3 Communications, which operates a telecommunications and collocation “gateway” at the facility. The following table summarizes information regarding the primary tenants of the Hudson Corporate Center property as of June 30, 2004: 

Tenant
	 	Principal
Nature of
Business
	 	Lease
Expiration
	 	 	Renewal
Options
	 	Total
Leased
Square Feet
	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	
Savvis Communications	 	IT services	 	Sep. 2011	(1)	 	2 x 7 yrs	 	234,570	 	75.2	%	 	$	5,395,110	 	86.9	%	 	$	23.00	
Level 3 Communications	 	Telecommunications	 	Oct. 2013	 	 	1 x 5 yrs	 	38,017	 	12.2	 	 	 	754,579	 	12.2	 	 	 	19.85	
 	 	 	 	 	 	 	 	 		 			 			 			 	 	 	
Total/Weighted Average	 	 	 	 	 	 	 	 	272,587	 	87.4	%	 	$	6,149,689	 	99.1	%	 	$	22.56	

(1)	 	Subsequent to March 31, 2004, Savvis agreed to extend the term of its lease for an additional two years, which will run after any extension options. 	
 
98 

Table of Contents
The following table sets forth the lease expirations for leases in place at the Hudson Corporate Center property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 7.4 years. 

Year of Lease Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	35,254	 	11.3	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	1	 	4,109	 	1.3	 	 	 	57,901	 	0.9	 	 	 	14.09	 	 	14.09	
2005	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2006	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2007	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2008	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2009	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2010	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2011	 	1	 	234,570	 	75.2	 	 	 	5,395,110	 	86.9	 	 	 	23.00	 	 	26.00	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	1	 	38,017	 	12.2	 	 	 	754,579	 	12.2	 	 	 	19.85	 	 	21.85	
Thereafter	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	3	 	311,950	 	100.0	%	 	$	6,207,590	 	100.0	%	 	$	    22.43	 	$	    25.25	

The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the Hudson Corporate Center property as of the indicated dates: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004	  	88.7	%	 	$	22.43	  	$	24.46	
December 31, 2003	  	88.7	 	 	 	22.43	  	 	24.58	
December 31, 2002(1)	  	100.0	 	 	 	21.48	  	 	23.62	

(1)	 	Because neither we nor GI Partners owned this property prior to 2002, we are unable to present information for years prior to 2002. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Hudson Corporate Center property. 
 
Savvis has a right of first offer with respect to the sale of the underlying premises. This right will not be triggered by this offering or the formation transactions or by a subsequent sale by us of the subsidiary that owns this property. 
 
Upon completion of this offering, the Hudson Corporate Center property will be one of the properties that secures the $155.0 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
The current real estate tax rate for the Hudson Corporate Center property is $30.58 per $1,000 of assessed value. The total annual tax for the Hudson Corporate Center property at this rate for the 2003 tax year is $1,541,232 (at a taxable assessed value of $50,400,000). There were no direct assessments imposed on the Hudson Corporate Center property by the City of Weehawken and Hudson County for the 2003 tax year. 
 
Savvis Data Center, Santa Clara, California (Silicon Valley metropolitan area) 
 
The Savvis Data Center is a two building, 300,000 square foot data center facility located in Santa Clara, California. Built in 2000, the 2045 Lafayette and the 2055 Lafayette buildings are each 150,000 square foot, two-story steel frame structures with precast concrete exterior walls, featuring 135,000 square feet of raised floor 
 
99 

Table of Contents
space in each building. The property was built specifically for Exodus, the predecessor to Savvis, as a state-of-the-art data center. We estimate that Exodus invested approximately $150 million in the electrical systems, including high capacity, redundant service and UPS/generator systems, enhanced HVAC and fire suppression systems and robust security systems. The Santa Clara location is attractive because it is in the heart of the Silicon Valley technology and telecommunications markets and because users benefit by using Silicon Valley Power for electrical service. Similar to DWP in Los Angeles, Silicon Valley Power is generally less expensive and more reliable than the regional utility. It is the local, municipal utility for Santa Clara, with a substation on site providing high quality power delivery that is important for data center users. 
 
GI Partners purchased the property from the developer in May 2004. Upon completion of this offering, we will be the fee simple owner of the Savvis Data Center property. 
 
As of June 30, 2004, the Savvis Data Center property was 100.0% leased to Savvis Communications. Savvis is a leading company in the web hosting, network, and application services sector. Savvis subleases a portion of the facility to Microsoft Corporation, which uses the property as its primary Bay Area data center for customer-facing infrastructure. Microsoft has the ability to expand further in the facility. 
 
The following table summarizes information regarding Savvis Communications and its lease as of June 30 2004: 

Tenant
	 	Principal
Nature of
Business
	 	Lease
Expiration
	 	Renewal
Options
	 	Total
Leased
Square
Feet
	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	 	Annualized
Rent Per
Leased
Square Foot
at Expiration
	
Savvis Communications	 	IT Services	 	Sep. 2015	 	3 x 5 yrs	 	300,000	 	100.0	%	 	$	5,580,000	 	100.0	%	 	$	18.60	 	$	25.20	
 
The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the Savvis Data Center property as of the indicated date: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004(1)	  	100.0	%	 	$	18.60	  	$	22.07	

(1)	 	Because neither we nor GI Partners owned this property prior to 2004, we are unable to present information for years prior to 2004. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Savvis Data Center property. 
 
Upon completion of this offering, the Savvis Data Center will not be subject to any debt. However, our ability to incur debt secured by the Savvis Data Center will be limited by the terms of our unsecured credit facility, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
The current real estate tax rate for the Savvis Data Center property is $10.93 per $1,000 of assessed value. The total annual tax for the Savvis Data Center property at this rate for the 2003 tax year is $398,768 (at a taxable assessed value of $26,474,299). There were no direct assessments imposed on the Savvis Data Center property by the City of Santa Clara for the 2003 tax year. 
 
AboveNet Data Center, San Jose, California (Silicon Valley metropolitan area) 
 
The AboveNet Data Center building is a 179,489 square foot facility, centrally located in downtown San Jose, California. The building contains a major web hosting and telecommunications collocation facility for 
 
100 

Table of Contents
AboveNet Communications, including over 65,000 square feet of data center and collocation facilities. The remainder of their space consists of extensively improved conference and training facilities and a network operations center. AboveNet provides its customers with web hosting, managed services and telecommunications network services. The central business district location is one of the densest aggregations of carriers on the West Coast making the property a desirable site for collocation and hosting businesses. Carriers serving the facility include SBC, MCI, AT&T, and MFN, which is AboveNet’s network. 
 
This property was re-developed in 1998 for AboveNet’s data center occupancy. The facility was improved to provide superior electrical and mechanical systems infrastructure, including abundant available electrical power and specialized UPS/backup power generation, telecommunications quality HVAC capacity and distribution, ample telecommunications and electrical riser and conduit capacity, and multiple telecommunications networks that provide service to, and interconnect within, the building. Data center quality enhanced fire/life/safety systems and security systems were installed. The building structure has been enhanced to robust seismic specifications and to accommodate heavier floor loads and power availability and distribution for AboveNet and its customers. We estimate that AboveNet invested over $30 million in the improvements. 
 
GI Partners currently has the property under contract for purchase. Closing is expected in September 2004. Upon completion of this offering, we will be the fee simple owner of the AboveNet Data Center property. 
 
As of June 30, 2004, the AboveNet Data Center property was approximately 97.1% leased to nine tenants. AboveNet, the primary tenant of this property, leases approximately 128,184 square feet at an annualized rent of $3,435,187, or $26.80 per square foot. AboveNet’s lease expires in November 2019 and is subject to two ten-year renewal options. 
 
The following table sets forth the lease expirations for leases in place at the AboveNet Data Center property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 13.7 years. 

Year of Lease
  Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage of
Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	5,265	 	2.9	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	1	 	9,650	 	5.4	 	 	 	223,766	 	5.3	 	 	 	23.19	 	 	23.19	
2006	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2007	 	1	 	904	 	0.5	 	 	 	20,880	 	0.5	 	 	 	23.10	 	 	23.10	
2008	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2009	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2010	 	1	 	4,145	 	2.3	 	 	 	40,027	 	0.9	 	 	 	9.66	 	 	9.66	
2011	 	2	 	3,094	 	1.7	 	 	 	76,260	 	1.8	 	 	 	24.65	 	 	40.56	
2012	 	1	 	3,184	 	1.8	 	 	 	82,784	 	1.9	 	 	 	26.00	 	 	28.00	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	3	 	153,247	 	85.4	 	 	 	3,816,269	 	89.6	 	 	 	24.90	 	 	44.59	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	9	 	179,489	 	100.0	%	 	$	4,259,986	 	100.0	%	 	$	    24.45	 	$	    42.08	

Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the AboveNet Data Center property. 
 
Upon completion of this offering, the AboveNet Data Center will not be subject to any debt. However, our ability to incur debt secured by the AboveNet Data Center will be limited by the terms of our unsecured credit facility, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
101 

Table of Contents
Webb at LBJ, Dallas, Texas 
 
The Webb at LBJ building is a 365,449 square foot single story web hosting, telecommunications and office property. The property is very well located with immediate access and high visibility from the LBJ Freeway at Webb Chapel Road. In addition, the site is located near several major telecommunications networks, including SBC, MCI, AT&T, and T-Mobile. The property was originally developed as a retail center and was substantially re-developed for telecommunications and data center users in 1998-99. The major tenant at this building is SBC Communications. The T-Mobile wireless division of Deutsche Telecom, formerly Voicestream also leases approximately 30,000 square feet in the building. Both of these companies have made extensive improvements to their spaces with robust electrical service and UPS/generator back-up, extensive HVAC systems, and specialized fire suppression and security systems. This site is one of two national SBC web-hosting and managed services facilities for corporate customers and telecommunications collocation, with the other in Irvine, California. The T-Mobile facility is one of the primary wireless service switch facilities in North Texas. In addition, approximately 83,000 square feet of the property is leased to retail tenants. 
 
As of June 30, 2004, the Webb at LBJ property was approximately 78.9% leased. SBC Communications leases 141,663 square feet of the property pursuant to a lease that expires in November 2010 and is subject to two five-year renewal options. Annualized rent under SBC Communications’ lease is $2,773,762, or $19.58 per leased square foot. 
 
The following table sets forth the lease expirations for leases in place at the Webb at LBJ property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 5.8 years. 

Year of Lease
  Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	76,937	 	21.1	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2006	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2007	 	1	 	3,000	 	0.8	 	 	 	48,000	 	1.1	 	 	 	16.00	 	 	16.00	
2008	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2009	 	1	 	80,000	 	21.9	 	 	 	380,000	 	9.1	 	 	 	4.75	 	 	4.75	
2010	 	2	 	175,629	 	48.0	 	 	 	3,154,181	 	75.5	 	 	 	17.96	 	 	18.42	
2011	 	1	 	29,883	 	8.2	 	 	 	529,228	 	12.7	 	 	 	17.71	 	 	17.71	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	1	 	—  	 	—  	 	 	 	65,550	 	1.6	 	 	 	—  	 	 	—  	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	6	 	365,449	 	100.0	%	 	$	4,176,959	 	100.0	%	 	$	    14.48	 	$	    14.83	

Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Webb at LBJ property. 
 
Upon completion of this offering, the Webb at LBJ property will be one of the properties that secures the $155.0 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
NTT/Verio Premier Data Center, San Jose, California (Silicon Valley metropolitan area) 
 
The NTT/Verio Premier Data Center is a two-story 130,752 square foot data center 100% leased to Verio, Inc., a wholly owned subsidiary of Nippon Telegraph & Telephone. The building was designed as one of Verio’s two “premier” data centers in the United States, into which the great majority of Verio’s customer operations for 
 
102 

Table of Contents
web hosting and collocation are being consolidated. In 2001, Verio completed significant improvements to the property, which we estimate cost over $60 million, to create a critical use data center infrastructure containing over 90,000 square feet of raised floor space, with substantial mission-critical infrastructure such as large electrical capacity and distribution, UPS/backup generator systems, robust HVAC systems and state-of-the-art fire suppression and security systems. In addition, the structure was significantly re-developed to meet very high seismic specifications. The property also serves as an important telecommunications node connecting NTT’s network to a major west coast Internet peering facility, also located in San Jose, California, a primary Internet peering and interconnection point on the West Coast. The property was acquired by GI Partners in December 2002. Upon completion of this offering, we will be the fee simple owner of the NTT/Verio Data Center property. 
 
Verio’s lease expires in May 2010 and is subject to three five-year renewal options. Annualized rent under the Verio lease is $3,781,200, or $28.92 per leased square foot. Verio has a right of first offer with respect to the sale of the underlying premises. This right will not be triggered by this offering or the formation transactions or by a subsequent sale by us of the subsidiary that owns this property. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the NTT/Verio Data Center property. 
 
The NTT/Verio Data Center is one of three properties that secures a $43.0 million securitized first mortgage and a $22.0 million securitized mezzanine mortgage described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
eBay Data Center, Rancho Cordova, California (Sacramento metropolitan area) 
 
The eBay Data Center is a 62,957 square foot data center facility strategically located in Rancho Cordova, a technology-oriented suburb of Sacramento. Built in 1983, the building underwent significant improvements from 1999 to 2000, including its development as a data center for its current tenant, Sprint Communications Company. eBay, Inc. has been operating out of the facility for over five years under a web-hosting collocation agreement with Sprint, and has recently entered into a lease directly with the owner of the property. The building includes approximately 30,000 square feet of data center space with raised floors. The property contains redundant UPS and backup generators, large electrical capacity, robust HVAC systems and state-of-the-art security systems and fire detection and suppression systems. Tenants benefit from redundant electrical feeds from the Sacramento Municipal Utility district. 
 
Upon completion of this offering, we will own a 75% tenancy-in-common interest in the eBay Data Center property and an unrelated third party will hold the remaining 25% of the tenancy-in-common. From January 1, 2005 to April 1, 2005, the third party will have the right to compel us to purchase its 25% interest and after January 1, 2005, we will have the right to compel the unrelated third party to sell us its interest, which we expect to exercise. The purchase price for the remaining 25% interest under either alternative will be based on a formula set forth in a co-tenancy agreement. The purchase price under the co-tenancy agreement will be equal to an amount equal to the lesser of (1) $4.7 million plus the seller’s pro rata share of undistributed cash flow from the property and certain other reserves, and less an amount equal to the aggregate of all distributions received by it with respect to any third-party financing, or (2) the amount equal to the “property value” (as defined in the co-tenancy agreement) less $10.6 million and certain interim and transaction costs, plus the sum of $1.5 million and the seller’s pro rata share of undistributed cash flow from the property and certain other reserves, and less an amount equal to the aggregate of all distributions received by it with respect to any third-party financing. Under the co-tenancy agreement, we will manage and direct the eBay Data Center property’s operations. 
 
As of June 30, 2004, the eBay Data Center property was 100% leased to Sprint. Commencing October 1, 2004, pursuant to leases entered into on June 1, 2004, the eBay Data Center property will be 100% leased by two 
 
103 

Table of Contents
tenants, eBay and Sprint. eBay’s lease for 49,648 square feet, or 78.86% of the facility, will expire on September 30, 2009. Annualized rent under eBay’s lease will be $1,245,168, or $25.08 per square foot as of October 1, 2004. Sprint’s new lease for 13,309 square feet, or 21.14% of the facility, will expire on September 30, 2014. Annualized rent under Sprint’s new lease will be approximately $234,771, or $17.64 per square foot as of October 1, 2004. Both leases are subject to three five-year extension options. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the eBay Data Center property. 
 
Upon completion of this offering, the eBay Data Center property will be subject to an $8.0 million secured bridge loan, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
Brea Data Center, Brea, California (Los Angeles metropolitan area) 
 
The Brea Data Center is a 68,807 square foot single story office building built in 1981 as a data center for Beckman Coulter Engineering. The building contains 30,000 square feet of data center space improved with redundant, robust infrastructure improvements including UPS and backup generators, enhanced HVAC systems, fire suppression and security systems. The remainder of the facility is improved for office use. The property was acquired by GI Partners in August 2003. Upon completion of this offering, we will be the fee simple owner of the Brea Data Center property. 
 
As of June 30, 2004, the Brea Data Center property was 100% leased to Systems Management Specialists, Inc., or SMS, which operates its IT outsourcing business in the facility. SMS manages business applications and other mission-critical operations for its customers. SMS was acquired in April 2004 by Infocrossing, a larger, publicly traded company, also focused on corporate enterprises and institutional customers. SMS made significant infrastructure improvements to the Brea Data Center in 2000, which we estimate to be over $10 million, improving the electrical and HVAC infrastructure in the facility. SMS’s lease expires in December 2014, and is subject to two five-year renewal options. The annualized rent under the SMS lease is $1,176,600, or $17.10 per leased square foot. 
 
GI Partners made a significant equity investment in SMS in 2003 that was sold as part of the Infocrossing transaction in April 2004. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Brea Data Center property. 
 
Upon completion of this offering, the Brea Data Center property will be one of the properties that secures the $155.0 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
AT&T Web Hosting Facility, Lithia Springs, Georgia (Atlanta metropolitan area) 
 
The AT&T Web Hosting Facility is a 250,191 square foot building located in suburban Atlanta, Georgia. The building was constructed in 1998 as a warehouse distribution facility, and AT&T subsequently leased 50% of the building for its web hosting/managed services and collocation business. We estimate that AT&T invested over $50 million to improve 113,225 square feet of the space into a state-of-the-art data center for their web-based businesses and corporate data center customers. AT&T invested heavily in the electrical systems including redundant service and UPS/generator systems, enhanced HVAC and fire suppression systems, and robust security 
 
104 

Table of Contents
systems. The property benefits from its proximity to several telecommunications networks including AT&T, Savvis, and BellSouth. The property was acquired by GI Partners in June 2003. Upon completion of this offering, we will be the fee simple owner of the AT&T Web Hosting Facility property. 
 
As of June 30, 2004, the property was 50.0% leased to AT&T; the balance of the building consists of industrial warehouse space that is presently unoccupied. AT&T’s lease expires in March 2016 and has four five-year renewal options. The annualized rent under AT&T’s lease is $1,098,036, or $8.78 per leased square foot. AT&T has a right of first refusal with respect to the sale of the underlying premises. This right will not be triggered by this offering or the formation transactions or by the subsequent sale by us of the subsidiary that owns this property. 
 
We have begun certain ordinary course capital improvement projects in the vacant half of the building. We do not expect the costs of these improvements to be material. 
 
The AT&T Web Hosting Facility property is subject to a mortgage loan, which totaled $8.8 million at June 30, 2004, described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
Technology Manufacturing Properties.    The following three properties are occupied primarily by tenants that focus on technology manufacturing. 
 
Ardenwood Corporate Park, Fremont, California (Silicon Valley metropolitan area) 
 
The Ardenwood Corporate Park property is a comprised of two one-story and one two-story office and biotechnology R&D buildings with a total of 307,657 square feet of net rentable space. Biotechnology labs, clean room, quality control and labeling facilities, cold storage space for biotechnology materials and administrative space occupies 131,386 square feet. The remaining 176,271 square feet is used as office space. GI Partners acquired this property in January 2003. Upon completion of the offering, we will be the fee simple owner of the Ardenwood Corporate Park property. 
 
As of June 30, 2004, the Ardenwood Corporate Park property was 100.0% leased by three tenants. Abgenix, a biopharmaceutical company focused on the research, development and manufacturing of therapeutic human antibodies, occupies a newly completed biotechnology lab and quality control facility. This facility operates as part of Abgenix’s corporate campus environment in conjunction with its corporate headquarters and manufacturing facility located adjacent to the facility. Logitech, a leading global manufacturer of personal computer hardware peripherals (e.g. keyboards, computer mice, web cameras, etc.), uses the property as its Western United States headquarters. Infosys Technologies, a global information technology services and consulting firm, uses the property as its North American headquarters. 
 
The following table summarizes information regarding the primary tenants of the Ardenwood Corporate Park property as of June 30, 2004: 

Tenant
	 	Principal
Nature of Business
	 	Lease
Expiration
	 	Renewal
Options
	 	Total Leased
Square Feet
	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	
Abgenix	 	Biotechnology	 	Apr. 2011	 	2 x 5 yrs	 	131,386	 	42.7	%	 	$	4,925,265	 	65.0	%	 	$	37.49	
Logitech	 	Computer interface products	 	Mar. 2013	 	1 x 5 yrs	 	144,271	 	46.9	 	 	 	2,263,700	 	29.8	 	 	 	15.69	
Infosys	 	IT Services	 	Jan. 2010	 	1 x 5 yrs	 	32,000	 	10.4	 	 	 	391,680	 	5.2	 	 	 	12.24	
 	 	 	 	 	 	 	 		 			 			 			 	 	 	
Total/Weighted Average	 	 	 	 	 	 	 	307,657	 	100.0	%	 	$	7,580,645	 	100.0	%	 	$	    24.64	

105 

Table of Contents
The following table sets forth the lease expirations for leases in place at the Ardenwood Corporate Park property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 7.6 years. 

Year of Lease Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	—  	 	—  	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2006	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2007	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2008	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2009	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2010	 	1	 	32,000	 	10.4	 	 	 	391,680	 	5.2	 	 	 	12.24	 	 	13.66	
2011	 	3	 	131,386	 	42.7	 	 	 	4,925,265	 	65.0	 	 	 	37.49	 	 	47.51	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	5	 	144,271	 	46.9	 	 	 	2,263,700	 	29.8	 	 	 	15.69	 	 	17.16	
Thereafter	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	9	 	307,657	 	100.0	%	 	$	7,580,645	 	100.0	%	 	$	    24.64	 	$	    29.76	

The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the Ardenwood Corporate Park property as of the indicated dates: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004	  	100.0	%	 	$	24.64	  	$	25.39	
December 31, 2003(1)	  	80.7	 	 	 	26.84	  	 	29.48	

(1)	 	Because neither we nor GI Partners owned this property prior to 2003, we are unable to present information for years prior to 2003. 	
 
Other than normally recurring capital expenditures and certain tenant improvements in connection with the Infosys lease, we have no plans with respect to significant renovation, improvement or redevelopment of the Ardenwood Corporate Park property. 
 
The Ardenwood Corporate Park is one of three properties that secures a $43.0 million securitized first mortgage and a $22.0 million securitized mezzanine mortgage described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
The current real estate tax rate for the Ardenwood Corporate Park property is $10.88 per $1,000 of assessed value. The total annual tax for the Ardenwood Corporate Park property at this rate for the 2003 tax year is $364,171 (at a taxable assessed value of $33,480,874). In addition, there were $220,588 in various direct assessments imposed on the Ardenwood Corporate Park property by the City of Fremont for the 2003 tax year. 
 
Maxtor Manufacturing Facility, Fremont, California (Silicon Valley metropolitan area) 
 
The Maxtor Manufacturing property is a two-building 183,050 square foot facility located in Fremont, California. The property contains 65,000 square feet of clean room manufacturing space with extensive tenant improvements, and was originally built as a computer disk manufacturing facility. The 1055 Page Avenue building (59,040 square feet) is a single-story office and light manufacturing facility built in 1991, and the 47700 Kato Road building (124,010 square feet) is a two-story steel frame with glass curtain wall clean room and 
 
106 

Table of Contents
office facility constructed in 1997. The building contains substantial electrical and HVAC improvements, and we estimate that over $100 million was invested by the previous owner to improve the property. GI Partners acquired the space vacant in September 2003 and simultaneously leased it to Maxtor Inc. for a term of eight years. Upon completion of this offering, we will be the fee simple owner of the Maxtor Manufacturing property. 
 
Maxtor Corporation leases 100.0% of the property. The term of Maxtor’s lease expires in September 2011 and is subject to one three-year extension option. Annualized rent under Maxtor’s lease is $3,272,934, or $17.88 per leased square foot. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Maxtor Manufacturing property. 
 
The Maxtor Manufacturing property is subject to a mortgage loan, which totaled $18.0 million at June 30, 2004, described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
ASM Lithography Facility, Tempe, Arizona (Phoenix metropolitan area) 
 
The ASM Lithography Facility is a 113,405 square foot two-story technical training and office facility for ASML US, Inc., the U.S. subsidiary of ASM Lithography Inc., one of the largest suppliers of lithography equipment to the semiconductor industry. The facility, which was completed in 2002 and has been improved with electrical and HVAC upgrades, contains an 11,200 square foot clean room environment for customer training with ASM Lithography’s photolithography equipment, which is used for wafer production in the computer chip industry. 
 
The property is in the Arizona state-sponsored Arizona State University Research Park adjacent to ASM Lithography’s U.S. headquarters. The ASU Research Park is subject to a ground lease between the Arizona Board of Regents and Price-Elliot Research Park, Inc., a non-profit organization established by the State of Arizona. GI Partners acquired a ground sublease interest in the land on which the ASM Lithography facility is located from Price-Elliot Research Park, Inc. in May 2003. This ground sublease expires on December 31, 2082. The rent payment amount due annually through 2016 under the ground sublease is approximately $241,399. Thereafter, the rent increases every ten years as set forth in the sublease agreement. In addition, GI Partners is required under the ground sublease to be assessed and pay a municipal service fee to the City of Tempe to reimburse the City for the cost of providing municipal services to the ASU Research Park. We have the right to terminate this lease at any time during the first 30 years of the term, and thereafter upon every ten-year anniversary. Upon completion of this offering, we will be the holder of this ground sublease. 
 
As of June 30, 2004, the ASM Lithography Facility was 100.0% leased to ASM Lithography. ASM Lithography’s lease does not expire until February 2017 and is subject to two five-year renewal options. Annualized rent under ASM Lithography’s lease is $2,549,165, or $22.48 per leased square foot, and is guaranteed by ASM Lithography’s parent company. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the ASM Lithography Facility. 
 
Upon completion of this offering, the ASM Lithography Facility will not be subject to any debt. However, our ability to incur debt secured by the ASM Lithography Facility will be limited by the terms of our unsecured credit facility, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
107 

Table of Contents
Technology Office/Corporate Headquarters Properties.    The following five properties are primarily leased as technology office/corporate headquarters. 
 
Comverse Technology Building, Wakefield, Massachusetts (Boston metropolitan area) 
 
The Comverse Technology Building is a two-building, 388,000 square foot facility located in Wakefield, Massachusetts. The property is well located on the Route 128 technology corridor with almost one-half mile of freeway frontage and access from two highway exits. The 168,000 square foot 100 Quannapowitt building is a four-story, suburban office facility built in 1999, consisting of a steel frame structure and concrete framing and exterior walls. The facility also includes a parking structure providing 455 parking spaces. The 220,000 square foot 200 Quannapowitt building, is a two-story, office and research and development facility built in 1957 with periodic upgrades, consisting of concrete frame and floors. The building was originally developed and served as the headquarters for American Mutual Insurance until the late 1980s. 
 
As of June 30, 2004, the Comverse Technology Building was 99.7% leased. 94.6% of the property is leased to the Comverse business unit of Comverse Technology, Inc., a provider of enhanced telecommunications systems for major carriers such as Verizon and Verizon Wireless. The Comverse Technology Building serves as the division’s United States headquarters, providing sales and customer training labs, corporate data center, electronics and software testing and assembly facilities, and executive offices for the CEO and senior management of the division. This division is one of the largest business units within the parent company. 
 
The property was purchased by GI Partners in June 2004. Upon completion of this offering, we will be the fee simple owner of the Comverse Technology Building. 
 
The following table summarizes information regarding the Comverse Technology lease as of June 30, 2004: 

Tenant
	 	Principal
Nature Of
Business
	 	Lease
Expiration
	 	Renewal
Options
	 	Total
Leased
Square
Feet
	 	Percentage
of Property
Square
Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per
Leased
Square Foot
	
Comverse Technology	 	Software	 	Feb. 2011	 	2 x 5 yrs	 	367,033	 	94.6	%	 	$	5,592,548	 	94.9	%	 	$	15.24	
 
The following table sets forth the lease expirations for leases in place at the Comverse Technology Building as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 6.4 years. 

Year of Lease
  Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	1,044	 	0.3	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2005	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2006	 	1	 	19,923	 	5.1	 	 	 	298,845	 	5.1	 	 	 	15.00	 	 	15.00	
2007	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2008	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2009	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2010	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2011	 	3	 	367,033	 	94.6	 	 	 	5,592,548	 	94.9	 	 	 	15.24	 	 	16.83	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	4	 	388,000	 	100.0	%	 	$	5,891,393	 	100.0	%	 	$	    15.22	 	$	    16.73	

108 

Table of Contents
The following table sets forth the percentage leased, annualized rent per leased square foot and annualized net effective rent per leased square foot for the Comverse Technology Building as of the indicated date: 

Date
	  	Percent Leased
	 	 	Annualized Rent
Per Leased
Square Foot
	  	Annualized Net
Effective Rent
Per Leased
Square Foot
	
June 30, 2004(1)	  	99.7	%	 	$	15.22	  	$	16.11	

(1)	 	Because neither we nor GI Partners owned this property prior to 2004, we are unable to present information for years prior to 2004. 	
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Comverse Technology Building. 
 
Upon completion of this offering, the Comverse Technology Building will be one of the properties that secures the $155.0 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
The current real estate tax rate for the Comverse Technology Building is $23.30 per $1,000 of assessed value. The total annual tax for the Comverse Technology Building at this rate for the 2003 tax year is $1,198,226 (at a taxable assessed value of $51,426,000). There were no direct assessments imposed on the Comverse Technology Building by the City of Wakefield for the 2003 tax year. 
 
Stanford Place II, Englewood, Colorado (Denver metropolitan area) 
 
Stanford Place II is a 17-story, 348,573 square foot office building in the Denver Tech Center. The building and associated parking structure were developed in 1982 with the latest lobby and HVAC upgrades completed in 2003. The building is well located with exceptional highway (I-25 and I-225) and surface street access and ample covered parking. GI Partners acquired this property in October 2003. Upon completion of this offering, we will own 98% of the entity that is the fee simple owner of the Stanford Place II property and an unrelated third party will continue to hold the remaining 2% interest in the entity that owns this property. After we and our 2% joint venture partner receive a return of capital plus a 15% return on investment, our joint venture partner will be allocated a larger share of subsequent distributions. 
 
As of June 30, 2004, the Stanford Place II property was 78.4% leased. The following table sets forth the lease expirations for leases in place at the Stanford Place II property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 4.0 years. 

Year of Lease
  Expiration
	 	Number of
Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	75,430	 	21.6	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	6	 	39,254	 	11.3	 	 	 	557,528	 	18.1	 	 	 	14.20	 	 	14.65	
2005	 	4	 	14,790	 	4.2	 	 	 	153,119	 	5.0	 	 	 	10.35	 	 	10.94	
2006	 	5	 	34,057	 	9.8	 	 	 	516,830	 	16.8	 	 	 	15.18	 	 	16.45	
2007	 	7	 	56,922	 	16.3	 	 	 	859,299	 	27.7	 	 	 	15.10	 	 	17.58	
2008	 	2	 	3,593	 	1.0	 	 	 	39,644	 	1.3	 	 	 	11.03	 	 	13.80	
2009	 	3	 	13,604	 	3.9	 	 	 	125,002	 	4.1	 	 	 	9.19	 	 	13.44	
2010	 	5	 	89,364	 	25.7	 	 	 	821,437	 	26.7	 	 	 	9.19	 	 	13.43	
2011	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	1	 	21,559	 	6.2	 	 	 	8,408	 	0.3	 	 	 	0.39	 	 	17.89	
 	 		 		 			 			 			 	 	 	 	 	 	
Total/Weighted Average	 	33	 	348,573	 	100.0	%	 	$	3,081,267	 	100.0	%	 	$	    11.28	 	$	    15.07	

109 

Table of Contents
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Stanford Place II property. 
 
The Stanford Place II property is subject to two secured notes which total of $26.0 million as of June 30, 2004, described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
100 Technology Center Drive, Stoughton, Massachusetts (Boston metropolitan area) 
 
The 100 Technology Center Drive property is a six-story 197,000 square foot office building with a brick and granite exterior located in Stoughton, Massachusetts. The property is well located in the Route 128 South suburban sub-market and was originally developed as the headquarters for Reebok. 
 
The property is currently the regional headquarters for Stone & Webster, Inc., a primary operating division of The Shaw Group Inc., which guarantees the lease. Stone & Webster leases 100.0% of the property and operates its environmental and energy engineering and construction management services from this site. In addition, the facility is the primary corporate data center of Stone & Webster and a data back-up site for The Shaw Group. Stone & Webster’s lease expires in March 2013 and is subject to two five-year renewal options. Annualized rent under Stone & Webster’s lease is $3,743,000, or $19.00 per leased square foot. GI Partners acquired this property in February 2004. Upon completion of this offering, we will be the fee simple owner of the 100 Technology Center Drive property. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the 100 Technology Center Drive property. 
 
The 100 Technology Center Drive property is subject to a mortgage loan which totaled $20.0 million at June 30, 2004, described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
Granite Tower, Farmers Branch, Texas (Dallas metropolitan area) 
 
The Granite Tower is a ten-story, 240,151 square foot office tower located in suburban Dallas, Texas. The property was developed in 1999 and represents one of the newest properties in its sub-market. The property also contains a four-story parking structure providing 900 parking spaces. The property is well located with high visibility and easy access from the LBJ Freeway and is less than five minutes from the Galleria sub-market. The Granite Tower property was acquired by GI Partners in September 2003. Upon completion of this offering, we will be the fee simple owner of the Granite Tower property. 
 
As of June 30, 2004, the Granite Tower property was 98.0% leased to 17 tenants operating in various businesses, including software services. The primary tenants are Home Interiors & Gifts, Inc. and Carreker Corp. Home Interiors leases 74,139 square feet under a lease that expires on January 2010. Annualized rent under Home Interiors’ lease is $1,092,067, or $14.73 per leased square foot. Monster Worldwide, Inc. subleases 43,661 square feet of net rentable space at the property from Home Interiors. USF Processors, Inc. sub-subleases 18,948 square feet of net rentable space at the property from Monster Worldwide, Inc. Carreker leases an aggregate of 72,433 square feet on three floors with terms expiring in May 2010 with two five-year renewal options. The annualized rent under these leases is an aggregate of $1,153,858, or $15.93 per leased square foot. 
 
110 

Table of Contents
The following table sets forth the lease expirations for leases in place at the Granite Tower property as of June 30, 2004 plus available space, for each of the ten full and partial calendar years beginning April 1, 2004, assuming that tenants exercise no renewal options and all early termination options. As of June 30, 2004, the weighted average remaining lease term for this building was 4.7 years. 

Year of Lease Expiration
	 	Number
of Leases
Expiring
	 	Square Footage of
Expiring Leases
	 	Percentage of
Property
Square Feet
	 	 	Annualized
Rent
	 	Percentage
of Property
Annualized
Rent
	 	 	Annualized
Rent Per Leased
Square Foot
	 	Annualized
Rent Per
Leased Square
Foot at
Expiration
	
Available	 	—  	 	4,895	 	2.0	%	 	$	—  	 	—  	%	 	$	—  	 	$	—  	
2004	 	1	 	5,957	 	2.5	 	 	 	98,431	 	2.8	 	 	 	16.52	 	 	16.52	
2005	 	3	 	10,857	 	4.5	 	 	 	168,531	 	4.8	 	 	 	15.52	 	 	15.52	
2006	 	7	 	35,007	 	14.6	 	 	 	551,138	 	15.6	 	 	 	15.74	 	 	15.92	
2007	 	1	 	6,612	 	2.8	 	 	 	76,700	 	2.2	 	 	 	11.60	 	 	16.20	
2008	 	2	 	16,054	 	6.7	 	 	 	191,171	 	5.4	 	 	 	11.91	 	 	15.20	
2009	 	3	 	8,093	 	3.4	 	 	 	97,090	 	2.8	 	 	 	12.00	 	 	16.00	
2010	 	4	 	146,572	 	61.0	 	 	 	2,245,925	 	63.6	 	 	 	15.32	 	 	15.83	
2011	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2012	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
2013	 	—  	 	—  	 	—  	 	 	 	—  	 	—  	 	 	 	—  	 	 	—  	
Thereafter	 	1	 	6,104	 	2.5	 	 	 	99,923	 	2.8	 	 	 	16.37	 	 	17.12	
 	 		 		 			 			 			 	 	 	 	 	 	
 	 	22	 	240,151	 	100.0	%	 	$	3,528,909	 	100.0	%	 	$	    15.00	 	$	    15.85	

Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Granite Tower property. 
 
The Granite Tower property is subject to a mortgage loan which totaled $21.6 million as of June 30, 2004, described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” We intend for this debt to remain outstanding upon completion of this offering. 
 
Siemens Building, Farmers Branch, Texas (Dallas metropolitan area) 
 
The Siemens Building is a two-story 125,538 square foot office building completed in 1999. The building, while presently 100.0% leased to Siemens Subscriber Networks, is readily divisible, consisting of three individual “pods” connected via two glass atrium lobbies. The property is well located adjacent to the desirable Galleria complex with easy access to the Dallas Toll Road and the LBJ Freeway. Siemens Subscriber Networks is an independent business unit of Siemens Information and Communication Networks, a division of Siemens AG. Siemens Subscriber Networks uses the property as its headquarters as well as one of its main research facilities. Siemens Subscriber Networks is a major provider of DSL modems and networking technology for major telecommunications carriers such as SBC. Siemens Subscriber Networks’ lease expires in May 2010 and is subject to two five-year renewal options. The annualized rent under the Siemens Subscriber Networks lease is $1,917,505, or $15.27 per leased square foot. GI Partners acquired the property in April 2004. Upon completion of this offering, we will be the fee simple owner of the Siemens Building. 
 
Other than normally recurring capital expenditures, we have no plans with respect to renovation, improvement or redevelopment of the Siemens Building. 
 
Upon completion of this offering, the Siemens Building will be one of the properties that secures the $155.0 million mortgage loan described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering.” 
 
111 

Table of Contents
Right of First Offer Properties 
 
In addition to its interests in the properties that will comprise our initial portfolio and our option property, Carrier Center, GI Partners owns interests in two additional vacant technology-related properties. The first is an 84,000 square foot data center located in Englewood, Colorado (Denver metropolitan area), and the second is a 129,366 square foot data center located in Frankfurt, Germany. We will not acquire either of these properties in the formation transactions, and we do not have an option to purchase either of them as of the close of this offering. However, we do have rights of first offer with respect to the sale of either of these properties by GI Partners. See “Certain Relationships and Related Transactions—Carrier Center Option and Right of First Offer Agreements.” 
 
Indebtedness 
 
The following table sets forth information with respect to the indebtedness that we expect will be outstanding after this offering and the formation transactions on a pro forma basis as of June 30, 2004, but does not give effect to interest rate swap agreements that we expect to enter into in connection with this offering (in thousands). 

Properties
	 	Interest Rate
	 	Principal
Amount
	 	 	Annual
Debt
Service(1)
	 	Maturity Date
	 	Balance at
Maturity(2)
	
100 Technology Center Drive—Mortgage	 	LIBOR + 1.70%   	 	$	20,000	 	 	$	746	 	Apr. 1, 2009	 	$	20,000	
200 Paul Avenue—Mortgage	 	LIBOR + 3.18%(3)	 	 	46,908	 	 	 	4,196	 	Jul. 1, 2006(4)	 	 	43,794	
Ardenwood Corporate Park, NTT/Verio Premier Data Center, VarTec Building—Mortgage Note	 	LIBOR + 1.59%   	 	 	43,000	 	 	 	1,476	 	Aug. 9, 2006(5)	 	 	43,000	
Ardenwood Corporate Park, NTT/Verio Premier Data Center, VarTec Building—Mezzanine	 	LIBOR + 5.75%   	 	 	22,000	 	 	 	1,670	 	Aug. 9, 2006(5)	 	 	22,000	
AT&T Web Hosting Facility—Mortgage	 	LIBOR + 1.85%   	 	 	8,775	 	 	 	340	 	Dec. 1, 2006(4)	 	 	8,775	
Camperdown House—Mortgage	 	6.85%   	 	 	23,079	(6)	 	 	3,130	 	Oct. 31, 2009	 	 	14,040	
Carrier Center—Mortgage(7)	 	LIBOR + 4.25%(8)	 	 	26,221	 	 	 	2,449	 	Oct. 4, 2007	 	 	24,057	
Granite Tower—Mortgage	 	LIBOR + 1.20%   	 	 	21,645	 	 	 	922	 	Jan. 1, 2009	 	 	19,530	
Maxtor Manufacturing Facility—Mortgage	 	LIBOR + 2.25%   	 	 	18,000	 	 	 	1,011	 	Dec. 31, 2006(4)	 	 	17,186	
Stanford Place II—Mortgage	 	5.14%   	 	 	26,000	 	 	 	1,336	 	Jan. 10, 2009	 	 	26,000	
Univision Tower—Mortgage(9)	 	6.09%   	 	 	60,000	 	 	 	3,995	 	Nov. 4, 2009	 	 	55,973	
eBay Bridge Loan	 	LIBOR + 2.00%   	 	 	7,950	 	 	 	305	 	Aug. 11, 2005	 	 	7,950	
New Mortgage Debt(10)	 	5.79%   	 	 	155,000	 	 	 	10,902	 	Nov. 30, 2014	 	 	129,263	
New Unsecured Credit Facility(11)	 	LIBOR + 1.75%   	 	 	—  	 	 	 	—  	 	Nov. 30, 2007	 	 	—  	
 	 	 	 				 			 	 	 			
Total	 	 	 	$	478,578	 	 	$	32,478	 	 	 	$	431,568	

  (1)	 	Annual debt service for floating rate loans is calculated based on the 1-month, 3-month and 6-month LIBOR rates at October 1, 2004, which were 1.84%, 2.03% and 2.20% respectively. 	
  (2)	 	Assuming no payment has been made on the principal in advance of its due date. 	
  (3)	 	Reflects the weighted average interest rate as of the expected assumption date. 	
  (4)	 	Two one-year extensions are available. 	
  (5)	 	A 13-month extension and a one-year extension are available. 	
  (6)	 	Based on our hedged exchange rate of $1.6083 to £1.00. 	
  (7)	 	Assuming the refinancing of the outstanding balances of a mortgage loan and a mezzanine loan in October 2004 pursuant to a letter of commitment from the lender under these loans. The letter of commitment provides for a 3-year term and an interest rate based on LIBOR (subject to a 2.5% floor) plus 4.25% per annum, and a one-year extension. 	
  (8)	 	Subject to a 2.5% LIBOR floor. 	
  (9)	 	Assuming the refinancing of the outstanding balances of a mortgage loan and a mezzanine loan pursuant to a letter of commitment from a lender. 	
(10)	 	This amount represents new mortgage debt that we intend to incur in connection with this offering. We will use our fee simple interests in 36 Northeast Second Street, Brea Data Center, Comverse Technology Building, Hudson Corporate Center, Siemens Building, and Webb at LBJ to secure new mortgage loans. 	
(11)	 	The interest rate under our new unsecured credit facility will equal LIBOR plus a margin of between 1.375% to 1.750% based on our leverage ratio. 	
 
112 

Table of Contents
Depreciation 
 
The following table sets forth for each property in our initial portfolio and component thereof upon which depreciation is taken, the (i) federal tax basis upon completion of this offering and consummation of the formation transactions, (ii) rate, (iii) method, and (iv) life claimed with respect to such property or component thereof for purposes of depreciation. 

Property
	  	Federal Tax Basis(1)
	  	Rate
	 	 	Method(2)
	  	Life Claimed(2)
	
36 Northeast Second Street	  	$	28,170,984	  	2.56	%	 	Straight line	  	39 years	
100 Technology Center Drive	  	 	34,918,217	  	2.56	 	 	Straight line	  	39 years	
200 Paul Avenue	  	 	15,592,288	  	2.56	 	 	Straight line	  	39 years	
1100 Space Park Drive	  	 	27,077,854	  	2.56	 	 	Straight line	  	39 years	
AboveNet Data Center	  	 	31,337,821	  	2.56	 	 	Straight line	  	39 years	
Ardenwood Corporate Park	  	 	41,564,825	  	2.56	 	 	Straight line	  	39 years	
ASM Lithography Facility	  	 	22,051,847	  	2.56	 	 	Straight line	  	39 years	
AT&T Web Hosting Facility	  	 	12,160,108	  	2.56	 	 	Straight line	  	39 years	
Brea Data Center	  	 	6,319,529	  	2.56	 	 	Straight line	  	39 years	
Camperdown House	  	 	30,739,003	  	2.56	 	 	Straight line	  	39 years	
Carrier Center	  	 	56,159,528	  	2.56	 	 	Straight line	  	39 years	
Comverse Technology Building	  	 	45,291,795	  	2.56	 	 	Straight line	  	39 years	
eBay Data Center	  	 	6,300,000	  	2.56	 	 	Straight line	  	39 years	
Granite Tower	  	 	29,361,656	  	2.56	 	 	Straight line	  	39 years	
Hudson Corporate Center	  	 	50,676,879	  	2.56	 	 	Straight line	  	39 years	
Maxtor Manufacturing Facility	  	 	22,089,281	  	2.56	 	 	Straight line	  	39 years	
NTT/Verio Premier Data Center	  	 	24,417,834	  	2.56	 	 	Straight line	  	39 years	
Savvis Data Center	  	 	53,589,398	  	2.56	 	 	Straight line	  	39 years	
Siemens Building	  	 	11,490,511	  	2.56	 	 	Straight line	  	39 years	
Stanford Place II	  	 	31,288,639	  	2.56	 	 	Straight line	  	39 years	
Univision Tower	  	 	89,296,424	  	2.56	 	 	Straight line	  	39 years	
VarTec Building	  	 	10,621,749	  	2.56	 	 	Straight line	  	39 years	
Webb at LBJ	  	 	38,347,596	  	2.56	 	 	Straight line	  	39 years	

(1)	 	Upon the consummation of the formation transactions, the entity that owns Univision Tower will terminate for tax purposes and the entity that owns Stanford Place II will “technically terminate” for tax purposes under Section 708(b)(1)(B) of the Code. Consequently, under Section 168(i)(7) of the Code, each of these properties will be treated as a newly acquired asset placed in service on the day following the consummation of the formation transactions, the federal tax basis of which will be depreciated over its claimed life. Federal tax basis numbers assume that 95% of the basis adjustments resulting from the formation transactions are allocated to the real property and 5% to land. 	
(2)	 	Unless otherwise noted, depreciation method and life claimed for each property and component thereof is determined by reference to the IRS-mandated method for depreciating assets placed into service after 1986, known as the Modified Accelerated Cost Recovery System. 	
 
In addition, we have an aggregate of approximately $2.0 million in additional tax basis of depreciable furniture, fixtures and equipment associated with the properties in our portfolio as of June 30, 2004. Depreciation on this furniture, fixtures and equipment is computed on the straight line and double declining balance methods over the claimed life of such property, which is either five or seven years. 
 
113 

Table of Contents
Regulation 
 
General 
 
Office properties in our submarkets are subject to various laws, ordinances and regulations, including regulations relating to common areas. We believe that each of the initial properties has the necessary permits and approvals to operate its business. 
 
Americans With Disabilities Act 
 
Our properties must comply with Title III of the Americans with Disabilities Act, or ADA, to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe that the initial properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect. 
 
Environmental Matters 
 
Under various laws relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances at that property, and may be required to investigate and clean up such contamination at that property or emanating from that property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. Previous owners used some of our properties for industrial and retail purposes, so those properties may contain some level of environmental contamination. The presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability or materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. 
 
Some of the properties may contain asbestos-containing building materials. Environmental laws require that asbestos-containing building materials be properly managed and maintained, and may impose fines and penalties on building owners or operators for failure to comply with these requirements. These laws may also allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials. 
 
In addition, some of our tenants, particularly those in the biotechnology and life sciences industry and those in the technology manufacturing industry, routinely handle hazardous substances and wastes as part of their operations at our properties. Environmental laws and regulations subject our tenants, and potentially us, to liabi-lity resulting from these activities or from previous industrial or retail uses of those properties. Environmental liabilities could also affect a tenant’s ability to make rental payments to us. We require our tenants to comply with these environmental laws and regulations and to indemnify us for any related liabilities. 
 
Independent environmental consultants have conducted Phase I or similar environmental site assessments on all of the properties in our initial portfolio. Each of the site assessments has been either completed or updated since January 1, 2002, except 36 Northeast Second Street and Univision Tower. Site assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties. These assessments do not generally include soil samplings, subsurface investigations or an asbestos survey. None of the recent site assessments revealed any past or present environmental liability that we believe would have a material adverse effect on our business, assets or results of operations. However, the assessments may have failed to reveal all environmental conditions, liabilities or compliance concerns. Material environmental conditions, liabilities or compliance concerns may have arisen 
 
114 

Table of Contents
after the review was completed or may arise in the future; and future laws, ordinances or regulations may impose material additional environmental liability. 
 
Insurance 
 
Upon completion of this offering and consummation of the formation transactions, we will carry comprehensive liability, fire, extended coverage, earthquake, business interruption and rental loss insurance covering all of the properties in our portfolio under a blanket policy. We will select policy specifications and insured limits which we believe to be appropriate given the relative risk of loss, the cost of the coverage and industry practice and, in the opinion of our company’s management, the properties in our portfolio are currently, and upon completion of this offering will be, adequately insured. We will not carry insurance for generally uninsured losses such as loss from riots, war or acts of God. In addition, we will carry earthquake insurance on our properties in an amount and with deductibles which we believe are commercially reasonable. Certain of the properties in our portfolio will be located in areas known to be seismically active. See “Risk Factors—Risks Related to Our Business and Operations—Potential losses may not be covered by insurance.” 
 
Competition 
 
We compete with numerous developers, owners and operators of office and commercial real estate, many of which own properties similar to ours in the same submarkets in which our properties are located, but which have lower occupancy rates than our properties. If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire. 
 
Employees 
 
We initially intend to employ approximately 20 persons. We currently expect that none of these employees will be represented by a labor union. 
 
We intend to enter into an arrangement with a professional employer organization (PEO) pursuant to which the PEO will provide personnel management services to us. The services will be provided through a co-employment relationship between us and the PEO, under which all of our employees will be treated as employed by both the PEO and us. The services and benefits provided by the PEO are expected to include payroll services, workers’ compensation insurance and certain employee benefits plan coverage. Our agreement with the PEO is expected to be terminable by either party upon 30 days’ prior written notice. 
 
Offices 
 
Our headquarters is located, in Menlo Park, California. Based on the anticipated growth of our company, we intend to relocate our corporate headquarters to a larger facility in the near future. In addition, we may add regional offices depending upon our future operational needs. 
 
Legal Proceedings 
 
In the ordinary course of our business, we are frequently subject to claims for negligence and other claims and administrative proceedings, none of which we believe would have a material adverse effect or are material. 
 
115 

Table of Contents
MANAGEMENT 
 
Directors and Executive Officers 
 
Upon completion of this offering, our board of directors will consist of six members, including a majority of directors who are independent within the meaning of the NYSE listing standards. Pursuant to our charter, each of our directors will be elected by our stockholders to serve until the next annual meeting and until their successors are duly elected and qualify. See “Material Provisions of Maryland Law and of Our Charter and Bylaws—Our Board of Directors.” The first annual meeting of our stockholders after this offering will be held in 2005. Subject to rights pursuant to any employment agreements, officers serve at the pleasure of our board of directors. 
 
The following table sets forth certain information concerning the individuals who are our directors, executive officers and certain of our other senior officers upon completion of this offering: 

Name
	 	Age
	 	Position
	
Richard A. Magnuson*	 	47	 	Executive Chairman of the Board	
Michael F. Foust*	 	48	 	Chief Executive Officer and Director	
Laurence A. Chapman	 	55	 	Director Nominee	
Ruann F. Ernst, Ph.D.	 	57	 	Director Nominee	
Kathleen Earley Reed	 	52	 	Director Nominee	
Dennis E. Singleton	 	60	 	Director Nominee	
A. William Stein*	 	50	 	Chief Financial Officer and Chief Investment Officer	
Scott E. Peterson*	 	42	 	Senior Vice President, Acquisitions	
John O. Wilson*	 	58	 	Executive Vice President, Technology Infrastructure	

*	 	Denotes our named executive officers. 	
 
The following is a biographical summary of the experience of our directors, executive officers and certain other senior officers. 
 
Richard A. Magnuson serves as Executive Chairman of our Board of Directors. Mr. Magnuson is a founder of, and has served as Chief Executive Officer of the advisor to, GI Partners since February 2001. Since November 1999, Mr. Magnuson has served as Executive Managing Director of CB Richard Ellis Investors, where he formed and continues to manage the investments and activities of GI Partners. From 1994 through 1999 Mr. Magnuson held various positions with Nomura Securities, most recently as Deputy Managing Director of their London based Principal Finance Group. From 1989 until 1994, Mr. Magnuson was a Director in the Investment Banking division of Merrill Lynch. From 1981 until 1986, Mr. Magnuson worked for Digital Research, the company that developed the personal computer operating system, and founded and sold InterActive Software, a software services company. Mr. Magnuson serves on the board of directors of NYSE listed Glenborough Realty Trust, a REIT focused on multi-tenant office properties, where he is a member of the Audit Committee and is Chairman of the Nomination and Governance Committee. Mr. Magnuson is also a director of two private companies. Mr. Magnuson holds a Bachelor of Arts degree from Dartmouth College and a Master of Business Administration degree from Stanford University Graduate School of Business. 
 
Michael F. Foust has served as our Chief Executive Officer and as a Director since our inception. Mr. Foust is a founder of, and has served as a managing director of the advisor to, GI Partners since February 2001. During his tenure at GI Partners, Mr. Foust directed technical property acquisitions and portfolio management. Mr. Foust has over 19 years of experience in institutional real estate investments and portfolio management. Prior to GI Partners, from 1999 to 2001, he was a senior director at CB Richard Ellis Investors. From 1995 to 1999, Mr. Foust was a senior vice president at CB Richard Ellis, where he managed regional asset services operations. During the period from 1985 to 1995, Mr. Foust held senior portfolio management and investment positions at UBS Asset Management, Karsten Realty Advisors, and Trammell Crow Company. Prior to his real estate career, from 1979 to 1985, Mr. Foust participated in the origination of two related, international telecommunications 
 
116 

Table of Contents
companies, Consortium Communications International and Progressive Systems Inc. The companies provided message switching and turn-key networks for multinational corporations. Mr. Foust received a Bachelor of Arts degree from Harvard University and a Master of Business Administration degree from Harvard Business School. 
 
Laurence A. Chapman served as Senior Vice President and Chief Financial Officer of Goodrich Corp. from 1999 to 2000. Mr. Chapman served as Senior Vice President and Chief Financial Officer of Rohr, Inc., a $1.2 billion aerospace company, from 1994 until 1999, when Rohr, Inc. merged with Goodrich Corp. His responsibilities at both companies included accounting, treasury, tax, insurance, investor relations, financial planning and information technology functions. Prior to his service at Rohr, Inc., Mr. Chapman was employed at Westinghouse Electric Corporation from 1981 through 1994. From 1992 through 1994, Mr. Chapman was the Vice President and Treasurer of Westinghouse Electric Corporation where he was responsible for the financing activities of Westinghouse Electric Corporation and Westinghouse Credit Corp. His responsibilities included supervising corporate finance, cash and short-term funding, project finance, bank relations and international treasury. Mr. Chapman received a Bachelor of Commerce degree with Distinction from McGill University and a Master of Business Administration degree from Harvard Business School. Mr. Chapman has been designated chair of our audit committee and will be a member of our nominating and corporate governance committee. 
 
Ruann F. Ernst, Ph.D. served as Chief Executive Officer of Digital Island, Inc., an e-business delivery network company, from June 1998 through January 2002. Dr. Ernst was Chairperson of the Board of Digital Island from December 1999 through July 2001, when the company was acquired by Cable & Wireless, Plc. From 1988 through 1998, Dr. Ernst worked for Hewlett Packard Company, an electronics equipment and computer company, in various management positions, most recently as General Manager, Financial Services Business Unit. Since 1998, Dr. Ernst has served as a director of Advanced Fibre Communications, where she is a member of the audit, nominating and governance committees. Dr. Ernst is also a director of one private and two not-for-profit companies. Dr. Ernst received a Bachelor of Science, a Master of Science and a Ph.D. from The Ohio State University. Ms. Ernst will be a member of our audit, compensation and nominating and corporate governance committees. 
 
Kathleen Earley Reed was employed at AT&T Corporation from 1994 through September 2001. While at AT&T Corporation, Ms. Earley Reed served as Senior Vice President of Enterprise Networking and Chief Marketing Officer where she oversaw all AT&T Corporation business-related brand, image and advertising and marketing strategy. One of Ms. Earley Reed’s largest contributions was as President of AT&T Data & Internet Services, an $8 billion business unit that provided Internet Protocol (IP), web hosting, data and managed network services. Under her leadership, AT&T’s network became one of the largest Internet backbones in the industry. Prior to joining AT&T Corporation, Ms. Earley Reed was employed by IBM Corporation for 17 years with positions in sales, marketing, planning and strategy development. Ms. Earley Reed is currently a member of the board of directors of two publicly held companies, Vignette Corp. and Computer Network Technology Corp. Ms. Earley Reed received a Bachelor of Science degree and a Master of Business Administration degree, both from the University of California, Berkeley. Ms. Earley Reed has been designated chair of our nominating and corporate governance committee and will be a member of our compensation committee. 
 
Dennis E. Singleton was a founding partner of Spieker Partners, the predecessor of Spieker Properties, Inc., one of the largest owners and operators of commercial property on the west coast prior to its $7.2 billion acquisition by Equity Office Properties Trust in 2001. Mr. Singleton served as Chief Financial Officer and Director of Spieker Properties, Inc. from 1993 to 1995, Chief Investment Officer and Director from 1995 to 1997 and Vice Chairman and Director from 1998 to 2001. During his tenure, Mr. Singleton was involved in identifying and analyzing strategic portfolio acquisition and operating opportunities and oversaw the acquisition and development of more than 20 million square feet of commercial property. From 2001 to present, Mr. Singleton has managed personal investments in real estate. Mr. Singleton received a Bachelor of Science degree from Lehigh University and a Master of Business Administration degree from Harvard Business School. Mr. Singleton has been designated chair of our compensation committee and will be a member of our audit committee. 
 
117 

Table of Contents
A. William Stein joined GI Partners as a consultant in April 2004 and became our Chief Financial Officer and Chief Investment Officer in July 2004. Mr. Stein has over 20 years of investment, financial and operating management experience in both large company environments and small, rapidly growing companies. Prior to joining our company, Mr. Stein provided turnaround management advice to both public and private companies. From 2000 to 2001, Mr. Stein served as Co-Head of VentureBank@PNC and Media and Communications Finance at The PNC Financial Services Group where he was responsible for directing the delivery of PNC’s products and services to VentureBank’s high technology and emerging growth client base. Before joining PNC, Mr. Stein was President and Chief Operating Officer of TriNet Corporate Realty Trust, a $1.8 billion REIT that was acquired by Starwood Financial Trust (now called iStar Financial) in late 1999. Prior to being named President of TriNet, Mr. Stein was Executive Vice President, Chief Financial Officer and Secretary. TriNet’s portfolio consisted of office, industrial and retail properties throughout the U.S. Before joining TriNet in 1995, Mr. Stein held a number of senior investment and financial management positions with Westinghouse Electric, Westinghouse Financial Services and Duquesne Light Company. Mr. Stein practiced law for eight years, specializing in financial transactions and litigation. Mr. Stein received a Bachelor of Arts degree from Princeton University, a Juris Doctor degree from the University of Pittsburgh and a Master of Science degree with Distinction from the Graduate School of Industrial Administration at Carnegie Mellon University. 
 
Scott E. Peterson will become our Senior Vice President responsible for acquisition activities upon completion of this offering. Mr. Peterson has been a managing director of GI Partners since August 2002. While at GI Partners, Mr. Peterson was responsible for property acquisitions with an emphasis on technical properties. Mr. Peterson has over 17 years of real estate experience and was most recently a Senior Vice President with GIC Real Estate, the real estate investment entity for the Government of Singapore Investment Corporation, from May 1994 to August 2002. Previously, Mr. Peterson was active in investments, development and asset management with LaSalle Partners, a real estate services company and Trammell Crow Company, a real estate developer. Mr. Peterson received a Bachelor of Arts degree from Northwestern University, and a Master of Business Administration from Northwestern University. 
 
John O. Wilson will become Executive Vice President of our technology infrastructure assets upon completion of this offering. Mr. Wilson has 32 years of real estate investment and development experience including extensive experience owning and managing technology related real estate. Prior to his current position, Mr. Wilson served as President and CEO of the telecommunications assets of The Cambay Group, Inc., the principal U.S. real estate subsidiary of British Isles based Somerston Holdings Limited. From 1990 through 1998, Mr. Wilson served as Vice President and Director of Cambay. Mr. Wilson has also held real estate positions at such firms as Richard Ellis, Inc., The First National Bank of Chicago and Real Estate Research Corporation. Mr. Wilson served as an officer in the U.S. Navy and holds a Bachelor of Science degree from Georgetown University and a Master of Business Administration degree from The University of Michigan. 
 
Board Committees 
 
Upon completion of this offering, our board of directors will appoint a nominating and corporate governance committee, an audit committee and a compensation committee. Under our bylaws, the composition of each committee must comply with the listing requirements and other rules and regulations of the New York Stock Exchange, as amended or modified from time to time, and we currently anticipate that each of these committees will be comprised of three independent directors. Our bylaws define “independent director” by reference to the rules, regulations and listing qualifications of the New York Stock Exchange, or NYSE, which generally deem a director to be independent if the director has no relationship to us that may interfere with the exercise of the director’s independence from management and our company. 
 
The board of directors will have three standing committees: an audit committee, a compensation committee, and a nominating and corporate governance committee. 
 
Audit Committee.    The audit committee will help ensure the integrity of our financial statements, the qualifications and independence of our independent auditor and the performance of our internal audit function 
 
118 

Table of Contents
and independent auditors. The audit committee will select, assist and meet with the independent auditor, oversee each annual audit and quarterly review, establish and maintain our internal audit controls and prepare the report that federal securities laws require be included in our annual proxy statement. Mr. Chapman has been designated as chair and Ms. Ernst and Mr. Singleton have been appointed as members of the audit committee. 
 
Compensation Committee.    The compensation committee will review and approve the compensation and benefits of our executive officers, administer and make recommendations to our board of directors regarding our compensation and stock incentive plans, produce an annual report on executive compensation for inclusion in our proxy statement and publish an annual committee report for our stockholders. Mr. Singleton has been designated as chair and Ms. Ernst and Ms. Earley Reed have been appointed as members of the compensation committee. 
 
Nominating and Corporate Governance Committee.    The nominating and corporate governance committee will develop and recommend to our board of directors a set of corporate governance principles, adopt a code of ethics, adopt policies with respect to conflicts of interest, monitor our compliance with corporate governance requirements of state and federal law and the rules and regulations of the NYSE, establish criteria for prospective members of our board of directors, conduct candidate searches and interviews, oversee and evaluate our board of directors and management, evaluate from time to time the appropriate size and composition of our board of directors and recommend, as appropriate, increases, decreases and changes in the composition of our board of directors and formally propose the slate of directors to be elected at each annual meeting of our stockholders. Ms. Earley Reed has been designated as chair and Ms. Ernst and Mr. Chapman have been appointed as members of the nominating and corporate governance committee. 
 
Our board of directors may from time to time establish certain other committees to facilitate the management of our company. 
 
Compensation of Directors 
 
Upon completion of this offering, each of our directors who is not an employee of our company or our subsidiaries will receive an annual retainer of $20,000 for services as a director and will receive a fee of $1,500 for each meeting attended in person and $500 for each meeting attended telephonically. Directors who serve on our audit, nominating and corporate governance and/or compensation committees will receive a fee of $1,000 for each meeting attended in person or $500 for each meeting attended telephonically. Directors who serve as the Chair of one of our committees will receive an additional annual retainer of $3,000. Directors who are employees of our company or our subsidiaries will not receive compensation for their services as directors. 
 
Our 2004 incentive award plan provides for formula grants of long-term incentive units to non-employee directors. In connection with this offering and the formation transactions, each non-employee director will receive 6,448 long-term incentive units. Thereafter, on the date of each annual meeting of stockholders at which each non-employee director is reelected to our board of directors, commencing with the third such meeting, such non-employee director will receive an additional 1,612 long-term incentive units. Similarly, each non-employee director who is initially elected to our board of directors after this offering will receive 6,448 long-term incentive units on the date of such initial election and an additional 1,612 long-term incentive units on the date of each annual meeting of stockholders at which the non-employee director is reelected to our board of directors, commencing with the third such meeting. If a non-employee director does not qualify as an “accredited investor” within the meaning of the federal securities laws on the date of any grant of long-term incentive units, the director will not receive that grant of long-term incentive units, but will instead receive an equivalent number of fully vested shares of restricted stock at a per share purchase price equal to the par value of our common stock. 
 
Executive Officer Compensation 
 
Because we were only recently organized, meaningful individual compensation information is not available for prior periods. The following table sets forth the annual base salary and other compensation expected to be 
 
119 

Table of Contents
paid in 2004 to our chief executive officer and our other executive officers. We have entered into employment-related arrangements with these executive officers which will become effective in connection with this offering. 
 
Summary Compensation Table 

 	 	 	 	Annual Compensation
	 	Long-Term Compensation
	 	 	
Name and Principal Position
	 	Year
	 	Base
Salary($)(1)
	 	Bonus($)
	 	 	Other Annual
Compensation
($)
	 	Long-Term
Incentive Unit
Awards($)(3)
	 	Securities
Underlying
Options (#)
	 	All Other
Compensation($)
	
Richard A. Magnuson, Executive Chairman	 	2004	 	150,000	 	(2	)	 	—  	 	12,122,235	 	125,263	 	—  	
Michael F. Foust, Chief Executive Officer	 	2004	 	350,000	 	(2	)	 	—  	 	4,121,565	 	125,263	 	—  	
A. William Stein, Chief Financial Officer and Chief Investment Officer	 	2004	 	290,000	 	(2	)	 	—  	 	2,121,390	 	80,815	 	—  	
Scott E. Peterson, Senior Vice President, Acquisitions	 	2004	 	250,000	 	(2	)	 	—  	 	1,575,885	 	80,815	 	—  	
John O. Wilson, Executive Vice President, Technology Infrastructure	 	2004	 	250,000	 	(2	)	 	—  	 	—  	 	—  	 	—  	

(1)	 	Amounts given are annualized projections for the year ending December 31, 2004 based on employment agreements which will become effective in connection with this offering. See “—Employment Agreements.” 	
(2)	 	Under the terms of Mr. Magnuson’s Executive Chairman agreement, Mr. Magnuson will be eligible to receive an annual performance-based bonus with an initial target and maximum level equal to 100% and 150% of annual base compensation, respectively. Under the terms of Mr. Foust’s, Mr. Stein’s, Mr. Peterson’s and Mr. Wilson’s employment agreements, these executives will be eligible to receive annual performance-based bonuses with initial target and maximum levels equal to 50% and 75% of base salary, respectively. 	
(3)	 	In connection with this offering, Messrs. Magnuson, Foust, Stein and Peterson will be granted 808,149, 274,771, 141,426 and 105,059, respectively, vested long-term incentive units pursuant to our incentive award plan. These long-term incentive units will not be transferable for a period of three years from the date of grant and will receive the same quarterly per unit distributions as common units in our operating partnership, which equal per share distributions on our common stock. Initially, long-term incentive units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in our operating partnership for all purposes, and therefore accrete to an economic value equivalent to our common stock on a one-for-one basis. If such parity is reached, long-term incentive units may be converted into an equal number of common units of our operating partnership at any time, and thereafter enjoy all the rights of common units of our operating partnership. However, there are circumstances under which the long-term incentive units will not achieve full parity with common units of our operating partnership. Until and unless such parity is reached, the value that a holder will realize for a given number of long-term incentive units will be less than the value of an equal number of shares of our common stock. 	
 
Option Grants in 2004 

Name
	 	Number of Securities
Underlying Options
to be Granted(#)
	 	Percent of Total
Options Granted
to Employees in
2004
	 	 	Exercise
Price per
Common
Share(1)
	 	Expiration
Date(2)
	 	Potential Realizable
Value at
Assumed Annual Rates
of Share
Price Appreciation
for Option Term
	
	 		 			 		 		 	    5%    
	 	  10%  
	
Richard A. Magnuson, Executive Chairman	 	125,263	 	15.5	%	 	$	15	 	 	 	$	1,181,658	 	$	2,994,554	
Michael F. Foust, Chief Executive Officer	 	125,263	 	15.5	 	 	 	15	 	 	 	 	1,181,658	 	 	2,994,554	
A. William Stein, Chief Financial Officer and Chief Investment Officer	 	80,815	 	10.0	 	 	 	15	 	 	 	 	762,362	 	 	1,931,974	
Scott E. Peterson, Senior Vice President, Acquisitions	 	80,815	 	10.0	 	 	 	15	 	 	 	 	762,362	 	 	1,931,974	
John O. Wilson, Executive Vice President, Technology Infrastructure	 	—  	 	—  	 	 	 	—  	 	 	 	 	—  	 	 	—  	

(1)	 	Based on the assumed initial public offering price. The exercise price per share will be the initial public offering price. 	
(2)	 	Ten years following the date on which the option is granted. 	
 
120 

Table of Contents
2004 Incentive Award Plan 
 
We intend to adopt the 2004 Incentive Award Plan of Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. The incentive award plan provides for the grant of incentive awards to our and their employees, directors and consultants (and our and their respective subsidiaries). Awards issuable under the incentive award plan include stock options, restricted stock, dividend equivalents, stock appreciation rights, long-term incentive units, cash performance bonuses and other incentive awards. Only our employees and employees of our qualifying subsidiaries are eligible to receive incentive stock options under the incentive award plan. We intend to reserve a total of 4,474,102 shares of our common stock for issuance pursuant to the incentive award plan, subject to certain adjustments set forth in the plan. Each long-term incentive unit issued under the incentive award plan will count as one share of stock for purposes of calculating the limit on shares that may be issued under the plan and the individual award limit discussed below. 
 
With respect to stock option grants and other awards granted to our independent directors, the plan will be administered by our board. With respect to all other awards, the plan will be administered by our compensation committee or another committee designated by our board. Each member of the committee that administers the plan will be both a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and an “outside director” within the meaning of Section 162(m) of the Code. The incentive award plan provides that the plan administrator has the authority to designate recipients of awards and to determine the terms and provisions of awards, including the exercise or purchase price, expiration date, vesting schedule and terms of exercise. 
 
The incentive award plan provides that the maximum number of shares which may be subject to awards granted any individual during any calendar year will not exceed 1,118,526 shares. However, this limit will not apply until the earliest of the first material modification of the plan, the issuance of all of the shares reserved for issuance under the plan, the expiration of the plan, or the first meeting of our stockholders at which directors are to be elected that occurs more than three years after the completion of this offering. 
 
The exercise price of nonqualified stock options and incentive stock options granted under the incentive award plan must be at least 85% and 100%, respectively, of the fair market value of our common stock on the date of grant. Incentive stock options granted to optionees who own more than 10% of our outstanding common stock on the date of grant must have an exercise price that is at least 110% of fair market value of our common stock on the grant date. Stock options granted under the incentive award plan will expire no later than ten years after the date of grant, or five years after the date of grant with respect to incentive stock options granted to individuals who own more than 10% of our outstanding common stock on the grant date. The purchase price, if any, of other incentive awards will be determined by the plan administrator. 
 
The incentive award plan also provides for the issuance of restricted stock awards and other incentive awards to eligible individuals. Restricted stock awards will generally be subject to such transferability and vesting restrictions as the plan administrator shall determine. With respect to other incentive awards under the plan, such as stock appreciation rights, performance-based awards, dividend equivalents, stock payments and other stock-based awards, the plan administrator will determine the terms and conditions of such awards, including the purchase or exercise price, if any, of such awards, vesting and other exercisability conditions, and whether the awards will be based on specified performance criteria. 
 
Long-term incentive units may be issued to eligible participants for the performance of services to or for the benefit of our operating partnership. Long-term incentive units, whether vested or not, will receive the same quarterly per unit distributions as common units in our operating partnership, which equal per share distributions on our common stock. Initially, long-term incentive units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in our operating partnership for all purposes, and therefore accrete to an economic value for participants equivalent to our common stock on a one-for-one basis. If such parity is reached, vested long-term incentive units may be converted into an equal number of common units of our 
 
121 

Table of Contents
operating partnership at any time, and thereafter enjoy all the rights of common units of our operating partnership. Holders of common units in our operating partnership may elect to redeem their units for cash or, at our election, an equivalent number of shares of our common stock, at any time beginning 14 months after the consummation of this offering. However, there are circumstances under which the long-term incentive units will not achieve full parity with common units of our operating partnership. Until and unless such parity is reached, the value that a participant will realize for a given number of vested long-term incentive units will be less than the value of an equal number of shares of our common stock. In connection with this offering, we will cause our operating partnership to issue an aggregate of 1,490,561 long-term incentive units to our officers. 
 
Cash performance bonuses payable under the incentive award plan may be based on the attainment of performance goals that are established by the plan administrator and relate to one or more performance criteria described in the plan. Cash performance bonuses paid to certain of our employees must be based upon objectively determinable bonus formulas established in accordance with the plan, and the maximum bonus payable to any such individual with respect to any fiscal year may not exceed $2,000,000. 
 
The incentive award plan provides for formula grants of long-term incentive units to our independent directors. In connection with this offering and the formation transactions, each independent director who is an accredited investor will receive 6,448 long-term incentive units. Thereafter, commencing with the third annual meeting of stockholders following the completion of this offering, such independent director will receive 1,612 long-term incentive units on the date of each annual meeting of stockholders at which the independent director is reelected to the board. Similarly, each independent director who is initially elected to the board after the completion of this offering will receive 6,448 long-term incentive units on the date of such initial election and, commencing with the third annual meeting of stockholders following such initial election, 1,612 long-term incentive units on the date of each annual meeting of stockholders at which the independent director is reelected to the board. If a non-employee director does not qualify as an “accredited investor” within the meaning of the federal securities laws on the date of any grant of long-term incentive units, the director will not receive that grant of long-term incentive units, but will instead receive an equivalent number of fully vested shares of restricted stock at a per share purchase price equal to the par value of our common stock. 
 
In the event of certain corporate transactions and changes in our corporate structure or capitalization, the plan administrator may make appropriate adjustments to (i) the aggregate number and type of shares issuable under the incentive award plan, (ii) the terms and conditions of any outstanding awards, including the number and type of shares issuable thereunder, and (iii) the grant or exercise price of each outstanding award. In addition, in the event of a change in control (as defined in the plan), each outstanding award which is not converted, assumed or replaced by the successor corporation will become exercisable in full. The plan administrator also has the authority under the incentive award plan to take certain other actions with respect to outstanding awards in the event of a corporate transaction, including provision for the cash-out, termination, assumption or substitution of such awards. If a change in control occurs and outstanding awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the change in control such awards will become fully exercisable and all forfeiture restrictions on such awards will lapse. 
 
With the approval of our board, the plan administrator may at any time terminate, amend or modify the incentive award plan, provided that to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, we must obtain stockholder approval of any amendment in such a manner and to such a degree as required, and without the approval of our stockholders, no amendment may increase the maximum number of shares issuable under the incentive award plan, permit the plan administrator to grant options with an exercise price that is below the fair market value on the date of grant, or permit the plan administrator to extend the exercise period for an option beyond ten years from the date of grant. In addition, no stock option may be amended to reduce the exercise price of the shares subject thereto below the exercise price on the date on which the stock option is granted, and, subject to the plan’s adjustment provisions, no stock option may be granted in connection with the cancellation or surrender of any stock option having a higher per share exercise price. Any termination, amendment or modification of the incentive award plan which materially 
 
122 

Table of Contents
adversely affects any outstanding award requires the prior written consent of the affected holder. The incentive award plan will terminate on the earlier of the expiration of ten years from the date that it is adopted by our board or the expiration of ten years from the date it is approved by our stockholders. No award may be granted under the plan after its termination, but awards that are outstanding at such time will remain in effect. The incentive award plan will be effective as of the date it is approved by our stockholders. 
 
The incentive award plan provides that no participant in the plan will be permitted to acquire, or will have any right to acquire, shares thereunder if such acquisition would be prohibited by the stock ownership limits contained in our charter or would impair our status as a REIT. 
 
We intend to file with the Securities and Exchange Commission a Registration Statement on Form S-8 covering the shares of common stock issuable under the incentive award plan. 
 
Employment Agreements 
 
We have entered into employment agreements, effective as of the pricing of this offering or such earlier date as may be mutually agreed upon by the parties, with Messrs. Foust, Stein and Peterson. We have also entered into an employment agreement with Mr. Wilson which will become effective upon the completion of this offering or such earlier date as we and Mr. Wilson may mutually agree upon, provided that our operating partnership shall have acquired all of the properties and assets that are covered in the contribution agreement between our operating partnership and certain of the parties who are contributing 200 Paul Avenue and 1100 Space Park Drive. The employment agreements provide for Mr. Foust to serve as our Chief Executive Officer, Mr. Stein to serve as our Chief Financial Officer and Chief Investment Officer, Mr. Peterson to serve as our Senior Vice President, Acquisitions and Mr. Wilson to serve as our Executive Vice President, Technology Infrastructure. 
 
The employment agreements with Messrs. Foust and Stein have a term ending on the second anniversary of the completion of this offering. The employment agreements with Messrs. Peterson and Wilson provide that their employment with us is “at-will” and may be terminated by either the executive or us upon 30 days’ advance written notice. 
 
The employment agreements provide for (i) an annual base salary of $350,000 for Mr. Foust, $290,000 for Mr. Stein, $250,000 for Mr. Peterson and $250,000 for Mr. Wilson, subject to increase in accordance with our policies as in effect from time to time, (ii) eligibility for an annual cash performance bonus under our incentive bonus plan based on the satisfaction of performance goals established in accordance with the terms of such plan, and (iii) medical and other group welfare plan coverage and fringe benefits provided to similarly-situated executives. Each executive’s target and maximum annual bonus will initially be 50% and 75%, respectively, of his base salary. With respect to Messrs. Foust and Stein, these bonus provisions will apply until the earliest to occur of (i) the first material modification of the bonus plan (within the meaning of Section 162(m) of the Code), (ii) the expiration of the bonus plan, (iii) our first annual stockholders meeting that occurs after the close of the third calendar year following the calendar year in which our initial public offering occurs, or (iv) such other date required by Section 162(m) of the Code. The employment agreements also provide that, subject to adoption and approval of our incentive award plan, in connection with this offering and the formation transactions, we will issue to each of Messrs. Foust, Stein and Peterson that number of long-term incentive units of our operating partnership which is equal to 17%, 8.75% and 6.5%, respectively, of a management pool consisting of 1,616,299 units. Pursuant to the grant agreements, these long-term incentive units will not be transferable for a period of three years from the date of grant and will receive the same quarterly per unit distributions as common units in our operating partnership, which equal per share distributions on our common stock. Initially, long-term incentive units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in our operating partnership for all purposes, and therefore accrete to an economic value equivalent to our common stock on a one-for-one basis. If such parity is reached, long-term incentive units may be converted into an equal number of common units of our operating partnership at any time, and thereafter enjoy all the rights of common 
 
123 

Table of Contents
units of our operating partnership. However, there are circumstances under which the long-term incentive units will not achieve full parity with common units of our operating partnership. Until and unless such parity is reached, the value that a holder will realize for a given number of long-term incentive units will be less than the value of an equal number of shares of our common stock. The long-term incentive units will be issued to each executive as part of his compensation for services rendered to or for the benefit of our operating partnership. In addition, subject to adoption and approval of our incentive award plan, in connection with this offering, each of Messrs. Foust, Stein and Peterson will receive an incentive stock option to purchase that number of shares of our common stock which is equal to 15.5%, 10.0% and 10.0%, respectively, of a management pool consisting of 808,149 options. The options will be issued to each executive in his capacity as an employee of the REIT or its subsidiary corporations. The per share exercise price of such options will be equal to the initial public offering price. Subject to the executive’s continued employment with us, the options will vest in equal annual installments of 25% on each of the first four anniversaries of the date of grant. In the event of a change in control of our company, the options will vest in full. The long-term incentive units and the stock options will be awarded under our incentive award plan. 
 
The employment agreements also provide that if an executive’s employment is terminated by us without “cause” or, in the case of Messrs. Foust and Stein, by the executive for “good reason” (each as defined in the employment agreements), then, subject to the executive’s execution and non-revocation of a general release of claims, the executive will be entitled to receive a lump-sum severance payment in an amount equal to 100% (in the case of Messrs. Foust and Stein) or 50% (in the case of Messrs. Peterson and Wilson) of the sum of his then current annual base salary plus target annual bonus. If, however, such termination occurs within one year after a change in control of our company or within the six month period immediately preceding a change in control in connection with the change in control, the amount of the executive’s severance payment will be equal to 200% (in the case of Messrs. Foust and Stein) or 100% (in the case of Messrs. Peterson and Wilson) of the sum of his then current annual base salary and target annual bonus (or if greater, the executive’s annual bonus for the preceding year). In addition, in such event, all outstanding stock options and other equity-based awards held by the executive will become fully vested and exercisable on the later to occur of the termination of employment or the change in control. The executive will not be entitled to any such payment or benefit if the termination of his employment results from his disability or death. Mr. Foust’s and Mr. Stein’s employment agreements provide that if their employment is terminated by us within the six months prior to, or twelve months after, a change in control, the termination will be presumed to be without cause. 
 
In the event that Mr. Foust or Mr. Stein voluntarily terminates his employment without good reason prior to the end of the employment term, the employment agreement provides that we may elect to retain him as a consultant for a period ending not later than the earlier of the first anniversary of his termination of employment or the second anniversary of the completion of this offering. Under this arrangement, the executive will be obligated to perform up to 10 hours of consulting services per month and we will pay him a consulting fee in an amount equal to the base salary that he would have received for the consulting period had he remained employed by us. Subject to the executive’s compliance with the confidentiality, non-solicitation and non-compete covenants discussed below, the consulting fee is payable in full in a lump-sum upon completion of the consulting period. 
 
Messrs. Foust and Stein are each entitled to an additional tax gross-up payment under their employment agreement if any amounts paid or payable to the executive would be subject to the excise tax on certain so-called “excess parachute payments” under Section 4999 of the Code. However, if a reduction in the payments of 10% or less would render the excise tax inapplicable, then the payments will be reduced by such amount and we will not be required to make the gross-up payment. 
 
The employment agreements also contain standard confidentiality provisions which apply indefinitely and non-solicitation provisions which will apply during the term of the executive’s employment and for a one year period thereafter (six months in the case of Messrs. Peterson and Wilson) or, in the case of Messrs. Foust and Stein, for the duration of the consulting period, if later. In addition, Messrs. Foust’s and Stein’s employment 
 
124 

Table of Contents
agreements provide that they generally may not compete with us through the acquisition or ownership of technology-related real estate properties in the United States or Europe during the term of their employment with us or the period during which they are providing consulting services to us. This covenant will not prohibit Messrs. Foust or Stein from making investments in which they own less than a 9.5% beneficial interest and have no active management role and, under limited circumstances, investments in which they own more than a 9.5% interest. 
 
Mr. Wilson’s employment agreement also provides that his continued involvement as a member or director of the Cambay Group, the eXchange parties and related entities during his employment will not in and of itself violate his employment agreement with us. 
 
Executive Chairman Agreement 
 
We have entered into an agreement with Mr. Magnuson, effective as of the pricing of this offering or such earlier date as we and Mr. Magnuson may mutually agree upon, pursuant to which we and our operating partnership will employ him as Executive Chairman of our board of directors. Mr. Magnuson’s employment agreement has a term ending on the second anniversary of the completion of this offering. The agreement subjects Mr. Magnuson to the confidentiality, non-solicitation and non-compete covenants discussed below. Under the agreement, Mr. Magnuson has agreed to waive his right to receive all cash compensation payable to him for serving as a member of our board of directors. This waiver will remain in effect until such time as GI Partners ceases to own at least a 10% beneficial interest in our operating partnership (on a fully diluted basis). Prior to that time, Mr. Magnuson will be entitled to base compensation during his employment equal to $150,000 per year and an annual bonus based on the satisfaction of performance goals established under our applicable bonus plan. During this period, Mr. Magnuson’s target and maximum annual bonus will be 100% and 150%, respectively, of his annual base compensation. Effective at such time as GI Partners ceases to own such a 10% beneficial interest, and continuing during his employment, Mr. Magnuson will be entitled to base compensation equal to $300,000 per year and an annual bonus based on the satisfaction of performance goals established under our applicable bonus plan. Mr. Magnuson’s target and maximum annual bonus during this period will be 50% and 75%, respectively, of his annual base compensation. Mr. Magnuson’s target and maximum bonus amounts set forth above will apply until the earliest to occur of (i) the first material modification of the bonus plan (within the meaning of Section 162(m) of the Code), (ii) the expiration of the bonus plan, (iii) our first annual stockholders meeting that occurs after the close of the third calendar year following the calendar year in which our initial public offering occurs, or (iv) such other date required by Section 162(m) of the Code. 
 
The agreement also provides that, subject to adoption and approval of our incentive award plan, in connection with this offering and the formation transactions, we will issue Mr. Magnuson that number of long- term incentive units of our operating partnership equal to 50% of a management pool consisting of 1,616,299 units. The long-term incentive units will be issued to Mr. Magnuson as part of his compensation for services rendered to or for the benefit of our operating partnership. These long-term incentive units will not be transferable for a period of three years from the date of grant and will receive the same quarterly per unit distributions as common units in our operating partnership, which equal per share distributions on our common stock. Initially, long-term incentive units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events, long-term incentive units may over time achieve full parity with common units in our operating partnership for all purposes, and therefore accrete to an economic value equivalent to our common stock on a one-for-one basis. If such parity is reached, long-term incentive units may be converted into an equal number of common units of our operating partnership at any time, and thereafter enjoy all the rights of common units of our operating partnership. However, there are circumstances under which the long-term incentive units will not achieve full parity with common units of our operating partnership. Until and unless such parity is reached, the value that a holder will realize for a given number of long-term incentive units will be less than the value of an equal number of shares of our common stock. In addition, subject to adoption and approval of our incentive award plan, in connection with this offering, we will grant Mr. Magnuson an incentive stock option to purchase that number of shares of our common stock which is equal to 15.5% of a 
 
125 

Table of Contents
management pool consisting of 808,149 options. The option will be issued to Mr. Magnuson in his capacity as an employee of the REIT or its subsidiary corporations. The per share exercise price of the options will be equal to the initial public offering price. Subject to Mr. Magnuson’s continued employment or directorship with us, the options will vest in equal annual installments of 25% on each of the first four anniversaries of the date of grant. In the event of a change in control of our company, the options will vest in full. The long-term incentive units and the stock options will be awarded to Mr. Magnuson under our incentive award plan. 
 
The agreement also provides that, subject to Mr. Magnuson’s execution and non-revocation of a general release of claims, if he is not reelected to our board or if we remove or fail to nominate him (other than for “cause,” as defined in the agreement), we will pay him a lump-sum payment in an amount equal to the sum of (x) the greater of $300,000 or 100% of his then current annual base compensation as described above plus (y) his then current target annual bonus. If, however, such termination occurs within one year after a change in control of our company or within the six month period immediately before a change in control in connection with the change in control, the amount of this payment will be equal to 200% of the sum of (x) the greater of $300,000 or his then current annual compensation plus (y) his target annual bonus (or if greater, his annual bonus for the preceding year). In addition, in such event, all outstanding stock options and other equity-based awards held by Mr. Magnuson will become fully vested and exercisable on the later to occur of the termination of directorship or the change in control. If Mr. Magnuson remains employed by us after his directorship terminates, he will not be entitled to these payments or benefits until his employment terminates. Mr. Magnuson will not be entitled to these payments or benefits if the termination of his directorship results from his disability or death. Mr. Magnuson’s employment agreement provides that if his directorship is terminated by us within the six months prior to, or twelve months after, a change in control, the termination will be presumed to be without cause. 
 
In the event that Mr. Magnuson voluntarily terminates his employment prior to the end of the employment term, the employment agreement provides that we may elect to retain him as a consultant for a period ending not later than the earlier of the first anniversary of his termination of employment or the second anniversary of the completion of this offering. Under this arrangement, Mr. Magnuson will be obligated to perform up to 10 hours of consulting services per month and we will pay him a consulting fee in an amount equal to the base compensation that he would have received for the consulting period had he remained employed by us. Subject to Mr. Magnuson’s compliance with the confidentiality, non-solicitation and non-compete covenants discussed below, the consulting fee is payable in full in a lump-sum upon completion of the consulting period. 
 
Mr. Magnuson is also entitled to an additional tax gross-up payment under his agreement if any amounts paid or payable to him would be subject to the excise tax on certain so-called “excess parachute payments” under Section 4999 of the Code. However, if a reduction in the payments of 10% or less would render the excise tax inapplicable, then the payments will be reduced by such amount and we will not be required to make the gross-up payment. 
 
The agreement provides that Mr. Magnuson’s employment with us is not exclusive and, subject to the confidentiality, non-solicitation and non-compete covenants discussed below, will not limit Mr. Magnuson’s ability to provide services to any other person or entity, including CB Richard Ellis Investors, where he will remain employed following completion of this offering, or its affiliates and GI Partners. Mr. Magnuson’s agreement contains standard confidentiality provisions which apply indefinitely and non-solicitation provisions which will apply during the term of his employment or directorship and continue for the duration of the consulting period or a one year period after termination of his employment or directorship (whichever is later). In addition, Mr. Magnuson’s employment agreement provides that he generally may not compete with us through the acquisition or ownership of technology-related real estate properties in the United States or Europe during the term of his employment with us or the period during which he is providing consulting services to us. This covenant will not prohibit Mr. Magnuson from providing management or other services in respect of real estate which does not involve the acquisition or ownership by him of technology real estate, or making investments in which he owns less than a 9.5% beneficial interest and has no active management role and, under limited circumstances, investments in which he owns more than a 9.5% interest. 
 
126 

Table of Contents
401(k) Plan 
 
Under the client services arrangement which we intend to enter into with the PEO, both we and the PEO are intended to be co-employers of our employees. Accordingly, we expect that our employees will be eligible to participate in the PEO’s 401(k) plan, a retirement savings plan that is intended to be tax-qualified under Section 401(a) of the Code. 
 
Indemnification Agreements 
 
We intend to enter into indemnification agreements with each of our executive officers and directors that will obligate us to indemnify them to the maximum extent permitted by Maryland law. The form of indemnification agreement provides that: 
 
 	•	 	If a director or executive officer is a party or is threatened to be made a party to any proceeding, other than a proceeding by or in the right of our company, by reason of such director’s or executive officer’s status as a director, officer or employee of our company, we must indemnify such director or executive officer for all expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, unless it has been established that: 	
 
 	•	 	the act or omission of the director or executive officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; 	
 
 	•	 	the director or executive officer actually received an improper personal benefit in money, property or other services; or 	
 
 	•	 	with respect to any criminal action or proceeding, the director or executive officer had reasonable cause to believe that his or her conduct was unlawful. 	
 
 	•	 	If a director or executive officer is a party or is threatened to be made a party to any proceeding by or in the right of our company to procure a judgment in our company’s favor by reason of such director’s or executive officer’s status as a director, officer or employee of our company, we must indemnify such director or executive officer for all expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, unless it has been established that: 	
 
 	•	 	the act or omission of the director or executive officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; or 	
 
 	•	 	the director or executive officer actually received an improper personal benefit in money, property or other services; 	
 
provided, however, that we will have no obligation to indemnify such director or executive officer for all expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, if it has been adjudged that such director or executive officer is liable to us with respect to such proceeding. 
 
 	•	 	Upon application of a director or executive officer of our company to a court of appropriate jurisdiction, the court may order indemnification of such director or executive officer if: 	
 
 	•	 	the court determines that such director or executive officer is entitled to indemnification under the applicable section of the MGCL, in which case the director or executive officer shall be entitled to recover from us the expenses of securing such indemnification; or 	
 
 	•	 	the court determines that such director or executive officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director or executive officer has met the standards of conduct set forth in the applicable section of the MGCL or has been adjudged liable for receipt of an improper personal benefit under the applicable section of MGCL; provided, however, that our indemnification obligations to such director or executive officer will be limited to the expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with any proceeding by or in the right of our company or in which the officer or director shall have been adjudged liable for receipt of an improper personal benefit under the applicable section of the MGCL. 	
 
127 

Table of Contents
 	•	 	Notwithstanding, and without limiting, any other provisions of the agreements, if a director or executive officer is a party or is threatened to be made a party to any proceeding by reason of such director’s or executive officer’s status as a director, officer or employee of our company, and such director or executive officer is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such proceeding, we must indemnify such director or executive officer for all expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with each successfully resolved claim, issue or matter, including any claim, issue or matter in such a proceeding that is terminated by dismissal, with or without prejudice. 	
 
 	•	 	We must pay all indemnifiable expenses in advance of the final disposition of any proceeding if the director or executive officer furnishes us with a written affirmation of the director’s or executive officer’s good faith belief that the standard of conduct necessary for indemnification by our company has been met and a written undertaking to reimburse us if a court of competent jurisdiction determines that the director or executive officer is not entitled to indemnification. 	
 
We must pay all indemnifiable expenses to the director or executive officer within 20 calendar days following the date the director or executive officer submits proof of the expenses to us. 
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. 
 
Compensation Committee Interlocks and Insider Participation 
 
There are no compensation committee interlocks and none of our employees participate on the compensation committee. 
 
128 

Table of Contents
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 
 
Acquisition of Certain Properties by GI Partners Prior to the Formation Transactions 
 
Through various transactions during the two years prior to this offering and the formation transactions, GI Partners acquired the following properties (the aggregate purchase price paid by GI Partners for each property is indicated parenthetically): Camperdown House ($34,014,000); Hudson Corporate Center ($57,030,000); NTT/Verio Premier Data Center ($28,500,000); VarTec Building ($12,000,000); Ardenwood Corporate Park ($57,000,000); ASM Lithography Facility ($22,400,000); AT&T Web Hosting Facility ($13,500,000); Brea Data Center ($10,150,000); Granite Tower ($33,200,000); Maxtor Manufacturing Facility ($25,000,000); Stanford Place II ($35,050,000); 100 Technology Center Drive ($38,100,000); Siemens Building ($17,200,000); Carrier Center ($75,000,000); Savvis Data Center ($60,000,000); Comverse Technology Building ($58,000,000); Webb at LBJ ($45,850,000); AboveNet Data Center ($36,500,000) and eBay Data Center (75% interest for $9.6 million, with an option to purchase the remaining 25% interest for approximately $4.7 million). 
 
GI Partners Contribution Agreement 
 
GI Partners is party to a contribution agreement with our operating partnership pursuant to which GI Partners will contribute its direct or indirect interests in a portfolio of properties to the operating partnership in exchange for units. See “Structure and Formation of Our Company—Formation Transactions.” Under GI Partners’ contribution agreement, GI Partners will directly receive 31,930,695 units. The aggregate value of the units to be issued to GI Partners is $479.0 million, based upon the midpoint of the pricing range set forth on the cover page of this prospectus. The aggregate historical combined net tangible book value of the interests to be contributed to us by GI Partners was approximately $114.6 million as of June 30, 2004. 
 
GI Partners’ contribution agreement provides that we will assume or succeed to all of the contributors’ rights, obligations and responsibilities with respect to the properties and the property entities contributed. It contains representations and warranties by GI Partners to our operating partnership with respect to the condition and operations of the properties and interests to be contributed to us and certain other matters. With some exceptions, GI Partners has agreed to indemnify our operating partnership for breach of these representations and warranties on or prior to February 15, 2006, subject to a $500,000 deductible and up to a maximum of $15.0 million. GI Partners will pledge units to our operating partnership with a value, based on the price per share of our common stock in this offering, equal to $15.0 million, in order to secure its indemnity obligations, and except in limited circumstances, these units will be the sole recourse of our operating partnership in the case of a breach of a representation or warranty or other claim for indemnification. 
 
In connection with this offering and the formation transactions, GI Partners will cause the entities that own the properties being contributed to us to make special distributions payable to GI Partners in an aggregate amount that we currently anticipate will be no greater than $10.0 million. These distributions are intended to be in an amount calculated to approximate customary commercial real estate prorations, whereby the buyer and seller apportion rents, taxes, utilities, escrowed or restricted funds and other operating expenses. Such distributions were contemplated by the parties in connection with determining the aggregate consideration to be received by GI Partners under its contribution agreement. 
 
eBay Data Center Purchase Agreement 
 
GI Partners is a party to a purchase and sale agreement with our operating partnership pursuant to which GI Partners will transfer its 75% direct or indirect interest in the entity that owns the eBay Data Center property for a purchase price in cash equal to the amount paid by GI Partners to acquire the property plus transaction costs and expenses, for a maximum aggregate price of approximately $10.3 million. The purchase and sale agreement contains representations and warranties by GI Partners to our operating partnership with respect to the interests to 
 
129 

Table of Contents
be transferred to us and certain other matters. GI Partners has agreed to indemnify us for breach of these representations and warranties on or prior to February 15, 2006. 
 
Aggregate Consideration to GI Partners 
 
The following table sets forth the aggregate consideration we will pay for GI Partners’ properties (in thousands, valuing units based upon the midpoint of the pricing range set forth on the cover page of this prospectus): 

Property Location
	  	Cash
Payments
	  	Value of
Units
	 	 	Debt
Assumed
and
Repaid(1)
	 	 	Debt
Assumed
and Not
Repaid(1)
	 	 	Total Value of
Consideration
	 	
100 Technology Center Drive	  	$	—  	  	$	24,705	 	 	$	—  	 	 	$	20,000	 	 	$	44,705	 	
36 Northeast Second Street	  	 	—  	  	 	22,221	 	 	 	17,780	 	 	 	—  	 	 	 	40,001	 	
AboveNet Data Center	  	 	—  	  	 	25,806	 	 	 	27,375	(2)	 	 	—  	 	 	 	53,181	 	
Ardenwood Corporate Park	  	 	—  	  	 	50,829	 	 	 	—  	 	 	 	38,000	(3)	 	 	88,829	 	
ASM Lithography Facility	  	 	—  	  	 	13,178	 	 	 	13,902	 	 	 	—  	 	 	 	27,080	 	
AT&T Web Hosting Facility	  	 	—  	  	 	2,492	 	 	 	—  	 	 	 	8,775	 	 	 	11,267	 	
Brea Data Center	  	 	—  	  	 	6,949	 	 	 	7,613	(2)	 	 	—  	 	 	 	14,562	 	
Camperdown House	  	 	—  	  	 	25,877	 	 	 	—  	 	 	 	23,079	 	 	 	48,956	 	
Carrier Center	  	 	—  	  	 	43,033	 	 	 	30,139	(2)	 	 	26,001	 	 	 	99,173	 	
Comverse Technology Building	  	 	—  	  	 	29,621	 	 	 	43,500	(2)	 	 	—  	 	 	 	73,121	 	
eBay Data Center(3)	  	 	2,363	  	 	—  	 	 	 	—  	 	 	 	7,950	 	 	 	10,313	 	
Granite Tower	  	 	—  	  	 	23,209	 	 	 	—  	 	 	 	21,645	 	 	 	44,854	 	
Hudson Corporate Center	  	 	—  	  	 	39,062	 	 	 	42,773	(2)	 	 	—  	 	 	 	81,835	 	
Maxtor Manufacturing Facility	  	 	—  	  	 	23,621	 	 	 	—  	 	 	 	18,000	 	 	 	41,621	 	
NTT/Verio Premier Data Center	  	 	—  	  	 	27,939	 	 	 	—  	 	 	 	19,250	(4)	 	 	47,189	 	
Savvis Data Center	  	 	—  	  	 	18,990	 	 	 	45,000	(2)	 	 	—  	 	 	 	63,990	 	
Siemens Building	  	 	—  	  	 	10,737	 	 	 	12,900	(2)	 	 	—  	 	 	 	23,637	 	
Stanford Place II	  	 	—  	  	 	19,706	 	 	 	—  	 	 	 	26,000	 	 	 	45,706	 	
Univision Tower	  	 	—  	  	 	55,741	 	 	 	50,839	(5)	 	 	—  	 	 	 	106,580	 	
VarTec Building	  	 	—  	  	 	9,262	 	 	 	—  	 	 	 	7,750	(4)	 	 	17,012	 	
Webb at LBJ	  	 	—  	  	 	13,935	 	 	 	34,388	(2)	 	 	—  	 	 	 	48,323	 	
Unallocated Debt(6)	  	 	—  	  	 	(7,952	)	 	 	6,117	 	 	 	—  	 	 	 	(1,835	)	
 	  			  				 				 				 				
Subtotal	  	$	2,363	  	$	478,961	 	 	$	332,326	 	 	$	216,450	 	 	$	1,030,100	 	

(1)	 	Debt balances reflect estimated balances as of November 5, 2004. 	
(2)	 	Represents allocated indebtedness under the secured bridge loan related to the purchase of these properties by GI Partners. 	
(3)	 	Represents the purchase of a 75% interest in this property. 	
(4)	 	Represents a portion of the mortgage and mezzanine indebtedness related to these properties. 	
(5)	 	Represents 90% of the indebtedness encumbering the property. The remaining 10% of such indebtedness was allocated to the minority owner of the property. 	
(6)	 	Unallocated debt represents indebtedness of GI Partners not specifically allocated to individual properties that will be repaid in connection with this offering. 	
 
Purchase of Operating Partnership Units from CalPERS and Global Innovation Contributors 
 
Immediately following the completion of this offering, GI Partners will make a pro rata allocation, in accordance with their respective interests and with the terms of its constitutive documents, to its investors, CalPERS and Global Innovation Contributors, LLC, or GI Contributors, of a portion of the operating partnership units received by GI Partners in the formation transactions (having an aggregate value of approximately $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus), and immediately thereafter, we will purchase from these investors the operating partnership units allocated to them at a price per unit equal to the per share public offering price of our common stock in this offering, net of 
 
130 

Table of Contents
underwriting discounts and commissions and financial advisory fees payable to the underwriters. If the underwriters exercise their over-allotment option, GI Partners will make an additional pro rata allocation to CalPERS and GI Contributors of an aggregate number of operating partnership units equal to the number of shares sold pursuant to such exercise, and we will purchase such operating partnership units from CalPERS and GI Contributors at a price per unit equal to the per share public offering price, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters. The units purchased by us from CalPERS and GI Contributors will automatically convert from limited partner interests to general partner interests upon purchase by us. 
 
Richard Magnuson, the Executive Chairman of our board of directors, Michael Foust, our Chief Executive Officer and a member of our board of directors, and Scott Peterson, our Senior Vice President, Acquisitions, are minority investors in GI Contributors, and will receive in the aggregate less than 0.1% of the total cash paid by us to CalPERS and GI Contributors, consistent with the percentage of their total capital commitment in GI Partners. See “—Other Benefits to Related Parties and Related Party Transactions.” 
 
200 Paul Avenue and 1100 Space Park Drive Contribution Agreement 
 
San Francisco Wave eXchange, LLC, Santa Clara Wave eXchange, LLC and eXchange colocation, LLC, referred to below as the eXchange parties, are parties to a contribution agreement with our operating partnership pursuant to which the eXchange parties will contribute their interests in 200 Paul Avenue, 1100 Space Park Drive, the eXchange colocation business and other specified assets and liabilities to the operating partnership in exchange for cash and units. See “Structure and Formation of Our Company—Formation Transactions.” Under the eXchange parties’ contribution agreement, the eXchange parties will directly receive $15.0 million in cash and 5,935,846 units. In addition, we will assume $62.8 million of indebtedness encumbering the properties. The eXchange parties are unaffiliated with GI Partners; however John O. Wilson, our Executive Vice President, Technology Infrastructure, owns a 10% interest in the eXchange parties. 
 
The eXchange parties’ contribution agreement provides that we will assume or succeed to all of the contributors’ rights, obligations and responsibilities with respect to the properties and the property entities contributed. It contains representations and warranties by the eXchange parties to our operating partnership with respect to the condition and operations of the properties and interests to be contributed to us and certain other matters. The eXchange parties have agreed to indemnify our operating partnership for breach of these representations and warranties on or prior to February 15, 2006, subject to a $150,000 deductible and up to a maximum of $5.0 million. The eXchange parties will pledge units to our operating partnership with a value, based on the price per share of our common stock in this offering, equal to $5.0 million, in order to secure its indemnity obligations, and, except in limited circumstances, these units will be the sole recourse of our operating partnership in the case of a breach of a representation or warranty or other claim for indemnification. 
 
Under the eXchange parties’ contribution agreement, we have agreed to indemnify each eXchange party against adverse tax consequences in the event our operating partnership directly or indirectly, sells, exchanges or otherwise disposes of (whether by way of merger, sale of assets or otherwise) in a taxable transaction any interest in 200 Paul Avenue or 1100 Space Park Drive until the earlier of the ninth anniversary of the completion of this offering and the date on which these contributors hold less than 25% of the units issued to them in the formation transactions. The 200 Paul Avenue and 1100 Space Park Drive properties represented 14.6% of our portfolio’s annualized rent as of June 30, 2004. These tax indemnities do not apply to the disposition of a restricted property pursuant to a transaction described in Section 721, 1031 or 1033 of the Code, or other applicable non-recognition provision under the Code. 
 
Under the eXchange parties’ contribution agreement, we agreed to make $20 million of indebtedness available for guaranty by these parties until the earlier of the ninth anniversary of the completion of this offering and the date on which these contributors or certain transferees hold less than 25% of the units issued to them in the formation transactions. Among other things, these guaranties of debt allow the eXchange parties to defer the recognition of gain in connection with the formation transactions. 
 
131 

Table of Contents
Aggregate Consideration to the eXchange Parties 
 
The following table sets forth the consideration we will pay for the eXchange parties’ properties (in thousands, valuing units based upon the midpoint of the pricing range set forth on the cover page of this prospectus): 

Property Location
	  	Cash
Payments
	  	Value of
Units
	  	Debt
Assumed
and
Repaid(1)
	  	Debt
Assumed
and Not
Repaid(1)
	  	Total Value of
Consideration
	
200 Paul Avenue	  	$	14,501	  	$	71,243	  	$	—  	  	$	46,908	  	$	132,652	
1100 Space Park Drive	  	 	499	  	 	17,795	  	 	15,913	  	 	—  	  	 	34,207	
 	  			  			  			  			  			
Subtotal	  	$	15,000	  	$	89,038	  	$	15,913	  	$	46,908	  	$	166,859	

(1)	 	Debt balances reflect estimated balances as of November 5, 2004. 	
 
200 Paul Avenue and 1100 Space Park Drive Property Management Agreement 
 
Concurrent with the consummation of this offering, we will enter into a property management agreement with the eXchange parties. We entered into this agreement in order to maintain continuity of management until we internalize our property management function, which we intend to do in the months following completion of this offering. Under the terms of the agreement, the eXchange parties will generally supervise the operation and management of the 200 Paul Avenue and 1100 Space Park Drive properties in exchange for a monthly management fee in the amount of 2% of the gross monthly rents and other revenues received from the properties. We will be responsible for all leasing commissions and costs of on-site employees of the eXchange parties. We will pay the eXchange parties additional fees to supervise major rehabilitation, remodeling, repair, or construction projects. The initial term of this agreement will be for one year following completion of this offering, but will automatically extend on a monthly basis subject to cancellation by either party. 
 
Partnership Agreement 
 
Concurrently with the completion of this offering, we will enter into a partnership agreement with the various limited partners of our operating partnership, including GI Partners. Pursuant to the partnership agreement, persons holding units as a result of the formation transactions will have rights beginning 14 months after the completion of this offering, to cause our operating partnership to redeem each of their units for cash equal to the then-current market value of one share of common stock, or, at our election, to exchange their units for shares of our common stock on a one-for-one basis. See “Description of the Partnership Agreement of Digital Realty Trust, L.P.” 
 
Executive Chairman and Employment Agreements 
 
We have entered into employment agreements with our executive officers as described in “Management— Employment Agreements” and an agreement with the Executive Chairman of our board of directors as described in “Management—Executive Chairman Agreement,” that will become effective in connection with this offering and the formation transactions. These agreements provide for salary, bonuses and other benefits, including, severance benefits upon a termination of employment, as well as vested long-term incentive units and option awards, among other matters. 
 
We will also issue 6,448 long-term incentive units to each of our outside directors under our incentive award plan. 
 
Indemnification of Officers and Directors 
 
Effective upon completion of this offering, we will enter into an indemnification agreement with each of our executive officers and directors as described in “Management—Indemnification Agreements.” 
 
132 

Table of Contents
Carrier Center Option and Right of First Offer Agreements 
 
We have entered into an option agreement with GI Partners granting our operating partnership the right to acquire the Carrier Center property. We intend to exercise the Carrier Center option simultaneously with, or shortly after, completion of this offering and consummation of the formation transactions. See “Business and Properties—Description of Initial Portfolio—Telecommunications Infrastructure Properties—Carrier Center.” We may exercise the Carrier Center option for 2,868,846 operating partnership units at any time until seven months after the date of this prospectus and thereafter may exercise this option for a number of operating partnership units equal to a set dollar value, plus amounts spent by GI Partners for capital expenditures, tenant improvements and leasing commissions benefiting the Carrier Center property subsequent to the date of this prospectus, divided by the then-current market price of our stock. We have a right of first refusal during the option term with respect to any proposed sale of Carrier Center at the lower of the price set forth above and any proposed offer price to a third party. Our option expires on December 31, 2005, or earlier upon the completion of the dissolution of GI Partners or if we do not exercise our right of first refusal and the property is transferred to a third party. 
 
We also have right of first offer agreements with respect to each of the Denver property and the Frankfurt property, each of which is currently owned by GI Partners. Pursuant to these agreements, we have the right to make the first offer to purchase these properties if GI Partners decides to sell them. If we make an offer that is rejected, GI Partners may sell such property, but only to a third party within 180 days thereafter, on terms that are better than the terms of our offer or the unsolicited offer that we elected not to match. Any purchase by us of these properties may be paid by us with units, with each unit valued at the then-fair market value of a share of our common stock, or in cash. The right of first offer agreements will expire on the earlier of December 31, 2009, upon the completion of the dissolution of GI Partners and the date on which GI Partners no longer owns the subject property. 
 
Registration Rights 
 
As limited partners of our operating partnership, GI Partners and other contributors will receive registration rights to cause us, beginning 14 months after the completion of this offering, to register shares of our common stock acquired by them in connection with their exercise of redemption/exchange rights under the partnership agreement. We have also agreed to grant registration rights to GI Partners with respect to any units issued under the Carrier Center option agreement or the Denver or Frankfurt right of first offer agreements. See “Shares Eligible for Future Sale—Registration Rights.” 
 
Transition Services Agreement with CB Richard Ellis Investors 
 
We have entered into a transition services agreement with CB Richard Ellis Investors pursuant to which CB Richard Ellis Investors will provide us with transitional accounting and other services for an interim period. We anticipate that this interim period will last approximately two fiscal quarters but in no event can extend beyond December 31, 2005. We will be required to pay CB Richard Ellis Investors a one-time fee of $58,500 for these services, and will also be required to reimburse CB Richard Ellis Investors for reasonable travel and other out of pocket expenses. 
 
Employment Relationships 
 
Richard A. Magnuson, our Executive Chairman, Michael F. Foust, our Chief Executive Officer and Scott E. Peterson, our Senior Vice President, Acquisitions, are presently employees of CB Richard Ellis Investors. Mr. Magnuson will remain an employee of CB Richard Ellis Investors following completion of this offering. Effective upon completion of this offering, the employment of Messrs. Foust and Peterson with CB Richard Ellis Investors will terminate and they will become our full-time employees. See “Management—Employment Agreements.” 
 
133 

Table of Contents
GI Partners Loan Agreement 
 
In connection with this offering, we have borrowed funds from GI Partners on an interest-free basis in order to pay expenses (including accounting and legal fees) relating to this offering and the formation transactions. We have committed to repaying these borrowed funds, in a total amount of approximately $4.5 million, within 10 days following completion of this offering. 
 
Non-Competition Agreement with Global Innovation Partners, LLC 
 
We have entered into a non-competition agreement with GI Partners pursuant to which GI Partners has agreed not to acquire or own interests in, directly or indirectly, technology-related real estate properties in the United States or Europe for the remainder of GI Partners’ investment period, which ends in February 2006. This agreement does not prohibit GI Partners from, among other things, providing management or other services in respect of non-owned real estate. It also does not prohibit the acquisition of any entity so long as the ownership of technology-related real estate does not comprise such entity’s primary business, provided that the value of the technology-related real estate owned by such entity accounts for less than 35% of the entity’s total enterprise value, as determined by GI Partners. In addition, this agreement does not prohibit GI Partners from owning Carrier Center, to the extent we do not exercise our option, or the Denver and Frankfurt data centers. The sole remedy available to us for breach of this agreement is the right to purchase the property from GI Partners at GI Partners’ cost within 90 days of notice to us of the purchase by GI Partners. 
 
Other Benefits to Related Parties and Related Party Transactions 
 
CB Richard Ellis Investors, Richard Magnuson, the Executive Chairman of our board of directors, Michael Foust, our Chief Executive Officer and a member of our board of directors, and Scott Peterson, our Senior Vice President, Acquisitions, are investors in Global Innovation Manager, LLC, or GI Manager, the manager of GI Partners. GI Manager is entitled under certain circumstances to share in distributions made by GI Partners to its investors, including distributions related to GI Partners’ ownership interest in our operating partnership. Under the terms of GI Partners’ constitutive agreement, GI Manager is only entitled to share in distributions after the other investors in GI Partners - CalPERS and GI Contributor - receive a return of their invested capital and a specified rate of return from their capital investments. Distributions from GI Partners to GI Manager are distributed by GI Manager 50% to CB Richard Ellis Investors, and 50% to the GI Partners professionals including Mr. Magnuson, Mr. Foust and Mr. Peterson. To date, no distributions have been made to GI Manager, and GI Partners has advised us that no distribution will be made to GI Manager in connection with the consummation of the formation transactions. 
 
CB Richard Ellis Investors is the sole member of Global Innovation Advisor, LLC, or GI Advisor. GI Advisor manages the investments of GI Partners on behalf of GI Manager. Mr. Magnuson is a member of the management and investment committees of GI Advisor, for which he is not separately compensated. Mr. Magnuson is the chief executive officer of GI Advisor, for which he is not separately compensated. 
 
Pursuant to the terms of GI Partners’ constitutive agreement, GI Partners pays GI Advisor an asset management fee equal to a percentage of its investors’ capital commitments or, following the fund’s investment period, its investors’ capital contributions, to GI Partners. Although we are not a party to this arrangement and are not obligated to pay this management fee in the future, $1,592,000, $3,185,000, $3,185,000 and $2,663,000 of these fees were allocated to the Digital Realty Predecessor for the six months ended June 30, 2004, the years ended December 31, 2003 and 2002, and the period from inception on February 28, 2001 to December 31, 2001, respectively. These fees were allocated to the Digital Realty Predecessor because the asset management fee represented GI Partners’ general and administrative expenses. 
 
134 

Table of Contents
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES 
 
The following is a discussion of certain of our investment, financing and other policies. These policies have been determined by our board of directors and, in general, may be amended or revised from time to time by our board of directors without a vote of our stockholders. 
 
Investment Policies 
 
Investment in Real Estate or Interests in Real Estate 
 
We will conduct all of our investment activities through our operating partnership and its subsidiaries. Our investment objectives are to maximize the cash flow of our properties, provide quarterly cash distributions and achieve long-term capital appreciation for our stockholders through increases in the value of our company. We have not established a specific policy regarding the relative priority of these investment objectives. For a discussion of the properties and our acquisition and other strategic objectives, see “Business and Properties.” 
 
We expect to pursue our investment objectives primarily through the ownership by our operating partnership of the properties and other acquired properties and assets. We currently intend to invest primarily in technology-related real estate. Future investment or development activities will not be limited to any geographic area, property type or to a specified percentage of our assets. While we may diversify in terms of property locations, size and market, we do not have any limit on the amount or percentage of our assets that may be invested in any one property or any one geographic area. We intend to engage in such future investment activities in a manner that is consistent with the maintenance of our status as a REIT for U.S. federal income tax purposes. In addition, we may purchase or lease income-producing technology-related and other types of properties for long-term investment, expand and improve the properties we presently own or other acquired properties, or sell such properties, in whole or in part, when circumstances warrant. 
 
We may also participate with third parties in property ownership, through joint ventures or other types of co-ownership. These types of investments may permit us to own interests in larger assets without unduly restricting our diversification and, therefore, provide us with flexibility in structuring our portfolio. We will not, however, enter into a joint venture or other partnership arrangement to make an investment that would not otherwise meet our investment policies. 
 
Equity investments in acquired properties may be subject to existing mortgage financing and other indebtedness or to new indebtedness which may be in acquired properties incurred in connection with acquiring or refinancing these investments. Debt service on such financing or indebtedness will have a priority over any dividends with respect to our common stock. Investments are also subject to our policy not to be treated as an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act. 
 
Investments in Real Estate Mortgages 
 
While our current portfolio consists of, and our business objectives emphasize, equity investments in technology-related real estate, we may, at the discretion of our board of directors, invest in mortgages and other types of real estate interests consistent with our qualification as a REIT. We do not presently intend to invest in mortgages or deeds of trust, but may invest in participating or convertible mortgages if we conclude that we may benefit from the gross revenues or any appreciation in value of the property. Investments in real estate mortgages run the risk that one or more borrowers may default under the mortgages and that the collateral securing those mortgages may not be sufficient to enable us to recoup our full investment. 
 
Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers 
 
Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities. 
 
135 

Table of Contents
Dispositions 
 
We do not currently intend to dispose of any of our properties, although we reserve the right to do so if, based upon management’s periodic review of our portfolio, our board of directors determines that such action would be in the best interest of our stockholders. Any decision to dispose of a property will be made by our board of directors. We may be obligated to indemnify certain contributors against adverse tax consequences to them in the event that we sell or dispose of certain properties in taxable transactions under the tax indemnification provisions of the contribution agreement related to the 200 Paul Avenue and 1100 Space Park Drive properties. See “—Conflict of Interest Policies.” 
 
Financing Policies 
 
Our board of directors has adopted a policy of limiting our indebtedness to 60% of our total market capitalization. Our total market capitalization is defined as the sum of the market value of our outstanding common stock (which may decrease, thereby increasing our debt to total capitalization ratio), plus the aggregate value of units not owned by us, plus the book value of our total consolidated indebtedness. Since this ratio is based, in part, upon market values of equity, it will fluctuate with changes in the price of our common stock; however, we believe that this ratio provides an appropriate indication of leverage for a company whose assets are primarily real estate. We expect that our ratio of debt to total market capitalization upon completion of this offering will be approximately 37.6%. Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur. We are, however, subject to certain indebtedness limitations pursuant to the restrictive covenants of our outstanding indebtedness. Our board of directors may from time to time modify our debt policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the market for debt and equity securities, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors. Accordingly, we may increase or decrease our ratio of debt to total market capitalization beyond the limits described above. If these policies were changed, we could become more highly leveraged, resulting in an increased risk of default on our obligations and a related increase in debt service requirements that could adversely affect our financial condition and results of operations and our ability to make distributions to our stockholders. We have adopted a policy relating to the use of derivative financial instruments to hedge interest rate risks related to our borrowings. This policy governs our use of derivatives to manage the interest rates on our variable rate borrowings. Our policy states that we will not use derivatives for speculative or trading purposes and will only enter into contracts with major financial institutions based on their credit rating and other factors. See “Risk Factors—Risks Related to Our Business and Operations—Payments on our debt reduce cash available for distribution and may expose us to the risk of default under our debt obligations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” 
 
Conflict of Interest Policies 
 
Sale or Refinancing of Properties.    Upon the sale of certain of the properties to be owned by us at the completion of the formation transactions and on the repayment of indebtedness, certain unitholders, including our Executive Vice President, Technology Infrastructure, could incur adverse tax consequences which are different from the tax consequences to us and to holders of our common stock. Consequently, unitholders may have differing objectives regarding the appropriate pricing and timing of any such sale or repayment of indebtedness. 
 
While we will have the exclusive authority under the partnership agreement to determine whether, when, and on what terms to sell a property or when to refinance or repay indebtedness, any such decision would require the approval of our board of directors. The limited partners of our operating partnership have agreed that in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our capacity as general partner of our operating partnership, to such limited partners, we will fulfill our fiduciary duties to our operating partnership by acting in the best interests of our stockholders. See “Description of the Partnership Agreement of Digital Realty Trust, L.P.” 
 
136 

Table of Contents
Policies Applicable to All Directors and Officers.    We have adopted certain policies that are designed to eliminate or minimize certain potential conflicts of interest. We have also adopted a code of business conduct and ethics that prohibits conflicts of interest between our employees, officers and directors and our company. In addition, our board of directors is subject to certain provisions of Maryland law, which are also designed to eliminate or minimize conflicts. We have adopted a policy that, without the approval of a majority of the independent directors, we will not exercise our rights of first offer with respect to the excluded Denver and Frankfurt properties. 
 
However, there can be no assurance that these policies or provisions of law will always be successful in eliminating the influence of such conflicts, and if they are not successful, decisions could be made that might fail to reflect fully the interests of all stockholders. 
 
Interested Director and Officer Transactions 
 
Pursuant to the MGCL, a contract or other transaction between us and a director or between us and any other corporation or other entity in which any of our directors is a director or has a material financial interest is not void or voidable solely on the grounds of such common directorship or interest, the presence of such director at the meeting at which the contract or transaction is authorized, approved or ratified or the counting of the director’s vote in favor thereof, provided that: 
 
 	•	 	the fact of the common directorship or interest is disclosed or known to our board of directors or a committee of our board, and our board or committee authorizes, approves or ratifies the transaction or contract by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum; 	
 
 	•	 	the fact of the common directorship or interest is disclosed or known to our stockholders entitled to vote thereon, and the transaction or contract is authorized, approved or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director or corporation, firm or other entity; or 	
 
 	•	 	the transaction or contract is fair and reasonable to us. 	
 
Furthermore, under Maryland law (where our operating partnership is formed), we, as general partner, have a fiduciary duty to our operating partnership and, consequently, such transactions also are subject to the duties of care and loyalty that we, as general partner, owe to limited partners in our operating partnership (to the extent such duties have not been eliminated pursuant to the terms of the partnership agreement). We will adopt a policy which requires that all contracts and transactions between us, our operating partnership or any of our subsidiaries, on the one hand, and any of our directors or executive officers or any entity in which such director or executive officer is a director or has a material financial interest, on the other hand, must be approved by the affirmative vote of a majority of the disinterested directors even if less than a quorum. Where appropriate in the judgment of the disinterested directors, our board of directors may obtain a fairness opinion or engage independent counsel to represent the interests of nonaffiliated securityholders, although our board of directors will have no obligation to do so. 
 
Policies With Respect To Other Activities 
 
We have authority to offer common stock, preferred stock or options to purchase stock in exchange for property and to repurchase or otherwise acquire our common stock or other securities in the open market or otherwise, and we may engage in such activities in the future. As described in “Description of the Partnership Agreement of Digital Realty Trust, L.P.,” we expect, but are not obligated, to issue common stock to holders of units upon exercise of their redemption rights. Except in connection with the formation transactions or employment agreements, we have not issued common stock, units or any other securities in exchange for property or any other purpose, and our board of directors has no present intention of causing us to repurchase any 
 
137 

Table of Contents
common stock. Our board of directors has the power, without further stockholder approval, to increase the number of authorized shares of common stock or preferred stock and issue additional shares of common stock or preferred stock, in one or more series, in any manner, and on the terms and for the consideration, it deems appropriate. See “Description of Securities.” We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers other than our operating partnership and do not intend to do so. At all times, we intend to make investments in such a manner as to qualify as a REIT, unless because of circumstances or changes in the Code, or the Treasury regulations, our board of directors determines that it is no longer in our best interest to qualify as a REIT. We have not made any loans to third parties, although we may in the future make loans to third parties, including, without limitation, to joint ventures in which we participate. We intend to make investments in such a way that we will not be treated as an investment company under the 1940 Act. 
 
Reporting Policies 
 
We intend to make available to our stockholders our annual reports, including our audited financial statements. After this offering, we will become subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended. Pursuant to those requirements, we will be required to file annual and periodic reports, proxy statements and other information, including audited financial statements, with the Securities and Exchange Commission. 
 
138 

Table of Contents
STRUCTURE AND FORMATION OF OUR COMPANY 
 
Our Operating Partnership 
 
Following the completion of this offering and the consummation of the formation transactions, substantially all of our assets will be held by, and our operations run through, our operating partnership. We will contribute the net proceeds of this offering to our operating partnership. GI Partners and private investors who are not affiliated with GI Partners will contribute interests in the properties or the property entities and will own the remaining units and be limited partners of our operating partnership. In general, our interest in our operating partnership will entitle us to share in cash distributions from, and in the profits and losses of, our operating partnership in proportion to our percentage ownership. As sole general partner of our operating partnership, we will generally have the exclusive power under the partnership agreement to manage and conduct its business, subject to certain limited approval and voting rights of the other limited partners described more fully below in “Description of the Partnership Agreement of Digital Realty Trust, L.P.” Our board of directors will manage the affairs of our company by directing the affairs of our operating partnership. 
 
Beginning on or after the date which is 14 months after the completion of this offering, limited partners of our operating partnership have the right to require our operating partnership to redeem part or all of their units for cash, or, at our election, shares of our common stock, based upon the fair market value of an equivalent number of shares of our common stock at the time of the redemption, subject to the ownership limits set forth in our charter and described under the section entitled “Description of Securities—Restrictions on Transfer.” With each redemption of units, we increase our percentage ownership interest in our operating partnership and our share of our operating partnership’s cash distributions and profits and losses. See “Description of the Partnership Agreement of Digital Realty Trust, L.P.” 
 
Formation Transactions 
 
Prior to or simultaneously with the completion of this offering, we will engage in the formation transactions described below, which are designed to consolidate the ownership of a portfolio of properties currently owned by GI Partners and private investors who are not affiliated with GI Partners into our operating partnership, facilitate this offering, enable us to raise necessary capital to repay existing indebtedness related to certain of the properties in our portfolio and other obligations, enable us to qualify as a REIT for federal income tax purposes commencing with the taxable year ending December 31, 2004 and preserve the tax position of certain continuing investors. Pursuant to the formation transactions and in conjunction with this offering: 
 
 	•	 	Digital Realty Trust, Inc. was formed as a Maryland corporation in March, 2004 with Digital Properties Holdings, LLC as its sole stockholder. In April 2004, Digital Properties Holdings, LLC sold its entire interest to GI Partners for $2,000. 	
 
 	•	 	Our operating partnership was formed as a Maryland limited partnership on July 21, 2004. 	
 
 	•	 	Our operating partnership will receive a contribution of, or will purchase, direct and indirect interests in a portfolio of properties owned by GI Partners (including the Carrier Center option property) in exchange for aggregate consideration with a value of $1,030.1 million, consisting of $2.4 million in cash, assumption of indebtedness and 31,930,695 units, having a total value of $479.0 based upon the midpoint of the pricing range set forth on the cover page of this prospectus. 	
 
 	•	 	The 200 Paul Avenue and 1100 Space Park Drive properties will be contributed to our operating partnership by unaffiliated third parties in exchange for aggregate consideration with a value of $166.9 million, including $15.0 million in cash, assumption of indebtedness and 5,935,846 units, having a total value of $89.0 million based upon the midpoint of the pricing range set forth on the cover page of this prospectus. 	
 
 	•	 	The 10% minority interest in the Univision Tower will be contributed to our operating partnership in exchange for 395,665 units. An affiliate of the contributor of this interest is the lender under a 	
 
139 

Table of Contents
$17.5 million loan with respect to this property, which we intend to repay immediately after the completion of this offering. 
 
 	•	 	We intend to acquire the remaining 25% tenancy-in-common interest in the eBay Data Center property not acquired from GI Partners as part of our initial portfolio from an unaffiliated third party in exchange for $4.7 million in cash in early 2005. 	
 
 	•	 	We will sell 20,000,000 shares of our common stock in this offering and an additional 3,000,000 shares if the underwriters exercise their over-allotment option in full. 	
 
 	•	 	Immediately following the completion of this offering, GI Partners will make a pro rata allocation, in accordance with their respective interests and its constitutive documents, to its investors, CalPERS and GI Contributors, of a portion of the operating partnership units received by GI Partners in the formation transactions (having an aggregate value of approximately $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus). Immediately thereafter, as part of the formation transactions, we will purchase from CalPERS and GI Contributors these operating partnership units at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees, for an aggregate of $95.0 million based on the midpoint of the pricing range indicated on the front cover of this prospectus. If the underwriters exercise their over-allotment option, GI Partners will make an additional pro rata allocation to CalPERS and GI Contributors of an aggregate number of operating partnership units equal to the number of shares sold pursuant to such exercise, and we will purchase such operating partnership units from CalPERS and GI Contributors at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees, for an aggregate of $41.9 million based on the midpoint of the range indicated on the front cover of this prospectus and assuming exercise of the underwriters’ over-allotment option in full. The units purchased by us from CalPERS and GI Contributors will automatically convert from limited partner interests to general partner interests upon purchase. We structured the transaction in this manner because certain of GI Partners’ members, CalPERS and GI Contributors, wished to receive cash in connection with the formation transactions, while its other member did not. This structure is also consistent with the intent of GI Partners and its other members to not recognize taxable gain in connection with the formation transactions. 	
 
 	•	 	Our operating partnership will enter into an unsecured credit facility. We expect that the unsecured credit facility will be entered into prior to or concurrently with the completion of this offering. 	
 
 	•	 	Upon consummation of this offering or shortly thereafter, our operating partnership or the property-owning entities will use certain of the properties to be contributed by GI Partners to secure approximately $215.0 million of new mortgage loans. 	
 
 	•	 	We will repay GI Partners for approximately $4.5 million loaned to us for transaction expenses related to this offering and the formation transactions. See “Use of Proceeds.” 	
 
 	•	 	Our operating partnership will use a portion of the net proceeds of this offering and the new mortgage loans to repay approximately $354.0 million of indebtedness and prepayment penalties, including amounts to be paid to an affiliate of Citigroup Global Markets Inc. See “Use of Proceeds.” 	
 
 	•	 	Richard Magnuson, the chief executive officer of the advisor to GI Partners, and Michael Foust and Scott Peterson, both managing directors of the advisor to GI Partners, will become executives of our company and our operating partnership. Additional professionals and consultants dedicated to GI Partners’ real estate business will become employees of our company and our operating partnership. 	
 
 	•	 	We will issue an aggregate of 1,490,561 vested long-term incentive units and unvested options to purchase 783,902 shares of our common stock to the Executive Chairman of our board of directors and our officers and certain key employees. 	
 
140 

Table of Contents
 	•	 	The number of units to be issued by our operating partnership in exchange for the initial properties was determined through negotiations among us and the contributors, based on the historical performance, growth prospects, leverage and other factors relating to the properties contributed by the various contributors. The value of the units that we issue in exchange for contributed property interests and other assets will increase or decrease if our common stock is priced above or below the midpoint of the range of prices shown on the front cover of this prospectus, and if the initial public offering price of our common stock is outside of the range set forth on the cover page of this prospectus, we may increase or decrease the number of shares in the offering. We have not obtained any recent third-party appraisals of the properties and other assets to be contributed to our operating partnership or purchased by our operating partnership for cash in the formation transactions, or any other independent third-party valuations or fairness opinions in connection with the formation transactions. As a result, the consideration to be given by us for these properties and other assets in the formation transactions may exceed their fair market value. 	
 
141 

Table of Contents
Consequences of this Offering and the Formation Transactions 
 
The following diagram depicts our ownership structure upon completion of this offering, consummation of the formation transactions and exercise of the Carrier Center option. Our operating partnership will own the various properties depicted below directly or indirectly, and in some cases through special purpose entities that were created in connection with various financings: 

(1)	 	Reflects the purchase by us of 6,810,036 units from the investors in GI Partners immediately following completion of this offering as part of the formation transactions. See “Certain Relationships and Related Transactions—Purchase of Operating Partnership Units from CalPERS and Global Innovation Contributors.” 	
(2)	 	Excludes shares issuable with respect to stock options that have been granted but are not yet exercisable. 	
(3)	 	Reflects limited partnership interests held by our officers and directors in the form of vested long-term incentive units that will be issued in connection with this offering and the formation transactions. 	
(4)	 	This property will be held through a taxable REIT subsidiary. 	
(5)	 	Upon completion of this offering and consummation of the formation transactions, we will own a 75% tenancy-in-common interest in this property. Beginning in January 2005 we will have the right to acquire the remaining 25% interest in this property from a third party, which we intend to exercise. 	
(6)	 	Upon completion of this offering and consummation of the formation transactions, we will indirectly own a 98% interest in a subsidiary that holds the fee simple interest in this property. An unrelated third party holds the remaining 2% interest in this subsidiary. See “Business and Properties—Description of Initial Portfolio—Technology Office/Corporate Headquarters Properties—Stanford Place II.” 	
 
142 

Table of Contents
Determination of Offering Price 
 
Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price of our common stock will be determined by negotiations between us and the underwriters. Among the factors to be considered in determining the initial public offering price are our record of operations, our management, our estimated net income, our estimated funds from operations, our estimated cash available for distribution, our anticipated dividend yield, our growth prospects, the current market valuations, financial performance and dividend yields of publicly traded companies considered by us and the underwriters to be comparable to us and the current state of the commercial real estate industry and the economy as a whole. The initial public offering price does not necessarily bear any relationship to our book value, assets, financial condition or any other established criteria of value and may not be indicative of the market price for our common stock after this offering. In addition, we will not conduct an asset-by-asset valuation of our company based on historical cost or current market valuation. We also have not obtained appraisals of the properties in connection with this offering. As a result, the consideration given by us in exchange for the properties in our portfolio may exceed the fair market value of these properties. See “Risk Factors—Risks Related to Our Business and Operations—We have not obtained appraisals of the properties in connection with this offering and the consideration given by us in exchange for them may exceed their fair market value.” 
 
Based on the issuance of 20,000,000 shares of our common stock in this offering, we expect to hold a 37.8% ownership interest in our operating partnership and the contributors to hold a 59.4% ownership interest in our operating partnership. If the underwriters exercise their over-allotment option in full, we expect to hold a 43.4% ownership interest in our operating partnership and the contributors to hold a 53.7% ownership interest in our operating partnership. 
 
143 

Table of Contents
DESCRIPTION OF THE 
PARTNERSHIP AGREEMENT OF DIGITAL REALTY TRUST, L.P. 
 
We have summarized the material terms and provisions of the Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., which we refer to as the “partnership agreement.” This summary is not complete. For more detail, you should refer to the partnership agreement itself, a copy of which is filed as an exhibit to the registration statement of which this prospectus is part. For purposes of this section, references to “we,” “our,” “us” and “our company” refer to Digital Realty Trust, Inc. 
 
Management of Our Operating Partnership 
 
Our operating partnership, Digital Realty Trust, L.P., is a Maryland limited partnership that was formed on July 21, 2004. Our company is the sole general partner of our operating partnership and conducts substantially all of our business in or through it. As sole general partner of our operating partnership, we exercise exclusive and complete responsibility and discretion in its day-to-day management and control. We can cause our operating partnership to enter into major transactions including acquisitions, dispositions and refinancings, subject to certain limited exceptions. The limited partners of our operating partnership may not transact business for, or participate in the management activities or decisions of, our operating partnership, except as provided in the partnership agreement and as required by applicable law. We may not be removed as general partner by the limited partners. The partnership agreement restricts our ability to engage in a business combination as more fully described in “—Termination Transactions” below. 
 
The limited partners of our operating partnership expressly acknowledged that we, as general partner of our operating partnership, are acting for the benefit of the operating partnership, the limited partners and our stockholders collectively. Neither our company nor our board of directors is under any obligation to give priority to the separate interests of the limited partners or our stockholders in deciding whether to cause our operating partnership to take or decline to take any actions. If there is a conflict between the interests of our stockholders on one hand and the limited partners on the other, we will endeavor in good faith to resolve the conflict in a manner not adverse to either our stockholders or the limited partners; provided, however, that for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders. We are not liable under the partnership agreement to our operating partnership or to any partner for monetary damages for losses sustained, liabilities incurred, or benefits not derived by limited partners in connection with such decisions; provided, that we have acted in good faith. 
 
The partnership agreement provides that all of our business activities, including all activities pertaining to the acquisition and operation of properties, must be conducted through our operating partnership, and that our operating partnership must be operated in a manner that will enable us to satisfy the requirements for being classified as a REIT. 
 
Transferability of Interests 
 
Except in connection with a transaction described in “—Termination Transactions” below, we, as general partner, may not voluntarily withdraw from our operating partnership, or transfer or assign all or any portion of our interest in our operating partnership, without the consent of the holders of a majority of the limited partnership interests. The limited partners have agreed not to sell, assign, encumber or otherwise dispose of their units in our operating partnership without our consent for the 12-month period following the completion of this offering, other than to us, as general partner, to immediate family members, to a trust for the benefit of a charitable beneficiary, or to a lending institution as collateral for a bona fide loan, subject to certain limitations. After the 12-month period following the completion of this offering, any transfer of units by the limited partners, except to the parties specified above or to an affiliate or member of such limited partner, will be subject to a right of first refusal by us. All transfers must be made only to “accredited investors” as defined under Rule 501 of the Securities Act. 
 
144 

Table of Contents
Amendments of the Partnership Agreement 
 
Amendments to the partnership agreement may be proposed by us, as general partner, or by limited partners owning at least 25% of the units held by limited partners. 
 
Generally, the partnership agreement may not be amended, modified or terminated without the approval of limited partners (other than limited partners 50% or more of whose equity is owned, directly or indirectly, by us as general partner) holding a majority of all outstanding units held by limited partners. As general partner, we will have the power to unilaterally make certain amendments to the partnership agreement without obtaining the consent of the limited partners as may be required to: 
 
 	•	 	add to our obligations as general partner or surrender any right or power granted to us as general partner for the benefit of the limited partners; 	
 
 	•	 	reflect the issuance of additional units or the admission, substitution, termination or withdrawal of partners in accordance with the terms of the partnership agreement; 	
 
 	•	 	reflect a change of an inconsequential nature that does not adversely affect the limited partners in any material respect, or cure any ambiguity, correct or supplement any provisions of the partnership agreement not inconsistent with law or with other provisions of the partnership agreement, or make other changes concerning matters under the partnership agreement that will not otherwise be inconsistent with the partnership agreement or law; 	
 
 	•	 	satisfy any requirements, conditions or guidelines of federal or state law; 	
 
 	•	 	reflect changes that are reasonably necessary for us, as general partner, to maintain our status as a REIT; or 	
 
 	•	 	modify the manner in which capital accounts are computed. 	
 
Amendments that would, among other things, convert a limited partner’s interest into a general partner’s interest, modify the limited liability of a limited partner, alter a partner’s right to receive any distributions or allocations of profits or losses, adversely alter or modify the redemption rights or alter the protections of the limited partners in connection with termination transactions described below must be approved by each limited partner that would be adversely affected by such amendment. 
 
In addition, without the written consent of a majority of the units held by limited partners (other than limited partners 50% or more of whose equity is owned, directly or indirectly, by us as general partner), we, as general partner, may not do any of the following: 
 
 	•	 	take any action in contravention of an express prohibition or limitation contained in the partnership agreement; 	
 
 	•	 	perform any act that would subject a limited partner to liability as a general partner in any jurisdiction or any liability not contemplated in the limited partnership agreement; 	
 
 	•	 	enter into any contract, mortgage loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of a limited partner to exercise its redemption/exchange rights explained below; 	
 
 	•	 	enter into or conduct any business other than in connection with our role as general partner of the operating partnership and our operation as a REIT; 	
 
 	•	 	acquire an interest in real or personal property other than through our operating partnership; 	
 
 	•	 	withdraw from the operating partnership or transfer any portion of our general partnership interest; or 	
 
 	•	 	be relieved of our obligations under the partnership agreement following any permitted transfer of our general partnership interest. 	
 
145 

Table of Contents
Distributions to Unitholders 
 
The partnership agreement provides that holders of units are entitled to receive quarterly distributions of available cash on a pro rata basis in accordance with their respective percentage interests. 
 
Redemption/Exchange Rights 
 
Limited partners who acquire units in the formation transactions have the right, commencing on or after the date which is 14 months after the completion of this offering, to require our operating partnership to redeem part or all of their units for cash based upon the fair market value of an equivalent number of shares of our company’s common stock at the time of the redemption. Alternatively, we may elect to acquire those units in exchange for shares of our company’s common stock. Our acquisition will be on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuances of stock rights, specified extraordinary distributions and similar events. We presently anticipate that we will elect to issue shares of our company’s common stock in exchange for units in connection with each redemption request, rather than having our operating partnership redeem the units for cash. With each redemption or exchange, we increase our company’s percentage ownership interest in our operating partnership. Commencing on or after the date which is 14 months after the completion of this offering, limited partners who hold units may exercise this redemption right from time to time, in whole or in part, except when, as a consequence of shares of our common stock being issued, any person’s actual or constructive stock ownership would exceed our company’s ownership limits, or any other limit as provided in our charter or as otherwise determined by our board of directors as described under the section entitled “Description of Securities—Restrictions on Transfer.” 
 
In addition, if the number of units delivered by a limited partner for redemption exceeds 9.8% of our outstanding common stock and $50.0 million in gross value (based on a unit having a value equal to the trailing ten-day daily price of our common stock) and we are eligible to file a registration statement on Form S-3 under the Securities Act, then we may also elect to redeem the units with the proceeds from a public offering or private placement of our common stock. In the event we elect this option, we may require the other limited partners to also elect whether or not to participate. If we do so, any limited partner who does not elect to participate will not be permitted to redeem units for the subsequent 12 months, subject to limited exceptions. Participating limited partners will receive on the redemption date the lesser of the cash our operating partnership would otherwise be required to pay for such units or the net proceeds per share in the public offering, but will have a limited opportunity to withdraw their units from the redemption immediately prior to the pricing of the public offering. 
 
Issuance of Additional Units, Common Stock or Convertible Securities 
 
As sole general partner, we have the ability to cause the operating partnership to issue additional units representing general and limited partnership interests. These additional units may include preferred limited partnership units. In addition, we may issue additional shares of our common stock or convertible securities, but only if we cause our operating partnership to issue to us partnership interests or rights, options, warrants or convertible or exchangeable securities of our operating partnership having designations, preferences and other rights, so that the economic interests of our operating partnership’s interests issued are substantially similar to the securities that we have issued. 
 
Tax Matters 
 
We are the tax matters partner of our operating partnership and, as such, we have authority to make tax elections under the Code on behalf of our operating partnership. 
 
Allocations of Net Income and Net Losses to Partners 
 
The net income or net loss of our operating partnership will generally be allocated to us, as general partner, and the limited partners in accordance with our respective percentage interests in our operating partnership. 
 
146 

Table of Contents
However, in some cases losses may be disproportionately allocated to partners who have guaranteed debt of our operating partnership. 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. See “Federal Income Tax Considerations—Tax Aspects of Our Operating Partnership, the Subsidiary Partnerships and the Limited Liability Companies.” 
 
In addition, we will from time to time issue long-term incentive units to persons who provide services to our operating partnership for such consideration or for no consideration as we may determine to be appropriate, and admit such persons as limited partners of our operating partnership. The long-term incentive units will be similar to our units in many respects and will rank pari passu with our units as to the payment of regular and special periodic or other distributions except liquidating distributions. The long-term incentive units may be subject to vesting requirements. Also, initially long-term incentive units will not have redemption or common stock exchange rights. Holders of vested long-term incentive units generally may convert some or all of their long-term incentive units into units under certain circumstances, provided that the holder’s capital account balance attributable to each such long-term incentive unit to be converted equals our capital account balance with respect to a unit. Because the holders of long-term incentive units generally will not pay fair market value for the long-term incentive units, their capital account balance attributable to a long-term incentive unit initially will be less than the amount required to convert such long-term incentive unit into a unit. Accordingly, to increase the capital account balances of holders of long-term incentive units so they may convert such profits interest units into units, the partnership agreement provides that holders of long-term incentive units are to receive special allocations of gain in the event of a sale or hypothetical sale of assets of our operating partnership prior to the allocation of gain to us or other limited partners. Once the long-term incentive units are converted to units, the units will have all of the rights and obligations associated with units as set forth in the partnership agreement. 
 
Operations 
 
The partnership agreement provides that we, as general partner, will determine in our discretion and distribute available cash on a quarterly basis, pro rata in accordance with the partners’ percentage interests. Available cash is the partnership’s net operating cash flow plus the reduction of any reserves and minus principal payment on debt and capital expenditures, investments in any entity, and increase in reserves or working capital accounts and any amounts paid in redemption of limited partner interests. 
 
The partnership agreement provides that our operating partnership will assume and pay when due, or reimburse us for payment of all costs and expenses relating to the operations of, or for the benefit of, our operating partnership. 
 
Termination Transactions 
 
The partnership agreement provides that our company may not engage in any merger, consolidation or other combination with or into another person, sale of all or substantially all of our assets or any reclassification or any recapitalization or change in outstanding shares of our common stock (a “termination transaction”), unless in connection with a termination transaction 
 
(i) we obtain the consent of at least 35% of the partners of our operating partnership (including units held by us), and 
 
(ii) either: 
 
(A) all limited partners will receive, or have the right to elect to receive, for each unit an amount of cash, securities or other property equal to the product of: 
 
 	•	 	the number of shares of our company’s common stock into which each unit is then exchangeable, and 	
 
147 

Table of Contents
 	•	 	the greatest amount of cash, securities or other property paid to the holder of one share of our company’s common stock in consideration of one share of our common stock in connection with the termination transaction, 	
 
provided that, if, in connection with a termination transaction, a purchase, tender or exchange offer is made to and accepted by the holders of more than 50% of the outstanding shares of our company’s common stock, each holder of units will receive, or will have the right to elect to receive, the greatest amount of cash, securities or other property which such holder would have received had it exercised its redemption right and received shares of our common stock in exchange for its units immediately prior to the expiration of such purchase, tender or exchange offer and accepted such purchase, tender or exchange offer; or 
 
(B) the following conditions are met: 
 
 	•	 	substantially all of the assets of the surviving entity are held directly or indirectly by our operating partnership or another limited partnership or limited liability company which is the surviving partnership of a merger, consolidation or combination of assets with our operating partnership; 	
 
 	•	 	the holders of units own a percentage interest of the surviving partnership based on the relative fair market value of the net assets of our operating partnership and the other net assets of the surviving partnership immediately prior to the consummation of this transaction; 	
 
 	•	 	the rights, preferences and privileges of such unit holders in the surviving partnership are at least as favorable as those in effect immediately prior to the consummation of the transaction and as those applicable to any other limited partners or non-managing members of the surviving partnership; and 	
 
 	•	 	the limited partners may exchange their interests in the surviving partnership for either the consideration available to the common limited partners pursuant to the first paragraph in this section, or the right to redeem their units for cash on terms equivalent to those in effect with respect to their units immediately prior to the consummation of the transaction if the ultimate controlling person of the surviving partnership has publicly traded common equity securities, shares of those common equity securities, at an exchange ratio based on the relative fair market value of those securities and our common stock. 	
 
Term 
 
Our operating partnership will continue in full force and effect until December 31, 2103, or until sooner dissolved in accordance with its terms or as otherwise provided by law. 
 
Indemnification and Limitation of Liability 
 
To the extent permitted by applicable law, the partnership agreement indemnifies us, as general partner, and our officers, directors, employees, agents and any other persons we may designate from and against any and all claims arising from operations of our operating partnership in which any indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that: 
 
 	•	 	the act or omission of the indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith, fraud or was the result of active and deliberate dishonesty; 	
 
 	•	 	the indemnitee actually received an improper personal benefit in money, property or services; or 	
 
 	•	 	in the case of any criminal proceeding, the indemnitee had reasonable cause to believe that the act or omission was unlawful. 	
 
Similarly, we, as general partner of our operating partnership, and our officers, directors, agents or employees, are not liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or any act or omission so long as we acted in good faith. 
 
148 

Table of Contents
PRINCIPAL STOCKHOLDERS 
 
The following table sets forth the beneficial ownership of shares of our common stock and shares of common stock into which units are exchangeable immediately following the completion of this offering and the formation transactions for (i) each person who is expected to be the beneficial owner of 5% or more of the outstanding common stock immediately following the completion of this offering, (ii) directors, proposed directors and the executive officers, and (iii) directors, proposed directors and executive officers as a group. This table assumes that the formation transactions and this offering are completed. Each person named in the table has sole voting and investment power with respect to all of the shares of our common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. The extent to which a person will hold shares of common stock as opposed to units is set forth in the footnotes below. Unless otherwise indicated, the address of each named person is c/o Digital Realty Trust, Inc., 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025. 

Name of Beneficial Owner
	  	Number of Shares
and Units
Beneficially
Owned
	  	Percent
of All
Shares(1)
	 	 	Percent of
All Shares and
Units(2)
	 	
Global Innovation Partners, LLC(3)	  	25,120,659	  	55.7	%	 	47.4	%	
The Cambay Group, Inc. and Wave Exchange, Inc.(4)	  	5,935,846	  	22.9	 	 	11.2	 	
Richard A. Magnuson(5)(6)	  	25,928,808	  	56.5	 	 	49.0	 	
Michael F. Foust(7)	  	274,771	  	1.4	 	 	*	 	
Lawrence A. Chapman	  	6,448	  	*	 	 	*	 	
Ruann F. Ernst	  	6,448	  	*	 	 	*	 	
Kathleen Earley Reed	  	6,448	  	*	 	 	*	 	
Dennis E. Singleton	  	6,448	  	*	 	 	*	 	
A. William Stein(8)	  	141,426	  	*	 	 	*	 	
Scott E. Peterson(9)	  	105,059	  	*	 	 	*	 	
John O. Wilson(10)	  	5,935,846	  	22.9	 	 	11.2	 	
All directors, director nominees and executive officers as a group (nine (9) persons)	  	32,409,452	  	61.8	%	 	61.2	%	

 *	 	Less than one percent. 	
(1)	 	Assumes 20,000,000 shares of our common stock are outstanding immediately following this offering. In addition, amounts listed for each individual assumes that all units, including vested long-term incentive units, held by such individual are exchanged for shares of our common stock, and amounts for all directors and officers as a group assume all vested long-term incentive units held by them are exchanged for shares of our common stock, but none of the units held by other persons are exchanged for shares of our common stock. 	
(2)	 	Assumes a total of 52,942,731 shares of common stock and units, including vested long-term incentive units, are outstanding immediately following this offering, comprised of 20,000,000 shares of common stock and 32,942,731 units which may be exchanged for cash or shares of common stock under certain circumstances. 	
(3)	 	Amounts shown reflect the number of units owned by GI Partners. GI Partners is a Delaware limited liability company managed by Global Innovation Manager, LLC and Global Innovation Advisor, LLC. These entities are managed by a single management committee of which the current members are Richard A. Magnuson, Michael F. Foust, Robert H. Zerbst and Bill Harris. Investment decisions of GI Partners are controlled by an investment committee currently comprised of Richard A. Magnuson, Michael F. Foust, Robert H. Zerbst, Bill Harris and Eric Harrison. Mr. Foust will resign from the management committee and the investment committee prior to the consummation of this offering. 	
(4)	 	Amounts shown reflect 5,935,846 units that, upon completion of this offering, will be owned by The Cambay Group, Inc. and Wave eXchange, Inc. F. Allan Chapman, John O. Wilson and William C. Scott, Jr. are the sole directors of these corporations, and these corporations are under common ownership. The address for The Cambay Group, Inc., Wave eXchange, Inc., Messrs. Chapman, Scott and Wilde and Ms. Dell’Osso is c/o The Cambay Group, Inc., 1350 Treat Boulevard, Suite 560, Walnut Creek, CA 94956. 	
(5)	 	Does not include 125,263 stock options to purchase shares of our common stock in each case that will be granted in connection with this offering. 	
(6)	 	Mr. Magnuson is the president of GI Manager and may be considered to have beneficial ownership of GI Partners’ interest in us. Mr. Magnuson disclaims beneficial ownership of all such shares. See note 3 above. 	
(7)	 	Does not include 125,263 stock options to purchase shares of our common stock in each case that will be granted in connection with this offering. 	
(8)	 	Does not include 80,815 stock options to purchase shares of our common stock in each case that will be granted in connection with this offering. 	
(9)	 	Does not include 80,815 stock options to purchase shares of our common stock in each case that will be granted in connection with this offering. 	
(10)	 	Amounts shown reflect 5,935,846 units beneficially owned in connection with his position as a director of The Cambay Group, Inc. and Wave eXchange, Inc. Mr. Wilson disclaims beneficial ownership of the 90% of such units in which he does not have a pecuniary interest. 	
 
149 

Table of Contents
DESCRIPTION OF SECURITIES 
 
The following summary of the terms of the stock of our company does not purport to be complete and is subject to and qualified in its entirety by reference to our charter and bylaws, copies of which are exhibits to the registration statement of which this prospectus is a part. See “Where You Can Find More Information.” 
 
General 
 
Our charter provides that we may issue up to 100 million shares of our common stock, $0.01 par value per share or, common stock, and 20 million shares of preferred stock, $0.01 par value per share, or preferred stock. Our charter authorizes our board of directors to increase or decrease the number of authorized shares without stockholder approval. Upon completion of this offering, 20,000,000 shares of our common stock and no shares of preferred stock will be issued and outstanding. Under Maryland law, stockholders generally are not liable for the corporation’s debts or obligations. 
 
Common Stock 
 
All shares of our common stock offered hereby will be duly authorized, fully paid and nonassessable. Subject to the preferential rights of any other class or series of stock and to the provisions of the charter regarding the restrictions on transfer of stock, holders of shares of our common stock are entitled to receive dividends on such stock if, as and when authorized by our board of directors out of assets legally available therefor and declared by us and to share ratably in the assets of our company legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up after payment or establishment of reserves for all debts and liabilities of our company. 
 
Subject to the provisions of our charter regarding the restrictions on transfer of stock and except as may be otherwise specified therein with respect to any class or series of common stock, each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as provided with respect to any other class or series of stock, the holders of such shares will possess the exclusive voting power. There is no cumulative voting in the election of our board of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all of the directors then standing for election and the holders of the remaining shares will not be able to elect any directors. 
 
Holders of shares of our common stock have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and have no preemptive rights to subscribe for any securities of our company. Subject to the provisions of the charter regarding the restrictions on transfer of stock, shares of our common stock will have equal dividend, liquidation and other rights. 
 
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless approved by the affirmative vote of stockholders holding at least two thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Our charter provides that these actions may be taken if declared advisable by a majority of our board of directors and approved by the vote of a majority of the votes entitled to be cast on the matter. However, Maryland law permits a corporation to transfer all or substantially all of its assets without the approval of the stockholders of the corporation to one or more persons if all of the equity interests of the person or persons are owned, directly or indirectly, by the corporation. In addition, because operating assets may be held by a corporation’s subsidiaries, as in our situation, these subsidiaries may be able to transfer all or substantially all of such assets without a vote of our stockholders. 
 
Our charter authorizes our board of directors to reclassify any unissued shares of our common stock into other classes or series of classes of stock and to establish the number of shares in each class or series and to set 
 
150 

Table of Contents
the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series. 
 
Preferred Stock 
 
Our charter authorizes our board of directors to classify any unissued shares of preferred stock and to reclassify any previously classified but unissued shares of any series. Prior to issuance of shares of each series, our board of directors is required by the MGCL and our charter to set, subject to the provisions of our charter regarding the restrictions on transfers of stock, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each such series. Thus, our board of directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interest. As of the date hereof, no shares of preferred stock are outstanding and we have no present plans to issue any preferred stock. 
 
Power to Increase Authorized Stock and Issue Additional Shares of our Common Stock and Preferred Stock 
 
We believe that the power of our board of directors to increase or decrease the number of authorized shares of stock, issue additional authorized but unissued shares of our common stock or preferred stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to cause us to issue such classified or reclassified shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series, as well as the common stock, will be available for issuance without further action by our stockholders, unless stockholder consent is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although our board of directors does not intend to do so, it could authorize us to issue a class or series that could, depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interest. 
 
Restrictions on Transfer 
 
In order for us to qualify as a REIT under the Code, our stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities such as qualified pension plans) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). 
 
Our charter contains restrictions on the ownership and transfer of our common stock which are intended to assist us in complying with these requirements and continuing to qualify as a REIT. The relevant sections of our charter provide that, subject to the exceptions described below, no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock or more than 9.8% of the value of our outstanding capital stock. We refer to these restrictions as the “common stock ownership limit” and the “aggregate stock ownership limit,” respectively. A person or entity that becomes subject to the common stock ownership limit or the aggregate ownership limit by virtue of a violative transfer that results in a transfer to a trust, as set forth below, is referred to as a “purported beneficial transferee” if, had the violative transfer been effective, the person or entity would have been a record owner and beneficial owner or solely a beneficial owner of our common or capital stock, as applicable, or is referred to as a “purported record transferee” if, had the violative transfer been effective, the person or entity would have been solely a record owner of our common stock or capital stock, as applicable. 
 
151 

Table of Contents
The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of our common stock or less than 9.8% of the value of our outstanding capital stock (or the acquisition of an interest in an entity that owns, actually or constructively, our common stock or capital stock, as applicable) by an individual or entity, could, nevertheless cause that individual or entity, or another individual or entity, to own constructively in excess of 9.8% of our outstanding common stock or capital stock, as applicable and thereby subject such stock to the applicable ownership limit. 
 
Our board of directors may, in its sole discretion, waive the common stock ownership limit or aggregate stock ownership limit with respect to a particular stockholder if it: 
 
 	•	 	determines that such ownership will not cause any individual’s beneficial ownership of shares of our capital stock to violate the aggregate stock ownership limit and that any exemption from the applicable ownership limit will not jeopardize our status as a REIT; and 	
 
 	•	 	determines that such stockholder does not and will not own, actually or constructively, an interest in a tenant of ours (or a tenant of any entity owned in whole or in part by us) that would cause us to own, actually or constructively, more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant or that any such ownership would not cause us to fail to qualify as a REIT under the Code. 	
 
As a condition of our waiver, our board of directors may require an opinion of counsel or IRS ruling satisfactory to our board of directors, and/or representations or undertakings from the applicant with respect to preserving our REIT status. 
 
In connection with the waiver of the common stock ownership limit or aggregate stock ownership limit or at any other time, our board of directors may increase the common stock ownership limit or aggregate stock ownership limit, as applicable, for one or more persons and decrease the common stock ownership limit or aggregate stock ownership limit, as applicable, for all other persons and entities; provided, however, that the decreased common stock ownership limit or aggregate stock ownership limit will not be effective for any person or entity whose percentage ownership in our stock is in excess of such decreased ownership limit until such time as such person or entity’s percentage of our common stock or capital stock, as applicable, equals or falls below the decreased common stock ownership limit or aggregate stock ownership limit, as applicable; but any further acquisition of our common stock or capital stock, as applicable, in excess of such percentage ownership will be in violation of the applicable ownership limit. Additionally, the new ownership limit, as applicable, may not allow five or fewer stockholders to beneficially own more than 49% in value of our outstanding capital stock. 
 
Our charter provisions further prohibit: 
 
 	•	 	any person from beneficially or constructively owning shares of our stock that would result in us being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT; and 	
 
 	•	 	any person from transferring shares of our common stock if such transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution). 	
 
Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate any of the foregoing restrictions on transferability and ownership will be required to give notice immediately to us and provide us with such other information as we may request in order to determine the effect of such transfer on our status as a REIT. The foregoing provisions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. 
 
Pursuant to our charter, if any purported transfer of our stock or any other event would otherwise result in any person violating the ownership limits or such other limit as established by our board of directors or would result in us being “closely held” under Section 856(h) of the Code or otherwise failing to qualify as a REIT, then 
 
152 

Table of Contents
that number of shares in excess of the applicable ownership limit or causing us to be “closely held” or otherwise to fail to qualify as a REIT (rounded up to the nearest whole share) will be automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us. The automatic transfer will be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in a transfer to the trust. Any dividend or other distribution paid to the purported record transferee, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to the trustee upon demand for distribution to the beneficiary of the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable ownership limit or our being “closely held” or otherwise failing to qualify as a REIT, then our charter provides that the transfer of the shares in excess of the ownership limit will be void. If any transfer would result in shares of our stock being beneficially owned by fewer than 100 persons, then any such purported transfer will be void and of no force or effect. 
 
Shares of our stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price paid by the purported record transferee for the shares (or, if the event which resulted in the transfer to the trust did not involve a purchase of such shares of our stock at market price, the last reported sales price reported on the New York Stock Exchange on the trading day immediately preceding the day of the event which resulted in the transfer of such shares of our stock to the trust) and (2) the market price on the date we, or our designee, accepts such offer. We have the right to accept such offer until the trustee has sold the shares of our stock held in the trust pursuant to the clauses discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported record transferee and any dividends or other distributions held by the trustee with respect to such stock will be paid to the charitable beneficiary. 
 
If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the common stock ownership limit and the aggregate stock ownership limit or such other limit as established by our board of directors. After that, the trustee must distribute to the purported record transferee an amount equal to the lesser of (1) the price paid by the purported record transferee or owner for the shares (or, if the event which resulted in the transfer to the trust did not involve a purchase of such shares at market price, the last reported sales price reported on the New York Stock Exchange on the trading day immediately preceding the day of the event which resulted in the transfer of such shares of our stock to the trust) and (2) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. Any net sales proceeds in excess of the amount payable to the purported record transferee will be immediately paid to the charitable beneficiary, together with any dividends or other distributions thereon. In addition, if prior to discovery by us that shares of our stock have been transferred to a trust, such shares of stock are sold by a purported record transferee, then such shares shall be deemed to have been sold on behalf of the trust and to the extent that the purported record transferee received an amount for or in respect of such shares that exceeds the amount that such purported record transferee was entitled to receive, such excess amount shall be paid to the trustee upon demand. The purported beneficial transferee or purported record transferee has no rights in the shares held by the trustee. 
 
The trustee shall be designated by us and shall be unaffiliated with us and with any purported record transferee or purported beneficial transferee. Prior to the sale of any shares in excess of the common stock ownership limit or aggregate stock ownership limit by the trust, the trustee will receive, in trust for the beneficiary, all dividends and other distributions paid by us with respect to the shares in excess of the applicable ownership limit, and may also exercise all voting rights with respect to such shares. 
 
Subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee shall have the authority, at the trustee’s sole discretion: 
 
 	•	 	to rescind as void any vote cast by a purported record transferee prior to our discovery that the shares have been transferred to the trust; and 	
 
153 

Table of Contents
 	•	 	to recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust. 	
 
However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote. 
 
In addition, if our board of directors or other permitted designees determine in good faith that a proposed transfer would violate the restrictions on ownership and transfer of our stock set forth in our charter, our board of directors or other permitted designees will take such action as it deems or they deem advisable to refuse to give effect to or to prevent such transfer, including, but not limited to, causing the company to redeem shares of common stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. 
 
Any beneficial owner or constructive owner of shares of our stock and any person or entity (including the stockholder of record) who is holding shares of our stock for a beneficial owner must, on request, provide us with a completed questionnaire containing the information regarding their ownership of such shares, as set forth in the applicable Treasury regulations. In addition, any person or entity that is a beneficial owner or constructive owner of shares of our stock and any person or entity (including the stockholder of record) who is holding shares of our stock for a beneficial owner or constructive owner shall, on request, be required to disclose to us in writing such information as we may request in order to determine the effect, if any, of such stockholder’s actual and constructive ownership of shares of our stock on our status as a REIT and to ensure compliance with the common stock ownership limit and the aggregate stock ownership limit, or as otherwise permitted by our board of directors. 
 
All certificates representing shares of our common stock bear a legend referring to the restrictions described above. 
 
These ownership limits could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for our stock or otherwise be in the best interest of our stockholders. 
 
Transfer Agent and Registrar 
 
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company. 
 
154 

Table of Contents
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS 
 
The following summary of certain provisions of Maryland law and of our charter and bylaws does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and our charter and bylaws, copies of which are exhibits to the registration statement of which this prospectus is a part. See “Where You Can Find More Information.” 
 
Our Board of Directors 
 
Our bylaws provide that the number of directors of our company may be established by our board of directors but may not be fewer than the minimum number permitted under the MGCL nor more than 15. Except as may be provided by our board of directors in setting the terms of any class or series of stock, any vacancy may be filled only by a vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum. Any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies. 
 
Pursuant to our charter, each of our directors is elected by our stockholders to serve until the next annual meeting and until their successors are duly elected and qualify. Holders of shares of our common stock will have no right to cumulative voting in the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the shares of our common stock will be able to elect all of our directors. 
 
Removal of Directors 
 
Our charter provides that a director may be removed only for cause (as defined in our charter) and only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. This provision, when coupled with the exclusive power of our board of directors to fill vacant directorships, (1) precludes stockholders from removing incumbent directors except upon the existence of cause for removal and a substantial affirmative vote and (2) filling the vacancies created by such removal with their own nominees. 
 
Business Combinations 
 
Under the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and any interested stockholder, or an affiliate of such an interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Maryland law defines an interested stockholder as any person who beneficially owns 10% or more of the voting power of the corporation’s shares or an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. Our board of directors may provide that its approval is subject to compliance with any terms and conditions determined by it. 
 
After such five-year period, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (2) two thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected, unless, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. 
 
These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested 
 
155 

Table of Contents
stockholder. Pursuant to the statute, our board of directors has by resolution opted out of the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any interested stockholder of ours. As a result, anyone who later becomes an interested stockholder may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by our company with the super-majority vote requirements and the other provisions of the statute. We cannot assure you that our board of directors will not opt to be subject to such business combination provisions in the future. 
 
Control Share Acquisitions 
 
The MGCL provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved at a special meeting by the affirmative vote of two-thirds of the votes entitled to be cast on the matter, excluding shares of stock in a corporation in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting power of shares of stock of the corporation in the election of directors: (1) a person who makes or proposes to make a control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is also a director of the corporation. “Control shares” are voting shares of stock which, if aggregated with all other such shares of stock previously acquired by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power: (1) one-tenth or more but less than one-third, (2) one-third or more but less than a majority, or (3) a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A ”control share acquisition” means the acquisition of control shares, subject to certain exceptions. 
 
A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses), may compel our board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the control shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting. 
 
If voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition. 
 
The control share acquisition statute does not apply (1) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (2) to acquisitions approved or exempted by the charter or bylaws of the corporation. 
 
Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our common stock. We cannot provide you any assurance that our board of directors will not amend or eliminate this provision at any time in the future. 
 
Title 3, Subtitle 8 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Securities Exchange Act of 1934 and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any of (1) a classified board, (2) a two-thirds vote requirement for removing a director, (3) a requirement that the number of directors be fixed only by vote of the directors, (4) a requirement 
 
156 

Table of Contents
that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred, or (5) a majority requirement for the calling of a special meeting of stockholders. Pursuant to Subtitle 8, we have elected to provide that vacancies on our board may be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in our charter and bylaws unrelated to Subtitle 8, we already require a two-thirds vote for the removal of any director from the board, vest in the board the exclusive power to fix the number of directorships and fill vacancies and require, unless called by our Executive Chairman of the board, our president, our chief executive officer or the board, the request of holders of a majority of outstanding shares to call a special meeting. 
 
Amendments to Our Charter and Bylaws 
 
Our charter may be amended only if such amendment is declared advisable by our board of directors and approved by the affirmative vote of the holders of a majority of all of the votes entitled to be cast on the matter. However, our charter’s provisions regarding removal of directors may be amended only if such amendment is declared advisable by our board of directors and approved by the affirmative vote of the holders of not less than two-thirds of all the votes entitled to be cast on the matter. Our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws or to make new bylaws. 
 
Transactions Outside the Ordinary Course of Business 
 
We may not merge with or into another company, sell all or substantially all of our assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless such transaction is declared advisable by our board of directors and approved by the affirmative vote of the holders of a majority of all of the votes entitled to be cast on the matter. 
 
Dissolution of Our Company 
 
The dissolution of our company must be declared advisable by a majority of our entire board of directors and approved by the affirmative vote of the holders of a majority of all of the votes entitled to be cast on the matter. 
 
Advance Notice of Director Nominations and New Business 
 
Our bylaws provide that: 
 
 	•	 	with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of business to be considered by stockholders may be made only: 	
 
 	•	 	pursuant to our notice of the meeting; 	
 
 	•	 	by or at the direction of our board of directors; or 	
 
 	•	 	by a stockholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our bylaws. 	
 
 	•	 	with respect to special meetings of stockholders, only the business specified in our company’s notice of meeting may be brought before the meeting of stockholders and nominations of individuals for election to our board of directors may be made only: 	
 
 	•	 	pursuant to our notice of the meeting; 	
 
 	•	 	by or at the direction of our board of directors; or 	
 
 	•	 	provided that our board of directors has determined that directors shall be elected at such meeting, by a stockholder who is entitled to vote at the meeting and has complied with the advance notice provisions set forth in our bylaws. 	
 
157 

Table of Contents
The advance notice procedures of our bylaws provide that, to be timely, a stockholder’s notice with respect to director nominations or proposals for an annual meeting must be delivered to our corporate secretary at our principal executive office not less than 120 nor more than 150 days prior to the first anniversary of the date of the mailing of the notice for our preceding year’s annual meeting. With respect to our 2005 annual meeting, the bylaws provide that notice of the prior year’s annual meeting will be deemed to have been mailed on March 31, 2004. In the event that the date of the mailing of the notice for the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, to be timely, a stockholder’s notice must be delivered not earlier than the 150th day prior to the date of such annual meeting and not later than the close of business on the later of the 120th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. 
 
Anti-takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws 
 
The provisions of our charter on removal of directors and the advance notice provisions of the bylaws could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interest. Likewise, if our company’s board of directors were to opt in to the business combination provisions of the MGCL or the provisions of Title 3, Subtitle 8 of the MGCL, or if the provision in the bylaws opting out of the control share acquisition provisions of the MGCL were rescinded, these provisions of the MGCL could have similar anti-takeover effects. 
 
Ownership Limit 
 
Our charter provides that no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock or more than 9.8% of the value of our outstanding capital stock. We refer to these restrictions as the “ownership limits.” For a fuller description of this restriction and the constructive ownership rules, see “Description of Securities—Restrictions on Transfer.” 
 
Indemnification and Limitation of Directors’ and Officers’ Liability 
 
The MGCL permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter contains such a provision which eliminates such liability to the maximum extent permitted by Maryland law. 
 
The MGCL requires a corporation (unless its charter provides otherwise, which our company’s charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or are threatened to be made a party by reason of their service in those or other capacities unless it is established that: 
 
 	•	 	the act or omission of the director or officer was material to the matter giving rise to the proceeding and: 	
 
 	•	 	was committed in bad faith; or 	
 
 	•	 	was the result of active and deliberate dishonesty. 	
 
 	•	 	the director or officer actually received an improper personal benefit in money, property or services; or 	
 
 	•	 	in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. 	
 
158 

Table of Contents
However, under the MGCL, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. In addition, the MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of: 
 
 	•	 	a written affirmation by the director or officer of his good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and 	
 
 	•	 	a written undertaking by the director or on the director’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director did not meet the standard of conduct. 	
 
Our charter authorizes us to obligate our company and our bylaws obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to: 
 
 	•	 	any present or former director or officer who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity; or 	
 
 	•	 	any individual who, while a director of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. 	
 
Our charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above and to any employee or agent of our company or a predecessor of our company. 
 
The partnership agreement provides that we, as general partner, and our officers and directors are indemnified to the fullest extent permitted by law. See “Description of the Partnership Agreement of Digital Realty Trust, L.P.—Indemnification and Limitation of Liability.” 
 
Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 
 
Indemnification Agreements 
 
We have entered into an indemnification agreement with each of our executive officers and directors as described in “Management—Indemnification Agreements.” 
 
159 

Table of Contents
SHARES ELIGIBLE FOR FUTURE SALE 
 
General 
 
Upon completion of this offering, based upon an offering at the midpoint of the pricing range indicated on the front cover of this prospectus, we expect to have outstanding 20,000,000 shares of our common stock (23,000,000 shares if the underwriters exercise their over-allotment option in full). In addition, 31,452,170 shares of our common stock are reserved for issuance upon exchange of units. 
 
The 20,000,000 shares sold in this offering (23,000,000 shares if underwriters exercise their over-allotment option in full) will be freely transferable without restriction or further registration under the Securities Act, subject to the limitations on ownership set forth in our charter, except for any shares held by our “affiliates,” as that term is defined by Rule 144 under the Securities Act. Any shares purchased by affiliates in this offering and the shares of our common stock owned by affiliates upon redemption/exchange of units will be “restricted shares” as defined in Rule 144. 
 
Rule 144 
 
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned restricted shares of our common stock for at least one year would be entitled to sell, within any three-month period, that number of shares that does not exceed the greater of: 
 
 	•	 	1% of the shares of our common stock then outstanding, which will equal approximately 200,000 shares immediately after this offering (230,000 shares if the underwriters exercise their over-allotment option in full); or 	
 
 	•	 	the average weekly trading volume of our common stock on the New York Stock Exchange during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. 	
 
Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. 
 
Rule 701 
 
Rule 701 under the Securities Act may be relied upon with respect to the resale of securities originally purchased from us by our employees, trustees or officers prior to the offering. In addition, the SEC has indicated that Rule 701 will apply to the typical stock options granted by an issuer before it becomes a public company, along with the shares acquired upon exercise of those options, including exercises after the date of this offering. Securities issued in reliance on Rule 701 are restricted securities and, subject to the “lock-up” agreements described below, beginning 90 days after the date of this prospectus, may be sold by: 
 
 	•	 	persons other than affiliates, in ordinary brokerage transactions; and 	
 
 	•	 	by affiliates under Rule 144 without compliance with the one-year holding requirement. 	
 
Redemption/Exchange Rights 
 
In connection with the formation transactions, our operating partnership will issue an aggregate of 31,452,170 units to contributors of interests in the property entities. Beginning on or after the date which is 14 months after the completion of this offering, limited partners of our operating partnership have the right to require our operating partnership to redeem part or all of their units for cash, or, at our election, shares of our common stock, based upon the fair market value of an equivalent number of shares of our common stock at the time of the redemption, subject to the ownership limits set forth in our charter and described under the section entitled “Description of Securities—Restrictions on Transfer.” See “Description of the Partnership Agreement of Digital Realty Trust, L.P.” 
 
160 

Table of Contents
In addition, if the number of units delivered by a limited partner for redemption exceeds 9.8% of our outstanding common stock and $50.0 million in gross value (based on a unit having a value equal to the trailing ten-day daily price of our common stock) and we are eligible to file a registration statement on Form S-3 under the Securities Act, then we may also elect to redeem the units with the proceeds from a public offering or private placement of our common stock. In the event we elect this option, we may require the other limited partners to also elect whether or not to participate. If we do so, any limited partner who does not elect to participate will not be permitted to redeem units for the subsequent 12 months, subject to limited exceptions. Participating limited partners will receive on the redemption date the lesser of the cash our operating partnership would otherwise be required to pay for such units or the net proceeds per share in the public offering, but will have a limited opportunity to withdraw their units from the redemption immediately prior to the pricing of the public offering. 
 
Registration Rights 
 
We have granted those persons with a direct or indirect interest in the property entities who will receive units in the formation transactions certain registration rights with respect to the shares of our common stock that may be acquired by them in connection with the exercise of the redemption/exchange rights under the partnership agreement. These registration rights require us to seek to register all such shares of our common stock effective as of that date which is 14 months following completion of this offering on a “shelf” registration statement under the Securities Act. In addition, commencing on the date which is 16 months following completion of this offering, each of GI Partners and another third party receiving units in the formation transactions have the right, on one occasion, to require us to register all such shares of our common stock, provided, that such right lapses when such party ceases to own in excess of 7.5% of our common stock determined in accordance with the methodology for calculating the ownership limit under our charter. We will bear expenses incident to our registration requirements under the registration rights, except that such expenses shall not include any underwriting fees, discounts or commissions or any out-of-pocket expenses of the persons exercising the redemption/exchange rights or transfer taxes, if any, relating to such shares. 
 
We have also granted to the entities that will receive units from us upon exercise of the Carrier Center option agreement or the Denver or Frankfurt right of first offer agreements certain registration rights with respect to our shares of common stock that may be acquired by them in connection with the exercise of the redemption/exchange rights under the partnership agreement. These registration rights require us to seek to register all such shares of our common stock effective as of the date which is 14 months following the closing of the property acquisition upon exercise of such option agreement or right of first offer agreement. In the event we fail to file this registration statement or if filed fail to maintain its effectiveness, holders will have the right (subject to certain limitations) to have their shares included in any registration statement we file for an underwritten public offering, and holders who individually or in the aggregate own more than $5 million of such shares will have the right to require us to register all such shares of our common stock, provided that we will not be required to effect more than one such demand registration in any twelve month period. We will bear expenses incident to our registration requirements under the registration rights, except that such expenses shall not include any underwriting fees, discounts or commissions or any out-of-pocket expenses of the persons exercising the redemption/exchange rights or transfer taxes, if any, relating to such shares. 
 
Stock Options and Incentive Award Plan 
 
We intend to adopt the 2004 Incentive Award Plan of Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. The incentive award plan provides for the grant of incentive awards to our and their employees, directors and consultants (and our and their respective subsidiaries). We intend to issue 783,902 stock options and 1,490,561 long-term incentive units to officers, directors and key employees immediately after this offering, and intend to reserve an additional 2,199,639 shares of our common stock for issuance under the plan. 
 
We intend to file with the Securities and Exchange Commission a Registration Statement on Form S-8 covering the shares of common stock issuable under the incentive award plan. Shares of our common stock 
 
161 

Table of Contents
covered by this registration statement, including any shares of our common stock issuable upon the exercise of options or restricted shares of our common stock, will be eligible for transfer or resale without restriction under the Securities Act unless held by affiliates. Furthermore, our officers and directors have agreed not to sell or otherwise transfer any long-term incentive units granted to them under our incentive award plan for a period of three years from date of grant. 
 
Lock-up Agreements and Other Contractual Restrictions on Resale 
 
In addition to the limits placed on the sale of shares of our common stock by operation of Rule 144 and other provisions of the Securities Act, (i) our senior officers and directors have agreed, subject to certain limited exceptions, not to sell or otherwise transfer or encumber any shares of our common stock or securities convertible into common stock (including units) owned by them at the completion of this offering or thereafter acquired by them for a period of one year after the completion of this offering without the consent of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and (ii) we have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock (except for a registration statement on Form S-8 relating to our 2004 Incentive Award Plan or a registration statement on Form S-4 relating to an acquisition of a real property company), or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days after the date of this prospectus, subject to certain limited exceptions set forth in “Underwriting.” At the conclusion of the one-year period referenced in clause (i) above, common stock issued upon the subsequent exchange of units may be sold by our senior officers and directors in the public market once registered pursuant to the registration rights described above. 
 
162 

Table of Contents
FEDERAL INCOME TAX CONSIDERATIONS 
 
The following summary of material federal income tax considerations regarding our company and this offering of our common stock is based on current law, including: 
 
 	•	 	the Code; 	
 
 	•	 	current, temporary and proposed Treasury regulations promulgated under the Code; 	
 
 	•	 	the legislative history of the Code; 	
 
 	•	 	current administrative interpretations and practices of the IRS; and 	
 
 	•	 	court decisions; 	
 
in each case, as of the date of this prospectus. In addition, the administrative interpretations and practices of the IRS include its practices and policies as expressed in private letter rulings that are not binding on the IRS except with respect to the particular taxpayers who requested and received those rulings. Future legislation, Treasury regulations, administrative interpretations and practices and/or court decisions may adversely affect the tax considerations described in this prospectus. Any such change could apply retroactively to transactions preceding the date of the change. We have not requested and do not intend to request a ruling from the IRS that we qualify as a REIT, and the statements in this prospectus are not binding on the IRS or any court. Thus, we can provide no assurance that the tax considerations contained in this summary will not be challenged by the IRS or will be sustained by a court if challenged by the IRS. This summary does not discuss any state, local or foreign tax consequences associated with the acquisition, ownership, sale or other disposition of our common stock or our election to be taxed as a REIT. 
 
Taxation of Our Company 
 
General.    We intend to elect to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ending December 31, 2004. We believe that we are organized and will operate in a manner that will allow us to qualify for taxation as a REIT under the Code commencing with our taxable year ending December 31, 2004, and we intend to continue to be organized and operate in this manner. However, qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Code, including through actual annual operating results, asset diversification, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that we will be organized or able to operate in a manner so as to qualify or remain qualified as a REIT. See “—Failure to Qualify.” 
 
The sections of the Code that relate to the qualification and operation as a REIT are highly technical and complex. The following sets forth the material aspects of the sections of the Code that govern the federal income tax treatment of a REIT and its stockholders. This summary is qualified in its entirety by the applicable Code provisions, relevant rules and regulations promulgated under the Code, and administrative and judicial interpretations of the Code and these rules and regulations. 
 
Latham & Watkins LLP has acted as our tax counsel in connection with this offering of our common stock and our election to be taxed as a REIT. Latham & Watkins LLP has rendered to us an opinion to the effect that, commencing with our taxable year ending December 31, 2004, we have been organized in conformity with the requirements for qualification and taxation as a REIT, and our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT under the Code. It must be emphasized that this opinion was based on various assumptions and representations as to factual matters, including representations made by us in a factual certificate provided by one of our officers. Latham & Watkins LLP has no obligation to update its opinion subsequent to its date. In addition, this opinion was based upon our factual representations set forth in this prospectus. Moreover, our qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Code discussed below, including through annual operating results, asset diversification and diversity of stock ownership, the results of which have not been reviewed by Latham & 
 
163 

Table of Contents
Watkins LLP. Accordingly, no assurance can be given that our actual results of operation for any particular taxable year will satisfy those requirements. Further, the anticipated income tax treatment described in this prospectus may be changed, perhaps retroactively, by legislative, administrative or judicial action at any time. See “—Failure to Qualify.” 
 
If we qualify for taxation as a REIT, we generally will not be required to pay federal corporate income taxes on our net income that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” that generally results from investment in a C corporation. A C corporation generally is required to pay full corporate-level tax. Double taxation generally means taxation that occurs once at the corporate-level when income is earned and once again at the stockholder level when the income is distributed. We will, however, be required to pay federal income tax as follows: 
 
 	•	 	First, we will be required to pay tax at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains. 	
 
 	•	 	Second, we may be required to pay the “alternative minimum tax” on our items of tax preference under some circumstances. 	
 
 	•	 	Third, if we have (1) net income from the sale or other disposition of “foreclosure property” which is held primarily for sale to customers in the ordinary course of business or (2) other nonqualifying income from foreclosure property, we will be required to pay tax at the highest corporate rate on this income. Foreclosure property generally is defined as property we acquired through foreclosure or after a default on a loan secured by the property or a lease of the property. 	
 
 	•	 	Fourth, we will be required to pay a 100% tax on any net income from prohibited transactions. Prohibited transactions are, in general, sales or other taxable dispositions of property held primarily for sale to customers in the ordinary course of business, other than foreclosure property. 	
 
 	•	 	Fifth, if we fail to satisfy the 75% or 95% gross income test, as described below, but have otherwise maintained our qualification as a REIT because certain other requirements are met, we will be required to a pay a tax equal to (1) the greater of (A) the amount by which 75% of our gross income exceeds the amount qualifying under the 75% gross income test, and (B) the amount by which 90% of our gross income exceeds the amount qualifying under the 95% gross income test, multiplied by (2) a fraction intended to reflect our profitability. 	
 
 	•	 	Sixth, we will be required to pay a 4% excise tax to the extent we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain net income for the year, and (3) any undistributed taxable income from prior periods. 	
 
 	•	 	Seventh, if we acquire any asset from a corporation which is or has been a C corporation in a transaction in which the basis of the asset in our hands is determined by reference to the basis of the asset in the hands of the C corporation, and we subsequently recognize gain on the disposition of the asset during the ten-year period beginning on the date on which we acquired the asset, then we will be required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of (1) the fair market value of the asset over (2) our adjusted basis in the asset, in each case determined as of the date on which we acquired the asset. The results described in this paragraph with respect to the recognition of gain assume that the C corporation will refrain from making an election to receive different treatment under existing Treasury regulations on its tax return for the year in which we acquire an asset from the C corporation. 	
 
 	•	 	Eighth, we will be required to pay a 100% tax on any “redetermined rents,” “redetermined deductions” or “excess interest.” In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our tenants by a “taxable REIT subsidiary” of ours. See “—Penalty Tax.” Redetermined deductions and excess interest generally represent amounts that are deducted by a taxable REIT subsidiary of ours for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s length negotiations. 	
 
164 

Table of Contents
Requirements for Qualification as a Real Estate Investment Trust.    The Code defines a “REIT” as a corporation, trust or association: 
 
(1) that is managed by one or more trustees or directors; 
 
(2) that issues transferable shares or transferable certificates to evidence its beneficial ownership; 
 
(3) that would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code; 
 
(4) that is not a financial institution or an insurance company within the meaning of certain provisions of the Code; 
 
(5) that is beneficially owned by 100 or more persons; 
 
(6) not more than 50% in value of the outstanding stock of which is owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of each taxable year; and 
 
(7) that meets other tests, described below, regarding the nature of its income and assets and the amount of its distributions. 
 
The Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Conditions (5) and (6) do not apply until after the first taxable year for which an election is made to be taxed as a REIT. For purposes of condition (6), pension funds and other specified tax-exempt entities generally are treated as individuals, except that a “look-through” exception applies with respect to pension funds. 
 
We believe that we will be organized, will operate and will issue sufficient shares of our common stock with sufficient diversity of ownership pursuant to this offering of our common stock to allow us to satisfy conditions (1) through (7) inclusive. In addition, our charter provides for restrictions regarding ownership and transfer of our shares which are intended to assist us in continuing to satisfy the share ownership requirements described in (5) and (6) above. These stock ownership and transfer restrictions are described in “Description of Securities—Restrictions on Transfer.” These restrictions, however, may not ensure that we will, in all cases, be able to satisfy the share ownership requirements described in (5) and (6) above. If we fail to satisfy these share ownership requirements, except as provided in the next sentence, our status as a REIT will terminate. If, however, we comply with the rules contained in applicable Treasury regulations that require us to ascertain the actual ownership of our shares and we do not know, or would not have known through the exercise of reasonable diligence, that we failed to meet the requirement described in condition (6) above, we will be treated as having met this requirement. See the section below entitled “—Failure to Qualify.” 
 
In addition, we may not maintain our status as a REIT unless our taxable year is the calendar year. We will have a calendar taxable year. 
 
Ownership of Interests in Partnerships, Limited Liability Companies and Qualified REIT Subsidiaries.    In the case of a REIT which is a partner in a partnership or a member in a limited liability company treated as a partnership for federal income tax purposes, Treasury regulations provide that the REIT will be deemed to own its pro rata share of the assets of the partnership or limited liability company, as the case may be, based on our interest in partnership capital. Also, the REIT will be deemed to be entitled to the income of the partnership or limited liability company attributable to its pro rata share of the assets of that entity. The character of the assets and gross income of the partnership or limited liability company retains the same character in the hands of the REIT for purposes of Section 856 of the Code, including satisfying the gross income tests and the asset tests. Thus, our pro rata share of the assets and items of income of our operating partnership, including our operating partnership’s share of these items of any partnership or limited liability company in which it owns an interest, are treated as our assets and items of income for purposes of applying the requirements described in this prospectus, including the income and asset tests described below. We have included a brief summary of the rules governing 
 
165 

Table of Contents
the federal income taxation of partnerships and limited liability companies and their partners or members below in “—Tax Aspects of Our Operating Partnership, the Subsidiary Partnerships and the Limited Liability Companies.” 
 
We have control of our operating partnership and the subsidiary partnerships and limited liability companies and intend to operate them in a manner consistent with the requirements for our qualification as a REIT. In the future, we may be a limited partner or non-managing member in some of our partnerships and limited liability companies. If such a partnership or limited liability company were to take actions which could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a REIT income or asset test, and that we would not become aware of such action in a time frame which would allow us to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to qualify as a REIT unless entitled to relief, as described below. 
 
We may from time to time own and operate certain properties through wholly owned subsidiaries that we intend to be treated as “qualified REIT subsidiaries” under the Code. A corporation will qualify as our qualified REIT subsidiary if we own 100% of its outstanding stock and if we do not elect with the subsidiary to treat it as a “taxable REIT subsidiary,” described below. A corporation that is a qualified REIT subsidiary is not treated as a separate corporation, and all assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary are treated as assets, liabilities and items of income, deduction and credit (as the case may be) of the parent REIT for all purposes under the Code (including all REIT qualification tests). Thus, in applying the requirements described in this prospectus, any qualified REIT subsidiaries we own are ignored, and all assets, liabilities and items of income, deduction and credit of such subsidiaries are treated as our assets, liabilities and items of income, deduction and credit. A qualified REIT subsidiary is not required to pay federal income tax, and our ownership of the stock of a qualified REIT subsidiary will not violate the restrictions on ownership of securities of any one issuer that constitute more than 10% of the voting power or value of such issuer’s securities or more than 5% of the value of our total assets, as described below under “—Asset Tests.” 
 
Ownership of Interests in Taxable REIT Subsidiaries.    A taxable REIT subsidiary is a corporation other than a REIT in which we directly or indirectly hold stock, and that has made a joint election with us to be treated as a taxable REIT subsidiary. A taxable REIT subsidiary also includes any corporation other than a REIT with respect to which a taxable REIT subsidiary in which we own an interest owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation. Other than some activities relating to lodging and health care facilities, a taxable REIT subsidiary may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A taxable REIT subsidiary is subject to regular federal income tax, and state and local income tax where applicable, as a regular C corporation. In addition, a taxable REIT subsidiary may be prevented from deducting interest on debt funded directly or indirectly by our company if certain tests regarding the taxable REIT subsidiary’s debt to equity ratio and interest expense are not satisfied. See “—Asset Tests.” We currently hold an interest in two taxable REIT subsidiaries and may acquire securities in additional taxable REIT subsidiaries in the future. One of our taxable REIT subsidiaries, Asbury Park Holdings, is organized under the laws of Jersey and owns the Camperdown House property. The United Kingdom and other foreign countries may impose taxes on our operations within their jurisdictions, including the operations of Asbury Park Holdings. To the extent possible, we will structure our activities to minimize our foreign tax liability. However, there can be no complete assurance that we will be able to eliminate our foreign tax liability or reduce it to a specified level. Furthermore, as a REIT, both we and our stockholders will derive little or no benefit from foreign tax credits arising from those taxes. From time to time we may own other properties through taxable REIT subsidiaries, although we have no present plan or intention to do so. 
 
Income Tests.    We must satisfy two gross income requirements annually to maintain our qualification as a REIT. First, in each taxable year we must derive directly or indirectly at least 75% of our gross income, excluding gross income from prohibited transactions, from investments relating to real property or mortgages on 
 
166 

Table of Contents
real property, including “rents from real property” and, in certain circumstances, interest, or from certain types of temporary investments. Second, in each taxable year we must derive at least 95% of our gross income, excluding gross income from prohibited transactions, from these real property investments, dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing. For these purposes, the term “interest” generally does not include any amount received or accrued, directly or indirectly, if the determination of the amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term “interest” solely by reason of being based on a fixed percentage or percentages of receipts or sales. 
 
Rents we receive from a tenant will qualify as “rents from real property” for the purpose of satisfying the gross income requirements for a REIT described above only if the following conditions are met: 
 
 	•	 	The amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount we receive or accrue generally will not be excluded from the term “rents from real property” solely by reason of being based on a fixed percentage or percentages of receipts or sales; 	
 
 	•	 	We, or an actual or constructive owner of 10% or more of our capital stock, must not actually or constructively own 10% or more of the interests in the tenant, or, if the tenant is a corporation, 10% or more of the voting power or value of all classes of stock of the tenant. Rents received from such tenant that is a taxable REIT subsidiary, however, will not be excluded from the definition of “rents from real property” as a result of this condition if either at least 90% of the space at the property to which the rents relate is leased to third parties, and the rents paid by the taxable REIT subsidiary are comparable to rents paid by our other tenants for comparable space; 	
 
 	•	 	Rent attributable to personal property, leased in connection with a lease of real property, is not greater than 15% of the total rent received under the lease. If this requirement is not met, then the portion of rent attributable to personal property will not qualify as “rents from real property”; and 	
 
 	•	 	We generally must not operate or manage the property or furnish or render services to the tenants of the property, subject to a 1% de minimis exception, other than through an independent contractor from whom we derive no revenue. We may, however, directly perform certain services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered “rendered to the occupant” of the property. Examples of such services include the provision of light, heat, or other utilities, trash removal and general maintenance of common areas. In addition, we may employ an independent contractor to provide customary services, or a taxable REIT subsidiary, which may be wholly or partially owned by us, to provide both customary and non-customary services to our tenants without causing the rent we receive from those tenants to fail to qualify as “rents from real property.” Any amounts we receive from a taxable REIT subsidiary with respect to the taxable REIT subsidiary’s provision of noncustomary services will, however, be nonqualified income under the 75% gross income test and, except to the extent received through the payment of dividends, the 95% REIT gross income test. 	
 
We generally do not intend, and as a general partner of our operating partnership, do not intend to permit our operating partnership, to take actions we believe will cause us to fail to satisfy the rental conditions described above. However, we may intentionally fail to satisfy some of these conditions to the extent the failure will not, based on the advice of our tax counsel, jeopardize our tax status as a REIT. In addition, with respect to the limitation on the rental of personal property, we have not obtained appraisals of the real property and personal property leased to tenants. Accordingly, there can be no assurance that the IRS will not disagree with our determinations of value. 
 
Income we receive that is attributable to the rental of parking spaces at the properties will constitute rents from real property for purposes of the REIT gross income tests if any services provided with respect to the parking facilities are performed by independent contractors from whom we derive no income, either directly or indirectly, or by a taxable REIT subsidiary. We believe that the income we receive that is attributable to parking 
 
167 

Table of Contents
facilities will meet these tests and, accordingly, will constitute rents from real property for purposes of the REIT gross income tests. 
 
From time to time, we enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase these items, and futures and forward contracts. To the extent that we enter into an interest rate swap or cap contract, option, futures contract, forward rate agreement, or any similar financial instrument to hedge our indebtedness incurred or to be incurred to acquire or carry “real estate assets,” any periodic income or gain from the disposition of that contract attributable to the carrying or acquisition of the real estate assets should be qualifying income for purposes of the 95% gross income test, but not the 75% gross income test. To the extent that we hedge with other types of financial instruments, the income from those transactions are not likely to be treated as qualifying income for purposes of the gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our status as a REIT. 
 
From time to time we may incur foreign currency gains or losses as a result of distributions made by Asbury Park Holdings to our operating partnership, because Asbury Park Holdings’ functional currency is not the United States dollar. While any foreign currency gains we recognize may not be qualifying income for purposes of the 75% and 95% gross income tests, we do not expect that any such foreign currency gains will adversely affect our ability to comply with such tests. 
 
To the extent our taxable REIT subsidiaries pay dividends, we generally will derive our allocable share of such dividend income through our interest in our operating partnership. Such dividend income will qualify under the 95%, but not the 75%, REIT gross income test. In addition, because Asbury Park Holdings is a “controlled foreign corporation” for United States federal income tax purposes under applicable tax rules, we will be deemed to receive our allocable share of certain income earned by Asbury Park Holdings through our interest in our operating partnership, whether or not such income actually is distributed to our operating partnership. We intend to take the position that such income will qualify under the 95%, but not the 75%, REIT gross income test, although there is no law that directly addresses the tax treatment of such income for purposes of the REIT gross income tests. We will monitor the amount of the dividend and other income from our taxable REIT subsidiaries and will take actions intended to keep this income, and any other non-qualifying income, within the limitations of the REIT income tests. While we expect these actions would prevent a violation of the REIT income tests, we cannot guarantee that such actions will in all cases prevent such a violation. 
 
If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for the year if we are entitled to relief under certain provisions of the Code. Generally, we may avail ourselves of the relief provisions if: 
 
 	•	 	our failure to meet these tests was due to reasonable cause and not due to willful neglect; 	
 
 	•	 	we attach a schedule of the sources of our income to our federal income tax return; and 	
 
 	•	 	any incorrect information on the schedule was not due to fraud with intent to evade tax. 	
 
It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions. For example, if we fail to satisfy the gross income tests because non-qualifying income that we intentionally accrue or receive exceeds the limits on non-qualifying income, the IRS could conclude that our failure to satisfy the tests was not due to reasonable cause. If these relief provisions do not apply to a particular set of circumstances, we will not qualify as a REIT. As discussed above in “—Taxation of Our Company—General,” even if these relief provisions apply, and we retain our status as a REIT, a tax would be imposed with respect to our non-qualifying income. 
 
Prohibited Transaction Income.    Any gain that we realize on the sale of any property held as inventory or otherwise held primarily for sale to customers in the ordinary course of business, including our share of any such gain realized by our operating partnership, either directly or through its subsidiary partnerships and limited 
 
168 

Table of Contents
liability companies, will be treated as income from a prohibited transaction that is subject to a 100% penalty tax. This prohibited transaction income may also adversely affect our ability to satisfy the income tests for qualification as a REIT. Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. Our operating partnership intends to hold its properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning its properties and to make occasional sales of the properties as are consistent with our operating partnership’s investment objectives. However, the IRS may successfully contend that some or all of the sales made by our operating partnership or its subsidiary partnerships or limited liability companies are prohibited transactions. We would be required to pay the 100% penalty tax on our allocable share of the gains resulting from any such sales. 
 
Penalty Tax.    Any redetermined rents, redetermined deductions or excess interest we generate will be subject to a 100% penalty tax. In general, redetermined rents are rents from real property that are overstated as a result of any services furnished by one of our taxable REIT subsidiaries to any of our tenants, and redetermined deductions and excess interest represent any amounts that are deducted by a taxable REIT subsidiary for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations. Rents we receive will not constitute redetermined rents if they qualify for certain safe harbor provisions contained in the Code. 
 
Our taxable REIT subsidiaries currently do not provide any services to our tenants. If, in the future, any of our taxable REIT subsidiaries provide services to our tenants, we intend to set the fees paid to our taxable REIT subsidiaries for such services at arm’s-length rates, although such rates may not satisfy any of the safe-harbor provisions described above. These determinations are inherently factual, and the IRS has broad discretion to assert that amounts paid between related parties should be reallocated to clearly reflect their respective incomes. If the IRS successfully made such an assertion, we would be required to pay a 100% penalty tax on the excess of an arm’s-length fee for tenant services over the amount actually paid. 
 
Asset Tests.    At the close of each quarter of our taxable year, we must also satisfy four tests relating to the nature and diversification of our assets. First, at least 75% of the value of our total assets must be represented by real estate assets, cash, cash items and government securities. For purposes of this test, real estate assets include stock or debt instruments that are purchased with the proceeds of a stock offering or a public offering of debt with a term of at least five years, but only for the one-year period beginning on the date we receive such proceeds. Second, not more than 25% of our total assets may be represented by securities, other than those securities includable in the 75% asset test. Third, of the investments included in the 25% asset class, and except for investments in REITs, qualified REIT subsidiaries and taxable REIT subsidiaries, the value of any one issuer’s securities may not exceed 5% of the value of our total assets, and we may not own more than 10% of the total vote or value of the outstanding securities of any one issuer except, in the case of the 10% value test, certain “straight debt” securities. Fourth, not more than 20% of the value of our total assets may be represented by the securities of one or more taxable REIT subsidiaries. 
 
Our operating partnership owns 100% of the stock of Asbury Park Holdings and Digital Services, Inc. We are considered to own our pro rata share of Asbury Park Holdings’ and Digital Services, Inc. stock because we own interests in our operating partnership. Each of Asbury Park Holdings and Digital Services, Inc. will elect, together with us, to be treated as our taxable REIT subsidiary. So long as each of these companies qualifies as a taxable REIT subsidiary, we will not be subject to the 5% asset test, 10% voting securities limitation or 10% value limitation with respect to our ownership of their stock. We may acquire securities in other taxable REIT subsidiaries in the future. We believe that the aggregate value of our taxable REIT subsidiaries does not exceed, and believe that in the future it will not exceed, 20% of the aggregate value of our gross assets. No independent appraisals have been obtained to support these conclusions. In addition, there can be no assurance that the IRS will not disagree with our determinations of value. 
 
The asset tests must be satisfied not only on the last day of the calendar quarter in which we, directly or through our operating partnership, acquire securities in the applicable issuer, but also on the last day of the 
 
169 

Table of Contents
calendar quarter in which we increase our ownership of securities of such issuer, including as a result of increasing our interest in our operating partnership. For example, our indirect ownership of securities of each issuer will increase as a result of our capital contributions to our operating partnership or as limited partners exercise their redemption/exchange rights. After initially meeting the asset tests at the close of any quarter, we will not lose our status as a REIT for failure to satisfy the asset tests at the end of a later quarter solely by reason of changes in asset values. If we fail to satisfy an asset test because we acquire securities or other property during a quarter, including as a result of an increase in our interest in our operating partnership, we may cure this failure by disposing of sufficient non-qualifying assets within 30 days after the close of that quarter. Although we plan to take steps to ensure that we satisfy such tests for any quarter with respect to which testing is to occur, there can be no assurance that such steps will always be successful, or will not require a reduction in our operating partnership’s overall interest in an issuer. If we fail to timely cure any noncompliance with the asset tests, we would cease to qualify as a REIT. 
 
Annual Distribution Requirements.    To maintain our qualification as a REIT, we are required to distribute dividends, other than capital gain dividends, to our stockholders in an amount at least equal to the sum of: 
 
 	•	 	90% of our “REIT taxable income”; and 	
 
 	•	 	90% of our after tax net income, if any, from foreclosure property; minus 	
 
 	•	 	the excess of the sum of certain items of non-cash income over 5% of our “REIT taxable income.” 	
 
Our “REIT taxable income” is computed without regard to the dividends paid deduction and our net capital gain. In addition, for purposes of this test, non-cash income means income attributable to leveled stepped rents, original issue discount on purchase money debt, cancellation of indebtedness or a like-kind exchange that is later determined to be taxable. 
 
We must pay these distributions in the taxable year to which they relate, or in the following taxable year if they are declared during the last three months of the taxable year, payable to stockholders of record on a specified date during such period and paid during January of the following year. Such distributions are treated as paid by us and received by our stockholders on December 31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared before we timely file our tax return for such year and paid on or before the first regular dividend payment after such declaration, provided such payment is made during the 12-month period following the close of such year. These distributions are taxable to our stockholders, other than tax-exempt entities, in the year in which paid. This is so even though these distributions relate to the prior year for purposes of our 90% distribution requirement. The amount distributed must not be preferential—i.e., every stockholder of the class of stock with respect to which a distribution is made must be treated the same as every other stockholder of that class, and no class of stock may be treated otherwise than in accordance with its dividend rights as a class. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be required to pay tax on that amount at regular ordinary and capital gain corporate tax rates, as applicable. We intend to make timely distributions sufficient to satisfy these annual distribution requirements and to minimize our corporate tax obligations. In this regard, the partnership agreement of our operating partnership authorizes us, as general partner of our operating partnership, to take such steps as may be necessary to cause our operating partnership to distribute to its partners an amount sufficient to permit us to meet these distribution requirements. 
 
We expect that our REIT taxable income will be less than our cash flow because of depreciation and other non-cash charges included in computing REIT taxable income. Accordingly, we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the distribution requirements described above. However, from time to time, we may not have sufficient cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in arriving at our taxable income. If these timing differences occur we may need to arrange for short-term, or possibly long-term, borrowings or need to pay dividends in the form of taxable stock dividends in order to meet the distribution requirements. 
 
170 

Table of Contents
Under some circumstances, we may be able to rectify an inadvertent failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in a later year, which may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends. However, we will be required to pay interest to the IRS based upon the amount of any deduction claimed for deficiency dividends. 
 
Furthermore, we will be required to pay a 4% excise tax to the extent we fail to distribute during each calendar year, or in the case of distributions with declaration and record dates falling in the last three months of the calendar year, by the end of January immediately following such year, at least the sum of 85% of our REIT ordinary income for such year, 95% of our REIT capital gain income for the year and any undistributed taxable income from prior periods. Any REIT taxable income and net capital gain on which this excise tax is imposed for any year is treated as an amount distributed during that year for purposes of calculating such tax. 
 
Like-Kind Exchanges.    We may dispose of properties in transactions intended to qualify as like-kind exchanges under the Code. Such like-kind exchanges are intended to result in the deferral of gain for federal income tax purposes. The failure of any such transaction to qualify as a like-kind exchange could subject us to federal income tax, possibly including the 100% prohibited transaction tax, depending on the facts and circumstances surrounding the particular transaction. 
 
Failure To Qualify 
 
If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions do not apply, we will be required to pay tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. Distributions to stockholders in any year in which we fail to qualify will not be deductible by us, and we will not be required to distribute any amounts to our stockholders. As a result, our failure to qualify as a REIT would reduce the cash available for distribution by us to our stockholders. In addition, if we fail to qualify as a REIT, all distributions to stockholders will be taxable as regular corporate dividends to the extent of our current and accumulated earnings and profits, and subject to certain limitations of the Code, corporate distributees may be eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, we will also be disqualified from taxation as a REIT for the four taxable years following the year during which we lost our qualification. It is not possible to state whether in all circumstances we would be entitled to this statutory relief. 
 
Tax Aspects of Our Operating Partnership, the Subsidiary Partnerships and the Limited Liability Companies 
 
General.    All of our investments will initially be held indirectly through our operating partnership. In addition, our operating partnership holds certain of its investments indirectly through subsidiary partnerships and limited liability companies which we expect will be treated as partnerships or disregarded entities for federal income tax purposes. In general, entities that are classified as partnerships or disregarded entities for federal income tax purposes are “pass-through” entities which are not required to pay federal income tax. Rather, partners or members of such entities are allocated their pro rata shares of the items of income, gain, loss, deduction and credit of the entity, and are potentially required to pay tax thereon, without regard to whether the partners or members receive a distribution of cash from the entity. We will include in our income our pro rata share of the foregoing items for purposes of the various REIT income tests and in the computation of our REIT taxable income. Moreover, for purposes of the REIT asset tests, we will include our pro rata share of assets held by our operating partnership, including its share of its subsidiary partnerships and limited liability companies, based on our capital interests. See “—Taxation of Our Company.” 
 
Entity Classification.    Our interests in our operating partnership and the subsidiary partnerships and limited liability companies involve special tax considerations, including the possibility that the IRS might challenge the status of these entities as a partnership (or disregarded entity), as opposed to an association taxable as a 
 
171 

Table of Contents
corporation for federal income tax purposes. If our operating partnership, or a subsidiary partnership or limited liability company, were treated as an association, it would be taxable as a corporation and would be required to pay an entity-level tax on its income. In this situation, the character of our assets and items of gross income would change and preclude us from satisfying the REIT asset tests and possibly the income tests. See “—Taxation of Our Company—Asset Tests” and “—Income Tests.” This, in turn, would prevent us from qualifying as a REIT. See “—Failure to Qualify” for a discussion of the effect of our failure to meet these tests for a taxable year. In addition, a change in our operating partnership’s or a subsidiary partnership’s or limited liability company’s status for tax purposes might be treated as a taxable event. If so, we might incur a tax liability without any related cash distributions. 
 
A domestic business entity not otherwise organized as a corporation and which has at least two members, an “eligible entity,” that did not exist, or did not claim a classification, prior to January 1, 1997, will be classified as a partnership for federal income tax purposes unless it elects otherwise. Our operating partnership and each of our other partnerships and limited liability companies intend to claim classification as a partnership under the final regulations. As a result, we believe these entities will be classified as partnerships for federal income tax purposes. 
 
Allocations of Income, Gain, Loss and Deduction.    The partnership agreement generally provides that items of operating income and loss will be allocated to the holders of units in proportion to the number of units held by each such unitholder. Certain limited partners have agreed to guarantee debt of our operating partnership, either directly or indirectly through an agreement to make capital contributions to our operating partnership under limited circumstances. As a result of these guaranties or contribution agreements, and notwithstanding the foregoing discussion of allocations of income and loss of our operating partnership to holders of units, such limited partners could under limited circumstances be allocated a disproportionate amount of net loss upon a liquidation of our operating partnership, which net loss would have otherwise been allocable to us. In addition, the partnership agreement further provides that holders of long-term incentive units will be entitled to receive special allocations of gain in the event of a sale or hypothetical sale of assets of our operating partnership prior to the allocation of gain to us or other limited partners. This special allocation of gain is intended to enable the holders of long-term incentive units to convert their long-term incentive units into units more quickly than if the allocations of gain were made pro rata to the holders of units. However, as a result of this special allocation, and notwithstanding the foregoing discussion of allocations of income and loss of our operating partnership to holders of units, holders of long-term incentive units may be allocated a disproportionate amount of gain upon the sale or hypothetical sale of assets of our operating partnership, which gain would have otherwise been allocable to us. 
 
If an allocation of partnership income or loss does not comply with the requirements of Section 704(b) of the Code and the Treasury regulations thereunder, the item subject to the allocation will be reallocated in accordance with the partners’ interests in the partnership. This reallocation will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. Our operating partnership’s allocations of taxable income and loss are intended to comply with the requirements of Section 704(b) of the Code and the Treasury regulations promulgated under this section of the Code. 
 
Tax Allocations with Respect to the Properties.    Under Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership, must be allocated in a manner so that the contributing partner is charged with the unrealized gain or benefits from the unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss generally is equal to the difference between the fair market value or book value and the adjusted tax basis of the property at the time of contribution. These allocations are solely for federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners. 
 
Appreciated property will be contributed to our operating partnership in exchange for interests in our operating partnership in connection with the formation transactions. The partnership agreement requires that 
 
172 

Table of Contents
these allocations be made in a manner consistent with Section 704(c) of the Code. Treasury regulations issued under Section 704(c) of the Code provide partnerships with a choice of several methods of accounting for book-tax differences. We and our operating partnership have agreed to use the “traditional method” for accounting for book-tax differences for the properties initially contributed to our operating partnership. Under the traditional method, which is the least favorable method from our perspective, the carryover basis of contributed interests in the properties in the hands of our operating partnership (i) will or could cause us to be allocated lower amounts of depreciation deductions for tax purposes than would be allocated to us if all contributed properties were to have a tax basis equal to their fair market value at the time of the contribution and (ii) could cause us to be allocated taxable gain in the event of a sale of such contributed interests or properties in excess of the economic or book income allocated to us as a result of such sale, with a corresponding benefit to the other partners in our operating partnership. An allocation described in (ii) above might cause us or the other partners to recognize taxable income in excess of cash proceeds in the event of a sale or other disposition of property, which might adversely affect our ability to comply with the REIT distribution requirements. See “—Taxation of Our Company—Requirements for Qualification as a Real Estate Investment Trust” and “—Annual Distribution Requirements.” 
 
Any property acquired by our operating partnership in a taxable transaction will initially have a tax basis equal to its fair market value, and Section 704(c) of the Code will not apply. 
 
Federal Income Tax Considerations for Holders of Our Common Stock 
 
The following summary describes the principal United States federal income tax consequences to you of purchasing, owning and disposing of our common stock. This summary deals only with common stock held as a “capital asset” (generally, property held for investment within the meaning of Section 1221 of the Code). It does not address all the tax consequences that may be relevant to you in light of your particular circumstances. In addition, it does not address the tax consequences relevant to persons who receive special treatment under the federal income tax law, except where specifically noted. Holders receiving special treatment include, without limitation: 
 
 	•	 	financial institutions, banks and thrifts; 	
 
 	•	 	insurance companies; 	
 
 	•	 	tax-exempt organizations; 	
 
 	•	 	“S” corporations; 	
 
 	•	 	regulated investment companies and real estate investment trusts; 	
 
 	•	 	foreign corporations or partnerships, and persons who are not residents or citizens of the United States; 	
 
 	•	 	dealers in securities or currencies; 	
 
 	•	 	persons holding our common stock as a hedge against currency risks or as a position in a straddle; or 	
 
 	•	 	United States persons whose functional currency is not the United States dollar. 	
 
If a partnership holds our common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisor regarding the tax consequences of the ownership and disposition of our common stock. 
 
If you are considering purchasing our common stock, you should consult your tax advisors concerning the application of United States federal income tax laws to your particular situation as well as any consequences of the purchase, ownership and disposition of our common stock arising under the laws of any state, local or foreign taxing jurisdiction. 
 
173 

Table of Contents
When we use the term “U.S. stockholder,” we mean a holder of shares of our common stock who, for United States federal income tax purposes: 
 
 	•	 	is a citizen or resident of the United States; 	
 
 	•	 	is a corporation, partnership, limited liability company or other entity created or organized in or under the laws of the United States or of any state thereof or in the District of Columbia unless, in the case of a partnership or limited liability company, Treasury regulations provide otherwise; 	
 
 	•	 	is an estate the income of which is subject to United States federal income taxation regardless of its source; or 	
 
 	•	 	is a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in the Treasury regulations, certain trusts in existence on August 20, 1996, and treated as United States persons prior to this date that elect to continue to be treated as United States persons, shall also be considered U.S. stockholders. 	
 
If you hold shares of our common stock and are not a U.S. stockholder, you are a “non-U.S. stockholder.” 
 
Taxation of Taxable U.S. Stockholders Generally 
 
Distributions Generally.    As long as we qualify as a REIT, distributions out of our current or accumulated earnings and profits, other than capital gain dividends discussed below, will constitute dividends taxable to our taxable U.S. stockholders as, in general, ordinary income and will not be eligible for the dividends-received deduction in the case of U.S. stockholders that are corporations. As a REIT, dividends by us of our ordinary income will generally not qualify as “qualified dividend income” eligible to be taxed in the case of individuals at capital gain rates. See “—Tax Rates” below. 
 
To the extent that we make distributions in excess of our current and accumulated earnings and profits, these distributions will be treated first as a tax-free return of capital to each U.S. stockholder. This treatment will reduce the adjusted tax basis which each U.S. stockholder has in its shares of stock for tax purposes by the amount of the distribution, but not below zero. Distributions in excess of a U.S. stockholder’s adjusted tax basis in its shares will be taxable as capital gains, and will be taxable as long-term capital gain if the shares have been held for more than one year. Dividends we declare in October, November, or December of any year and payable to a stockholder of record on a specified date in any of these months shall be treated as both paid by us and received by the stockholder on December 31 of that year, provided we actually pay the dividend on or before January 31 of the following calendar year. U.S. stockholders may not include in their own income tax returns any of our net operating losses or capital losses. 
 
Capital Gain Dividends.    Distributions that we properly designate as capital gain dividends will be taxable to taxable U.S. stockholders as gains from the sale or disposition of a capital asset, to the extent that such gains do not exceed our actual net capital gain for the taxable year. Depending on the characteristics of the assets which produced these gains, and on certain designations, if any, which we may make, these gains may be taxable to non-corporate U.S. stockholders at a 15% or 25% rate. 
 
U.S. stockholders that are corporations may, however, be required to treat up to 20% of certain capital gain dividends as ordinary income. 
 
Passive Activity Losses and Investment Interest Limitations.    Distributions we make and gain arising from the sale or exchange by a U.S. stockholder of our shares will not be treated as passive activity income. As a result, U.S. stockholders generally will not be able to apply any “passive losses” against this income or gain. A U.S. stockholder may elect to treat capital gain dividends, capital gains from the disposition of stock and qualified dividend income as investment income for purposes of computing the investment interest limitation, but 
 
174 

Table of Contents
in such case, the stockholder will be taxed at ordinary income rates on such amount. Other distributions made by the Company, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation. 
 
Retention of Net Capital Gains.    We may elect to retain, rather than distribute as a capital gain dividend, all or a portion of our net capital gains. If we make this election, we would pay tax on our retained net capital gains. In addition, to the extent we so elect, a U.S. stockholder generally would: 
 
 	•	 	include its pro rata share of our undistributed net capital gains in computing its long-term capital gains in its return for its taxable year in which the last day of our taxable year falls, subject to certain limitations as to the amount that is includable; 	
 
 	•	 	be deemed to have paid the capital gains tax imposed on us on the designated amounts included in the U.S. stockholder’s long-term capital gains; 	
 
 	•	 	receive a credit or refund for the amount of tax deemed paid by it; 	
 
 	•	 	increase the adjusted basis of its common stock by the difference between the amount of includable gains and the tax deemed to have been paid by it; and 	
 
 	•	 	in the case of a U.S. stockholder that is a corporation, appropriately adjust its earnings and profits for the retained capital gains in accordance with Treasury regulations to be promulgated by the IRS. 	
 
Dispositions of Our Common Stock.    If a U.S. stockholder sells or disposes of its shares of our common stock, it will recognize gain or loss for federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition and its adjusted basis in the shares for tax purposes. This gain or loss will be long-term capital gain or loss if it has held the common stock for more than one year. In general, if a U.S. stockholder recognizes loss upon the sale or other disposition of our common stock that it has held for six months or less, after applying certain holding period rules, the loss recognized will be treated as a long-term capital loss, to the extent the stockholder received distributions from us which were required to be treated as long-term capital gains. 
 
Tax Rates 
 
The maximum tax rate for non-corporate taxpayers for (1) capital gains, including “capital gain dividends,” has generally been reduced from 20% to 15% (for taxable years ending on or after May 6, 2003, although depending on the characteristics of the assets which produced these gains and on designations which we may make, certain capital gain dividends may be taxed at a 25% rate) and (2) “qualified dividend income” has generally been reduced from 38.6% to 15% (for taxable years beginning after December 31, 2002). In general, dividends payable by REITs are not eligible for the reduced tax rate on corporate dividends, except to the extent that certain holding requirements have been met and the REIT’s dividends are attributable to dividends received from taxable corporations (such as its taxable REIT subsidiaries), to income that was subject to tax at the corporate/REIT level (for example, if it distributed taxable income that it retained and paid tax on in the prior taxable year) or to dividends properly designated by the REIT as “capital gain dividends.” Although these tax rate changes do not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable treatment of regular corporate dividends could cause investors who are individuals to consider stock of other corporations that pay dividends to be more attractive relative to the stock of REITs. The currently applicable provisions of the United States federal income tax laws relating to the 15% tax rate are currently scheduled to “sunset” or revert back to the provisions of prior law effective for taxable years beginning after December 31, 2008, at which time the capital gains tax rate will be increased to 20% and the rate applicable to dividends will be increased to the tax rate then applicable to ordinary income. 
 
175 

Table of Contents
Backup Withholding 
 
We report to our U.S. stockholders and the IRS the amount of dividends paid during each calendar year, and the amount of any tax withheld. Under the backup withholding rules, a stockholder may be subject to backup withholding with respect to dividends paid unless the holder is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. A U.S. stockholder that does not provide us with its correct taxpayer identification number may also be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. Any amount paid as backup withholding will be creditable against the stockholder’s federal income tax liability. In addition, we may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status. See “—Taxation of Non-U.S. Stockholders.” 
 
Taxation of Tax Exempt Stockholders 
 
Dividend income from us and gain arising upon a sale of shares generally will not be unrelated business taxable income to a tax-exempt stockholder, except as described below. This income or gain will be unrelated business taxable income, however, if a tax-exempt stockholder holds its shares as “debt-financed property” within the meaning of the Code or if the shares are used in a trade or business of the tax-exempt stockholder. Generally, debt-financed property is property the acquisition or holding of which was financed through a borrowing by the tax-exempt stockholder. 
 
For tax-exempt stockholders which are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, or qualified group legal services plans exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Code, respectively, income from an investment in our shares will constitute unrelated business taxable income unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for specific purposes so as to offset the income generated by its investment in our shares. These prospective investors should consult their tax advisors concerning these “set aside” and reserve requirements. 
 
Notwithstanding the above, however, a portion of the dividends paid by a “pension-held REIT” may be treated as unrelated business taxable income as to some trusts that hold more than 10%, by value, of the interests in the REIT. A REIT will not be a “pension-held REIT” if it is able to satisfy the “not closely held” requirement without relying on the “look-through” exception with respect to certain trusts. As a result of limitations on the transfer and ownership of stock contained in our charter, we do not expect to be classified as a “pension-held REIT,” and as a result, the tax treatment described in this paragraph should be inapplicable to our stockholders. However, because our stock will be publicly traded, we cannot guarantee that this will always be the case. 
 
Taxation of Non-U.S. Stockholders 
 
The following discussion addresses the rules governing United States federal income taxation of the ownership and disposition of our common stock by non-U.S. stockholders. These rules are complex, and no attempt is made herein to provide more than a brief summary of such rules. Accordingly, the discussion does not address all aspects of United States federal income taxation and does not address state local or foreign tax consequences that may be relevant to a non-U.S. stockholder in light of its particular circumstances. 
 
Distributions Generally.    Distributions that are neither attributable to gain from sales or exchanges by us of United States real property interests nor designated by us as capital gain dividends will be treated as dividends of ordinary income to the extent that they are made out of our current or accumulated earnings and profits. Such distributions ordinarily will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as effectively connected with the conduct by the non-U.S. stockholder of a United States trade or business. Under certain treaties, however, lower withholding rates generally applicable to dividends do not apply to dividends 
 
176 

Table of Contents
from a REIT. Certain certification and disclosure requirements must be satisfied to be exempt from withholding under the effectively connected income exemption. Dividends that are treated as effectively connected with such a trade or business will be subject to tax on a net basis at graduated rates, in the same manner as dividends paid to U.S. stockholders are subject to tax, and are generally not subject to withholding. Any such dividends received by a non-U.S. stockholder that is a corporation may also be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. 
 
We expect to withhold United States income tax at the rate of 30% on any distributions made to a non-U.S. stockholder unless: 
 
(1) a lower treaty rate applies and the non-U.S. stockholder files with us an IRS Form W-8BEN evidencing eligibility for that reduced treaty rate; or 
 
(2) the non-U.S. stockholder files an IRS Form W-8ECI with us claiming that the distribution is income effectively connected with the non-U.S. stockholder’s trade or business. 
 
Distributions in excess of our current or accumulated earnings and profits will not be taxable to a non-U.S. stockholder to the extent that such distributions do not exceed the adjusted basis of the stockholder’s common stock, but rather will reduce the adjusted basis of such common stock. To the extent that such distributions exceed the adjusted basis of a non-U.S. stockholder’s common stock, they will give rise to gain from the sale or exchange of its common stock, the tax treatment of which is described below. For withholding purposes, we expect to treat all distributions as if made out of our current or accumulated earnings and profits. However, amounts withheld should generally be refundable if it is subsequently determined that the distribution was, in fact, in excess of our current or accumulated earnings and profits. 
 
Capital Gain Dividends and Distributions Attributable to a Sale or Exchange of United States Real Property Interests.    Distributions to a non-U.S. stockholder that we properly designate as capital gain dividends, other than those arising from the disposition of a United States real property interest, generally should not be subject to United States federal income taxation, unless: 
 
(1) the investment in our common stock is treated as effectively connected with the non-U.S. stockholder’s United States trade or business, in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain, except that a non-U.S. stockholder that is a foreign corporation may also be subject to the 30% branch profits tax, as discussed above; or 
 
(2) the non-U.S. stockholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met, in which case the nonresident alien individual will be subject to a 30% tax on the individual’s capital gains. 
 
Pursuant to the Foreign Investment in Real Property Tax Act, which is referred to as “FIRPTA,” distributions to a non-U.S. stockholder that are attributable to gain from sales or exchanges by us of United States real property interests, whether or not designated as capital gain dividends, will cause the non-U.S. stockholder to be treated as recognizing such gain as income effectively connected with a United States trade or business. Non-U.S. stockholders would thus generally be taxed at the same rates applicable to U.S. stockholders, subject to a special alternative minimum tax in the case of nonresident alien individuals. Also, such gain may be subject to a 30% branch profits tax in the hands of a non-U.S. stockholder that is a corporation, as discussed above. 
 
We will be required to withhold and to remit to the IRS 35% of any distribution to non-U.S. stockholders that is designated as a capital gain dividend or, if greater, 35% of a distribution to non-U.S. stockholders that could have been designated as a capital gain dividend. The amount withheld is creditable against the non-U.S. stockholder’s United States federal income tax liability. 
 
Retention of Net Capital Gains.    Although the law is not clear on the matter, it appears that amounts designated by us as retained capital gains in respect of the common stock held by U.S. stockholders generally 
 
177 

Table of Contents
should be treated with respect to non-U.S. stockholders in the same manner as actual distributions of capital gain dividends. Under that approach, the non-U.S. stockholders would be able to offset as a credit against their United States federal income tax liability resulting from their proportionate share of the tax paid by us on such retained capital gains and to receive from the IRS a refund to the extent their proportionate share of such tax paid by us were to exceed their actual United States federal income tax liability. 
 
Sale of Our Common Stock.    Gain recognized by a non-U.S. stockholder upon the sale or exchange of common stock generally will not be subject to United States taxation unless such shares of stock constitute a “United States real property interest” within the meaning of FIRPTA. Our common stock will not constitute a “United States real property interest” so long as we are a “domestically controlled REIT.” A “domestically controlled REIT” is a REIT in which at all times during a specified testing period less than 50% in value of its stock is held directly or indirectly by non-U.S. stockholders. We believe, but cannot guarantee, that we are a “domestically controlled REIT.” Even if we are a “domestically controlled REIT,” because our common stock is publicly traded, no assurance can be given that we will continue to be a “domestically controlled REIT.” 
 
Notwithstanding the foregoing, gain from the sale or exchange of common stock not otherwise subject to FIRPTA will be taxable to a non-U.S. stockholder if either (a) the investment in our common stock is treated as effectively connected with the non-U.S. stockholder’s United States trade or business or (b) the non-U.S. stockholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met. 
 
Even if we do not qualify as a “domestically controlled REIT” at the time a non-U.S. stockholder sells our common stock, gain arising from the sale or exchange by a non-U.S. stockholder of common stock would not be subject to United States taxation under FIRPTA as a sale of a “United States real property interest” if: 
 
(1) our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market such as the NYSE; and 
 
(2) such non-U.S. stockholder owned, actually or constructively, 5% or less of our common stock throughout the five-year period ending on the date of the sale or exchange. 
 
If gain on the sale or exchange of common stock were subject to taxation under FIRPTA, the non-U.S. stockholder would be subject to regular United States income tax with respect to such gain in the same manner as a taxable U.S. stockholder (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals) and the purchaser of the common stock would be required to withhold and remit to the IRS 10% of the purchase price. 
 
Backup Withholding Tax and Information Reporting.    Generally, we must report annually to the IRS the amount of dividends paid to a non-U.S. stockholder, such holder’s name and address, and the amount of tax withheld, if any. A similar report is sent to the non-U.S. stockholder. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the non-U.S. stockholder’s country of residence. 
 
Payments of dividends or of proceeds from the disposition of stock made to a non-U.S. stockholder may be subject to information reporting and backup withholding unless such holder establishes an exemption, for example, by properly certifying its non-United States status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that a non-U.S. stockholder is a United States person. 
 
Backup withholding is not an additional tax. Rather, the United States income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is furnished to the IRS. 
 
178 

Table of Contents
Other Tax Consequences 
 
We may be required to pay tax in various state or local jurisdictions, including those in which we transact business, and our stockholders may be required to pay tax in various state or local jurisdictions, including those in which they reside. Our state and local tax treatment may not conform to the federal income tax consequences discussed above. In addition, a stockholder’s state and local tax treatment may not conform to the federal income tax consequences discussed above. Consequently, prospective investors should consult their tax advisors regarding the effect of state and local tax laws on an investment in our shares. 
 
New Legislation 
 
Recently, certain rules relating to REITs were amended. The new legislation includes, among other things, the following changes: 
 
 	•	 	As discussed above under “Taxation of Our Company—Asset Tests,” we may not own more than 10% by vote or value of any one issuer’s securities. If we fail to meet this test at the end of any quarter and such failure is not cured within 30 days thereafter, we would fail to qualify as a REIT. Under the new legislation, after the 30 day cure period, a REIT may dispose of sufficient assets to cure such a violation that does not exceed the lesser of 1% of the REIT’s assets at the end of the relevant quarter or $10,000,000. For violations due to reasonable cause that are larger than this amount, the new legislation permits the REIT to avoid disqualification as a REIT, after the 30 day cure period, by taking steps including the disposition of sufficient assets to meet the asset test and paying a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets. 	
 
 	•	 	The new legislation expands the straight debt safe harbor under which certain types of securities are disregarded as securities when calculating the 10% value limitation discussed above. 	
 
 	•	 	The new legislation also changes the formula for calculating the tax imposed for certain violations of the 95% gross income tests described above under “Taxation of Our Company—Income Tests” and makes certain changes to the requirements for availability of the applicable relief provisions for failure to meet the 75% and 95% gross income tests. 	
 
 	•	 	The new legislation provides additional relief in the event that we violate a provision of the Code that would result in our failure to qualify as a REIT if (i) the violation is due to reasonable cause, (ii) we pay a penalty of $50,000 for each failure to satisfy the provision and (iii) the violation does not include a violation described in the first and third bullet points above. 	
 
 	•	 	As discussed above under the heading “Federal Income Tax Considerations for Holders of our Common Stock—Taxation of Non-U.S. Stockholders—Capital Gain Dividends and Distributions Attributable to a Sale or Exchange of United States Real Property Interests,” we are required to withhold 35% of any distribution to non-U.S. Stockholders that is designated as a capital gain dividend or, if greater, 35% of a distribution to non-U.S. Stockholders that could have been designated as a capital gain dividend. The new legislation eliminates this 35% withholding tax on any capital gain dividend with respect to any class of stock which is regularly traded on an established securities market located in the United States if the non-U.S. stockholder did not own more than 5% of such class of stock at any time during the taxable year. Instead any capital gain dividend will be treated as an ordinary distribution subject to the rules discussed above under “Federal Income Tax Considerations for Holders of our Common Stock—Taxation of Non-U.S. Stockholders—Distributions Generally.” 	
 
The foregoing is a non-exhaustive list of changes that were made by the new legislation. The provisions contained in this legislation relating to expansion of the straight debt safe harbor apply to taxable years beginning after December 31, 2000, and the remaining provisions described above generally apply to taxable years beginning after the date the legislation was enacted (i.e., beginning with our 2005 taxable year). 
 
179 

Table of Contents
ERISA CONSIDERATIONS 
 
General 
 
The following is a summary of certain material considerations arising under the Employee Retirement Income Security Act of 1974, as amended, or ERISA, and the prohibited transaction provisions of Section 4975 of the Code that may be relevant to a prospective purchaser. The following summary may also be relevant to a prospective purchaser that is not an employee benefit plan which is subject to ERISA, but is a tax-qualified retirement plan or an individual retirement account, individual retirement annuity, medical savings account or education individual retirement account, which we refer to collectively as an “IRA.” This discussion does not address all aspects of ERISA or Section 4975 of the Code or, to the extent not preempted, state law that may be relevant to particular employee benefit plan stockholders in light of their particular circumstances, including plans subject to Title I of ERISA, other employee benefit plans and IRAs subject to the prohibited transaction provisions of Section 4975 of the Code, and governmental, church, foreign and other plans that are exempt from all or certain provisions of ERISA and Section 4975 of the Code but that may be subject to other federal, state, local or foreign law requirements. 
 
A fiduciary making the decision to invest in shares of our common stock on behalf of a prospective purchaser which is an ERISA plan or an IRA or other employee benefit plan is advised to consult its legal advisor regarding the specific considerations arising under ERISA, Section 4975 of the Code, and, to the extent not preempted, state law with respect to the purchase, ownership or sale of shares of our common stock by the plan or IRA. 
 
Plans should also consider the entire discussion under the heading “Federal Income Tax Considerations,” as material contained in that section is relevant to any decision by an employee benefit plan, tax-qualified retirement plan or IRA to purchase our common stock. 
 
Employee Benefit Plans, Tax-Qualified Retirement Plans and IRAs 
 
Each fiduciary of an “ERISA plan,” which is an employee benefit plan subject to Title I of ERISA, should carefully consider whether an investment in shares of our common stock is consistent with its fiduciary responsibilities under ERISA. In particular, the fiduciary requirements of Part 4 of Subtitle B of Title I of ERISA require that: 
 
 	•	 	an ERISA plan make investments that are prudent and in the best interests of the ERISA plan, its participants and beneficiaries; 	
 
 	•	 	an ERISA plan make investments that are diversified in order to reduce the risk of large losses, unless it is clearly prudent for the ERISA plan not to do so; 	
 
 	•	 	an ERISA plan’s investments are authorized under ERISA and the terms of the governing documents of the ERISA plan; and 	
 
 	•	 	the fiduciary not cause the ERISA plan to enter into transactions prohibited under Section 406 of ERISA (and certain corresponding provisions of the Code). 	
 
In determining whether an investment in shares of our common stock is prudent for ERISA purposes, the appropriate fiduciary of an ERISA plan should consider all of the facts and circumstances, including whether the investment is reasonably designed, as a part of the ERISA plan’s portfolio for which the fiduciary has investment responsibility, to meet the objectives of the ERISA plan, taking into consideration the risk of loss and opportunity for gain or other return from the investment, the diversification, cash flow and funding requirements of the ERISA plan, and the liquidity and current return of the ERISA plan’s portfolio. A fiduciary should also take into account the nature of our business, the length of our operating history and other matters described in the section entitled “Risk Factors.” 
 
180 

Table of Contents
The fiduciary of an IRA or an employee benefit plan not subject to Title I of ERISA because it is a governmental or church plan (if no election has been made under Section 410(d) of the Code) or because it does not cover common law employees should consider that it may only make investments that are either authorized or not prohibited by the appropriate governing documents, not prohibited under Section 4975 of the Code and permitted under applicable state law. 
 
Our Status Under ERISA 
 
In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entity are deemed to be ERISA plan assets. This is known as the “look-through rule.” Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Parts 1 and 4 of Subtitle B of Title I of ERISA and Section 4975 of the Code, as applicable, may be expanded, and there may be an increase in their liability under these and other provisions of ERISA and the Code (except to the extent (if any) that a favorable statutory or administrative exemption or exception applies). For example, a prohibited transaction may occur if our assets are deemed to be assets of investing ERISA plans and persons who have certain specified relationships to an ERISA plan (“parties in interest” within the meaning of ERISA, and “disqualified persons” within the meaning of the Code) deal with these assets. Further, if our assets are deemed to be assets of investing ERISA plans, any person that exercises authority or control with respect to the management or disposition of the assets is an ERISA plan fiduciary. 
 
ERISA plan assets are not defined in ERISA or the Code, but the United States Department of Labor has issued regulations that outline the circumstances under which an ERISA plan’s interest in an entity will be subject to the look-through rule. The Department of Labor regulations apply to the purchase by an ERISA plan of an “equity interest” in an entity, such as stock of a REIT. However, the Department of Labor regulations provide an exception to the look-through rule for equity interests that are “publicly offered securities.” 
 
Under the Department of Labor regulations, a “publicly offered security” is a security that is: 
 
 	•	 	freely transferable; 	
 
 	•	 	part of a class of securities that is widely held; and 	
 
 	•	 	either part of a class of securities that is registered under section 12(b) or 12(g) of the Exchange Act or sold to an ERISA plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act, and the class of securities of which this security is a part is registered under the Exchange Act within 120 days, or longer if allowed by the SEC, after the end of the fiscal year of the issuer during which this offering of these securities to the public occurred. 	
 
Whether a security is considered “freely transferable” depends on the facts and circumstances of each case. Under the Department of Labor regulations, if the security is part of an offering in which the minimum investment is $10,000 or less, then any restriction on or prohibition against any transfer or assignment of the security for the purposes of preventing a termination or reclassification of the entity for federal or state tax purposes will not ordinarily prevent the security from being considered freely transferable. Additionally, limitations or restrictions on the transfer or assignment of a security which are created or imposed by persons other than the issuer of the security or persons acting for or on behalf of the issuer will ordinarily not prevent the security from being considered freely transferable. 
 
A class of securities is considered “widely held” if it is a class of securities that is owned by 100 or more investors independent of the issuer and of one another. A security will not fail to be “widely held” because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer’s control. 
 
The shares of our common stock offered in this prospectus may meet the criteria of the publicly offered securities exception to the look-through rule. First, the common stock could be considered to be freely 
 
181 

Table of Contents
transferable, as the minimum investment will be less than $10,000 and the only restrictions upon its transfer are those generally permitted under the Department of Labor regulations, those required under federal tax laws to maintain our status as a REIT, resale restrictions under applicable federal securities laws with respect to securities not purchased pursuant to this prospectus and those owned by our officers, directors and other affiliates, and voluntary restrictions agreed to by the selling stockholder regarding volume limitations. 
 
Second, we expect (although we cannot confirm) that our common stock will be held by 100 or more investors, and we expect that at least 100 or more of these investors will be independent of us and of one another. 
 
Third, the shares of our common stock will be part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act and the common stock is registered under the Exchange Act. 
 
In addition, the Department of Labor regulations provide exceptions to the look-through rule for equity interests in some types of entities, including any entity which qualifies as either a “real estate operating company” or a “venture capital operating company.” 
 
Under the Department of Labor regulations, a “real estate operating company” is defined as an entity which on certain testing dates has at least 50% of its assets, other than short-term investments pending long-term commitment or distribution to investors, valued at cost: 
 
 	•	 	invested in real estate which is managed or developed and with respect to which the entity has the right to substantially participate directly in the management or development activities; and 	
 
 	•	 	which, in the ordinary course of its business, is engaged directly in real estate management or development activities. 	
 
According to those same regulations, a “venture capital operating company” is defined as an entity which on certain testing dates has at least 50% of its assets, other than short-term investments pending long-term commitment or distribution to investors, valued at cost: 
 
 	•	 	invested in one or more operating companies with respect to which the entity has management rights; and 	
 
 	•	 	which, in the ordinary course of its business, actually exercises its management rights with respect to one or more of the operating companies in which it invests. 	
 
We have not endeavored to determine whether we will satisfy the “real estate operating company” or “venture capital operating company” exceptions. 
 
If for any reason our assets are deemed to be ERISA “plan assets” because we do not qualify for any exception under the Department of Labor regulations, certain transactions that we might enter into, or may have entered into, in the ordinary course of our business might constitute non-exempt “prohibited transactions” under Section 406 of ERISA or Section 4975 of the Code and might have to be rescinded and may give rise to prohibited transaction excise taxes and fiduciary liability, as described above. In addition, if our assets are deemed to be ERISA “plan assets,” our management may be considered to be fiduciaries under ERISA and Section 4975 of the Code. Moreover, if our underlying assets were deemed to be assets constituting “plan assets,” there are several other provisions of ERISA that could be implicated for an ERISA plan if it were to acquire and hold our common stock either directly or by investing in an entity whose underlying assets are deemed to be assets of the ERISA plan. 
 
Prior to making an investment in the shares offered in this prospectus, prospective employee benefit plan investors (whether or not subject to ERISA or section 4975 of the Code) should consult with their legal and other advisors concerning the impact of ERISA and the Code (and, particularly in the case of non-ERISA plans and arrangements, any additional state, local and foreign law considerations), as applicable, and the potential consequences in their specific circumstances of an investment in such shares. 
 
182 

Table of Contents
UNDERWRITING 
 
Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has agreed to purchase, and we have agreed to sell to that underwriter, the number of shares of our common stock set forth opposite the underwriter’s name. 

Underwriter
	  	Number of
Shares
	
Citigroup Global Markets Inc.	  	 	
Merrill Lynch, Pierce, Fenner & Smith
Incorporated	  	 	
Credit Suisse First Boston LLC	  	 	
UBS Securities LLC	  	 	
RBC Capital Markets Corporation	  	 	
KeyBanc Capital Markets, a division of McDonald Investments Inc.	  	 	
JMP Securities LLC	  	 	

 	  		
Total	  	20,000,000	

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other specified conditions, which include: the representations and warranties made by us to the underwriters are true; there is no material adverse effect on our prospects, earnings, business or properties; and we deliver customary documents to the underwriters. The underwriters are obligated to purchase all the shares, other than those covered by the over-allotment option described below, if they purchase any of the shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or this offering may be terminated. 
 
The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the shares to dealers at the public offering price less a concession not to exceed $             per share. The underwriters may allow, and dealers may reallow, a concession not to exceed $             per share on sales to other dealers. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and the other selling terms. The representatives have advised us that the underwriters do not intend sales to discretionary accounts to exceed five percent of the total number of shares of our common stock offered by them. 
 
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 3,000,000 additional shares of our common stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment. 
 
Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price for the shares will be determined by negotiations between us and the representatives. Among the factors to be considered in determining the initial public offering price are: 
 
 	•	 	our record of operations; 	
 
 	•	 	our management; 	
 
 	•	 	our estimated net income; 	
 
183 

Table of Contents
 	•	 	our estimated funds from operations; 	
 
 	•	 	our estimated cash available for distribution; 	
 
 	•	 	our anticipated dividend yield; 	
 
 	•	 	our growth prospects; 	
 
 	•	 	the current market valuations, financial performance and dividend yields of publicly traded companies considered by us and the underwriters to be comparable to us; and 	
 
 	•	 	the current state of the commercial real estate industry and the economy as a whole. 	
 
We cannot assure you, however, that the prices at which our shares of common stock will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our common stock will develop and continue after this offering. 
 
The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of common stock. 

 	  	Paid by Digital Realty Trust
	
 	  	No Exercise
	  	Full Exercise
	
Per share	  	$	            	  	$	            	
Total	  	$	 	  	$	 	
 
In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended. 
 
 	•	 	Stabilizing transactions consist of bids for or purchases of the underlying security in the open market while this offering is in progress so long as the stabilizing bids do not exceed a specified maximum. 	
 
 	•	 	Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market. 	
 
 	•	 	Syndicate covering transactions involve purchases of our common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in this offering. 	
 
The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the representatives repurchase shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases. 
 
Any of these activities may have the effect of preventing or retarding a decline in the market price of our common stock. They may also cause the price of our common stock to be higher than the price that would 
 
184 

Table of Contents
otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the New York Stock Exchange or in the over-the-counter market, or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time. 
 
For a period of 180 days after the date of this prospectus, we will agree that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement (except a registration statement on Form S-8 relating to our 2004 Incentive Award Plan or a registration statement on Form S-4 relating to an acquisition of a real property company) under the Securities Act relating to, any additional shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated other than: 
 
 	•	 	grants of stock options, restricted stock or long-term incentive units to employees, consultants or directors pursuant to the terms of a plan in effect as of the date of this prospectus; 	
 
 	•	 	issuances of our common stock pursuant to the exercise of any employee stock options either outstanding as of the date of this prospectus or granted pursuant to the terms of a plan in effect as of the date of this prospectus; 	
 
 	•	 	issuances of our common stock pursuant to the redemption of units issued upon conversion of long-term incentive units either outstanding as of the date of this prospectus or granted pursuant to the terms of a plan in effect as of the date of this prospectus; 	
 
 	•	 	issuances of our common stock pursuant to a dividend reinvestment plan (if any); or 	
 
 	•	 	issuances of our common stock or securities convertible into or exchangeable or exercisable for shares of common stock in connection with other acquisitions of real property or real property companies. 	
 
Our officers and directors will agree, subject to certain limited exceptions, that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of one year after the date of this prospectus. In addition, our officers and directors have agreed not to make any demand for or exercise any right with respect to, the registration of our common stock or any securities convertible into or exercisable or exchangeable for our common stock for a period of one year following the date of this prospectus without the prior written consent of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated in their sole discretion may release any of the securities subject to lock-up agreements at any time without notice. 
 
At our request, the underwriters have reserved up to         % of the shares of common stock for sale at the initial public offering price to persons who are directors, officers or employees, or who are otherwise associated with us through a directed share program. The number of shares of common stock available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Any directed shares not purchased will be offered by the underwriters to the general public on the same basis as all other shares of common stock offered. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the sales of the directed shares. 
 
We estimate that the total expenses of this offering will be $9.0 million. In addition, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated will receive, in the aggregate, a financial advisory fee of $            . 
 
185 

Table of Contents
We and our operating partnership will agree to indemnify the underwriters against liabilities under the Securities Act or contribute to payments that the underwriters may be required to make in that respect. 
 
Our common stock has been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol “DLR”. In connection with the listing of our common stock on the New York Stock Exchange, the underwriters will undertake to sell round lots of 100 shares or more to a minimum of 2,000 beneficial owners. 
 
The underwriters may, from time to time, engage in transactions with and perform investment banking, commercial banking and advisory services for us and our affiliates in the ordinary course of their business for which they will receive customary fees and expenses. 
 
An affiliate of Citigroup Global Markets Inc. is the lender under a $251.6 million bridge loan facility made to GI Partners prior to this offering and will receive approximately $175.0 million of the net proceeds from this offering in connection with the repayment of such facility. See “Use of Proceeds.” Additionally, affiliates of Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are joint lead arrangers and joint bookrunning managers of our unsecured credit facility and we expect that affiliates of one or more of the underwriters will be agents or lenders under this facility. 
 
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make Internet distributions on the same basis as other allocations. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. 
 
186 

Table of Contents
LEGAL MATTERS 
 
Certain legal matters will be passed upon for us by Latham & Watkins LLP, Los Angeles, California, and for the underwriters by Goodwin Procter LLP, Boston, Massachusetts. Venable LLP, Baltimore, Maryland, will issue an opinion to us regarding certain matters of Maryland law, including the validity of the common stock offered hereby. 
 
EXPERTS 
 
The balance sheet of Digital Realty Trust, Inc. as of March 31, 2004 has been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 
 
The combined financial statements of the Digital Realty Predecessor as of December 31, 2003 and 2002, and for the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) through December 31, 2001 have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 
 
The statements of revenue and certain expenses of Ardenwood Corporate Park, ASM Lithography Facility, AT&T Web Hosting Facility, Granite Tower, and Stanford Place II for the year ended December 31, 2002; and the statements of revenue and certain expenses of 100 Technology Center Drive, Carrier Center, Comverse Technology Building, Savvis Data Center, Webb at LBJ, AboveNet Data Center, 200 Paul Avenue and 1100 Space Park Drive for the year ended December 31, 2003 have been included herein and in the registration statement in reliance upon the reports of KPMG LLP, independent accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. KPMG LLP’s reports refer to the fact that the statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of revenue and expenses. 
 
187 

Table of Contents
WHERE YOU CAN FIND MORE INFORMATION 
 
We have filed with the Securities and Exchange Commission a registration statement on Form S-11, including exhibits, schedules and amendments filed with this registration statement, under the Securities Act with respect to the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the registration statement. For further information with respect to our company and the shares of our common stock to be sold in this offering, reference is made to the registration statement, including the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document referred to in this prospectus are not necessarily complete and, where that contract is an exhibit to the registration statement, each statement is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference room of the Securities and Exchange Commission, 450 Fifth Street, N.W. Room 1024, Washington, DC 20549. Information about the operation of the public reference room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0300. Copies of all or a portion of the registration statement can be obtained from the public reference room of the Securities and Exchange Commission upon payment of prescribed fees. Our Securities and Exchange Commission filings, including our registration statement, are also available to you on the Securities and Exchange Commission’s Web site, www.sec.gov. 
 
AS A RESULT OF THIS OFFERING, WE WILL BECOME SUBJECT TO THE INFORMATION AND REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND WILL FILE ANNUAL, QUARTERLY AND OTHER PERIODIC REPORTS AND PROXY STATEMENTS AND WILL MAKE AVAILABLE TO OUR STOCKHOLDERS QUARTERLY REPORTS FOR THE FIRST THREE QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED INTERIM FINANCIAL INFORMATION. 
 
188 

Table of Contents
INDEX TO FINANCIAL STATEMENTS 

 	  	Page
	
Digital Realty Trust, Inc. and Subsidiary:	  	 	
Unaudited Pro Forma Condensed Consolidated Information:	  	 	
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2004 	  	F-4	
Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 2004 	  	F-5	
Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2003 	  	F-6	
Notes to Pro Forma Condensed Consolidated Financial Statements 	  	F-7	
Historical Financial Statements:	  	 	
Report of Independent Registered Public Accounting Firm	  	F-19	
Balance Sheet as of March 31, 2004 and June 30, 2004 (unaudited) 	  	F-20	
Notes to Balance Sheet	  	F-21	
		
Digital Realty Predecessor:	  	 	
Report of Independent Registered Public Accounting Firm 	  	F-23	
Combined Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003 and 2002	  	F-24	
Combined Statements of Operations for the six months ended June 30, 2004 and 2003 (unaudited), the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) through December 31, 2001	  	F-25	
Combined Statements of Owner’s Equity and Comprehensive Income (Loss) for the six months ended June 30, 2004 (unaudited), the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) through December 31, 2001	  	F-26	
Combined Statements of Cash Flows for the six months ended June 30, 2004 and 2003 (unaudited), the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) through December 31, 2001	  	F-27	
Notes to Combined Financial Statements	  	F-28	
Supplemental Schedule—Schedule III—Properties and Accumulated Depreciation	  	F-39	
Notes to Schedule III—Properties and Accumulated Depreciation 	  	F-40	
		
Ardenwood Corporate Park:	  	 	
Independent Auditors’ Report	  	F-41	
Statements of Revenue and Certain Expenses for the period from January 1, 2003 through January 12, 2003 (unaudited) and year ended December 31, 2002	  	F-42	
Notes to Statements of Revenue and Certain Expenses	  	F-43	
		
ASM Lithography Facility:	  	 	
Independent Auditors’ Report	  	F-45	
Statements of Revenue and Certain Expenses for the period from January 1, 2003 through May 19, 2003 (unaudited) and year ended December 31, 2002	  	F-46	
Notes to Statements of Revenue and Certain Expenses	  	F-47	
		
AT&T Web Hosting Facility:	  	 	
Independent Auditors’ Report	  	F-49	
Statements of Revenue and Certain Expenses for the period from January 1, 2003 through June 22, 2003 (unaudited) and year ended December 31, 2002	  	F-50	
Notes to Statements of Revenue and Certain Expenses	  	F-51	
		
Granite Tower:	  	 	
Independent Auditors’ Report	  	F-53	
Statements of Revenue and Certain Expenses for the period from January 1, 2003 through September 21, 2003 (unaudited) and year ended December 31, 2002	  	F-54	
Notes to Statements of Revenue and Certain Expenses	  	F-55	
 
F-1 

Table of Contents
INDEX TO FINANCIAL STATEMENTS (Continued) 

 	  	Page
	
Stanford Place II:	  	 	
Independent Auditors’ Report	  	F-57	
Statements of Revenue and Certain Expenses for the period from January 1, 2003 through September 30, 2003 (unaudited) and year ended December 31, 2002	  	F-58	
Notes to Statements of Revenue and Certain Expenses	  	F-59	
		
100 Technology Center Drive:	  	 	
Independent Auditors’ Report	  	F-61	
Statements of Revenue and Certain Expenses for the period from January 1, 2004 through February 16, 2004 (unaudited) and the year ended December 31, 2003	  	F-62	
Notes to Statements of Revenue and Certain Expenses	  	F-63	
		
Carrier Center:	  	 	
Independent Auditors’ Report	  	F-65	
Statements of Revenue and Certain Expenses for the period from January 1, 2004 through May 24, 2004 (unaudited) and the year ended December 31, 2003	  	F-66	
Notes to Statements of Revenue and Certain Expenses	  	F-67	
		
Comverse Technology Building:	  	 	
Independent Auditors’ Report	  	F-70	
Statements of Revenue and Certain Expenses for the period from January 1, 2004 through June 15, 2004 (unaudited) and the year ended December 31, 2003	  	F-71	
Notes to Statements of Revenue and Certain Expenses	  	F-72	
		
Savvis Data Center:	  	 	
Independent Auditors’ Report	  	F-74	
Statements of Revenue and Certain Expenses for the period from January 1, 2004 through May 24, 2004 (unaudited) and the year ended December 31, 2003	  	F-75	
Notes to Statements of Revenue and Certain Expenses	  	F-76	
		
Webb at LBJ:	  	 	
Independent Auditors’ Report	  	F-78	
Statements of Revenue and Certain Expenses for the six months ended June 30, 2004 (unaudited) and the year ended December 31, 2003	  	F-79	
Notes to Statements of Revenue and Certain Expenses	  	F-80	
		
AboveNet Data Center:	  	 	
Independent Auditors’ Report	  	F-82	
Statements of Revenue and Certain Expenses for the six months ended June 30, 2004 (unaudited) and the year ended December 31, 2003	  	F-83	
Notes to Statements of Revenue and Certain Expenses	  	F-84	
		
200 Paul Avenue:	  	 	
Independent Auditors’ Report	  	F-86	
Statements of Revenue and Certain Expenses for the six months ended June 30, 2004 (unaudited) and the year ended December 31, 2003	  	F-87	
Notes to Statements of Revenue and Certain Expenses	  	F-88	
		
1100 Space Park Drive:	  	 	
Independent Auditors’ Report	  	F-91	
Statements of Revenue and Certain Expenses for the six months ended June 30, 2004 (unaudited) and the year ended December 31, 2003	  	F-92	
Notes to Statements of Revenue and Certain Expenses	  	F-93	
 
F-2 

Table of Contents
DIGITAL REALTY TRUST, INC. 
Pro Forma Condensed Consolidated Financial Statements 
(unaudited) 
 
The unaudited pro forma condensed consolidated financial statements as of June 30, 2004 and for the six months ended June 30, 2004 and the year ended December 31, 2003 are presented as if this offering, the formation transactions and the exercise of our option to acquire Carrier Center all had occurred on June 30, 2004 for the pro forma condensed consolidated balance sheet and on the first day of the period presented for the pro forma condensed consolidated statements of operations. Additionally, the pro forma condensed consolidated statements of operations are presented as if the acquisitions of the properties acquired to date during 2004 and the properties expected to be acquired prior to or upon completion of this offering and in the case of the remaining 25% interest in eBay Data Center, shortly after the completion of the offering, along with related financing transactions had occurred on the first day of the periods presented. The pro forma purchase accounting adjustments are calculated pursuant to the same methodology described in note 2(e) of the combined financial statements of the Digital Realty Predecessor on page F-27. 
 
The pro forma condensed consolidated financial statements should be read in conjunction with the combined historical financial statements of the Digital Realty Predecessor, including the notes thereto, included elsewhere in this Prospectus. The pro forma condensed consolidated financial statements do not purport to represent our financial position or the results of operations that would actually have occurred assuming the completion of this offering, the formation transactions and the acquisitions of additional properties along with the related financing transactions all had occurred by June 30, 2004 or on the first day of the periods presented, nor do they purport to project our financial position or results of operations as of any future date or for any future period. 
 
F-3 

Table of Contents
DIGITAL REALTY TRUST, INC 
 
Pro Forma Condensed Consolidated Balance Sheet 
June 30, 2004 
(unaudited) 
(In thousands) 

 	 	Digital Realty
Predecessor
Historical
	 	Properties
Acquired
in 2004 
	 	 	Financing
Transactions
	 	 	Subtotal
	 	Receipt and
Use of the
Proceeds From
this Offering
	 	 	Company
Pro Forma
	
Assets	 	 	(A)	 	(B)	 	 	(C)	 	 	 	 	 	 	 	 	
Investments in real estate, net	 	$	582,737	 	214,887	 	 	—  	 	 	797,624	 	—  	 	 	797,624	
Cash and cash equivalents	 	 	4,268	 	(110,880	)	 	386,170	 	 	11,918	 	270,000	 (D)	 	11,918	
 	 	 	 	 	18,337	 	 	(275,977	)	 	 	 	(95,000	)(E)	 	 	
 	 	 	 	 	(10,000	)	 	 	 	 	 	 	(175,000	)(I)	 	 	
Accounts and other receivables	 	 	2,152	 	—  	 	 	—  	 	 	2,152	 	—  	 	 	2,152	
Deferred rent	 	 	7,858	 	—  	 	 	—  	 	 	7,858	 	—  	 	 	7,858	
Acquired above market leases, net	 	 	18,953	 	27,202	 	 	—  	 	 	46,155	 	—  	 	 	46,155	
Acquired in place lease value and deferred leasing costs, net	 	 	104,290	 	38,281	 	 	—  	 	 	142,571	 	—  	 	 	142,571	
Deferred financing costs, net	 	 	4,237	 	—  	 	 	7,689	 	 	8,556	 	—  	 	 	8,556	
 	 	 	 	 	 	 	 	(3,370	)	 	 	 	 	 	 	 	
Other assets	 	 	6,742	 	(750	)	 	—  	 	 	5,992	 	—  	 	 	5,992	
 	 			 			 			 		 			 		
Total assets	 	$	731,237	 	177,077	 	 	114,512	 	 	1,022,826	 	—  	 	 	1,022,826	
 	 			 			 			 		 			 		
Liabilities and Stockholders’ and Owner’s Equity 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes payable under line of credit	 	$	75,317	 	—  	 	 	(75,317	)	 	—  	 	—  	 	 	—  	
Notes payable under bridge loan	 	 	99,500	 	—  	 	 	152,138	 	 	182,950	 	(175,000	)(I)	 	7,950	
 	 	 	 	 	 	 	 	(68,688	)	 	 	 	 	 	 	 	
Mortgage loans	 	 	247,218	 	62,821	 	 	26,221	 	 	448,628	 	—  	 	 	448,628	
 	 	 	 	 	 	 	 	60,000	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	155,000	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	(101,544	)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	(1,088	)	 	 	 	 	 	 	 	
Other secured loans	 	 	51,861	 	(500	)	 	(29,361	)	 	22,000	 	—  	 	 	22,000	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	 	 	6,894	 	—  	 	 	(962	)	 	6,432	 	—  	 	 	6,432	
 	 	 	 	 	 	 	 	500	 	 	 	 	 	 	 	 	
Acquired below market leases, net	 	 	23,761	 	14,527	 	 	—  	 	 	38,288	 	—  	 	 	38,288	
Security deposits and prepaid rents	 	 	4,337	 	—  	 	 	—  	 	 	4,337	 	—  	 	 	4,337	
Asset management fees payable to related party	 	 	796	 	—  	 	 	—  	 	 	796	 	—  	 	 	796	
 	 			 			 			 		 			 		
Total liabilities	 	 	509,684	 	76,848	 	 	116,899	 	 	703,431	 	(175,000	)	 	528,431	
Minority interests in consolidated joint ventures	 	 	3,250	 	(3,081	)	 	—  	 	 	169	 	—  	 	 	169	
Minority interests in operating partnership	 	 	—  	 	94,973	 	 	—  	 	 	94,973	 	(95,000	)(E)	 	307,507	
 	 	 	 	 	 	 	 	 	 	 	 	 	22,358	 (G)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	285,176	 (H)	 	 	
Owner’s equity, including accumulated other comprehensive income	 	 	218,303	 	18,337	 	 	(105	)	 	224,253	 	(201,895	)(F)	 	—  	
 	 	 	 	 	(10,000	)	 	(3,370	)	 	 	 	(22,358	)(G)	 	 	
 	 	 	 	 	 	 	 	1,088	 	 	 	 	 	 	 	 	
Common stock	 	 	—  	 	—  	 	 	—  	 	 	—  	 	200	 (D)	 	200	
Additional paid in capital	 	 	—  	 	—  	 	 	—  	 	 	—  	 	269,800	 (D)	 	186,209	
 	 	 	 	 	 	 	 	 	 	 	 	 	201,585	 (F)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	(285,176	)(H)	 	 	
Accumulated other comprehensive income	 	 	—  	 	—  	 	 	—  	 	 	—  	 	310	 (F)	 	310	
 	 			 			 			 		 			 		
Total stockholders’ and owner’s equity	 	 	218,303	 	8,337	 	 	(2,387	)	 	224,253	 	(37,534	)	 	186,719	

 	 	$	731,237	 	177,077	 	 	114,512	 	 	1,022,826	 	—  	 	 	1,022,826	

See accompanying notes to pro forma condensed consolidated financial statements. 
 
F-4 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Pro Forma Condensed Consolidated Statement of Operations 
For the Six Months Ended June 30, 2004 
(unaudited) 
(In thousands except per share data) 

 	 	Digital Realty
Trust
Predecessor
Historical
	 	 	Properties
Acquired
Subsequent to
June 30, 2004
	  	Properties
Acquired
During the
Six Months Ended
June 30, 2004
	  	Financing
Transactions
	 	 	Other
Pro Forma
Adjustments
	 	 	Company
Pro Forma
	 	
 	 	(AA)	 	 	(BB)	  	(CC)	  	(DD)	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	  	 	  	 	 	 	 	 	 	 	 	 	
Rental	 	$	34,461	 	 	14,563	  	11,524	  	—  	 	 	—  	 	 	 	60,548	 	
Tenant reimbursements	 	 	5,397	 	 	2,599	  	3,184	  	—  	 	 	—  	 	 	 	11,180	 	
Other	 	 	1,712	 	 	300	  	308	  	—  	 	 	—  	 	 	 	2,320	 	
 	 				 		  		  			 			 				
 	 	 	41,570	 	 	17,462	  	15,016	  	—  	 	 	—  	 	 	 	74,048	 	
 	 				 		  		  			 			 				
Expenses:	 	 	 	 	 	 	  	 	  	 	 	 	 	 	 	 	 	 	
Rental property operating and maintenance	 	 	6,289	 	 	2,990	  	3,148	  	—  	 	 	—  	 	 	 	12,427	 	
Property taxes	 	 	3,833	 	 	870	  	1,132	  	—  	 	 	—  	 	 	 	5,835	 	
Insurance	 	 	562	 	 	322	  	346	  	—  	 	 	—  	 	 	 	1,230	 	
Interest	 	 	7,878	 	 	1,584	  	736	  	4,167	 	 	—  	 	 	 	14,365	 	
Asset management fees to related party	 	 	1,592	 	 	—  	  	—  	  	—  	 	 	(1,592	)(FF)	 	 	—  	 	
Depreciation and amortization	 	 	12,218	 	 	5,418	  	4,739	  	—  	 	 	—  	 	 	 	22,375	 	
General and administrative	 	 	157	 	 	—  	  	—  	  	—  	 	 	22,517	 (EE)	 	 	24,731	 	
 	 	 	 	 	 	 	  	 	  	 	 	 	1,350	 (FF)	 	 	 	 	
 	 	 	 	 	 	 	  	 	  	 	 	 	707	 (GG)	 	 	 	 	
Other	 	 	2,540	 	 	2	  	46	  	—  	 	 	—  	 	 	 	2,588	 	
 	 				 		  		  			 			 				
 	 	 	35,069	 	 	11,186	  	10,147	  	4,167	 	 	22,982	 	 	 	83,551	 	
 	 				 		  		  			 			 				
Income (loss) before minority interests	 	 	6,501	 	 	6,276	  	4,869	  	(4,167	)	 	(22,982	)	 	 	(9,503	)	
Minority interests in consolidated joint ventures	 	 	(56	)	 	42	  	—  	  	—  	 	 	—  	 	 	 	(14	)	
Minority interests in operating partnership	 	 	—  	 	 	—  	  	—  	  	—  	 	 	(5,904	)(HH)	 	 	(5,904	)	
 	 				 		  		  			 			 				
Net income (loss)	 	$	6,557	 	 	6,234	  	4,869	  	(4,167	)	 	(17,078	)	 	 	(3,585	)	
 	 				 		  		  			 			 				
Pro Forma loss per share—basic and diluted	 	 	 	 	 	 	  	 	  	 	 	 	 	 	 	$	(0.18	)(II)	
 	 	 	 	 	 	 	  	 	  	 	 	 	 	 	 				
Pro Forma weighted average common shares outstanding—basic and diluted	 	 	 	 	 	 	  	 	  	 	 	 	 	 	 	 	20,000	 	

See accompanying notes to pro forma condensed consolidated financial statements. 
 
F-5 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Pro Forma Condensed Consolidated Statement of Operations 
For the Year Ended December 31, 2003 
(unaudited) 
(In thousands except per share data) 

 	  	Digital Realty
Trust
Predecessor
Historical
	  	Properties
Acquired
in 2004
	 	 	Properties
Acquired
in 2003
	  	Financing
Transactions
	 	 	Other
Pro Forma
Adjustments
	 	 	Company
Pro Forma
	 	
 	  	(AA)	  	(BB)	 	 	(CC)	  	(DD)	 	 	 	 	 	 	 	
Revenues:	  	 	 	  	 	 	 	 	  	 	 	 	 	 	 	 	 	 	
Rental	  	$	50,099	  	58,261	 	 	10,521	  	—  	 	 	—  	 	 	 	118,881	 	
Tenant reimbursements	  	 	8,661	  	13,005	 	 	622	  	—  	 	 	—  	 	 	 	22,288	 	
Other	  	 	4,328	  	1,620	 	 	68	  	—  	 	 	—  	 	 	 	6,016	 	
 	  			  			 		  			 			 				
 	  	 	63,088	  	72,886	 	 	11,211	  	—  	 	 	—  	 	 	 	147,185	 	
 	  			  			 		  			 			 				
Expenses:	  	 	 	  	 	 	 	 	  	 	 	 	 	 	 	 	 	 	
Rental property operating and maintenance	  	 	8,624	  	12,467	 	 	1,863	  	—  	 	 	—  	 	 	 	22,954	 	
Property taxes	  	 	4,688	  	4,902	 	 	1,423	  	—  	 	 	—  	 	 	 	11,013	 	
Insurance	  	 	626	  	1,408	 	 	244	  	—  	 	 	—  	 	 	 	2,278	 	
Interest	  	 	10,091	  	4,464	 	 	—  	  	14,168	 	 	—  	 	 	 	28,723	 	
Asset management fees to related party	  	 	3,185	  	—  	 	 	—  	  	—  	 	 	(3,185	)(FF)	 	 	—  	 	
Depreciation and amortization	  	 	16,295	  	22,728	 	 	5,065	  	—  	 	 	—  	 	 	 	44,088	 	
General and administrative	  	 	329	  	—  	 	 	—  	  	—  	 	 	22,676	 (EE)	 	 	27,060	 	
 	  	 	 	  	 	 	 	 	  	 	 	 	2,701	 (FF)	 	 	 	 	
 	  	 	 	  	 	 	 	 	  	 	 	 	1,354	 (GG)	 	 	 	 	
Other	  	 	2,459	  	56	 	 	183	  	—  	 	 	—  	 	 	 	2,698	 	
 	  			  			 		  			 			 				
 	  	 	46,297	  	46,025	 	 	8,778	  	14,168	 	 	23,546	 	 	 	138,814	 	
 	  			  			 		  			 			 				
Income before minority interests	  	 	16,791	  	26,861	 	 	2,433	  	(14,168	)	 	(23,546	)	 	 	8,371	 	
Minority interests 	  	 	149 	  	(149	) 	 	—  	  	—  	 	 	5,208	 (HH)	 	 	5,208	 	
 	  			  			 		  			 			 				
Net income	  	$	16,642	  	27,010	 	 	2,433	  	(14,168	)	 	(28,754	)	 	 	3,163	 	
 	  			  			 		  			 			 				
Pro Forma earnings per share—basic and diluted	  	 	 	  	 	 	 	 	  	 	 	 	 	 	 	$	0.16	(II)	
 	  	 	 	  	 	 	 	 	  	 	 	 	 	 	 				
Pro Forma weighted average common shares outstanding—basic and diluted	  	 	 	  	 	 	 	 	  	 	 	 	 	 	 	 	20,000	 	

See accompanying notes to pro forma condensed consolidated financial statements. 
 
F-6 

Table of Contents
DIGITAL REALTY TRUST, INC. 
Notes to Pro Forma Condensed Consolidated Financial Statements 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
1.	 	Adjustments to the Pro Forma Condensed Consolidated Balance Sheet 	
 
The adjustments to the pro forma condensed consolidated balance sheet as of June 30, 2004 are as follows: 
 
 	(A)	 	Reflects the Digital Realty Predecessor (the Predecessor) historical condensed combined balance sheet as of June 30, 2004. Pursuant to the contribution agreement between the owner of the Predecessor and the Operating Partnership, which was executed in July 2004, the Operating Partnership will receive a contribution of direct and indirect interests in the properties in our portfolio in exchange for limited partnership interests in the Operating Partnership. The contribution will be made in anticipation of the completion of this offering. 	
 
As of June 30, 2004, Global Innovation Partners, LLC (GI Partners) is the ultimate owner of 100% of the Company and the Predecessor. Upon completion of this offering, GI Partners will own 47.45% of the Operating Partnership, as a limited partner, and no shares of the Company’s common stock. The exchange of the interests contributed by GI Partners will be accounted for as a reorganization of entities under common control; accordingly the contributed assets and assumed liabilities will be recorded at the Predecessor’s historical cost basis. 
 
Upon completion of this offering and the formation transactions, the Company, as general partner, will own 37.78% of the Operating Partnership and will have control over major decisions of the Operating Partnership. Additionally, the limited partners do not have rights to replace the general partner, approve the sale or refinancing of the Operating Partnership’s assets or approve the acquisition of Operating Partnership assets, although they do have certain protective rights. Accordingly, the Company will consolidate the assets and liabilities of the Operating Partnership in accordance with AICPA Statement of Position 78-9, Accounting for Investments in Real Estate Ventures (SOP 78-9). 
 
There are also third parties that are contributing their ownership interests in two properties, 200 Paul Avenue and 1100 Space Park Drive, to the Operating Partnership pursuant to the contribution agreements executed in July 2004. These contributors will own limited partnership units in the Operating Partnership and no shares of the Company’s common stock upon completion of this offering. These two properties are not included in the Predecessor’s combined financial statements. The exchange of these ownership interests will be accounted for as a purchase by the Company and will be recorded at fair value, which is equal to the sum of the cash, debt assumed and units exchanged. See pro forma adjustment (B). 
 
F-7 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
 	(B)	 	Reflects the Predecessor’s acquisition of Webb at LBJ, consummated on August 25, 2004, the acquisition of AboveNet Data Center, consummated on September 17, 2004, the acquisition of eBay Data Center, consummated on October 14, 2004, and the acquisition of 200 Paul Avenue and 1100 Space Park Drive from third parties in exchange for cash, debt assumed and Operating Partnership units and the acquisition of our joint venture partner’s 10% interest in Univision Tower in exchange for Operating Partnership units, all upon completion of this offering. These exchanges will be accounted for as purchases based on the sum of cash paid and the fair value of the 6,331,511 Operating Partnership units issued valued at the midpoint of the pricing range of our common stock indicated on the front cover of this prospectus. 	
 
 	    	 	Also reflects a distribution to GI Partners intended to approximate a normal real estate proration related to the properties that GI Partners is contributing to the Operating Partnership. This proration includes rents, property taxes, utilities, escrowed or restricted funds and other customary operating expenses. This distribution was considered by the parties in connection with determining the aggregate consideration to be received by GI Partners. 	
 
 	    	 	The pro forma adjustments are comprised of the following: 	

 	 	Webb at
LBJ
	 	AboveNet
Data
Center
	 	eBay
Data
Center
	 	200 Paul
Avenue
	 	1100
Space Park
Drive
	 	10% Interest
in Univision
Tower
	 	Proration
	 	 	Total
	 	
Assets acquired:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments in real estate, net	 	$	40,091	 	30,999	 	12,572	 	102,352	 	26,519	 	2,354	 	—  	 	 	214,887	 	
Acquired above market leases, net	 	 	1,060	 	5,817	 	—  	 	14,194	 	6,131	 	—  	 	—  	 	 	27,202	 	
Acquired in place lease value and deferred leasing costs, net	 	 	8,035	 	1,653	 	2,333	 	24,594	 	1,666	 	—  	 	—  	 	 	38,281	 	
									
Subtract liabilities assumed:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mortgage loans	 	 	—  	 	—  	 	—  	 	46,908	 	15,913	 	—  	 	—  	 	 	62,821	 	
Acquired below market leases, net	 	 	3,336	 	1,969	 	625	 	8,488	 	109	 	—  	 	—  	 	 	14,527	 	
Add reversal of minority interest in consolidated joint venture	 	 	—  	 	—  	 	—  	 	—  	 	—  	 	3,081	 	—  	 	 	3,081	 	
Add reduction of existing loan made by an affiliate of our joint venture partner	 	 	—  	 	—  	 	—  	 	—  	 	—  	 	500	 	—  	 	 	500	 	
 	 			 		 		 		 		 		 			 			
Net assets acquired	 	 	45,850	 	36,500	 	14,280	 	85,744	 	18,294	 	5,935	 	—  	 	 	206,603	 	
Subtract:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deposits paid through June 30, 2004	 	 	500	 	250	 	—  	 	—  	 	—  	 	—  	 	—  	 	 	750	 	
Units issued in connection with acquisitions	 	 	—  	 	—  	 	—  	 	71,243	 	17,795	 	5,935	 	—  	 	 	94,973	 	
 	 			 		 		 		 		 		 			 			
Cash paid to acquire the properties	 	$	45,350	 	36,250	 	14,280	 	14,501	 	499	 	—  	 	—  	 	 	110,880	 	
 	 			 		 		 		 		 		 			 			
Cash contributed by GI Partners in connection with the property acquisitions	 	$	10,962	 	7,375	 	—  	 	—  	 	—  	 	—  	 	—  	 	 	18,337	 	
 	 			 		 		 		 		 		 			 			
Cash distributed to GI Partners upon completion of this offering to approximate a normal real estate proration	 	$	—  	 	—  	 	—  	 	—  	 	—  	 	—  	 	(10,000	)	 	(10,000	)	

F-8 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
 	(C)	 	Reflects proceeds and related financing costs related to additional borrowings under the bridge facility with an affiliate of Citigroup Global Markets Inc. by the Predecessor subsequent to June 30, 2004, but prior to the completion of this offering, and the secured term debt to be funded upon completion of this offering. Also reflects refinancing of the Carrier Center mortgage and mezzanine loan and the Univision Tower mortgage loan with new mortgage loans upon completion of this offering or shortly thereafter. The financing costs include loan assumption fees related to assuming certain of the Predecessor’s loans. Finally, reflects repayment upon completion of this offering of the 1100 Space Park Drive, ASM Lithography Facility, 36 Northeast Second Street, Univision Tower mezzanine loan, a portion of the bridge facility (see pro forma adjustment (I) for repayment of the remaining portion), and the outstanding advances allocated to the Predecessor under GI Partners’ line of credit: 	

New Debt
	  	Bridge
Facility
	 	 	Carrier
Center
Mortgage
	 	 	Univision
Tower
Mortgage
	 	 	Secured
Term
Debt
	 	 	Unsecured
Credit
Facility
	 	 	Loan
Assumption
Fees
	 	 	Total
	 	
Borrowings	  	$	152,138	 	 	26,221	 	 	60,000	 	 	155,000	 	 	—  	 	 	—  	 	 	393,359	 	
Loan costs	  	 	(1,721	)	 	(100	)	 	(450	)	 	(750	)	 	(3,000	)	 	(1,668	)	 	(7,689	)	
Loan costs due at a later date	  	 	—  	 	 	—  	 	 	—  	 	 	—  	 	 	500	 	 	—  	 	 	500	 	
 	  				 			 			 			 			 			 			
Net proceeds	  	$	150,417	 	 	26,121	 	 	59,550	 	 	154,250	 	 	(2,500	)	 	(1,668	)	 	386,170	 	

																		
Repayment of Debt
	 	1100
Space
Park
Drive
Mortgage
	 	ASM
Lithography
Facility
Mortgage
	 	36
Northeast
Second
Street
Mortgage
	 	Univision
Tower
Mortgage
and
Mezzanine
	 	Carrier
Center
Mortgage
and
Mezzanine
	 	Bridge
Facility
	 	GI
Partners’
Line of
Credit
	 	Total
	
Notes payable under line of credit	 	$	—  	 	—  	 	—  	 	—  	 	—  	 	—  	 	75,317	 	75,317	
Notes payable under bridge loan	 	 	—  	 	—  	 	—  	 	—  	 	—  	 	68,688	 	—  	 	68,688	
Mortgage loans	 	 	15,913	 	14,000	 	17,886	 	39,385	 	14,360	 	—  	 	—  	 	101,544	
Other secured loans	 	 	—  	 	—  	 	—  	 	17,500	 	11,861	 	—  	 	—  	 	29,361	
Prepayment penalties	 	 	—  	 	21	 	84	 	—  	 	—  	 	—  	 	—  	 	105	
Accrued interest payable	 	 	—  	 	55	 	199	 	483	 	—  	 	76	 	149	 	962	
 	 			 		 		 		 		 		 		 		
Net payments	 	$	15,913	 	14,076	 	18,169	 	57,368	 	26,221	 	68,764	 	75,466	 	275,977	
 	 			 		 		 		 		 		 		 		
Write-off of remaining loan premium	 	$	—  	 	—  	 	—  	 	566	 	522	 	—  	 	—  	 	1,088	
 	 			 		 		 		 		 		 		 		
Write-off of unamortized deferred loan costs	 	$	—  	 	218	 	85	 	71	 	257	 	2,739	 	—  	 	3,370	

F-9 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 

(D)   Reflects the sale of 20,000,000 shares of common stock in this offering:	  	 	 	 	 	 	
			
Proceeds from this offering	  	 	 	 	$	300,000	
			
Less costs of this offering:	  	 	 	 	 	 	
			
Underwriters’ discounts and commissions and financial advisory fees	  	21,000	 	 	 	 	
			
Other costs	  	9,000	*	 	 	 	

 	  	 	 	 	 	30,000	

Net cash proceeds	  	 	 	 	$	270,000	

Common stock, 20,000,000 shares at $.01 per share	  	 	 	 	$	200	
			
Additional paid in capital	  	 	 	 	 	269,800	

 	  	 	 	 	$	270,000	

 	*	 	A portion of the other offering costs have already been incurred as of June 30, 2004 and the owner of the Predecessor has loaned the Company funds to pay for such costs. The loan is non-interest bearing. The loan along with any unpaid costs will be paid with offering proceeds upon completion of this offering. 	

						
(E)   Reflects purchase from the investors in GI Partners of 6,810,036 limited partnership units in the Operating Partnership having an aggregate value of $102,151 based on the midpoint of the pricing range indicated on the front cover of this prospectus at a purchase price equal to the public offering price, net of underwriting discounts and commissions and financial advisory fees	  	 	 	  	 	
	  	$	95,000	  	 	

						
(F)    Reflects reclassification of owner’s equity to common stock and additional paid in capital and accumulated other comprehensive income:	  	 	 	  	 	
			
Additional paid in capital	  	$	201,585	  	 	
Accumulated other comprehensive income	  	 	310	  	 	
 	  			  	 	
Owner’s equity	  	$	201,895	  	 	

						
(G)   Reflects awards of 1,490,561 fully-vested special long-term incentive units to be granted in connection with this offering to employees and our executive chairman, based on the number of units specified by employment agreements and our executive chairman’s agreement valued at the initial public offering price of our common stock, at the midpoint of the pricing range indicated on the front cover of this prospectus	  	 	 	 	 	
	  	$	  22,358	 	 	

F-10 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 

(H)   Reflects recording of minority interests in the Operating Partnership as a result of an aggregate of 31,452,170 limited partnership units in the Operating Partnership to be held by the owner of the Predecessor, the owners of 200 Paul Avenue and 1100 Space Park Drive and the Predecessor’s joint venture partner in Univision Tower and 1,490,561 fully-vested long-term incentive units to be held by our employees and our executive chairman:	  	 	  	 	

 	 	Sum of pro forma equity and pro forma minority interests in the Operating Partnership before allocation	  	$	494,226	 	 	 	
 	 	Percentage allocable to minority interests	  	 	62.22	%	 	 	
 	 	 	  				 	 	
 	 	Minority interests in operating partnership	  	 	307,507	 	 	 	
 	 	Pro forma aggregate adjustments to minority interests in operating partnership excluding this adjustment	  	 	22,331	 	 	 	
 	 	 	  				 	 	
 	 	 	  	$	285,176	 	 	 	

						
(I)     Repayment of the remaining balance of the bridge loan facility, see pro forma adjustment (C)	  	 	 	  	 	
	  	$	175,000	  	 	

2.	 	Adjustments to Pro Forma Condensed Consolidated Statements of Operations 	
 
The adjustments to the pro forma condensed consolidated statements of operations for the six months ended June 30, 2004, and the year ended December 31, 2003 are as follows: 
 
 	(AA)	 	Reflects the Predecessor’s historical condensed combined statements of operations for the six months ended June 30, 2004 and the year ended December 31, 2003. As discussed in note (A), the real estate properties and interests therein contributed by the owner of the Predecessor to the Operating Partnership in exchange for limited partnership interests in the Operating Partnership will be recorded at the Predecessor’s historical cost. Expenses such as depreciation and amortization to be recognized by the Operating Partnership related to the contributed interests are based on the Predecessor’s historical cost of related assets. 	
 
As discussed in note (A), upon completion of this offering and the formation transactions, the Company, as general partner, will own 37.78% of the Operating Partnership; however the Company will have control over all major decisions of the Operating Partnership. Accordingly, the Company will consolidate the revenues and expenses of the Operating Partnership. See note (HH) for the pro forma adjustment to allocate 62.22% of the net income (loss) of the Operating Partnership to the limited partners of the Operating Partnership. 
 
 	(BB)	 	Reflects the Predecessor’s acquisition of Webb at LBJ, consummated on August 25, 2004, AboveNet Data Center, consummated on September 17, 2004 and eBay Data Center, 75% of which was acquired on October 14, 2004 and the remaining 25% is expected to be consummated in early January 2005. Also reflects the acquisitions of 200 Paul Avenue and 1100 Space Park Drive from third parties in exchange for cash, debt assumed and Operating Partnership units and our joint venture partner’s 10% interest in Univision Tower in exchange for Operating Partnership units, all upon completion of this offering. 	
 
F-11 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
 	The purchase method of accounting is used to reflect the acquisition of these properties and the 10% interest. For the pro forma condensed consolidated income statement for the year ended December 31, 2003, also reflects the Predecessor’s acquisition of 100 Technology Center Drive, consummated on February 17, 2004, Siemens Building, consummated on April 23, 2004, Savvis Data Center, consummated on May 24, 2004, Carrier Center, consummated on May 25, 2004, and Comverse Technology Building, consummated on June 16, 2004. The pro forma adjustments are comprised of the following: 	

Six Months Ended June 30, 2004	
 	  	Combined
Historical
Revenues
and
Certain
Expenses(1)
	  	Adjustments
Resulting from
Purchasing
the Properties
	 	 	Pro Forma
Adjustments
	
Revenues:	  	 	 	  	 	 	 	 	
Rental	  	$	14,079	  	484	(2)	 	14,563	
Tenant reimbursements	  	 	2,599	  	—  	 	 	2,599	
Other	  	 	300	  	—  	 	 	300	
 	  			  			 		
 	  	 	16,978	  	484	 	 	17,462	
 	  			  			 		
Expenses:	  	 	 	  	 	 	 	 	
Rental property operating and maintenance	  	 	2,990	  	—  	 	 	2,990	
Property taxes	  	 	870	  	—  	 	 	870	
Insurance	  	 	322	  	—  	 	 	322	
Interest	  	 	1,584	  	—  	 	 	1,584	
Depreciation and amortization	  	 	—  	  	5,418	(3)	 	5,418	
Other	  	 	2	  	—  	 	 	2	
 	  			  			 		
 	  	 	5,768	  	5,418	 	 	11,186	
 	  			  			 		
Income before minority interests	  	 	11,210	  	(4,934	)	 	6,276	
Minority interests in consolidated joint ventures	  	 	—  	  	42	 	 	42	
 	  			  			 		
Net income	  	$	11,210	  	(4,976	)	 	6,234	

F-12 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 

Year Ended December 31, 2003	 	
 	  	Combined
Historical Revenues
and Certain
Expenses(1)
	  	Adjustments
Resulting from
Purchasing
the Properties
	 	 	Pro Forma
Adjustments
	 	
Revenues:	  	 	 	  	 	 	 	 	 	
Rental	  	$	57,051	  	1,210	(2)	 	58,261	 	
Tenant reimbursements	  	 	13,005	  	—  	 	 	13,005	 	
Other	  	 	1,620	  	—  	 	 	1,620	 	
 	  			  			 			
 	  	 	71,676	  	1,210	 	 	72,886	 	
 	  			  			 			
Expenses:	  	 	 	  	 	 	 	 	 	
Rental property operating and maintenance	  	 	12,467	  	—  	 	 	12,467	 	
Property taxes	  	 	4,902	  	—  	 	 	4,902	 	
Insurance	  	 	1,408	  	—  	 	 	1,408	 	
Interest	  	 	4,464	  	—  	 	 	4,464	 	
Depreciation and amortization	  	 	—  	  	22,728	(3)	 	22,728	 	
Other	  	 	56	  	—  	 	 	56	 	
 	  			  			 			
 	  	 	23,297	  	22,728	 	 	46,025	 	
 	  			  			 			
Income before minority interests	  	 	48,379	  	(21,518	)	 	26,861	 	
Minority interests in consolidated joint ventures	  	 	—  	  	(149	)	 	(149	)	
 	  			  			 			
Net income	  	$	48,379	  	(21,369	)	 	27,010	 	

 	(1)	 	The combined properties’ historical revenues and expenses are as follows: 	

Six Months Ended June 30, 2004	
 	  	Webb at LBJ
	  	AboveNet
Data
Center
	  	200
Paul
Avenue
	  	1100
Space Park
Drive
	  	eBay
Data
Center
	  	Combined
Historical
Revenues and
Certain
Expenses
	
Revenues:	  	 	 	  	 	  	 	  	 	  	 	  	 	
Rental	  	$	2,508	  	2,963	  	6,106	  	1,898	  	604	  	14,079	
Tenant reimbursements	  	 	167	  	695	  	1,439	  	298	  	—  	  	2,599	
Other	  	 	48	  	252	  	—  	  	—  	  	—  	  	300	
 	  			  		  		  		  		  		
 	  	 	2,723	  	3,910	  	7,545	  	2,196	  	604	  	16,978	
 	  			  		  		  		  		  		
Expenses:	  	 	 	  	 	  	 	  	 	  	 	  	 	
Rental property operating and maintenance	  	 	569	  	625	  	1,483	  	313	  	—  	  	2,990	
Property taxes	  	 	315	  	257	  	153	  	145	  	—  	  	870	
Insurance	  	 	21	  	130	  	149	  	22	  	—  	  	322	
Interest	  	 	—  	  	—  	  	1,086	  	498	  	—  	  	1,584	
Other	  	 	—  	  	—  	  	2	  	—  	  	—  	  	2	
 	  			  		  		  		  		  		
 	  	 	905	  	1,012	  	2,873	  	978	  	—  	  	5,768	
 	  			  		  		  		  		  		
Net income	  	$	1,818	  	2,898	  	4,672	  	1,218	  	604	  	11,210	

F-13 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 

Year Ended December 31, 2003	
 	 	100
Technology
Center
Drive
	 	Siemens
Building
	 	Savvis
Data
Center
	 	Carrier
Center
	 	Comverse
Technology
Building
	 	AboveNet
Data
Center
	 	Webb at
LBJ
	 	200
Paul
Avenue
	 	1100
Space Park
Drive
	 	eBay
Data
Center
	 	Combined
Historical
Revenues
and
Certain
Expenses
	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental	 	$	3,795	 	2,510	 	6,341	 	9,688	 	7,048	 	5,994	 	5,000	 	11,980	 	3,753	 	942	 	57,051	
Tenant reimbursements	 	 	368	 	266	 	901	 	2,768	 	3,269	 	1,394	 	369	 	3,095	 	575	 	—  	 	13,005	
Other	 	 	2	 	2	 	52	 	948	 	5	 	532	 	79	 	—  	 	—  	 	—  	 	1,620	
 	 			 		 		 		 		 		 		 		 		 		 		
 	 	 	4,165	 	2,778	 	7,294	 	13,404	 	10,322	 	7,920	 	5,448	 	15,075	 	4,328	 	942	 	71,676	
 	 			 		 		 		 		 		 		 		 		 		 		
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental property operating and maintenance	 	 	102	 	335	 	149	 	3,161	 	2,945	 	1,136	 	904	 	3,081	 	654	 	—  	 	12,467	
Property taxes	 	 	384	 	418	 	495	 	683	 	1,209	 	528	 	602	 	204	 	379	 	—  	 	4,902	
Insurance	 	 	—  	 	26	 	257	 	453	 	101	 	239	 	44	 	254	 	34	 	—  	 	1,408	
Interest	 	 	—  	 	—  	 	—  	 	1,077	 	—  	 	—  	 	—  	 	2,530	 	857	 	—  	 	4,464	
Other	 	 	—  	 	—  	 	—  	 	—  	 	46	 	—  	 	—  	 	5	 	5	 	—  	 	56	
 	 			 		 		 		 		 		 		 		 		 		 		
 	 	 	486	 	779	 	901	 	5,374	 	4,301	 	1,903	 	1,550	 	6,074	 	1,929	 	—  	 	23,297	
 	 			 		 		 		 		 		 		 		 		 		 		
Net income	 	$	3,679	 	1,999	 	6,393	 	8,030	 	6,021	 	6,017	 	3,898	 	9,001	 	2,399	 	942	 	48,379	

 	(2)	 	Reflects increase in rental revenues for straight line rent amounts and amortization of acquired below market leases, net of amortization of above market leases, all resulting from purchase accounting. 	
 
 	(3)	 	Reflects depreciation and amortization of the buildings and improvements, tenant improvements and acquired in-place lease values. 	
 
F-14 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
 	(CC)	 	For the pro forma condensed consolidated income statement for the six months ended June 30, 2004, reflects pro forma revenues and expenses for the period from January 1, 2004 through the date of acquisition of the applicable properties by the Predecessor for all properties acquired during the six months ended June 30, 2004 based on historical revenues and expenses, as adjusted for purchase accounting. For the pro forma condensed consolidated income statement for the year ended December 31, 2003, reflects pro forma revenues and expenses for the period from January 1, 2003 to the date of acquisition of the applicable property by the Predecessor for all properties acquired during 2003 based on historical revenues and expenses, as adjusted for purchase accounting: 	

Six Months Ended June 30, 2004	
 	  	100 Technology
Center Drive
	  	Siemens
Building
	  	Savvis Data
Center
	  	Carrier
Center
	  	Comverse
Technology
Building
	  	Pro Forma
Adjustments
	
Revenues:	  	 	 	  	 	  	 	  	 	  	 	  	 	
Rental	  	$	431	  	970	  	2,890	  	4,001	  	3,232	  	11,524	
Tenant reimbursements	  	 	47	  	35	  	301	  	1,110	  	1,691	  	3,184	
Other	  	 	—  	  	—  	  	1	  	297	  	10	  	308	
 	  			  		  		  		  		  		
 	  	 	478	  	1,005	  	3,192	  	5,408	  	4,933	  	15,016	
 	  			  		  		  		  		  		
Expenses:	  	 	 	  	 	  	 	  	 	  	 	  	 	
Rental property operating and maintenance	  	 	14	  	104	  	31	  	1,510	  	1,489	  	3,148	
Property taxes	  	 	47	  	129	  	160	  	211	  	585	  	1,132	
Insurance 	  	 	—  	  	8	  	110	  	180	  	48	  	346	
Interest	  	 	—  	  	—  	  	—  	  	736	  	—  	  	736	
Depreciation and amortization	  	 	310	  	346	  	1,188	  	907	  	1,988	  	4,739	
Other	  	 	—  	  	—  	  	—  	  	—  	  	46	  	46	
 	  			  		  		  		  		  		
 	  	 	371	  	587	  	1,489	  	3,544	  	4,156	  	10,147	
 	  			  		  		  		  		  		
Net income	  	$	107	  	418	  	1,703	  	1,864	  	777	  	4,869	

																					
	
Year Ended December 31, 2003	
 	 	VarTec
Building
	 	Ardenwood
Corporate
Park
	 	ASM
Lithography
Facility
	 	AT&T Web
Hosting Facility
	 	Brea Data
Center
	 	Granite
Tower
	 	Maxtor
Manufacturing
Facility
	 	 	Stanford
Place II
	 	Pro Forma
Adjustments
	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental	 	$	—  	 	340	 	1,154	 	667	 	846	 	3,675	 	—  	 	 	3,839	 	10,521	
Tenant reimbursements	 	 	9	 	39	 	5	 	75	 	62	 	356	 	—  	 	 	76	 	622	
Other	 	 	—  	 	—  	 	—  	 	—  	 	—  	 	—  	 	—  	 	 	68	 	68	
 	 			 		 		 		 		 		 			 		 		
 	 	 	9	 	379	 	1,159	 	742	 	908	 	4,031	 	—  	 	 	3,983	 	11,211	
 	 			 		 		 		 		 		 			 		 		
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental property operating and maintenance	 	 	1	 	16	 	10	 	29	 	21	 	752	 	26	 	 	1,008	 	1,863	
Property taxes	 	 	7	 	20	 	—  	 	75	 	35	 	439	 	223	 	 	624	 	1,423	
Insurance	 	 	—  	 	2	 	9	 	10	 	3	 	45	 	107	 	 	68	 	244	
Interest	 	 	—  	 	—  	 	—  	 	—  	 	—  	 	—  	 	—  	 	 	—  	 	—  	
Depreciation and amortization	 	 	—  	 	130	 	299	 	196	 	268	 	1,601	 	599	 	 	1,972	 	5,065	
Other	 	 	—  	 	—  	 	130	 	—  	 	—  	 	36	 	17	 	 	—  	 	183	
 	 			 		 		 		 		 		 			 		 		
 	 	 	8	 	168	 	448	 	310	 	327	 	2,873	 	972	 	 	3,672	 	8,778	
 	 			 		 		 		 		 		 			 		 		
Net income (loss)	 	$	1	 	211	 	711	 	432	 	581	 	1,158	 	(972	)	 	311	 	2,433	

F-15 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
 	(DD)	 	Reflects the net increase in interest expense as a result of the financing related pro forma adjustments. The following outlines the loans to be outstanding upon completion of this offering and the formation transactions and the corresponding interest expense that would have been recorded had these loans been outstanding as of the beginning of the periods presented: 	

 	 	Loans
Payable
as of
June 30,
2004
	 	 	      Interest Rate(1)      
	 	Interest Expense
	 	
	 			 		 	Six Months
Ended
June 30,
2004
	 	 	Year Ended
December 31,
2003
	 	
100 Technology Center Drive—Mortgage	 	$	20,000	 	 	LIBOR + 1.70%	 	$	373	 	 	746	 	
Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building—Mortgage	 	 	43,000	 	 	LIBOR + 1.59%	 	 	738	 	 	1,476	 	
Ardenwood Corporate Park, NTT/Verio Premier Data Center and VarTec Building— Mezzanine	 	 	22,000	 	 	LIBOR + 5.75%	 	 	836	 	 	1,670	 	
AT&T Web Hosting Facility—Mortgage	 	 	8,775	 	 	LIBOR + 1.85%	 	 	170	 	 	340	 	
Camperdown House—Mortgage	 	 	23,079	(2)	 	6.85%	 	 	883	(2)	 	1,766	(2)	
Carrier Center—Mortgage	 	 	26,221	 	 	LIBOR + 4.25%(3)	 	 	885	 	 	1,770	 	
Granite Tower—Mortgage	 	 	21,645	 	 	LIBOR + 1.20%	 	 	350	 	 	699	 	
Maxtor Manufacturing Facility—Mortgage	 	 	18,000	 	 	LIBOR + 2.25%	 	 	401	 	 	801	 	
Stanford Place II—Mortgage	 	 	26,000	 	 	5.14%	 	 	668	 	 	1,336	 	
Univision Tower—Mortgage	 	 	60,000	 	 	6.09%	 	 	1,827	 	 	3,654	 	
200 Paul Avenue—Mortgage	 	 	46,908	 	 	LIBOR + 3.18%	 	 	1,178	 	 	2,355	 	
Secured Term Debt	 	 	155,000	 	 	5.79%	 	 	4,488	 	 	8,975	 	
Bridge Facility	 	 	7,950	 	 	LIBOR + 2.00%	 	 	153	 	 	305	 	
Amortization of loan costs	 	 	 	 	 	 	 	 	1,415	 	 	2,830	 	
 	 				 	 	 				 			
Pro Forma totals	 	$	478,578	 	 	 	 	 	14,365	 	 	28,723	 	
 	 				 	 	 	 	 	 	 	 	 	
Historical interest expense for the Predecessor, Carrier Center,
200 Paul Avenue and 1100 Space Park Drive	 	 	(10,198	)	 	(14,555	)	
 	 	 	 	 	 	 	 				 			
 	 	 	 	 	 	 	 	$	4,167	 	 	14,168	 	

 	(1)	 	We intend to enter into a swap agreement to swap variable interest rates for fixed rates for a notional amount of principal totaling approximately $140.3 million. This is not reflected in our pro forma adjustment since we have not yet entered into the swap agreement. We calculated pro forma interest expense for loans with variable interest rates using current LIBOR rates (1.84% for one-month LIBOR to 2.20% for six-month LIBOR as of October 1, 2004). 	
 	(2)	 	The Camperdown House mortgage is denominated in pounds sterling. The loan payable has been converted to U.S. dollars using the exchange rates of our foreign currency forward contract whereas current exchange rate has been used for the interest expense. 	
 	(3)	 	The interest rate on the Carrier Center mortgage loan is subject to a 2.50% LIBOR floor. 	
 
F-16 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 

											
(EE)	 	Reflects compensation expense related to awards of 1,490,561 fully-vested special long-term incentive units to be granted in connection with this offering to employees and our executive chairman, based on the number of units specified by employment agreements and our executive chairman’s agreement and utilizing the initial public offering price of our common stock, based on the midpoint of the pricing range indicated on the front cover of this prospectus, as the value of such units. Also reflects compensation expense related to awards of an aggregate of 783,902 stock options, which vest over a four-year period, to be granted to employees and our executive chairman upon completion of this offering:	  	 	 	 	 	 	 	 	
				
 	 	 	  	Six Months
Ended
June 30,
2004
	 	 	Year Ended.
December 31,
2003
	 	
 	 	Long-term incentive units	  	$	22,358	 	 	$	22,358	 	
 	 	Stock options	  	 	159	 	 	 	318	 	
 	 	 	  				 				
 	 	 	  	$	22,517	 	 	$	22,676	 	

(FF)	 	Reflects reclassification of asset management fees to general and administrative expense. Although such asset management fees will not be payable subsequent to the completion of this offering, the asset management fees incurred historically will be replaced with direct payments of compensation expense, rent and other general and administrative expenses that were paid for indirectly prior to the completion of this offering by paying the asset management fees. Also reflects removing the asset manager’s estimated profit that is included in the asset management fee:	  	 	 	 	 	 	 	 	
				
 	 	Asset management fees	  	$	1,592	 	 	 	3,185	 	
 	 	Remove asset manager’s estimated profit	  	 	(242	)	 	 	(484	)	

 	 	 	  	 	1,350	 	 	 	2,701	 	

(GG)	 	Reflects increases in general and administrative expense as a result of becoming a public company:	  	 	 	 	 	 	 	 	
				
 	 	Director fees	  	$	60	 	 	$	120	 	
 	 	Compensation for our chief financial officer, executive vice president of telecommunications infrastructure and others who will be hired upon completion of this offering	  	 	463	 	 	 	925	 	
 	 	Directors and officers insurance	  	 	125	 	 	 	250	 	
 	 	Other	  	 	59	 	 	 	59	 	
 	 	 	  				 				
 	 	 	  	$	707	 	 	$	1,354	 	

F-17 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Pro Forma Condensed Consolidated Financial Statements—(Continued) 
(unaudited) 
(Dollar amounts in thousands, except per share amounts) 
 
 	(HH)	 	Reflects allocation of minority interests in net income (loss) of the Operating Partnership as a result of limited partnership units in the Operating Partnership to be held by the owner of the Predecessor (47.45%), the owners of 200 Paul Avenue and 1100 Space Park Drive (collectively 11.21%), management (2.81%) and the owner of the 10% interest in Univision Tower (0.75%): 	 	

Total income (loss) after minority interests in consolidated joint ventures but before allocation to minority interest in operating partnership	    	$	(9,489	)	 	$	8,371	 	
Percentage allocable to minority interest	    	 	62.22	%	 	 	62.22	%	
 	    				 				
 	    	$	(5,904	)	 	$	5,208	 	

 	(II)	 	Pro forma earnings (loss) per share—basic and diluted are calculated by dividing pro forma consolidated net income (loss) by the number of shares of common stock issued in this offering. The stock options issued by the Company do not have a dilutive effect on earnings per share because the market value of the stock for pro forma purposes is equal to the initial public offering price which is equal to the exercise price for the stock options. 	 	
 
F-18 

Table of Contents
Report of Independent Registered 
Public Accounting Firm 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying balance sheet of Digital Realty Trust, Inc. and subsidiary (the Company) as of March 31, 2004. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement based on our audit. 
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Digital Realty Trust, Inc. as of March 31, 2004 in conformity with U.S. generally accepted accounting principles. 
 
KPMG LLP 
 
Los Angeles, California 
July 22, 2004 
 
F-19 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
BALANCE SHEET 

 	  	June 30, 2004
	  	March 31, 2004
	
 	  	(Unaudited)	  	 	
ASSETS	  	 	 	  	 	
Cash 	  	$	2,000	  	2,000	
Deferred offering costs	  	 	2,045,855	  	—  	
 	  			  		
Total assets	  	$	2,047,855	  	2,000	

LIABILITIES AND STOCKHOLDER’S EQUITY	  	 	 	  	 	
Non-interest bearing note payable to an affiliate and total liabilities	  	$	2,045,855	  	—  	
Stockholder’s Equity:	  	 	 	  	 	
Common stock, $.01 par value, 100,000,000 shares authorized; 200 shares issued and outstanding	  	 	2	  	2	
Additional paid-in capital	  	 	1,998	  	1,998	
 	  			  		
Total stockholder’s equity	  	 	2,000	  	2,000	
 	  			  		
Total liabilities and stockholder’s equity	  	$	2,047,855	  	2,000	

 
 
See accompanying notes to balance sheet. 
 
F-20 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Balance Sheet 
March 31, 2004 
 
(1) Organization and Description of Business 
 
Digital Realty Trust, Inc. (the Company) was incorporated in Maryland on March 9, 2004 under the name of Digital Properties Trust, at which time the Company issued 200 shares of its common stock to Global Properties Holdings, LLC in connection with the initial capitalization of the Company. On April 28, 2004, Global Properties Holdings, LLC sold its shares of the Company’s common stock to Global Innovation Partners, LLC (GI Partners) for $2,000. On July 21, 2004, the Company changed its name to Digital Realty Trust, Inc. The Company expects to file a Registration Statement on Form S-11 with the Securities and Exchange Commission with respect to a proposed public offering (the Offering) of common stock. The Company is the sole owner and general partner of Digital Realty Trust, L.P. (the Operating Partnership), which was formed on July 21, 2004 in anticipation of the Offering. Upon completion of the Offering, the Company and the Operating Partnership will continue to operate and expand the business of the Digital Realty Predecessor (the Predecessor). The Predecessor is not a legal entity; rather it is a combination of certain of the real estate subsidiaries of GI Partners along with an allocation of certain assets, liabilities, revenues and expenses of GI Partners related to the real estate held by such subsidiaries. The Predecessor is engaged in the business of ownership, acquisition, repositioning and management of technology-related real estate. Operations of the Company and the Operating Partnership are planned to commence upon completion of the Offering. 
 
The Company and the Operating Partnership together with the investors in GI Partners, the owner of the Predecessor and unrelated third parties (collectively, the Participants) will engage in certain formation transactions (the Formation Transactions). The Formation Transactions are designed to (i) continue the operations of the Predecessor, (ii) acquire additional properties or interests in properties from the Participants, (iii) enable the Company to raise the necessary capital to repay certain mortgage debt relating to certain of the properties and pay other indebtedness, (iv) fund costs, capital expenditures and working capital, (v) provide a vehicle for future acquisitions, (vi) enable the Company to comply with requirements under the federal income tax laws and regulations relating to real estate investment trusts and (vii) preserve tax advantages for certain Participants. 
 
The operations of the Company will be carried on primarily through the Operating Partnership. It is the intent of the Company to elect the status of and qualify as a REIT under Section 856 through 860 of the Internal Revenue Code of 1986, as amended for the taxable year ending December 31, 2004. Pursuant to a contribution agreement among the owner of the Predecessor and the Operating Partnership, which was executed in July 2004, the Operating Partnership will receive a contribution of interests in certain of GI Partners’ properties in exchange for limited partnership interests in the Operating Partnership and the assumption of debt and other specified liabilities. Additionally, pursuant to contribution agreements between the Operating Partnership and third parties, which were also executed in July 2004, the Operating Partnership will receive contributions of interests in certain additional real estate properties in exchange for limited partnership interests in the Operating Partnership and the assumption of specified liabilities. The value of the units that the Operating Partnership will give for contributed property interests and other assets will increase or decrease based on the initial public offering price of the Company’s common stock. The initial public offering price of the Company’s common stock will be determined in consultation with the underwriters. 
 
The Company has committed to purchase a portion of the limited partnership interests that will be issued to GI Partners immediately following the completion of the Offering. The purchase price will be equal to the value of the Operating Partnership units based on the initial public offering price of the Company’s Stock, net of underwriting discounts and commissions and financial advisory fees. Additionally, if the underwriters exercise their over-allotment option, the Company has committed to purchase additional units having a value equal to the net proceeds to the Company from such exercise. 
 
F-21 

Table of Contents
DIGITAL REALTY TRUST, INC. 
 
Notes to Balance Sheet—(Continued) 
March 31, 2004 
 
(2) Income Taxes 
 
As a REIT, the Company will be permitted to deduct distributions paid to its stockholders, eliminating the federal taxation of income represented by such distributions at the Company level. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. 
 
(3) Offering Costs 
 
In connection with the Offering, GI Partners will incur legal, accounting, and related costs, which will be reimbursed by the Company upon completion of the Offering. Such costs will be deducted from the gross proceeds of the Offering. 
 
F-22 

Table of Contents
Report of Independent 
Registered Public Accounting Firm 
 
The Owner 
Digital Realty Predecessor: 
 
We have audited the accompanying combined balance sheets of Digital Realty Predecessor (the Predecessor), as defined in Note 1, as of December 31, 2003 and 2002 and the related combined statements of operations, owner’s equity and comprehensive income (loss), and cash flows for the years then ended and for the period from February 28, 2001 (inception) through December 31, 2001. In connection with our audits of the combined financial statements, we also have audited the financial statement schedule III, Properties and Accumulated Depreciation. These combined financial statements and financial statement schedule are the responsibility of the Predecessor’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits. 
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 
 
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Digital Realty Predecessor as of December 31, 2003 and 2002 and the results of its operations and its cash flows for the years then ended and for the period from February 28, 2001 (inception) through December 31, 2001 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic combined financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. 
 
KPMG LLP 
 
Los Angeles, California 
July 22, 2004 
 
F-23 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Combined Balance Sheets 
(In thousands) 

 	  	 	 	 	December 31,
	 	
 	  	June 30, 2004
	 	 	2003
	 	 	2002
	 	
 	  	(unaudited)	 	 	 	 	 	 	 	
Assets	  	 	 	 	 	 	 	 	 	 	
Investments in real estate:	  	 	 	 	 	 	 	 	 	 	
Land	  	$	93,613	 	 	50,715	 	 	16,304	 	
Acquired ground lease	  	 	1,477	 	 	1,477	 	 	—  	 	
Buildings and improvements	  	 	456,538	 	 	323,981	 	 	190,299	 	
Tenant improvements	  	 	51,177	 	 	28,590	 	 	14,027	 	
 	  				 			 			
 	  	 	602,805	 	 	404,763	 	 	220,630	 	
Accumulated depreciation and amortization	  	 	(20,068	)	 	(13,026	)	 	(3,621	)	
 	  				 			 			
 	  	 	582,737	 	 	391,737	 	 	217,009	 	
Cash and cash equivalents	  	 	4,268	 	 	5,174	 	 	3,578	 	
Accounts and other receivables	  	 	2,152	 	 	1,139	 	 	2,240	 	
Deferred rent	  	 	7,858	 	 	5,178	 	 	1,409	 	
Acquired above market leases, net of accumulated amortization of $2,016 in 2003 and $401 in 2002	  	 	18,953	 	 	11,432	 	 	3,538	 	
Acquired in place lease value and deferred leasing costs, net of accumulated amortization of $10,560 in 2003 and $4,038 in 2002	  	 	104,290	 	 	59,477	 	 	40,057	 	
Deferred financing costs, net of accumulated amortization of $1,157 in 2003 and $345 in 2002	  	 	4,237	 	 	3,396	 	 	1,212	 	
Other assets	  	 	6,742	 	 	2,165	 	 	793	 	
 	  				 			 			
 	  	$	731,237	 	 	479,698	 	 	269,836	 	
 	  				 			 			
Liabilities and Owner’s Equity	  	 	 	 	 	 	 	 	 	 	
				
Notes payable under line of credit	  	$	75,317	 	 	44,436	 	 	53,000	 	
Notes payable under bridge loan	  	 	99,500	 	 	—  	 	 	—  	 	
Mortgage loans	  	 	247,218	 	 	213,429	 	 	85,560	 	
Other secured loans	  	 	51,861	 	 	40,000	 	 	18,000	 	
Accounts payable and accrued expenses	  	 	6,894	 	 	7,117	 	 	7,589	 	
Acquired below market leases, net of accumulated amortization of $5,768 in 2003 and $2,452 in 2002	  	 	23,761	 	 	19,258	 	 	16,891	 	
Security deposits and prepaid rents	  	 	4,337	 	 	3,267	 	 	1,688	 	
Asset management fees payable to related party	  	 	796	 	 	796	 	 	796	 	
 	  				 			 			
 	  	 	509,684	 	 	328,303	 	 	183,524	 	
				
Minority interests	  	 	3,250	 	 	3,444	 	 	3,135	 	
Owner’s equity, including $305 and $463 of accumulated other comprehensive income in 2003 and 2002, respectively	  	 	218,303	 	 	147,951	 	 	83,177	 	
 	  				 			 			
 	  	$	731,237	 	 	479,698	 	 	269,836	 	

 
 
See accompanying notes to combined financial statements. 
 
F-24 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Combined Statements of Operations 
(In thousands) 

 	  	Six months
Ended June 30,
	  	Years Ended
December 31,
	 	 	Period from
February 28,
2001 (inception)
through
December 31,
2001
	 	
 	  	2004
	 	 	2003
	  	2003
	  	2002
	 	 			
 	  	(Unaudited)	  	 	  	 	 	 	 	 	
Revenues:	  	 	 	 	 	 	  	 	  	 	 	 	 	 	
Rental	  	$	34,461	 	 	22,298	  	50,099	  	21,203	 	 	—  	 	
Tenant reimbursements	  	 	5,397	 	 	4,317	  	8,661	  	3,894	 	 	—  	 	
Other	  	 	1,712	 	 	4,222	  	4,328	  	458	 	 	12	 	
 	  				 		  		  			 			
 	  	 	41,570	 	 	30,837	  	63,088	  	25,555	 	 	12	 	
 	  				 		  		  			 			
Expenses:	  	 	 	 	 	 	  	 	  	 	 	 	 	 	
Rental property operating and maintenance	  	 	6,289	 	 	3,638	  	8,624	  	4,997	 	 	—  	 	
Property taxes	  	 	3,833	 	 	2,416	  	4,688	  	2,755	 	 	—  	 	
Insurance	  	 	562	 	 	208	  	626	  	83	 	 	—  	 	
Interest	  	 	7,878	 	 	4,099	  	10,091	  	5,249	 	 	—  	 	
Asset management fees to related party	  	 	1,592	 	 	1,592	  	3,185	  	3,185	 	 	2,663	 	
Depreciation and amortization	  	 	12,218	 	 	7,187	  	16,295	  	7,659	 	 	—  	 	
General and administrative	  	 	157	 	 	43	  	329	  	249	 	 	—  	 	
Other	  	 	2,540	 	 	2,480	  	2,459	  	1,249	 	 	107	 	
 	  				 		  		  			 			
 	  	 	35,069	 	 	21,663	  	46,297	  	25,426	 	 	2,770	 	
 	  				 		  		  			 			
Income (loss) before minority interests	  	 	6,501	 	 	9,174	  	16,791	  	129	 	 	(2,758	)	
						
Minority interests	  	 	(56	)	 	73	  	149	  	190	 	 	—  	 	
 	  				 		  		  			 			
Net income (loss)	  	$	6,557	 	 	9,101	  	16,642	  	(61	)	 	(2,758	)	

 
See accompanying notes to combined financial statements. 
 
F-25 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Combined Statements of Owner’s Equity and Comprehensive Income (Loss) 
 
Six months ended June 30, 2004 (unaudited), 
years ended December 31, 2003 and 2002 and period from 
February 28, 2001 (inception) through December 31, 2001 
(In thousands) 

Contributions	  	$	3,748	 	
Net loss	  	 	(2,758	)	
 	  				
Balance, December 31, 2001	  	 	990	 	
 	  				
Contributions	  	 	86,090	 	
Distributions	  	 	(4,305	)	
		
Net loss	  	 	(61	)	
Other comprehensive income—foreign currency translation adjustments	  	 	463	 	
 	  				
Comprehensive income	  	 	402	 	
 	  				
Balance, December 31, 2002	  	 	83,177	 	
Contributions	  	 	131,181	 	
Distributions	  	 	(82,891	)	
		
Net income	  	 	16,642	 	
Other comprehensive loss—foreign currency translation adjustments	  	 	(158	)	
 	  				
Comprehensive income	  	 	16,484	 	
 	  				
Balance, December 31, 2003	  	 	147,951	 	
Contributions (unaudited)	  	 	103,927	 	
Distributions (unaudited)	  	 	(40,137	)	
		
Net income (unaudited)	  	 	6,557	 	
Other comprehensive income—foreign currency translation adjustments (unaudited)	  	 	5	 	
 	  				
Comprehensive income (unaudited)	  	 	6,562	 	
 	  				
Balance, June 30, 2004 (unaudited)	  	$	218,303	 	

 
See accompanying notes to combined financial statements. 
 
F-26 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Combined Statements of Cash Flows 
(In thousands) 

 	 	Six months
Ended June 30,
	 	 	Years Ended
December 31,
	 	 	Period from
February 28,
2001 (inception)/
through
December 31,
2001
	 	
 	 	2004
	 	 	2003
	 	 	2003
	 	 	2002
	 	 			
 	 	(Unaudited)	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	6,557	 	 	9,101	 	 	16,642	 	 	(61	)	 	(2,758	)	
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minority interests	 	 	(56	)	 	73	 	 	149	 	 	190	 	 	—  	 	
Distributions to joint venture partner	 	 	(138	)	 	(57	)	 	(240	)	 	(395	)	 	 	 	
Write off of net assets due to early lease termination	 	 	2,371	 	 	2,336	 	 	2,094	 	 	1,210	 	 	—  	 	
Depreciation and amortization of buildings and improvements, tenant improvements and acquired ground lease	 	 	7,341	 	 	4,081	 	 	9,480	 	 	3,621	 	 	—  	 	
Amortization of deferred financing costs	 	 	834	 	 	118	 	 	816	 	 	341	 	 	—  	 	
Amortization of debt premium	 	 	(508	)	 	(485	)	 	(970	)	 	(889	)	 	—  	 	
Amortization of acquired in place lease value and deferred leasing costs	 	 	4,877	 	 	3,105	 	 	6,815	 	 	4,038	 	 	—  	 	
Amortization of acquired above market leases and acquired below market leases, net	 	 	(146	)	 	(1,251	)	 	(1,892	)	 	(2,051	)	 	—  	 	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts and other receivables	 	 	(1,013	)	 	180	 	 	1,101	 	 	(2,228	)	 	(12	)	
Deferred rent	 	 	(2,687	)	 	(1,621	)	 	(3,769	)	 	(1,409	)	 	—  	 	
Other assets	 	 	(3,827	)	 	(820	)	 	(2,337	)	 	(43	)	 	—  	 	
Accounts payable and accrued expenses	 	 	333	 	 	(2,622	)	 	(482	)	 	5,633	 	 	107	 	
Security deposits and prepaid rent	 	 	1,070	 	 	409	 	 	1,579	 	 	1,688	 	 	—  	 	
Asset management fee payable to related party	 	 	—  	 	 	796	 	 	—  	 	 	—  	 	 	796	 	
 	 				 			 			 			 			
Net cash provided by (used in) operating activities	 	 	15,008	 	 	13,343	 	 	28,986	 	 	9,645	 	 	(1,867	)	
 	 				 			 			 			 			
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisitions of properties	 	 	(223,920	)	 	(104,405	)	 	(210,318	)	 	(163,363	)	 	—  	 	
Deposits paid for acquisitions of properties	 	 	(750	)	 	—  	 	 	—  	 	 	(750	)	 	(1,881	)	
Improvements to investments in real estate	 	 	(3,077	)	 	(2,715	)	 	(4,945	)	 	(642	)	 	—  	 	
 	 				 			 			 			 			
Net cash used in investing activities	 	 	(227,747	)	 	(107,120	)	 	(215,263	)	 	(164,755	)	 	(1,881	)	
 	 				 			 			 			 			
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Borrowings under line of credit	 	 	99,381	 	 	42,575	 	 	91,436	 	 	53,000	 	 	—  	 	
Repayments under line of credit	 	 	(68,500	)	 	—  	 	 	(100,000	)	 	—  	 	 	—  	 	
Borrowings under bridge loan	 	 	99,500	 	 	—  	 	 	—  	 	 	—  	 	 	—  	 	
Proceeds from mortgage loans	 	 	20,000	 	 	14,000	 	 	131,420	 	 	23,173	 	 	—  	 	
Principal payments on mortgage loans	 	 	(640	)	 	(2,085	)	 	(2,673	)	 	(1,057	)	 	—  	 	
Proceeds from other secured loans	 	 	—  	 	 	—  	 	 	22,000	 	 	—  	 	 	—  	 	
Principal payments on other secured loans	 	 	(23	)	 	—  	 	 	—  	 	 	—  	 	 	—  	 	
Payment of loan fees and costs	 	 	(1,675	)	 	(327	)	 	(3,000	)	 	(1,553	)	 	—  	 	
Contribution from joint venture partner	 	 	—  	 	 	225	 	 	400	 	 	3,340	 	 	—  	 	
Contributions from owner	 	 	103,927	 	 	64,955	 	 	131,181	 	 	86,090	 	 	3,748	 	
Distributions to owner	 	 	(40,137	)	 	(27,118	)	 	(82,891	)	 	(4,305	)	 	—  	 	
 	 				 			 			 			 			
Net cash provided by financing activities	 	 	211,833	 	 	92,225	 	 	187,873	 	 	158,688	 	 	3,748	 	
 	 				 			 			 			 			
Net increase (decrease) in cash and cash equivalents	 	 	(906	)	 	(1,552	)	 	1,596	 	 	3,578	 	 	—  	 	
Cash and cash equivalents, beginning of period	 	 	5,174	 	 	3,578	 	 	3,578	 	 	—  	 	 	—  	 	
 	 				 			 			 			 			
Cash and cash equivalents, end of period	 	$	4,268	 	 	2,026	 	 	5,174	 	 	3,578	 	 	—  	 	
 	 				 			 			 			 			
Supplemental disclosure of cash flow information	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the period for interest	 	 	7,104	 	 	4,450	 	 	10,088	 	 	4,945	 	 	—  	 	
Supplemental disclosure of noncash investing and financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Increase (decrease) in net assets related to foreign currency translation adjustments	 	 	5	 	 	(176	)	 	(158	)	 	463	 	 	—  	 	
Accrual for additions to investments in real estate included in accounts payable and accrued expenses	 	 	1,104	 	 	1,317	 	 	1,859	 	 	1,849	 	 	—  	 	
Allocation of purchase of properties to:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments in real estate	 	 	171,373	 	 	88,895	 	 	180,546	 	 	137,319	 	 	—  	 	
Acquired above market leases	 	 	9,503	 	 	6,948	 	 	10,614	 	 	4,281	 	 	—  	 	
Acquired below market leases	 	 	(6,908	)	 	(5,322	)	 	(6,964	)	 	(19,343	)	 	—  	 	
Acquired in place lease value	 	 	50,497	 	 	13,884	 	 	26,122	 	 	44,015	 	 	—  	 	
Loan premium	 	 	(545	)	 	—  	 	 	—  	 	 	(2,909	)	 	 	 	
 	 				 			 			 			 			
Cash paid for acquisition of properties	 	 	223,920	 	 	104,405	 	 	210,318	 	 	163,363	 	 	—  	 	
Mortgage loans assumed in connection with the acquisition of a property	 	 	14,392	 	 	—  	 	 	—  	 	 	60,648	 	 	—  	 	
Other secured loan assumed in connection with the acquisition of a property	 	 	11,884	 	 	—  	 	 	—  	 	 	—  	 	 	—  	 	
Other secured loan obtained from seller of real estate	 	 	—  	 	 	—  	 	 	—  	 	 	18,000	 	 	—  	 	
Purchase deposits applied to acquisitions of properties	 	 	—  	 	 	750	 	 	750	 	 	1,881	 	 	—  	 	
 	 				 			 			 			 			
Total purchase price	 	 	250,196	 	 	105,155	 	 	211,068	 	 	243,892	 	 	—  	 	
 
See accompanying notes to combined financial statements. 
 
F-27 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements 
December 31, 2003 and 2002 
 
(1) Organization 
 
Digital Realty Predecessor (the Predecessor) is owned by Global Innovation Partners, LLC, a Delaware limited liability company (GI Partners). The Predecessor is not a legal entity; rather it is a combination of certain of the real estate subsidiaries of GI Partners along with an allocation of certain assets, liabilities, revenues and expenses of GI Partners related to the real estate held by such subsidiaries, as described below in Note (2)(a). The Predecessor is engaged in the business of ownership, acquisition, repositioning, and management of technology-related real estate. 
 
The Predecessor commenced operations on January 10, 2002 when it acquired its first investment in real estate. GI Partners was formed on February 28, 2001 by and between California Public Employees’ Retirement System (CalPERS), Global Innovation Contributors, LLC (GIC), and Global Innovation Manager, LLC (the Manager) (collectively, the Members). 
 
In anticipation of an initial public offering (the Offering) of the common stock of Digital Realty Trust, Inc. (the REIT), which is expected to be completed in 2004, the REIT and a majority owned limited partnership that the REIT formed on July 21, 2004, Digital Realty Trust, L.P. (the Operating Partnership), together with GI Partners and unrelated third parties (collectively, the Participants), will engage in certain formation transactions (the Formation Transactions). The Formation Transactions are designed to (i) continue the operations of the Predecessor, (ii) acquire additional properties or interests from third parties, (iii) enable the REIT to raise necessary capital to repay certain mortgage debt relating to certain of the properties and pay other indebtedness, (iv) fund costs, capital expenditures and working capital, (v) provide a vehicle for future acquisitions, (vi) enable the REIT to comply with requirements under the federal income tax laws and regulations relating to real estate investment trusts and (vii) preserve tax advantages for certain Participants. 
 
The operations of the REIT will be carried on primarily through the Operating Partnership. It is the intent of the REIT to elect the status of and qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended for the taxable year ending December 31, 2004. The REIT will be the sole general partner in the Operating Partnership. Pursuant to a contribution agreement among the owner of the Predecessor and the Operating Partnership, which was executed in July 2004, the Operating Partnership will receive a contribution of interests in the real estate properties in exchange for limited partnership interests in the Operating Partnership and the assumption of debt and other specified liabilities. 
 
The REIT has committed to purchase a portion of the limited partnership interests that will be issued to GI Partners immediately following the completion of the Offering. The purchase price will be equal to the value of the Operating Partnership units based on the initial public offering price of the REIT’s stock, net of underwriting discounts and commissions and financial advisory fees. Additionally, if the underwriters exercise their over-allotment option, the REIT has committed to purchase additional units from these members having a value equal to the net proceeds from such exercise. 
 
(2) Summary of Significant Accounting Policies 
 
(a) Principles of Combination 
 
The accompanying combined financial statements include the wholly owned real estate subsidiaries and majority owned real estate joint ventures that GI Partners intends to contribute to the Operating Partnership in connection with the Offering, including Carrier Center (unaudited) beginning May 25, 2004 upon acquisition of the property. The Operating Partnership has an option to acquire Carrier Center and management believes that it is probable that the Operating Partnership will acquire Carrier Center as of the consummation of the Formation Transactions and completion of the Offering. The interests of the joint venture partners, all of whom are third parties, are reflected in minority interests in the accompanying combined financial statements. 
 
F-28 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
The accompanying combined financial statements do not include the real estate subsidiaries for the properties owned by GI Partners that are subject to right of first offer agreements, whereby the Operating Partnership has the right to make the first offer to purchase these properties if GI Partners decides to sell them, since management believes that it is not currently probable that the Operating Partnership will acquire these properties as the properties are presently vacant. The accompanying combined financial statements also do not include any of GI Partners’ investments in privately held companies, which GI Partners also does not intend to contribute to the Operating Partnership. 
 
The accompanying combined statements include an allocation of GI Partners’ line of credit to the extent that such borrowings and the related interest expense relate to acquisitions of the real estate owned by the subsidiaries and joint ventures that GI Partners intends to contribute to the Operating Partnership. Additionally, the accompanying combined financial statements include an allocation of asset management fees to a related party incurred by GI Partners along with an allocation of the liability for any such fees that are unpaid as of the balance sheet dates and an allocation of GI Partners’ general and administrative expenses. 
 
(b) Cash Equivalents 
 
For purpose of the combined statements of cash flows, the Predecessor considers short-term investments with maturities of 90 days or less when purchased to be cash equivalents. As of December 31, 2003 and 2002, cash equivalents consist of investments in a money market fund. 
 
(c) Investments in Real Estate 
 
Investments in real estate are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are recorded on a straight line basis over the estimated useful lives as follows: 

Acquired ground lease	  	99 years	
		
Buildings and improvements	  	39 years	
		
Tenant improvements	  	Shorter of the useful lives or the terms of the related leases	
 
Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred. 
 
(d) Impairment of Long-Lived Assets 
 
The Predecessor assesses whether there has been impairment in the value of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Management believes no impairment in the net carrying values of the investments in real estate has occurred. 
 
(e) Purchase Accounting for Acquisition of Investments in Real Estate 
 
Purchase accounting is applied to the assets and liabilities related to all real estate investments acquired by the Predecessor. In accordance with Statement of Financial Accounting Standards No. 141, Business Combinations, the fair value of the real estate acquired is allocated to the acquired tangible assets, consisting primarily of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of 
 
F-29 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
the value of above-market and below-market leases, other value of in-place leases, value of tenant relationships and acquired ground leases, based in each case on their fair values. Loan premiums, in the case of above market rate loans, or loan discounts, in the case of below market loans, are recorded based on the fair value of any loans assumed in connection with acquiring the real estate. 
 
The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land (or acquired ground lease if the land is subject to a ground lease), building and tenant improvements based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. 
 
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in–place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods. The leases do not currently include any below market fixed rate renewal periods. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values, also referred to as acquired lease obligations, are amortized as an increase to rental income over the initial terms of the respective leases and any below market fixed rate renewal periods. 
 
In addition to the intangible value for above market leases and the intangible negative value for below market leases, there is intangible value related to having tenants leasing space in the purchased property, which is referred to as in-place lease value and tenant relationship value. Such value results primarily from the buyer of a leased property avoiding the costs associated with leasing the property including tenant improvement allowances and leasing commissions and also avoiding rent losses and unreimbursed operating expenses during the lease up period. The aggregate fair value of in-place leases and tenant relationships is equal to the excess of (i) the fair value of a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease value and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenant relationships has not been separated from in-place lease value for the real estate acquired by the Predecessor because such value and its consequence to amortization expense is immaterial for these particular acquisitions. Should future acquisitions of properties result in allocating material amounts to the value of tenant relationships, an amount would be separately allocated and amortized over the estimated life of the relationship. The value of in-place leases exclusive of the value of above-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off. 
 
(f) Deferred Leasing Costs 
 
Deferred leasing commissions and other direct costs associated with the acquisition of tenants are capitalized and amortized on a straight line basis over the terms of the related leases. 
 
F-30 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
(g) Foreign Currency Translation 
 
Assets and liabilities of the subsidiary that owns a real estate investment located in London, England are translated into U.S. dollars using year-end exchange rates except for the portion subject to a foreign currency forward contract discussed in Note (2)(h); income and expenses are translated using the average exchange rates for the reporting period. The functional currency of this subsidiary is the British pound. Translation adjustments are recorded as a component of accumulated other comprehensive income. 
 
(h) Foreign Currency Forward Contract 
 
The Predecessor accounts for its foreign currency hedging activities in accordance with FASB Statement No. 133, Accounting for Derivative Instruments and Certain Hedging Activities, and FASB Statement No. 52, Foreign Currency Translation. 
 
Changes in the fair value of foreign currency forward contracts that are highly effective as hedges are designated and qualify as foreign currency hedges, and are used as a hedge of a net investment in a foreign operation, are recorded as a component of accumulated other comprehensive income. 
 
The terms of the foreign currency forward contract held as of December 31, 2003, which has a notional amount denominated in British pounds, of £7,850,000, was used to convert the balances of the investment in real estate located in London, England into U.S. dollars. The fair value of such forward contract was $(1,350,000) as of December 31, 2003 and this is included in other comprehensive loss included in owner’s equity. The Predecessor had no forward contracts at December 31, 2002. 
 
(i) Deferred Financing Costs 
 
Loan fees and costs related to the Predecessor’s loans are capitalized and amortized over the life of the related loans on a straight line basis, which approximates the effective interest method. Such amortization is included as a component of interest expense. 
 
(j) Income Taxes 
 
No provision has been made in the combined financial statements for income taxes, as any such taxes are the responsibility of GI Partners’ Members, as GI Partners is a limited liability company. To the extent that any United Kingdom taxes are incurred by the subsidiary invested in real estate located in London, England, a provision is made for such taxes. There were no such taxes for the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) to December 31, 2001. 
 
(k) Revenue Recognition 
 
All leases are classified as operating leases and minimum rents are recognized on a straight line basis over the terms of the leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in deferred rent in the accompanying combined balance sheets and contractually due but unpaid rents are included in accounts and other receivables. 
 
Tenant reimbursements for real estate taxes, common area maintenance, and other recoverable costs are recognized in the period that the expenses are incurred. Lease termination fees, which are included in other income in the accompanying combined statements of operations, are recognized when the related leases are canceled and the Predecessor has no continuing obligation to provide services to such former tenants. 
 
A provision for possible loss is made if the receivable balances related to contractual rent, rent recorded on a straight line basis, and tenant reimbursements are considered to be uncollectible. 
 
F-31 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
(l) Unaudited Interim Combined Financial Information 
 
The combined financial statements as of June 30, 2004 and for the six months ended June 30, 2004 and 2003 are unaudited. In the opinion of management, such financial statements reflect all adjustments necessary for a fair presentation of the results of the respective interim periods. All such adjustments are of normal and recurring nature. 
 
(m) Management’s Estimates and Critical Accounting Policies 
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates made. 
 
Management has identified certain critical accounting policies that affect management’s more significant judgments and estimates used in the preparation of the Predecessor’s combined financial statements. On an on going basis, management evaluates estimates related to critical accounting policies, including those related to revenue recognition and the allowance for doubtful accounts receivable and investments in real estate and asset impairment. The estimates are based on information that is currently available to management and on various other assumptions that management believes are reasonable under the circumstances. 
 
Management must make estimates related to the collectibility of accounts receivable related to minimum rent, deferred rent, expense reimbursements, lease termination fees and other income. Management specifically analyzes accounts receivable and historical bad debts, tenant concentrations, tenant creditworthiness, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts receivable. These estimates have a direct impact on the Predecessor’s net income, because a higher bad debt allowance would result in lower net income. 
 
Management is required to make subjective assessments as to the useful lives of the properties for purposes of determining the amount of depreciation to record on an annual basis with respect to the Predecessor’s investments in real estate. These assessments have a direct impact on the Predecessor’s net income because if management were to shorten the expected useful lives of the Predecessor’s investments in real estate, the Predecessor would depreciate such investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis. 
 
Management is required to make subjective assessments as to whether there are impairments in the values of the Predecessor’s investments in real estate. These assessments have a direct impact on the Predecessor’s net income because recording an impairment loss results in an immediate negative adjustment to net income. 
 
Management is required to make subjective assessments as to the fair value of assets and liabilities in connection with purchase accounting related to real estate acquired by the Predecessor. These assessments have a direct impact on the Predecessor’s net income subsequent to the acquisition of the additional interests as a result of depreciation and amortization being recorded on these assets and liabilities over the expected lives of the related assets and liabilities. 
 
Management estimates the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs, similar to the income approach that is commonly utilized by appraisers. 
 
F-32 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
(3) Investments in Real Estate 
 
The Predecessor’s investments in real estate consist of equity investments in technology-related properties. The properties include telecommunications infrastructure, information technology infrastructure, technology manufacturing, and technology office/corporate headquarters facilities. As of December 31, 2003, the Predecessor held 13 properties; 12 located in seven states within the United States and one located in London, England, with 29% and 27% of the carrying value of the investments in real estate comprised of properties located in Texas and California, respectively. As of December 31, 2002, the Predecessor held five properties located in four states within the United States and one located in London, England, with 36% and 25% of the carrying value of the investments in real estate comprised of properties located in Texas and New Jersey, respectively. 
 
The Predecessor has a 90% ownership interest in a property known as Univision Tower, located in Texas. The minority partner’s 10% share is reflected in minority interests in the accompanying combined financial statements. 
 
The Predecessor has a 98% ownership interest in a property known as Stanford Place II, located in Colorado. The minority partner’s 2% share is reflected in minority interests in the accompanying combined financial statements. Distributions from this joint venture are allocated based on the stated percentage interests until distributions exceed the amount required to return all capital plus a 15% return. After that, disproportionate allocations are made based on the formulas described in the joint venture agreement whereby the 2% joint venture partner is allocated a larger share. 
 
(4) Debt 
 
(a) Line of Credit 
 
GI Partners has a $100,000,000 revolving credit facility with several banks and a financial services company, which expires on December 31, 2004. GI Partners is currently negotiating with the lenders to obtain a 12-month extension for this facility. Advances under the facility are secured by unfunded capital commitments of GI Partners. Outstanding advances totaled $60,000,000 and $57,000,000 as of December 31, 2003 and 2002, respectively, of which $44,436,000 and $53,000,000 has been allocated to the Predecessor since these borrowings relate to the Predecessor’s real estate investments. Available credit under the line is reduced by amounts set aside for GI Partners’ obligations under outstanding letters of credit. There were no outstanding letters of credit as of December 31, 2003 and 2002. 
 
Outstanding advances under the line of credit bear interest at variable rates based on LIBOR plus 0.875% or the reference rate, as defined in the revolving credit agreement, at the option of GI Partners. As of December 31, 2003 and 2002, all of the outstanding advances have been designated as LIBOR advances and the applicable borrowing rates from the various advances range from 2.025% to 2.045% as of December 31, 2003 and 2.275% to 2.635% as of December 31, 2002. Interest is payable monthly. 
 
Commitment fees equal to 0.2% per annum of the unused maximum commitment under this line of credit are due quarterly if the unused maximum commitment is greater than or equal to one-half of the maximum commitment under the credit facility. However, commitment fees equal to 0.15% per annum of the unused maximum commitment are due quarterly if the unused maximum commitment is less than one-half of the maximum commitment. Additionally, a letter of credit fee equal to 1% per annum of the daily stated amount of each letter of credit issued under the credit facility is due quarterly. 
 
Advances under the line of credit may be prepaid and reborrowed without penalty. The loan agreement includes certain covenants. Management believes that GI Partners has complied with these loan covenants. 
 
F-33 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
(b) Mortgage and Other Secured Loans 
 
Mortgage and other secured loans consist of the following as of December 31, 2003 and 2002 (in thousands): 

 	  	2003
	  	2002
	
Mortgage loans:	  	 	 	  	 	 	
Loan payable to a financial institution, secured by the Ardenwood Corporate Park, VarTec Building and NTT /Verio Premier Data Center properties. The loan bears interest, payable monthly, at the one-month LIBOR plus 1.59% (2.61% at December 31, 2003). Interest is due monthly. Principal is due at maturity on August 9, 2006. The loan may be extended at the Predecessor’s option for one thirteen-month period and one one-year period if certain conditions exist and upon payment of a 0.125% extension fee.	  	$	43,000	  	$	—  	
Loan payable to an insurance company, secured by the Univision Tower property. The loan bears interest at 7.52%. Monthly payments of principal and interest at $327. Outstanding principal is due at maturity on January 1, 2005.	  	 	39,856	  	 	40,747	
Loans payable to an insurance and mortgage company, secured by the Stanford Place II property. The loans bear interest at 5.14%, payable monthly. Principal is due at maturity on January 10, 2009.	  	 	26,000	  	 	—  	
Loan payable to Bank of Scotland, denominated in pounds sterling; secured by the Camperdown House property. The loan bears interest at 6.845%. Interest is due quarterly. Beginning November 2004, quarterly principal and interest payments based on a ten-year amortization schedule are due. Outstanding principal is due at maturity on October 31, 2009.	  	 	23,079	  	 	22,988	
Loan payable to an insurance company, secured by the Granite Tower property. The loan bears interest, payable monthly, at 2.37% through December 2003, and at the three-month LIBOR plus 1.20% thereafter. Beginning February 2005, monthly principal payments of $45 are required. The loan matures on January 1, 2009. Beginning January 2006, the Predecessor has a one-time option to convert the interest rate to a fixed rate based on the then available fixed rates if certain conditions exist and upon payment of a 1% conversion fee. If the interest rate is converted, monthly principal and interest payments based on a 30-year amortization schedule are required.	  	 	21,645	  	 	—  	
Loans payable to a bank, secured by the 36 Northeast Second Street property. The first mortgage bears interest, payable monthly, at the greater of 4% or one of the two variable rates as defined in the loan agreement. The applicable rate at December 31, 2003 and 2002 is 4%. Principal payments of $23 are due monthly. Outstanding principal is due at maturity on May 1, 2005. The second mortgage, which had a principal balance of $945 at December 31, 2002, was repaid during 2003.	  	 	18,024	  	 	19,805	
Loan payable to a bank, secured by the Maxtor Manufacturing Facility property. The loan bears interest, payable monthly, at the one-month LIBOR plus 2.25% (3.37% at December 31, 2003) and monthly principal payments of $35 are due beginning in January 2005 and the remaining principal is due at maturity on December 31, 2006. The loan may be extended for two one-year periods at the Predecessor’s option if certain conditions are met and upon prepayment of an extension fee of 0.35% .	  	 	18,000	  	 	—  	
 
F-34 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 

 	  	2003
	  	2002
	
Loan payable to a bank, secured by the ASM Lithography Facility property. The loan bears interest, payable monthly, at the greater of 4.75% or the one-month LIBOR plus 2.75% (the applicable rate is 4.75% at December 31, 2003). Beginning August 5, 2004, monthly principal payments are due based on a twenty-five year amortization period. The loan matures on June 30, 2006. The loan may be extended at the Predecessor’s option for two one-year periods if certain conditions exist and upon payment of a 0.5% extension fee.	  	$	14,000	  	$	—  	
Loan payable to an insurance company, secured by the AT&T Web Hosting Facility property. The loan bears interest, payable monthly, at the three-month LIBOR plus 1.85% (3.02% at December 31, 2003). Principal is due at maturity on December 1, 2006. The loan may be extended at the Predecessor’s option for two one-year periods if certain conditions exist.	  	 	8,775	  	 	—  	
 	  			  			
Total principal outstanding	  	 	212,379	  	 	83,540	
Loan premium	  	 	1,050	  	 	2,020	
 	  			  			
Total mortgage loans	  	$	213,429	  	$	85,560	
 	  			  			
Other secured loans:	  	 	 	  	 	 	
Loan payable to a financial institution, secured by the Predecessor’s interests in the subsidiaries that own the Ardenwood Corporate Park, VarTec Building, and NTT/Verio Premier Data Center properties. The loan bears interest at 5.875% through September 2003, and at the one-month LIBOR plus 5.75% thereafter (6.77% at December 31, 2003). Interest is due monthly. Outstanding principal is due at maturity on August 9, 2006. The loan may be extended at the option of the borrower for one thirteen-month period and one one-year period if certain conditions exist and upon payment of a .125% extension fee.	  	$	22,000	  	$	—  	
Loan payable to the former owner of the Univision Tower property. This loan is secured by all of the partnership interests in the majority-owned partnership that holds title to the real estate. The loan bears interest at 8%. Monthly payments of interest are due as described in the promissory note based, in part, on available cash flow. Principal and unpaid interest is due at maturity on January 31, 2007. The seller has made certain guaranties related to collectibility of rents from the tenants for a period of three years from the date of acquisition of the property. Any amounts due under such guaranties will be used to reduce amounts outstanding under this loan.	  	 	18,000	  	 	18,000	
 	  			  			
 	  	$	40,000	  	$	18,000	

The terms of loan agreements for most of the mortgage and other secured loans require prepayment penalties if the principal is prepaid. The loans secured by Ardenwood Corporate Park, VarTec Building and NTT/Verio Premier Data Center do not permit prepayment before October 8, 2005 and the loans secured by Granite Tower and AT&T Web Hosting Facility do not permit prepayment until January 1, 2006 and November 25, 2004, respectively. 
 
GI Partners has made certain guaranties with respect to certain of the Predecessor’s loans and expects that such guaranties will be released upon consummation of the formation transactions and the Offering. 
 
F-35 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
The minimum principal payments due for the mortgage and other secured loans in each of the next five years and thereafter are as follows (in thousands): 

2004	  	$	1,739	
2005	  	 	59,566	
2006	  	 	107,305	
2007	  	 	20,484	
2008	  	 	2,620	
Thereafter	  	 	60,665	
 	  			
 	  	$	252,379	

On March 5, 2004, the Predecessor borrowed $20,000,000 under a mortgage loan secured by the property acquired in February 2004 (note 8). This mortgage loan bears interest, payable monthly, at an annual rate of LIBOR plus 1.7% and principal is due at maturity on April 1, 2009. 
 
On May 25, 2004, the Predecessor assumed a mortgage loan with an outstanding balance of $14,392,000 (unaudited) and a mezzanine loan with an outstanding balance of $11,884,000 (unaudited) in connection with the acquisition of the Carrier Center property (note 9). 
 
(c) Bridge Loan (unaudited) 
 
During May and June 2004, the Predecessor borrowed an aggregate of $99,500,000 under a bridge loan facility. These borrowings are secured by five of the Predecessor’s investments in real estate, Savvis Data Center, Brea Data Center, Siemens Building, Hudson Corporate Center and Comverse Technology Building. The borrowings bear interest at one-month LIBOR plus 2% (3.24% as of June 30, 2004), payable monthly, and principal is due July 28, 2004. This bridge loan is expected to be replaced with another bridge loan from the same lender and that loan is expected to be repaid upon the completion of the offering. 
 
(5) Minimum Future Rentals 
 
The following is a schedule of minimum future rentals to be received on noncancelable operating leases as of December 31, 2003 (in thousands): 

2004	  	$	55,232	
2005	  	 	56,268	
2006	  	 	55,195	
2007	  	 	52,881	
2008	  	 	50,212	
Thereafter	  	 	185,956	
 	  			
 	  	$	455,744	

The above future minimum rentals do not include amounts for tenant reimbursement revenue. 
 
(6) Asset Management and Other Fees to Related Parties 
 
Pursuant to the terms of GI Partners’ Limited Liability Company Agreement, dated February 28, 2001 (the Agreement), Global Innovation Advisor, LLC (the Asset Manager), an affiliate of the Manager, receives an asset 
 
F-36 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
management fee from GI Partners. During the Investment Period, as defined, the asset management fee is equal to 1.25% per annum of Capital Commitments, as defined, and after the Investment Period ends, the management fee is equal to 1% of the unreturned Capital Contributions. Management fees are paid quarterly, in arrears. 
 
For the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) through December 31, 2001, asset management fees of $6,263,000, $6,579,000, and $5,500,000, respectively, were incurred by GI Partners based on the Investment Period formula. Asset management fees totaling $3,185,000, $3,185,000 and $2,663,000 have been allocated to the Predecessor for the years ended December 31, 2003 and 2002 and the period from February 28, 2001 (inception) through December 31, 2001, respectively. Although neither the REIT nor the Operating Partnership are or will be parties to the Agreement requiring the payment of the asset management fees, an allocation of such fees has been included in the accompanying combined financial statements since such fee is essentially the Predecessor’s historical general and administrative expense. The Predecessor does not directly incur personnel costs, home office space rent or other general and administrative expenses that are expected to be incurred directly by the REIT and the Operating Partnership subsequent to the completion of the Offering. These types of expenses were historically incurred by the Asset Manager and were passed through to GI Partners via the asset management fee. 
 
The allocation of asset management fees to the Predecessor was made based on the ratio of (a) the sum of GI Partners’ Capital Contributions invested in real estate as of December 31, 2003, including the Predecessor’s properties and the properties for which the Predecessor has rights of first offer, plus an estimate of future GI Partners’ Capital Contributions that will be utilized to acquire properties for the Predecessor during 2004 to (b) total Capital Commitments to GI Partners. Management expects the Investment Period to end during 2004 and thereafter asset management fees would be allocated to the Predecessor based on the ratio of unreturned Capital Contributions invested in the Predecessor’s properties to total unreturned Capital Contributions for GI Partners. Management believes that the method used to allocate asset management fees is reasonable. 
 
The Agreement also requires that the asset management fees payable by GI Partners for any quarter will be reduced by 50% of the amount of Creditable Fees, as defined, received during the immediately preceding quarter. Since Creditable Fees relate only to GI Partners’ private equity investments, no reduction of the asset management fee related to Creditable Fees has been allocated to the Predecessor. 
 
Additionally, the Agreement provides for payment of additional compensation, not encompassed in the management fee, to the Asset Manager or its affiliates for related real estate services. 
 
The following schedule presents fees incurred by GI Partners and earned by affiliates of the Asset Manager for the years ended December 31 (in thousands): 

 	  	2003
	  	2002
	
Lease commissions	  	$	1,092	  	$	116	
Brokerage fees	  	 	491	  	 	208	
Property management fees	  	 	288	  	 	11	
Property management salaries	  	 	114	  	 	—  	
Construction management fees	  	 	4	  	 	—  	
 	  			  			
 	  	$	1,989	  	$	335	

F-37 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
Notes to Combined Financial Statements—(Continued) 
December 31, 2003 and 2002 
 
(7) Fair Value of Financial Instruments 
 
As of December 31, 2003 and 2002, the fair values of the Predecessor’s variable rate loans, comprised of notes payable under a line of credit and certain mortgage loans and other secured loans are approximated by the carrying values as the terms are similar to those currently available to the Predecessor for debt with similar risk and the same remaining maturities. The fair value of the fixed rate mortgage and other secured loans aggregates $110,000,000 compared to the aggregate carrying amount of $106,935,000 as of December 31, 2003 and $87,000,000 compared to the aggregate carrying amount of $81,735,000 as of December 31, 2002. 
 
The carrying amounts for cash equivalents, accounts and other receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of the forward currency forward contract is discussed in note 2 (h). 
 
(8) Commitments and Contingencies 
 
As of December 31, 2003, the Predecessor had entered into purchase agreements to acquire a property located in Massachusetts known as 100 Technology Drive for $38,100,000 and a property located in Texas known as the Siemens Building for $17,200,000. These purchases were consummated in February and April 2004, respectively. 
 
The property known as ASM Lithography Facility is subject to an operating ground lease that expires in the year 2101. Rental expense for the period from acquisition of this property in May 2003 through December 31, 2003 totaled $198,000. The following is a schedule of minimum lease commitments for the ground lease as of December 31, 2003 (in thousands): 

2004	  	$	241	
2005	  	 	241	
2006	  	 	241	
2007	  	 	241	
2008	  	 	241	
Thereafter	  	 	9,814	
 	  			
 	  	$	11,019	

(9) Investments in Real Estate Acquired During the Six Months Ended June 30, 2004 (unaudited) 
 
In addition to the acquisitions of 100 Technology Drive and Siemens Building (note 8), the Predecessor acquired Carrier Center, Savvis Data Center, and Comverse Technology Building during the six months ended June 30, 2004. Carrier Center, which is located in Los Angeles, California, was purchased for approximately $75,000,000 on May 25, 2004, Savvis Data Center, which is located in Santa Clara, California, was purchased for approximately $60,000,000 on May 25, 2004 and Comverse Technology Building, which is located in Wakefield, Massachusetts, was purchased for approximately $58,000,000 on June 16, 2004. 
 
F-38 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
SCHEDULE III 
PROPERTIES AND ACCUMULATED DEPRECIATION 
DECEMBER 31, 2003 
(In thousands) 

 	 	 	 	 	Initial Costs
	 	Costs Capitalized
Subsequent to
Acquisition
	 	Total Costs
	 	 	 	 	 	
Description
	 	Encumbrances
	 	 	Land
	 	Acquired
Ground Lease
	 	Buildings
and
Improvements
	 	Improvements
	 	Carrying
Costs
	 	Land
	 	Acquired
Ground Lease
	 	Buildings
and
Improvements
	 	Total
	 	Accumulated
Depreciation
and Amortization
	 	Date of
Acquis.(A)
Constr.(C)
	 	
PROPERTIES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Univision Tower
Dallas, TX	 	$	39,856	 	 	$	1,838	 	$	—  	 	$	77,604	 	$	2,315	 	$	—  	 	$	1,838	 	$	—  	 	$	79,919	 	$	81,757	 	$	4,757	 	2002	(A)	
36 Northeast Second Street
Miami, FL	 	 	18,024	 	 	 	1,943	 	 	—  	 	 	24,184	 	 	154	 	 	—  	 	 	1,943	 	 	—  	 	 	24,338	 	 	26,281	 	 	1,504	 	2002	(A)	
Camperdown House London, UK	 	 	23,079	 	 	 	3,776	 	 	—  	 	 	28,166	 	 	1,410	 	 	—  	 	 	3,776	 	 	—  	 	 	29,576	 	 	33,352	 	 	1,154	 	2002	(A)	
Hudson Corporate Center
Weehawken, NJ	 	 	—  	 	 	 	5,140	 	 	—  	 	 	48,526	 	 	271	 	 	—  	 	 	5,140	 	 	—  	 	 	48,797	 	 	53,937	 	 	1,876	 	2002	(A)	
NTT/Verio Premier Data Center
San Jose, CA	 	 	13,000	*	 	 	3,607	 	 	—  	 	 	23,008	 	 	—  	 	 	—  	 	 	3,607	 	 	—  	 	 	23,008	 	 	26,615	 	 	833	 	2002	(A)	
Ardenwood Corporate Park
Fremont, CA	 	 	25,000	*	 	 	15,330	 	 	—  	 	 	32,419	 	 	—  	 	 	—  	 	 	15,330	 	 	—  	 	 	32,419	 	 	47,749	 	 	1,121	 	2003	(A)	
VarTec Building Carrollton, TX	 	 	5,000	*	 	 	1,477	 	 	—  	 	 	10,330	 	 	—  	 	 	—  	 	 	1,477	 	 	—  	 	 	10,330	 	 	11,807	 	 	365	 	2003	(A)	
ASM Lithography Facility
Tempe, AZ	 	 	14,000	 	 	 	—  	 	 	1,477	 	 	16,471	 	 	—  	 	 	—  	 	 	—  	 	 	1,477	 	 	16,471	 	 	17,948	 	 	298	 	2003	(A)	
AT&T Web Hosting Facility
Atlanta, GA	 	 	8,775	 	 	 	1,250	 	 	—  	 	 	11,577	 	 	87	 	 	—  	 	 	1,250	 	 	—  	 	 	11,664	 	 	12,914	 	 	164	 	2003	(A)	
Granite Tower
Dallas, TX	 	 	21,645	 	 	 	3,643	 	 	—  	 	 	22,060	 	 	4	 	 	—  	 	 	3,643	 	 	—  	 	 	22,064	 	 	25,707	 	 	228	 	2003	(A)	
Brea Data Center
Brea, CA	 	 	—  	 	 	 	3,777	 	 	—  	 	 	4,611	 	 	—  	 	 	—  	 	 	3,777	 	 	—  	 	 	4,611	 	 	8,388	 	 	95	 	2003	(A)	
Maxtor
Manufacturing Facility
Fremont, CA	 	 	18,000	 	 	 	5,272	 	 	—  	 	 	20,166	 	 	—  	 	 	—  	 	 	5,272	 	 	—  	 	 	20,166	 	 	25,438	 	 	129	 	2003	(A)	
Stanford Place II Denver, CO	 	 	26,000	 	 	 	3,662	 	 	—  	 	 	29,183	 	 	25	 	 	—  	 	 	3,662	 	 	—  	 	 	29,208	 	 	32,870	 	 	502	 	2003	(A)	
 	 				 			 			 			 			 			 			 			 			 			 			 	 	 	
 	 	$	212,379	 	 	$	50,715	 	$	1,477	 	$	348,305	 	$	4,266	 	$	—  	 	$	50,715	 	$	1,477	 	$	352,571	 	$	404,763	 	$	13,026	 	 	 	

*	 	This is an allocation of a $43,000 loan secured by three properties. 	
 
See accompanying independent auditors’ report. 
 
F-39 

Table of Contents
DIGITAL REALTY PREDECESSOR 
 
NOTES TO SCHEDULE III 
PROPERTIES AND ACCUMULATED DEPRECIATION 
December 31, 2003 
(In thousands) 
 
(1) Tax Basis Cost 
 
The aggregate gross cost of the Digital Realty Predecessor properties for federal income tax purposes approximated $493,758 (unaudited) as of December 31, 2003. 
 
(2) Historical Cost and Accumulated Depreciation and Amortization 
 
The following table reconciles the historical cost of the Digital Realty Predecessor properties for financial reporting purposes from February 28, 2001 (inception) through December 31, 2003: 

 	  	Years Ended
December 31,
	  	Period from
February 28,
2001(inception)
through
December 31,
2001
	
 	  	2003
	 	 	2002
	  		
Balance, beginning of period	  	$	220,630	 	 	$	—  	  	$	—  	
Additions during period (acquisitions and improvements)	  	 	184,673	 	 	 	220,630	  	 	—  	
Deductions during period (write-off of tenant improvements)	  	 	(540	)	 	 	—  	  	 	—  	
 	  				 			  			
Balance, close of period	  	$	404,763	 	 	$	220,630	  	$	—  	

The following table reconciles the accumulated depreciation and amortization of the Digital Realty Predecessor properties for financial reporting purposes from February 28, 2001 (inception) through December 31, 2003: 

 	  	Years Ended
December 31,
	  	Period from
February 28,
2001(inception)
through
December 31,
2001
	
 	  	2003
	 	  	2002
	  		
Balance, beginning of period	  	$	3,621	 	  	$	—  	  	$	—  	
Additions during period (depreciation and amortization expense)	  	 	9,480	 	  	 	3,621	  	 	—  	
Deductions during period (write-off of tenant improvements)	  	 	(75	)	  	 	—  	  	 	—  	
 	  				  			  			
Balance, close of period	  	$	13,026	 	  	$	3,621	  	$	—  	

F-40 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Ardenwood Corporate Park (the Property) for the year ended December 31, 2002. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of the Property for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-41 

Table of Contents
ARDENWOOD CORPORATE PARK 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1, 2003
through
January 12, 2003
	  	Year Ended
December 31,
2002
	
 	  	(unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	259	  	7,281	
Tenant reimbursements	  	 	39	  	1,039	
Other	  	 	—  	  	47	
 	  			  		
 	  	 	298	  	8,367	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	16	  	449	
Property taxes	  	 	20	  	567	
Insurance	  	 	2	  	60	
 	  			  		
 	  	 	38	  	1,076	
 	  			  		
Revenue in excess of certain expenses	  	$	260	  	7,291	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-42 

Table of Contents
ARDENWOOD CORPORATE PARK 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2003 through January 12, 2003 (unaudited) 
and year ended December 31, 2002 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relates to the operations of the property known as Ardenwood Corporate Park (the Property). The Property is a biotechnology manufacturing and office property located in Fremont, California. 
 
On January 13, 2003, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from AMB Property, L.P. for $57,000,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2002 or the period from January 1, 2003 through January 12, 2003 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2003 through January 12, 2003 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-43 

Table of Contents
ARDENWOOD CORPORATE PARK 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2003 through January 12, 2003 (unaudited) 
and year ended December 31, 2002 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2002 are as follows (in thousands): 
 
Year ending December 31: 

2003	  	$	7,176	
2004	  	 	7,518	
2005	  	 	7,882	
2006	  	 	6,583	
2007	  	 	6,302	
Thereafter	  	 	23,004	
 	  			
 	  	$	58,465	

(4) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2002 (in thousands): 

Tenant
	  	Rental Revenue
	
Abgenix	  	$	4,243	
Logitech	  	 	1,860	
 
F-44 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of ASM Lithography Facility (the Property) for the year ended December 31, 2002. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of ASM Lithography Facility for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-45 

Table of Contents
ASM LITHOGRAPHY FACILITY 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1,
2003 through
May 19, 2003
	  	Year Ended
December 31,
2002
	
 	  	(unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	1,112	  	2,387	
Tenant reimbursements	  	 	5	  	48	
Other	  	 	—  	  	5	
 	  			  		
 	  	 	1,117	  	2,440	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	10	  	33	
Insurance	  	 	9	  	24	
Ground lease rent	  	 	130	  	336	
 	  			  		
 	  	 	149	  	393	
 	  			  		
Revenue in excess of certain expenses	  	$	968	  	2,047	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-46 

Table of Contents
ASM LITHOGRAPHY FACILITY 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2003 through May 19, 2003 (unaudited) 
and year ended December 31, 2002 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relates to the operations of the property known as ASM Lithography Facility (the Property). The Property is a research and development building located in Tempe, Arizona. 
 
On May 20, 2003, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from Ryan Companies, US, Inc. for $22,400,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2002 or the period from January 1, 2003 through May 19, 2003 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Ground Lease 
 
Rental expense under the ground lease is recognized on a straight line basis. 
 
(c) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(d) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2003 through May 19, 2003 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-47 

Table of Contents
ASM LITHOGRAPHY FACILITY 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2003 through May 19, 2003 (unaudited) 
and year ended December 31, 2002 
 
(3) Minimum Future Lease Rentals 
 
The Property is leased to a single tenant under a non-cancelable operating lease that provides for minimum rent and reimbursement of Property expenses excluding the ground lease rent. Future minimum rentals to be received under the lease in effect as of December 31, 2002 are as follows (in thousands): 
 
Year ending December 31: 

2003	  	$	2,549	
2004	  	 	2,549	
2005	  	 	2,549	
2006	  	 	2,549	
2007	  	 	2,801	
Thereafter	  	 	27,851	
 	  			
 	  	$	40,848	

(4) Ground Lease 
 
The property is subject to an operating ground lease that expires in 2101. The following is a schedule of minimum lease commitments for the ground lease as of December 31, 2002 (in thousands): 
 
Year ending December 31: 

2003	  	$	241	
2004	  	 	241	
2005	  	 	241	
2006	  	 	241	
2007	  	 	241	
Thereafter	  	 	10,055	
 	  			
 	  	$	11,260	

(5) Tenant Concentrations 
 
The Property’s single tenant is ASM Lithography, a wholly owned subsidiary of ASML Holding NV. 
 
F-48 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of AT&T Web Hosting Facility (the Property) for the year ended December 31, 2002. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of AT&T Web Hosting Facility for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-49 

Table of Contents
AT&T WEB HOSTING FACILITY 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1, 2003
through
June 22, 2003
	  	Year Ended
December 31,
2002
	
 	  	(unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	593	  	1,283	
Tenant reimbursements	  	 	75	  	112	
Other	  	 	—  	  	10	
 	  			  		
 	  	 	668	  	1,405	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	29	  	75	
Property taxes	  	 	75	  	123	
Insurance	  	 	10	  	26	
 	  			  		
 	  	 	114	  	224	
 	  			  		
Revenue in excess of certain expenses	  	$	554	  	1,181	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-50 

Table of Contents
AT&T WEB HOSTING FACILITY 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2003 through June 22, 2003 (unaudited) 
and year ended December 31, 2002 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relates to the operations of the property known as AT&T Web Hosting Facility (the Property). The Property is an industrial warehouse located in Atlanta, Georgia. 
 
On June 23, 2003, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from Global R for $13,500,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2002 or the period from January 1, 2003 through June 22, 2003 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2003 through June 22, 2003 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of normal recurring nature. 
 
F-51 

Table of Contents
AT&T WEB HOSTING FACILITY 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2003 through June 22, 2003 (unaudited) 
and year ended December 31, 2002 
 
(3) Minimum Future Lease Rentals 
 
A portion of the Property is leased to a single tenant under a non-cancelable operating lease. The lease provides for minimum rent and reimbursement of the portion of Property expenses related to the leased space. Future minimum rentals to be received under the lease in effect as of December 31, 2002 are as follows (in thousands): 
 
Year ending December 31: 

2003	  	$	1,051	
2004	  	 	1,088	
2005	  	 	1,128	
2006	  	 	1,168	
2007	  	 	1,210	
Thereafter	  	 	11,788	
 	  			
 	  	$	17,433	

(4) Tenant Concentrations 
 
For the year ended December 31, 2002, approximately one half of the Property was leased to AT&T and the other portion was available for lease. 
 
F-52 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Granite Tower (the Property) for the year ended December 31, 2002. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of Granite Tower for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-53 

Table of Contents
GRANITE TOWER 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1,
2003 through
September 21,
2003
	  	Year Ended
December 31,
2002
	
 	  	(unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	3,722	  	5,164	
Tenant reimbursements	  	 	356	  	805	
Other	  	 	—  	  	57	
 	  			  		
 	  	 	4,078	  	6,026	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	752	  	1,412	
Property taxes	  	 	439	  	598	
Insurance	  	 	45	  	82	
Other	  	 	36	  	—  	
 	  			  		
 	  	 	1,272	  	2,092	
 	  			  		
Revenue in excess of certain expenses	  	$	2,806	  	3,934	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-54 

Table of Contents
GRANITE TOWER 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2003 through September 21, 2003 (unaudited) 
and year ended December 31, 2002 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relates to the operations of the property known as Granite Tower (the Property). The Property is an office building located in Dallas, Texas. 
 
On September 22, 2003, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from GPI Tower, Ltd. for $33,200,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2002 or the period from January 1, 2003 through September 21, 2003 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2003 through September 21, 2003 is unaudited in the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-55 

Table of Contents
GRANITE TOWER 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2003 through September 21, 2003 (unaudited) 
and year ended December 31, 2002 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2002 are as follows (in thousands): 
 
Year ending December 31: 

2003	  	$	5,059	
2004	  	 	5,049	
2005	  	 	4,939	
2006	  	 	4,671	
2007	  	 	4,016	
Thereafter	  	 	8,748	
 	  			
 	  	$	32,482	

(4) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2002 (in thousands): 

Tenant
	  	Rental Revenue
	
Home Interiors	  	$	1,652	
Carreker	  	 	1,592	
 
F-56 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Stanford Place II (the Property) for the year ended December 31, 2002. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of Stanford Place II for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-57 

Table of Contents
STANFORD PLACE II 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1,
2003 through
September 30,
2003
	  	Year Ended
December 31,
2002
	
 	  	(unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	4,063	  	4,745	
Tenant reimbursements	  	 	76	  	101	
Other	  	 	68	  	91	
 	  			  		
 	  	 	4,207	  	4,937	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	1,008	  	1,344	
Property taxes	  	 	624	  	832	
Insurance	  	 	68	  	91	
 	  			  		
 	  	 	1,700	  	2,267	
 	  			  		
Revenue in excess of certain expenses	  	$	2,507	  	2,670	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-58 

Table of Contents
STANFORD PLACE II 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2003 through September 30, 2003 (unaudited) 
and year ended December 31, 2002 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relates to the operations of the property known as Stanford Place II (the Property). The Property is a suburban office building located in Denver, Colorado. 
 
On October 1, 2003, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from QRP Limited Partnership and several minority sellers for $35,050,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2002 or the period from January 1, 2003 through September 30, 2003 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2003 through September 30, 2003 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-59 

Table of Contents
STANFORD PLACE II 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2003 through September 30, 2003 (unaudited) 
and year ended December 31, 2002 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2002 are as follows (in thousands): 
 
Year ending December 31: 

2003	  	$	4,415	
2004	  	 	5,332	
2005	  	 	5,339	
2006	  	 	4,208	
2007	  	 	3,051	
Thereafter	  	 	4,811	
 	  			
 	  	$	27,156	

(4) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2002 (in thousands): 

Tenant
	  	Rental Revenue
	
Lucent Technologies	  	$	1,401	
EKS&H	  	 	779	
AT&T	  	 	494	
 
F-60 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of 100 Technology Center Drive (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of 100 Technology Center Drive for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-61 

Table of Contents
100 TECHNOLOGY CENTER DRIVE 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1, 2004
through
February 16, 2004
	  	Year Ended
December 31,
2003

	  		  		
Revenue:	  	 	 	  	 	
Rental	  	$	491	  	3,795	
Tenant reimbursements	  	 	47	  	368	
Other	  	 	—  	  	2	
 	  			  		
 	  	 	538	  	4,165	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	14	  	102	
Property taxes	  	 	47	  	384	
 	  			  		
 	  	 	61	  	486	
 	  			  		
Revenue in excess of certain expenses	  	$	477	  	3,679	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-62 

Table of Contents
100 TECHNOLOGY CENTER DRIVE 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2004 through 
February 16, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as 100 Technology Center Drive (the Property). The Property is a suburban headquarters office building located in Stoughton, Massachusetts. 
 
On February 17, 2004, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from Stoughton Technology Investors, LLC for $38,100,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the period from January 1, 2004 through February 16, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2004 through February 16, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-63 

Table of Contents
100 TECHNOLOGY CENTER DRIVE 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2004 through 
February 16, 2004 (unaudited) 
and year ended December 31, 2003 

(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	3,694	
2005	  	 	3,743	
2006	  	 	3,743	
2007	  	 	3,965	
2008	  	 	4,039	
Thereafter	  	 	17,558	
 	  			
 	  	$	36,742	

(4) Tenant Concentrations 
 
The Property’s single tenant is Stone & Webster, a wholly owned subsidiary of the Shaw Group. 
 
F-64 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Carrier Center (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of Carrier Center for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-65 

Table of Contents
CARRIER CENTER 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1, 2004
through
May 24, 2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	3,892	  	9,688	
Tenant reimbursements	  	 	1,110	  	2,768	
Other	  	 	297	  	948	
 	  			  		
 	  	 	5,299	  	13,404	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	1,510	  	3,161	
Property taxes	  	 	211	  	683	
Insurance	  	 	180	  	453	
Interest	  	 	736	  	1,077	
 	  			  		
 	  	 	2,637	  	5,374	
 	  			  		
Revenue in excess of certain expenses	  	$	2,662	  	8,030	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-66 

Table of Contents
CARRIER CENTER 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2004 through May 24, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as Carrier Center (the Property). The Property is a data center and telecommunications carrier hotel located in Los Angeles, California. 
 
On May 25, 2004, a wholly owned subsidiary of Global Innovation Partners, L.L.C. (the Buyer) completed the acquisition of the Property from JMA Robinson Redevelopment, L.L.C. (the Seller) for $75,000,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the period from January 1, 2004 through May 24, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
Additionally, rental revenue is reduced by amortization of above market in-place lease values and increased by amortization of acquired lease obligations related to below market leases. Such above and below market lease values were recorded as of the date that the Seller acquired the Property based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and, for below-market leases, over a period equal to the initial term plus any below market fixed rate renewal periods. The leases do not currently include any below market fixed rate renewal periods. The capitalized above and below-market lease values are amortized over the remaining non-cancelable terms of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
F-67 

Table of Contents
CARRIER CENTER 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2004 through May 24, 2004 (unaudited) 
and year ended December 31, 2003 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2004 through May 24, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	9,229	
2005	  	 	9,427	
2006	  	 	9,551	
2007	  	 	9,354	
2008	  	 	8,221	
Thereafter	  	 	70,416	
 	  			
 	  	$	116,198	

(4) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2003 (in thousands): 

Tenant
	  	Rental Revenue
	
Equinix, Inc.	  	$	3,295	
Qwest Communications	  	 	2,339	
360 Networks (USA), Inc.	  	 	1,656	
 
(5) Interest Expense 
 
Interest expense has been included in the accompanying statements of revenue and certain expenses since the Buyer assumed the Seller’s loans. A summary of outstanding loans for the Property as of December 31, 2003 is as follows: 

Description
	  	Maturity date
	  	Interest rate
	  	Principal outstanding
(in thousands)
	
Mortgage	  	October 11, 2005	  	LIBOR (subject to a 2.5% floor) plus 4.0%.	  	$	14,744	
Mezzanine	  	October 11, 2005	  	LIBOR (subject to a 2.0% floor) plus 5.25% through October 4, 2004 and plus 7.75% thereafter.	  	 	12,000	

F-68 

Table of Contents
CARRIER CENTER 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Three months ended March 31, 2004 (unaudited) 
and year ended December 31, 2003 
 
Additionally, the mezzanine loan requires payment of “exit interest” of $2,000,000 on the maturity date. Such fee will be waived by the lender if the borrower refinances both the mortgage and mezzanine loans pursuant to a letter of commitment with the lender. Since the intention is to refinance these loans under the terms of the letter of commitment, the exit interest has not been reflected in the accompanying statement of revenue and certain expenses. Assuming the refinanced loan was originated after the prepayment penalty period on the existing loans, the maturity date would be April 4, 2008. The refinanced loan would bear interest at LIBOR plus 4.25%, with a 2.5% LIBOR floor. 
 
The mortgage and mezzanine loans may not be repaid prior to October 4, 2004. If the loans are repaid during the “lockout period” due to a default, a prepayment penalty of 10% of the principal amount of the loan repaid would be incurred. Additionally, there is a 1% prepayment penalty for prepayments of the mortgage loan for the six-month period following the expiration of the lockout period, October 4, 2004. 
 
F-69 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Comverse Technology Building (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of Comverse Technology Building for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-70 

Table of Contents
COMVERSE TECHNOLOGY BUILDING 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1, 2004
through
June 15, 2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	3,238	  	7,048	
Tenant reimbursements	  	 	1,691	  	3,269	
Other	  	 	10	  	5	
 	  			  		
 	  	 	4,939	  	10,322	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	1,489	  	2,945	
Property taxes	  	 	585	  	1,209	
Insurance	  	 	48	  	101	
Other	  	 	46	  	46	
 	  			  		
 	  	 	2,168	  	4,301	
 	  			  		
Revenue in excess of certain expenses	  	$	2,771	  	6,021	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-71 

Table of Contents
COMVERSE TECHNOLOGY BUILDING 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2004 through June 15, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as Comverse Technology Building (the Property). The Property is located in Wakefield, Massachusetts and includes an office building and research and development building. 
 
The Property is owned by SC Wakefield 100, Inc., and SC Wakefiled 200, Inc (collectively, the Owner). A wholly owned subsidiary of Global Innovation Partners, L.L.C., entered into an agreement with the Owner to purchase the Property for $58,000,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the period from January 1, 2004 through June 15, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2004 through June 15, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-72 

Table of Contents
COMVERSE TECHNOLOGY BUILDING 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2004 through June 15, 2004 (unaudited) 
and year ended December 31, 2003 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	6,979	
2005	  	 	7,077	
2006	  	 	7,089	
2007	  	 	7,027	
2008	  	 	7,077	
Thereafter	  	 	15,666	
 	  			
 	  	$	50,915	

(4) Tenant Concentrations 
 
The following tenant accounts for more than 10% of the Property’s revenue for the year ended December 31, 2003 (in thousands): 

Tenant
	  	Rental Revenue
	
Comverse Technology	  	$	6,859	
 
(5) Subsequent Event (Unaudited) 
 
On June 16, 2004, the purchase of the Property was consummated. 
 
F-73 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Savvis Data Center (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of Savvis Data Center for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-74 

Table of Contents
SAVVIS DATA CENTER 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Period from
January 1, 2004
through
May 24, 2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	2,542	  	6,341	
Tenant reimbursements	  	 	301	  	901	
Other	  	 	1	  	52	
 	  			  		
 	  	 	2,844	  	7,294	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	31	  	149	
Property taxes	  	 	160	  	495	
Insurance	  	 	110	  	257	
 	  			  		
 	  	 	301	  	901	
 	  			  		
Revenue in excess of certain expenses	  	$	2,543	  	6,393	

 

See accompanying notes to statements of revenue and certain expenses. 
 
F-75 

Table of Contents
SAVVIS DATA CENTER 
 
Notes to Statements of Revenue and Certain Expenses 
Period from January 1, 2004 through May 24, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as Savvis Data Center (the Property). The Property is a data center located in Santa Clara, California. 
 
On May 25, 2004, a wholly owned subsidiary of Global Innovation Partners, L.L.C. completed the acquisition of the Property from Sharp Lafayette, LLC (the Owner) for $60,000,000. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the period from January 1, 2004 through May 24, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the period from January 1, 2004 through May 24, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-76 

Table of Contents
SAVVIS DATA CENTER 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Period from January 1, 2004 through May 24, 2004 (unaudited) 
and year ended December 31, 2003 
 
(3) Minimum Future Lease Rentals 
 
The Property is leased to a single tenant under a non-cancelable operating lease that provides for minimum rent and reimbursement of property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the lease in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	5,625	
2005	  	 	5,805	
2006	  	 	5,985	
2007	  	 	6,165	
2008	  	 	6,345	
Thereafter	  	 	47,520	
 	  			
 	  	$	77,445	

(4) Tenant Concentrations 
 
The Property’s single tenant is Savvis Communications. 
 
F-77 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of Webb at LBJ (the Property) for the year ended December 31, 2003. This statement is the responsibility of management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of Webb at LBJ for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
May 28, 2004 
 
F-78 

Table of Contents
WEBB AT LBJ 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Six Months Ended
June 30,
2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	2,508	  	5,000	
Tenant reimbursements	  	 	167	  	369	
Other	  	 	48	  	79	
 	  			  		
 	  	 	2,743	  	5,448	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	569	  	904	
Property taxes	  	 	315	  	602	
Insurance	  	 	21	  	44	
 	  			  		
 	  	 	905	  	1,550	
 	  			  		
Revenue in excess of certain expenses	  	$	1,818	  	3,898	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-79 

Table of Contents
WEBB AT LBJ 
 
Notes to Statements of Revenue and Certain Expenses 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as Webb at LBJ (the Property). The Property is a mixed-use/technical facility located in Dallas, Texas. 
 
The Property is owned by AGB Northtown, L.P. (the Owner). A wholly owned subsidiary of Global Innovation Partners, L.L.C. (the Buyer), entered into an agreement with the Owner to purchase the Property for $46,500,000. The purchase is expected to be consummated during the third quarter of 2004. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the six months ended June 30, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the six months ended June 30, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-80 

Table of Contents
WEBB AT LBJ 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	4,964	
2005	  	 	5,018	
2006	  	 	5,059	
2007	  	 	5,045	
2008	  	 	5,013	
Thereafter	  	 	9,161	
 	  			
 	  	$	34,260	

(4) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2003 (in thousands): 

Tenant
	  	Rental Revenue
	
SBC Services	  	$	3,254	
Southwest Securities Group	  	 	657	
Voicestream GSM	  	 	536	
 
(5) Subsequent Event (Unaudited) 
 
On August 25, 2004, the purchase of the majority of the Property was consummated for $45,850,000. An outparcel, which comprises $650,000 of the total purchase price, has not yet been purchased. 
 
F-81 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of AboveNet Data Center (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of AboveNet Data Center for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
July 19, 2004 
 
F-82 

Table of Contents
ABOVENET DATA CENTER 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Six Months Ended
June 30,
2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	2,963	  	5,994	
Tenant reimbursements	  	 	695	  	1,394	
Other	  	 	252	  	532	
 	  			  		
 	  	 	3,910	  	7,920	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	625	  	1,136	
Property taxes	  	 	257	  	528	
Insurance	  	 	130	  	239	
 	  			  		
 	  	 	1,012	  	1,903	
 	  			  		
Revenue in excess of certain expenses	  	$	2,898	  	6,017	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-83 

Table of Contents
ABOVENET DATA CENTER 
 
Notes to Statements of Revenue and Certain Expenses 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as AboveNet Data Center (the Property). The Property is a data center located in San Jose, California. 
 
The Property is owned by F.C. Pavillion, LLC (the Owner). A wholly owned subsidiary of Global Innovation Partners, L.L.C. (the Buyer) entered into an agreement with the Owner to purchase the Property for $36,500,000. The purchase is expected to be consummated during the third quarter of 2004. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the six months ended June 30, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Interest 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the six months ended June 30, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-84 

Table of Contents
ABOVENET DATA CENTER 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(3) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	4,309	
2005	  	 	4,263	
2006	  	 	4,378	
2007	  	 	4,531	
2008	  	 	4,846	
Thereafter	  	 	68,614	
 	  			
 	  	$	90,941	

(4) Tenant Concentrations 
 
The following tenant accounted for more than 10% of the Property’s revenue for the year ended December 31, 2003 (in thousands): 

Tenant
	  	Rental Revenue
	
AboveNet	  	$	4,837	
 
(5) Subsequent Event (unaudited) 
 
On September 17, 2004, the purchase of the Property was consummated. 
 
F-85 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of 200 Paul Avenue (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of 200 Paul Avenue for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
June 23, 2004 
 
F-86 

Table of Contents
200 PAUL AVENUE 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Six Months Ended
June 30,
2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	6,106	  	11,980	
Tenant reimbursements	  	 	1,439	  	3,095	
 	  			  		
 	  	 	7,545	  	15,075	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	1,483	  	3,081	
Property taxes	  	 	153	  	204	
Insurance	  	 	149	  	254	
Interest	  	 	1,086	  	2,530	
Other	  	 	2	  	5	
 	  			  		
 	  	 	2,873	  	6,074	
 	  			  		
Revenue in excess of certain expenses	  	$	4,672	  	9,001	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-87 

Table of Contents
200 PAUL AVENUE 
 
Notes to Statements of Revenue and Certain Expenses 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as 200 Paul Avenue (the Property). The Property is a telecom hotel that leases space to telecommunications carriers and internet service providers and is located in San Francisco, California. 
 
The Property is owned by San Francisco Wave Exchange, LLC (the Owner). The Owner expects to contribute its ownership interests in the Property to Digital Realty Trust, Inc.’s operating partnership (the Operating Partnership) in exchange for a combination of cash and a limited partnership interest in such operating partnership upon consummation of Digital Realty Trust, Inc.’s initial public offering. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the six months ended June 30, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the six months ended June 30, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-88 

Table of Contents
200 PAUL AVENUE 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(3) Interest Expense 
 
Interest expense has been included in the accompanying statements of revenue and certain expenses since the Operating Partnership expects to assume the Owner’s loan. As of December 31, 2003, the Owner had a loan payable to a financial institution, secured by the Property, $45,000,000 bears interest at LIBOR plus 3% (4.12% as of December 31, 2003) and $3,700,000 bears interest at LIBOR plus 7% (8.12% as of December 31, 2003). Interest is due monthly and principal is due at maturity on July 1, 2006. The outstanding balance at December 31, 2003 is $48,700,000. 
 
The minimum principal payments due in each of the next five years and thereafter is as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	1,951	
2005	  	 	1,942	
2006	  	 	2,538	
2007	  	 	3,204	
2008	  	 	39,065	
 	  			
 	  	$	48,700	

(4) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	10,858	
2005	  	 	11,407	
2006	  	 	11,642	
2007	  	 	11,880	
2008	  	 	11,903	
Thereafter	  	 	60,635	
 	  			
 	  	$	118,325	

F-89 

Table of Contents
200 PAUL AVENUE 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Six months ended June 30, 2004 (unaudited) 
and year ended December 31, 2003 
 
(5) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2003 (in thousands): 

Tenant
	  	Rental Revenue
	
XO Communications	  	$	2,176	
RCN Telecom Services of California, Inc.	  	 	1,453	
Qwest Communications	  	 	4,437	
 
(6) Related Party Transactions 
 
The Property leases space to an affiliate under a lease that provides for annual lease payments of $823,000 on a straight line basis, from March 1, 2003 through February 28, 2009. In addition, the affiliate pays rent based on a percentage of revenue earned. Rental income from this affiliate was approximately $1,200,000 for the year ended December 31, 2003, of which $521,000 related to percentage rent. 
 
The Property is managed by an affiliated entity, which charges a monthly property management fee based on 2.5% of the Property’s revenue. 
 
F-90 

Table of Contents
Independent Auditors’ Report 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We have audited the accompanying statement of revenue and certain expenses of 1100 Space Park Drive (the Property) for the year ended December 31, 2003. This statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this statement based on our audit. 
 
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 
 
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 1 to the statement of revenue and certain expenses. It is not intended to be a complete presentation of the Property’s revenue and expenses. 
 
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses, as described in note 1, of 1100 Space Park Drive for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 
 
KPMG LLP 
 
Los Angeles, California 
June 23, 2004 
 
F-91 

Table of Contents
1100 SPACE PARK DRIVE 
 
Statements of Revenue and Certain Expenses 
(In thousands) 

 	  	Six Months Ended
June 30,
2004
	  	Year Ended
December 31,
2003
	
 	  	(Unaudited)	  	 	
Revenue:	  	 	 	  	 	
Rental	  	$	1,898	  	3,753	
Tenant reimbursements	  	 	298	  	575	
 	  			  		
 	  	 	2,196	  	4,328	
 	  			  		
Certain expenses:	  	 	 	  	 	
Rental property operating and maintenance	  	 	313	  	654	
Property taxes	  	 	145	  	379	
Insurance	  	 	22	  	34	
Interest	  	 	498	  	857	
Other	  	 	—  	  	5	
 	  			  		
 	  	 	978	  	1,929	
 	  			  		
Revenue in excess of certain expenses	  	$	1,218	  	2,399	

 
 
See accompanying notes to statements of revenue and certain expenses. 
 
F-92 

Table of Contents
1100 SPACE PARK DRIVE 
 
Notes to Statements of Revenue and Certain Expenses 
Six months ended June 30, 2004 (Unaudited) 
and year ended December 31, 2003 
 
(1) Basis of Presentation 
 
The accompanying statements of revenue and certain expenses relate to the operations of the property known as 1100 Space Park Drive (the Property). The Property is a telecom hotel that leases space to telecommunication companies and is located in Santa Clara, California. 
 
The Property is owned by Santa Clara Wave Exchange, LLC (the Owner). The Owner expects to contribute its ownership interests in the Property to Digital Realty Trust, Inc.’s operating partnership (the Operating Partnership) in exchange for a combination of cash and a limited partnership interest in such operating partnership upon consummation of Digital Realty Trust, Inc.’s initial public offering. 
 
The accompanying statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual results of operations of the Property for the year ended December 31, 2003 or the six months ended June 30, 2004 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property: 
 
 	•	 	Depreciation and amortization 	
 
 	•	 	Federal and state income taxes 	
 
 	•	 	Other costs not directly related to the proposed future operations of the Property 	
 
Management is not aware of any material factors relating to the Property other than those already described above that would cause the reported financial information not to be necessarily indicative of future operating results. 
 
(2) Summary of Significant Accounting Policies and Practices 
 
(a) Revenue Recognition 
 
Rental revenue is recognized on a straight line basis over the term of the respective leases. 
 
(b) Use of Estimates 
 
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenue and certain expenses during the reporting period to prepare the statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 
 
(c) Unaudited Interim Information 
 
The statement of revenue and certain expenses for the six months ended June 30, 2004 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature. 
 
F-93 

Table of Contents
1100 SPACE PARK DRIVE 
 
Notes to Statements of Revenue and Certain Expenses—(Continued) 
Six months ended June 30, 2004 (Unaudited) 
and year ended December 31, 2003 
 
(3) Interest Expense 
 
Interest expense has been included in the accompanying statements of revenue and certain expenses since the Operating Partnership expects to assume the Owner’s loan. As of December 31, 2003, the Owner has a loan payable to a financial institution, secured by the Property, bearing interest at the prime rate plus 1% (5% as of December 31, 2003). As of December 31, 2003, the maturity date was June 5, 2004; however, during 2004, the maturity date was extended to June 5, 2006 and the interest rate was reduced to the prime rate plus 0.5%. The outstanding balance at December 31, 2003 is $16,298,000. 
 
(4) Minimum Future Lease Rentals 
 
The Property’s leases are non-cancelable operating leases and generally provide for minimum rent and reimbursement of a portion of Property expenses, including property taxes, insurance and operating and maintenance expenses. Future minimum rentals to be received under the leases in effect as of December 31, 2003 are as follows (in thousands): 
 
Year ending December 31: 

2004	  	$	3,431	
2005	  	 	3,537	
2006	  	 	3,642	
2007	  	 	3,749	
2008	  	 	3,880	
Thereafter	  	 	28,106	
 	  			
 	  	$	46,345	

(5) Tenant Concentrations 
 
The following tenants accounted for more than 10% of the Property’s revenue for the year ended December 31, 2003 (in thousands): 

Tenant
	  	Rental Revenue
	
Tyco Networks, Inc.	  	$	2,983	
AT&T Corporation	  	 	670	
 
(6) Related Party Transactions 
 
The Property is managed by an affiliated entity, which charges a monthly property management fee based on 2.5% of the Property’s revenue. 
 
F-94 

Table of Contents

Table of Contents

Table of Contents
PART II 
 
INFORMATION NOT REQUIRED IN PROSPECTUS 
 
Item 31.     Other Expenses of Issuance and Distribution. 
 
The following table itemizes the expenses incurred by us in connection with the issuance and registration of the securities being registered hereunder. All amounts shown are estimates except the Securities and Exchange Commission registration fee. 

SEC Registration Fee	  	$	46,815	
NYSE Listing Fee	  	 	250,000	
NASD Fee	  	 	30,500	
Printing and Engraving Expenses	  	 	500,000	
Legal Fees (other than Blue Sky Expenses)	  	 	3,000,000	
Blue Sky Expenses	  	 	10,000	
Accounting Fees and Expenses	  	 	2,100,000	
Transfer Tax and Title Insurances	  	 	1,800,000	
Consulting Fees and Expenses	  	 	700,000	
Other Fees and Expenses	  	 	562,685	
 	  			
Total	  	$	9,000,000	

We will pay all of the costs identified above. 
 
Item 32.    Sales to Special Parties. 
 
None 
 
Item 33.    Recent Sales of Unregistered Securities. 
 
During the past three years, we have issued and sold the following securities: On March 9, 2004, in connection with our formation, Global Properties Holdings, LLC was issued 200 shares of our common stock for total consideration of $2,000 in cash in order to provide our initial capitalization. On April 28, 2004 Global Properties Holdings, LLC sold its shares of our common stock to Global Innovation Partners, LLC for $2,000 in cash. We will purchase these shares at cost upon completion of our initial public offering. The issuance of such shares was effected and the purchase of such shares will be effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933, as amended. 
 
As part of our formation transactions: 
 
 	•	 	on July 31, 2004, our operating partnership entered into a contribution agreement with Global Innovation Partners, LLC to acquire its interests in the properties comprising a substantial portion of our portfolio in exchange for 31,930,695 limited partnership units, subject to adjustment in certain circumstances based upon a formula set forth in the contribution agreement. The units will be issued upon completion of this offering. 	
 
 	•	 	on July 31, 2004, our operating partnership entered into a contribution agreement with Pacific-Bryan Partners, L.P., an unrelated party, to acquire the 10% minority interest in the Univision Tower property not held by Global Innovation Partners, LLC in exchange for 395,665 units, subject to adjustment in certain circumstances based upon a formula set forth in the contribution agreement. The units will be issued upon completion of this offering. 	
 
 	•	 	on July 31, 2004, our operating partnership entered into a contribution agreement with San Francisco Wave eXchange, LLC, Santa Clara Wave eXchange, LLC and eXchange colocation, LLC, unrelated 	
 
II-1 

Table of Contents
 	parties, to acquire 200 Paul Avenue, 1100 Space Park Drive, the eXchange colocation business and other specified assets and liabilities in exchange for $15.0 million in cash and 5,935,846 units, subject to adjustment in certain circumstances based upon a formula set forth in the contribution agreement. The units will be issued upon completion of this offering. 	
 
 	•	 	on July 31, 2004, our operating partnership entered into an option agreement with Global Innovation Partners to acquire its direct or indirect interest in the Carrier Center property in exchange for 2,868,846 units, subject to adjustment based upon a formula contained in the option agreement, as described in the prospectus in “Business and Properties—Carrier Center Option and Right of First Offer Agreements.” The units will be issued upon our exercise of the option, which we intend to exercise simultaneously with, or shortly after, completion of this offering. 	
 
All of such persons and entities irrevocably committed to the contribution of such interests and assets prior to the filing of this Registration Statement. In addition, such persons or entities are “accredited investors” as defined under Regulation D of the Securities Act. The issuance of such units will be effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act. 
 
Immediately following the completion of this offering, Global Innovation Partners will allocate out to its investors, CalPERS and Global Innovation Contributors, LLC, pro rata in accordance with their interests and the terms of its Limited Liability Company Agreement, a portion of the operating partnership units received by Global Innovation Partners in the formation transactions (having an aggregate value of $102.2 million based on the midpoint of the pricing range indicated on the front cover of this prospectus, subject to adjustment by the underwriters in a range between $75 million and $175 million if necessary to facilitate this offering), and immediately thereafter, Digital Realty Trust, Inc. will purchase from CalPERS and Global Innovation Contributors the operating partnership units received by them at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters. If the underwriters exercise their over-allotment option, Global Innovation Partners will additionally allocate out, pro rata, to CalPERS and Global Innovation Contributors an aggregate number of operating partnership units equal to the number of shares sold pursuant to such exercise, and Digital Realty Trust, Inc. will purchase such operating partnership units from CalPERS and Global Innovation Contributors at a price per unit equal to the per share public offering price of our common stock in this offering, net of underwriting discounts and commissions and financial advisory fees payable to the underwriters. Global Innovation Partners, CalPERS and Global Innovation Contributors have entered into definitive agreements prior to the filing of this Registration Statement irrevocably committing them to the allocation of the operating partnership units, and Digital Realty Trust, CalPERS and Global Innovation Contributors have entered into definitive agreements prior to the filing of this Registration Statement irrevocably committing them to the subsequent purchase of these units by Digital Realty Trust, Inc. The allocation of operating partnership units by Global Innovation Partners, LLC and subsequent purchase of such operating partnership units by Digital Realty Trust, Inc. are not sales by an issuer requiring registration or an exemption from registration under the Securities Act of 1933, because the allocation of the operating partnership units by Global Innovation Partners to its investors, pro rata, in accordance with their interests and the terms of its LLC agreement does not involve a transfer for value or a public distribution. Even were the allocation of operating partnership units treated as a sale, the transactions would be exempt from registration under Section 4(2) under the Securities Act of 1933. Each of CalPERS and Global Innovation Contributors is an “accredited investor” as defined under Regulation D of the Securities Act of 1933. 
 
Immediately following the completion of this offering, the eXchange parties will allocate out to their respective members, Cambay Tele.com, LLC and Wave eXchange, LLC, pro rata, in accordance with their interests and the terms of their respective limited liability company agreement, the operating partnership units received by the eXchange parties in exchange for their interest in 200 Paul Avenue and 1100 Space Park Drive. The eXchange parties and their respective members have entered into definitive agreements prior to the filing of this Registration Statement irrevocably committing the eXchange parties to the allocation of the operating partnership units to their respective members. The allocation of operating partnership units by the eXchange 
 
II-2 

Table of Contents
parties are not sales by an issuer requiring registration or exemption from registration under the Securities Act of 1933, because the allocation of the operating partnership units to their respective members, pro rata, in accordance with their interests and the terms of their respective LLC agreement does not involve a transfer for value or a public distribution. Even where the allocation of the operating partnership units is treated as a sale, the transactions would be exempt from registration under Section 4(2) under the Securities Act of 1933. Each of Cambay Tele.com and Wave eXchange, LLC is an “accredited investor” as defined under Regulation D of the Securities Act of 1933. 
 
In addition, in connection with the completion of this offering and pursuant to the terms of their employment agreements, we will issue to each of Messrs. Magnuson, Foust, Stein and Peterson and certain other officers and employees that number of long-term incentive units of our operating partnership which is equal to 50%, 17%, 8.75%, 6.5% and an aggregate of 7.125%, respectively, of a management pool consisting of approximately 3% of the total number of shares of our common stock outstanding on a fully diluted basis as of the completion of this offering. In addition, pursuant to the terms of their employment agreements, each of Messrs. Magnuson, Foust, Stein and Peterson and certain other officers and employees will receive incentive stock options to purchase that number of shares of common stock which is equal to 15.5%, 15.5%, 10.0%, 10.0% and an aggregate of 44.5%, respectively, of a management pool consisting of 1.5% of the total number of shares of our common stock outstanding on a fully diluted basis as of the completion of this offering. The exercise price of these options will be the initial public offering price of our common stock and will vest, subject to continued employment, in equal annual installments of 25% on each of the first four anniversaries of the date of grant. See “Management—Employment Agreements.” All of such executives irrevocably committed to acquire such units and options and entered into such employment agreements prior to the filing of this Registration Statement and are “accredited investors” as defined under Regulation D of the Securities Act. The issuance of such units and the grant of such options will be effected in reliance upon an exemption from registration under Section 4(2) of the Securities Act as well as under Rule 701 of the Securities Act of 1933. 
 
Item 34.    Indemnification of Directors and Officers. 
 
Our charter contains a provision permitted under the Maryland General Corporation Law that eliminates each director’s and officer’s personal liability to us or our stockholders for monetary damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment and which is material to the cause of action. In addition, to the maximum extent permitted under the Maryland General Corporation Law, our charter authorizes us to obligate our company and our bylaws require us to indemnify our directors and officers and pay or reimburse reasonable expenses in advance of final disposition of a proceeding if such director or officer is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. These rights are contract rights fully enforceable by each beneficiary of those rights, and are in addition to, and not exclusive of, any other right to indemnification. Furthermore, our officers and directors are indemnified against specified liabilities by the underwriters, and the underwriters are indemnified against certain liabilities by us, under the underwriting agreement relating to this offering. See “Underwriting.” 
 
We have entered into indemnification agreements with each of our executive officers and directors whereby we indemnify such executive officers and directors to the fullest extent permitted by Maryland law against all expenses and liabilities, subject to limited exceptions. These indemnification agreements also provide that upon an application for indemnity by an executive officer or director to a court of appropriate jurisdiction, such court may order us to indemnify such executive officer or director. 
 
In addition, our directors and officers are indemnified for specified liabilities and expenses pursuant to the partnership agreement of Digital Realty Trust, L.P., the partnership in which we serve as sole general partner. 
 
II-3 

Table of Contents
Item 35.    Treatment of Proceeds from Stock Being Registered. 
 
None. 
 
Item 36.    Financial Statements and Exhibits. 
 
 	(A)	 	Financial Statements.    See Index to Consolidated Financial Statements and the related notes thereto. 	
 
 	(B)	 	Exhibits.    The following exhibits are filed as part of, or incorporated by reference into, this registration statement on Form S-11: 	

Exhibit

1.1  	  	Form of Underwriting Agreement among Digital Realty Trust, Inc. and the underwriters named therein.	
		
**3.1  	  	Form of Articles of Amendment and Restatement of Digital Realty Trust, Inc.	
		
**3.2  	  	Form of Amended and Restated Bylaws of Digital Realty Trust, Inc.	
		
4.1  	  	Form of Certificate for Common Stock for Digital Realty Trust, Inc.	
		
*5.1  	  	Opinion of Venable LLP.	
		
*8.1  	  	Opinion of Latham & Watkins LLP with respect to tax matters.	
		
**10.1  	  	Form of Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.	
		
**10.2  	  	Form of Registration Rights Agreement among Digital Realty Trust, Inc. and the persons named therein.	
		
10.3  	  	Form of 2004 Incentive Award Plan of Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P.	
		
**10.4  	  	Form of Indemnification Agreement between Digital Realty Trust, Inc. and its directors and officers.	
		
**10.5  	  	Executive Chairman Agreement between Digital Realty Trust, Inc. and Richard Magnuson.	
		
**10.6  	  	Employment Agreement between Digital Realty Trust, Inc. and Michael Foust.	
		
**10.7  	  	Employment Agreement between Digital Realty Trust, Inc. and A. William Stein.	
		
**10.8  	  	Employment Agreement between Digital Realty Trust, Inc. and Scott E. Peterson	
		
**10.9  	  	Employment Agreement between Digital Realty Trust, Inc. and John O. Wilson	
		
**10.10	  	Form of Non-competition Agreement between Digital Realty Trust, Inc. and Global Innovation Partners, LLC.	
		
**10.11	  	Contribution Agreement, dated as of July 31, 2004, by and between Global Innovation Partners, LLC and Digital Realty Trust, L.P.	
		
**10.12	  	Contribution Agreement, dated as of July 31, 2004, by and among San Francisco Wave eXchange, LLC, Santa Clara Wave eXchange, LLC and eXchange colocation, LLC, Digital Realty Trust, L.P. and Digital Realty Trust, Inc.	
		
**10.13	  	Contribution Agreement, dated as of July 31, 2004, by and between Pacific-Bryan Partners, L.P. and Digital Realty Trust, L.P.	
		
**10.14	  	Option Agreement (Carrier Center) dated as of July 31, 2004.	
		
**10.15	  	Right of First Offer Agreement (Denver Data Center) dated as of July 31, 2004.	
		
**10.16	  	Right of First Offer Agreement (Frankfurt) dated as of July 31, 2004.	
 
II-4 

Table of Contents
			
Exhibit

**10.17	  	Allocation Agreement, dated as of July 31, 2004, entered into by and between Global Innovation Partners, LLC and Global Innovation Contributor, LLC.	
		
**10.18	  	Unit Purchase Agreement, dated as of July 31, 2004, entered into by and between Digital Realty Trust, Inc. and Global Innovation Contributor, LLC.	
		
**10.19	  	Allocation Agreement, dated as of July 31, 2004, entered into by and between Global Innovation Partners, LLC and State of California Public Employees’ Retirement System, a unit of the State and Consumer Service Agency of the State of California.	
		
**10.20	  	Unit Purchase Agreement, dated as of July 31, 2004, entered into by and between Digital Realty Trust, Inc. and State of California Public Employees’ Retirement System, a unit of the State and Consumer Service Agency of the State of California.	
		
**10.21	  	Loan Agreement, dated as of March 31, 2004, entered into by and between Global Innovation Partners, LLC and Digital Realty Trust, Inc.	
		
**10.22	  	Purchase and Sale Agreement, dated as of September 16, 2004, by and between Global Innovation Partners, LLC and Digital Realty Trust, L.P.	
		
**10.23	  	Form of Registration Rights Agreement among Digital Realty Trust, Inc. and the persons named therein (option and right of first offer agreement).	
		
**10.24	  	Loan and Security Agreement, dated as of August 18, 2003, between Global Marsh Property Owner, L.P. and German American Capital Corporation.	
		
**10.25	  	Omnibus First Amendment to Loan Documents, dated as of November 10, 2003, by and among Global Marsh Property Owner, L.P., Global Innovation Partners, LLC and German American Capital Corporation.	
		
**10.26	  	Note, dated as of August 18, 2003, by Global Marsh Property Owner, L.P. in favor of German American Capital Corporation.	
		
**10.27	  	First Amendment to Note, dated as of November 10, 2003, by and between Global Marsh Property Owner, L.P. and German American Capital Corporation.	
		
**10.28	  	Mezzanine Loan and Security Agreement, dated as of August 18, 2003, between Global Marsh Member, LLC and Global Marsh Limited Partner, LLC and German American Capital Corporation.	
		
**10.29	  	Omnibus First Amendment to Mezzanine Loan Documents, dated as of November 10, 2003, by and among Global Marsh Member, LLC, Global Marsh Limited Partner, LLC, Global Innovation Partners, LLC and German American Capital Corporation.	
		
**10.30	  	Note, dated as of August 18, 2003, by Global Marsh Property Owner, L.P. in favor of German American Capital Corporation.	
		
**10.31	  	Mezzanine Note, dated as of August 18, 2003, by Global Marsh Member, LLC and Global Marsh Limited Partner, LLC in favor of German American Capital Corporation.	
		
**10.32	  	First Amendment to Mezzanine Note, dated as of November 10, 2003, by and among Global Marsh Member, LLC, Global Marsh Limited Partnership, LLC and German American Capital Corporation.	
		
**10.33	  	Loan and Security Agreement, dated as of January 31, 2003, among San Francisco Wave eXchange, LLC, 200 Paul Wave eXchange, LLC, The Cambay Group, Inc. and Greenwich Capital Financial Products, Inc.	
		
**10.34	  	Amendment No. 1 to Loan Agreement, entered into as of March 31, 2003, by and among San Francisco Wave eXchange, LLC, 200 Paul Wave eXchange, LLC, The Cambay Group, Inc. and Greenwich Capital Financial Products, Inc.	
		
**10.35	  	Promissory Note A, dated as of January 31, 2003, by San Francisco Wave eXchange, LLC in favor of Greenwich Capital Financial Products, Inc.	
		
**10.36	  	Promissory Note B, dated as of January 31, 2003, by San Francisco Wave eXchange, LLC in favor of Greenwich Capital Financial Products, Inc.	
		
10.37	  	Form of Revolving Credit Agreement among Digital Realty Trust, L.P., as borrower, Digital Realty Trust, Inc., as parent guarantor, the subsidiary guarantors named therein, Citicorp North America, Inc., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndication agent, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint book running managers, and the other agents and lenders named therein.	
 
II-5 

Table of Contents
			
Exhibit

21.1  	  	List of Subsidiaries of Registrant.	
		
*23.1  	  	Consent of Venable LLP.	
		
*23.2  	  	Consent of Latham & Watkins LLP.	
		
23.3  	  	Consent of KPMG LLP, Independent Registered Public Accounting Firm.	
		
23.4  	  	Consent of KPMG LLP, Independent Registered Public Accounting Firm.	
		
23.5  	  	Consent of KPMG LLP, Independent Auditors.	
		
**24.1  	  	Power of Attorney (included on Signature Page).	
		
**99.1  	  	Consent of Ruann F. Ernst to be named as a proposed director.	
		
**99.2  	  	Consent of Forrester Research, Inc.	
		
**99.3  	  	Consent of Gartner Inc.	
		
**99.4  	  	Consent of IDC Research, Inc.	
		
**99.5  	  	Consent of Tier1 Research.	
		
**99.6  	  	Consent of Laurence A. Chapman to be named as a proposed director.	
		
**99.7  	  	Consent of Kathleen Early Reed to be named as a proposed director.	
		
**99.8  	  	Consent of Dennis E. Singleton to be named as a proposed director.	
		
**99.9  	  	Consent of PriMetrica, Inc.	

*	 	To be filed by amendment. 	
**	 	Previously filed. 	
 
Item 37.    Undertakings. 
 
(f) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. 
 
(h) Insofar as indemnification of liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 
 
(i) The undersigned registrant hereby undertakes that: 
 
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance under Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. 
 
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 
 
II-6 

Table of Contents
SIGNATURES 
 
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that the registrant meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Menlo Park, State of California, on this 26th day of October, 2004. 

DIGITAL REALTY TRUST, INC.	
		
By:	  	/s/    A. WILLIAM STEIN        
	
 	  	A. William Stein
Chief Financial Officer and Chief Investment Officer	
 
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. 

Signature
	  	Title
	 	Date

*

Michael F. Foust	  	Chief Executive Officer and Director (Principal Executive Officer)	 	October 26, 2004	
			
/s/    A. WILLIAM STEIN        

A. William Stein	  	Chief Financial Officer and Chief Investment Officer (Principal Financial and Accounting Officer)	 	October 26, 2004	
			
*

Richard A. Magnuson	  	Executive Chairman of the Board of Directors	 	October 26, 2004	

*By:	  	/s/    A. WILLIAM STEIN        	
 	  	Attorney-in-Fact	
 
II-7 

Table of Contents
EXHIBIT INDEX 

Exhibit

1.1  	  	Form of Underwriting Agreement among Digital Realty Trust, Inc. and the underwriters named therein.	
		
**3.1  	  	Form of Articles of Amendment and Restatement of Digital Realty Trust, Inc.	
		
**3.2  	  	Form of Amended and Restated Bylaws of Digital Realty Trust, Inc.	
		
4.1  	  	Form of Certificate for Common Stock for Digital Realty Trust, Inc.	
		
*5.1  	  	Opinion of Venable LLP.	
		
*8.1  	  	Opinion of Latham & Watkins LLP with respect to tax matters.	
		
**10.1  	  	Form of Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P.	
		
**10.2  	  	Form of Registration Rights Agreement among Digital Realty Trust, Inc. and the persons named therein.	
		
10.3  	  	Form of 2004 Incentive Award Plan of Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P.	
		
**10.4  	  	Form of Indemnification Agreement between Digital Realty Trust, Inc. and its directors and officers.	
		
**10.5  	  	Executive Chairman Agreement between Digital Realty Trust, Inc. and Richard Magnuson.	
		
**10.6  	  	Employment Agreement between Digital Realty Trust, Inc. and Michael F. Foust.	
		
**10.7  	  	Employment Agreement between Digital Realty Trust, Inc. and A. William Stein.	
		
**10.8  	  	Employment Agreement between Digital Realty Trust, Inc. and Scott E. Peterson	
		
**10.9  	  	Employment Agreement between Digital Realty Trust, Inc. and John O. Wilson	
		
**10.10	  	Form of Non-competition Agreement between Digital Realty Trust, Inc. and Global Innovation Partners, LLC.	
		
**10.11	  	Contribution Agreement, dated as of July 31, 2004, by and between Global Innovation Partners, LLC and Digital Realty Trust, L.P.	
		
**10.12	  	Contribution Agreement, dated as of July 31, 2004, by and among San Francisco Wave eXchange, LLC, Santa Clara Wave eXchange, LLC and eXchange colocation, LLC, Digital Realty Trust, L.P. and Digital Realty Trust, Inc.	
		
**10.13	  	Contribution Agreement, dated as of July 31, 2004, by and between Pacific-Bryan Partners, L.P. and Digital Realty Trust, L.P.	
		
**10.14	  	Option Agreement (Carrier Center) dated as of July 31, 2004.	
		
**10.15	  	Right of First Offer Agreement (Denver Data Center) dated as of July 31, 2004.	
		
**10.16	  	Right of First Offer Agreement (Frankfurt) dated as of July 31, 2004.	
		
**10.17	  	Allocation Agreement, dated as of July 31, 2004, entered into by and between Global Innovation Partners, LLC and Global Innovation Contributor, LLC.	
		
**10.18	  	Unit Purchase Agreement, dated as of July 31, 2004, entered into by and between Digital Realty Trust, Inc. and Global Innovation Contributor, LLC.	
		
**10.19	  	Allocation Agreement, dated as of July 31, 2004, entered into by and between Global Innovation Partners, LLC and State of California Public Employees’ Retirement System, a unit of the State and Consumer Service Agency of the State of California.	
		
**10.20	  	Unit Purchase Agreement, dated as of July 31, 2004, entered into by and between Digital Realty Trust, Inc. and State of California Public Employees’ Retirement System, a unit of the State and Consumer Service Agency of the State of California.	

Table of Contents
			
Exhibit

**10.21	  	Loan Agreement, dated as of March 31, 2004, entered into by and between Global Innovation Partners, LLC and Digital Realty Trust, Inc.	
		
**10.22	  	Purchase and Sale Agreement, dated as of September 16, 2004, by and between Global Innovation Partners, LLC and Digital Realty Trust, L.P.	
		
**10.23	  	Form of Registration Rights Agreement among Digital Realty Trust, Inc. and the persons named therein (option and right of first offer agreements).	
		
**10.24	  	Loan and Security Agreement, dated as of August 18, 2003, between Global Marsh Property Owner, L.P. and German American Capital Corporation.	
		
**10.25	  	Omnibus First Amendment to Loan Documents, dated as of November 10, 2003, by and among Global Marsh Property Owner, L.P., Global Innovation Partners, LLC and German American Capital Corporation.	
		
**10.26	  	Note, dated as of August 18, 2003, by Global Marsh Property Owner, L.P. in favor of German American Capital Corporation.	
		
**10.27	  	First Amendment to Note, dated as of November 10, 2003, by and between Global Marsh Property Owner, L.P. and German American Capital Corporation.	
		
**10.28	  	Mezzanine Loan and Security Agreement, dated as of August 18, 2003, between Global Marsh Member, LLC and Global Marsh Limited Partner, LLC and German American Capital Corporation.	
		
**10.29	  	Omnibus First Amendment to Mezzanine Loan Documents, dated as of November 10, 2003, by and among Global Marsh Member, LLC, Global Marsh Limited Partner, LLC, Global Innovation Partners, LLC and German American Capital Corporation.	
		
**10.30	  	Note, dated as of August 18, 2003, by Global Marsh Property Owner, L.P. in favor of German American Capital Corporation.	
		
**10.31	  	Mezzanine Note, dated as of August 18, 2003, by Global Marsh Member, LLC and Global Marsh Limited Partner, LLC in favor of German American Capital Corporation.	
		
**10.32	  	First Amendment to Mezzanine Note, dated as of November 10, 2003, by and among Global Marsh Member, LLC, Global Marsh Limited Partnership, LLC and German American Capital Corporation.	
		
**10.33	  	Loan and Security Agreement, dated as of January 31, 2003, among San Francisco Wave eXchange, LLC, 200 Paul Wave eXchange, LLC, The Cambay Group, Inc. and Greenwich Capital Financial Products, Inc.	
		
**10.34	  	Amendment No. 1 to Loan Agreement, entered into as of March 31, 2003, by and among San Francisco Wave eXchange, LLC, 200 Paul Wave eXchange, LLC, The Cambay Group, Inc. and Greenwich Capital Financial Products, Inc.	
		
**10.35	  	Promissory Note A, dated as of January 31, 2003, by San Francisco Wave eXchange, LLC in favor of Greenwich Capital Financial Products, Inc.	
		
**10.36	  	Promissory Note B, dated as of January 31, 2003, by San Francisco Wave eXchange, LLC in favor of Greenwich Capital Financial Products, Inc.	
		
10.37	  	Form of Revolving Credit Agreement among Digital Realty Trust, L.P., as borrower, Digital Realty Trust, Inc., as parent guarantor, the subsidiary guarantors named therein, Citicorp North America, Inc., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndication agent, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint book running managers, and the other agents and lenders named therein.	
		
21.1  	  	List of Subsidiaries of Registrant.	
		
*23.1  	  	Consent of Venable LLP.	
		
*23.2  	  	Consent of Latham & Watkins LLP.	

Table of Contents
			
Exhibit

23.3  	  	Consent of KPMG LLP, Independent Registered Public Accounting Firm.	
		
23.4  	  	Consent of KPMG LLP, Independent Registered Public Accounting Firm.	
		
23.5  	  	Consent of KPMG LLP, Independent Auditors.	
		
**24.1  	  	Power of Attorney (included on Signature Page).	
		
**99.1  	  	Consent of Ruann F. Ernst to be named as a proposed director.	
		
**99.2  	  	Consent of Forrester Research, Inc.	
		
**99.3  	  	Consent of Gartner Inc.	
		
**99.4  	  	Consent of IDC Research, Inc.	
		
**99.5  	  	Consent of Tier1 Research	
		
**99.6  	  	Consent of Laurence A. Chapman to be named as a proposed director.	
		
**99.7  	  	Consent of Kathleen Early Reed to be named as a proposed director.	
		
**99.8  	  	Consent of Dennis E. Singleton to be named as a proposed director.	
		
**99.9  	  	Consent of PriMetrica, Inc.	

*	 	To be filed by amendment. 	
**	 	Previously filed. 	

DIGITAL REALTY TRUST, INC. 
Exhibit 1.1 	
 
Shares a/ 
Common Stock 
($0.01 par value) 
 
Form of 
Underwriting Agreement 
 
New York, New York 
                    , 2004 
 
Citigroup Global Markets Inc. 
Merrill Lynch, Pierce, Fenner & Smith Incorporated 
As Representatives of the several Underwriters, 
c/o Citigroup Global Markets Inc. 
388 Greenwich Street 
New York, New York 10013 
 
Ladies and Gentlemen: 
 
Digital Realty Trust, Inc., a corporation organized under the laws of the State of Maryland (the “Company”), proposes to sell to the several underwriters named in Schedule I hereto (the “Underwriters”), for whom you (the “Representatives”) are acting as representatives,              shares of Common Stock, $0.01 par value (“Common Stock”) of the Company (said shares to be issued and sold by the Company being hereinafter called the “Underwritten Securities”). The Company also proposes to grant to the Underwriters an option to purchase up to              additional shares of Common Stock to cover over-allotments (the “Option Securities”; the Option Securities, together with the Underwritten Securities, being hereinafter called the “Securities”). To the extent there are no additional Underwriters listed on Schedule I other than you, the term Representatives as used herein shall mean you, as Underwriters, and the terms Representatives and Underwriters shall mean either the singular or plural as the context requires. Certain terms used herein are defined in Section 17 hereof. 
 
The Company is the sole general partner of Digital Realty Trust, L.P., a Maryland limited partnership (the “Operating Partnership”), the Company’s operating partnership subsidiary. On or prior to the Closing Date (as hereafter defined), the Company will complete a series of transactions (the “Formation Transactions”) described in the Prospectus under the captions 

a/	Plus an option to purchase from the Company, up to              additional Securities to cover over-allotments. 	

“Structure and Formation of Our Company” and “Certain Relationships and Related Transactions” pursuant to which certain persons will contribute their direct and indirect interests in certain properties, and interests in entities holding such properties (the “Property Partnerships”), to the Operating Partnership. 
 
As part of the offering contemplated by this Agreement, Citigroup Global Markets Inc. has agreed to reserve out of the Securities set forth opposite its name on Schedule I to this Agreement, up to              shares (the “Directed Share Program”), for sale to the Company’s employees, officers, and directors and other parties associated with the Company or its subsidiaries (collectively, “Participants”). The Securities to be sold by Citigroup Global Markets Inc. pursuant to the Directed Share Program (the “Directed Shares”) will be sold by Citigroup Global Markets Inc. pursuant to this Agreement at the public offering price. Any Directed Shares not orally confirmed for purchase by any Participants by 8:00 A.M. New York City time on the business day following the date on which this Agreement is executed will be offered to the public by Citigroup Global Markets Inc. as set forth in the Prospectus. 
 
1. Representations and Warranties. Each of the Company and the Operating Partnership, jointly and severally, represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1. 
 
(a) The Company has prepared and filed with the Commission a registration statement (file number 333-117865) on Form S-11, including a related preliminary prospectus, for registration under the Act of the offering and sale of the Securities. The Company may have filed one or more amendments thereto, including a related preliminary prospectus, each of which has previously been furnished to you. The Company will next file with the Commission one of the following: either (1) prior to the Effective Date of such registration statement, a further amendment to such registration statement (including the form of final prospectus) or (2) after the Effective Date of such registration statement, a final prospectus in accordance with Rules 430A and 424(b). In the case of clause (2), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in such registration statement and the Prospectus. As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, and, except for such modifications to which the Representatives do not reasonably object, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other substantive changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. 
 
(b) On the Effective Date, the Registration Statement did or will, and when the Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date (as defined herein) and on any date on which Option Securities are purchased, if such date is not the Closing Date (a “settlement date”), the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act and the rules thereunder; on the Effective Date and at the 
 
2 

Execution Time, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date and any settlement date, the Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statement, or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto). No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceeding for that purpose has been instituted or threatened by the Commission or by the state securities authority of any jurisdiction. No order preventing or suspending the use of the Prospectus has been issued and no proceeding for that purpose has been instituted by the Commission or by the state securities authority of any jurisdiction. 
 
(c) (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of State of Maryland with full corporate power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus, and to enter into and perform its obligations under this Agreement and the Formation Transaction Documents (as hereafter defined) to which it is a party and as general partner of the Operating Partnership to cause the Operating Partnership to enter into and perform the Operating Partnership’s obligations under this Agreement and the Formation Transaction Documents to which the Operating Partnership is a party and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(i) The Operating Partnership has been duly formed and is validly existing as a limited partnership in good standing under the laws of the State of Maryland with full power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement and the Formation Transaction Documents to which it is a party, and is duly qualified to do business and is in good standing as a foreign limited partnership under the laws of each jurisdiction which requires such qualification except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. At the Closing Date, the aggregate percentage interests of the Company and the limited partners 
 
3 

in the Operating Partnership will be as set forth in the Prospectus; provided, that to the extent any portion of the over-allotment option described in Section 2(b) hereof is exercised at the Closing Date, the percentage interest of the Company and of such limited partners in the Operating Partnership will be adjusted accordingly. 
 
(ii) Each subsidiary (as defined below) of the Company has been duly formed and is validly existing as a corporation, limited liability company or limited partnership, as the case may be, in good standing under the laws of the jurisdiction in which it is chartered or organized with full power and authority (corporate and other) to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation, limited liability company or limited partnership, as the case may be, and is in good standing under the laws of each jurisdiction which requires such qualification except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(d) All the outstanding shares of capital stock or other ownership interests of each subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, as of the Closing Date, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock or other ownership interests of the subsidiaries will be owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest or any other security interests, claims, mortgages, pledges, liens, encumbrances or other restrictions of any kind (collectively, “Liens”), except for Liens securing indebtedness as described in the Prospectus and except where such Liens would not individually or in the aggregate materially affect or interfere in any material respect with the Company’s ability to exercise control over each of such subsidiaries. Except as set forth in the Prospectus, there are no outstanding options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities or interests for capital stock or other ownership interests of any subsidiary. 
 
(e) The Company’s authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms in all material respects to the description thereof contained in the Prospectus; the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable; the Securities have been duly and validly authorized, and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will be fully paid and nonassessable; the Securities are duly listed, and admitted and authorized for trading, subject to official notice of issuance and evidence of satisfactory distribution, on the New York Stock Exchange; the certificates for the Securities are in valid and sufficient form; the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities; and, except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding; all 
 
4 

offers and sales of the Company’s shares of Common Stock prior to the date hereof were at all relevant times duly registered under the Act or were exempt from the registration requirements of the Act and were duly registered or the subject of an available exemption from the registration requirements of the applicable state securities or blue sky laws. 
 
(f) The units of limited partnership (“Units”) of the Operating Partnership issued or to be issued in connection with the Formation Transactions, including without limitation, the Units to be issued to the Company, have been duly authorized for issuance by the Operating Partnership to the holders or prospective holders thereof, and at the Closing Date will be validly issued and fully paid. The Units will be exempt from registration or qualification under the Act and applicable state securities laws. None of the Units will be issued in violation of the preemptive or other similar rights of any security holder of the Operating Partnership or any other person or entity. Except as set forth in the Prospectus, there are no outstanding options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities or interests for, Units or other ownership interests of the Operating Partnership. 
 
(g) There is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit thereto, which is not described or filed as required; and the statements in the Prospectus under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After this Offering,” “Description of the Partnership Agreement of Digital Realty Trust, L.P.,” “Description of Securities,” “Material Provisions of Maryland Law and of Our Charter and Bylaws” and “Federal Income Tax Considerations,” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings. 
 
(h) This Agreement and each of (i) the GI Partners contribution agreement, (ii) the eBay Data Center purchase agreement, (iii) the 200 Paul Avenue and 1100 Space Park Drive contribution agreement, (iv) the Univision Tower contribution agreement, (v) the amended and restated agreement of limited partnership of the Operating Partnership, (vi) the Carrier Center option agreement and (vii) the transition services agreement, in each case as identified in the Prospectus under the captions “Certain Relationships and Related Transactions” and/or “Structure and Formation of Our Company” (collectively, the “Formation Transaction Documents”) has been duly authorized, executed and delivered by the Company and the Operating Partnership to which it is a party; each Formation Transaction Document to which it is a party constitutes a legally valid and binding obligation of each of the Company and the Operating Partnership, enforceable against each of the Company and the Operating Partnership in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or affecting creditors’ rights and general principles of equity and except as rights to indemnity and contribution thereunder may be limited by applicable law or policies underlying such law. 
 
5 

(i) Each of the Company and the Operating Partnership is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus, will not be an “investment company” as defined in the Investment Company Act of 1940, as amended. 
 
(j) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or by the Formation Transaction Documents, except such as have been obtained under the Act, such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Prospectus or such consents, approvals, authorizations, filings or orders that will be obtained or completed by the Closing Date or the absence of which, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(k) Neither the issue and sale of the Securities nor the consummation of any other of the transactions herein contemplated or by the Formation Transaction Documents nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or the organizational or other governing documents of any of its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties, except, in the case of clauses (ii) or (iii) above, for such conflicts, breaches, violations, liens, charges or encumbrances that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(l) No holders of securities of the Company have rights to the registration of such securities under the Registration Statement. Except as set forth in the Prospectus, there are no contracts, agreements or understandings between the Company or the Operating Partnership and any person granting such person the right to require the Company or the Operating Partnership to file a registration statement under the Act with respect to any securities of the Company or the Operating Partnership owned or to be owned by such person or to require the Company or the Operating Partnership to include such securities in any securities being registered pursuant to any other registration statement filed by the Company or the Operating Partnership under the Act. 
 
6 

(m) The consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in the Prospectus and the Registration Statement present fairly in all material respects the financial condition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form in all material respects with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein). The selected financial data set forth under the caption “Selected Financial Data” in the Prospectus and Registration Statement fairly present in all material respects, on the basis stated in the Prospectus and the Registration Statement, the information included therein. The pro forma financial statements included in the Prospectus and the Registration Statement include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the pro forma financial statements included in the Prospectus and the Registration Statement. The pro forma financial statements included in the Prospectus and the Registration Statement comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements. 
 
(n) No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this Agreement or the Formation Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby or (ii) could reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(o) (i) Upon consummation of the Formation Transactions, except with respect to the Carrier Center property, which the Operating Partnership has an option to acquire and which option is expected to be exercised simultaneously with, or shortly after, the Closing Date, the Company or its subsidiaries will have fee simple title (or in the case of the ASM Lithography property, a leasehold interest, and in the case of the eBay Data Center property, a 75% tenancy in common interest) to all of the properties described in the Prospectus as owned or leased by them and the improvements (exclusive of improvements owned by tenants) located thereon (the “Properties”), in each case, free and clear of all liens, encumbrances, claims, security interests, restrictions and defects, except such as are set forth in the title reports and commitments listed on Schedule 1(o) hereto, are disclosed in the Prospectus or do not affect the value of such Property and do not interfere with the use made and proposed to be made of such Property by the Company and any subsidiary; (ii) except as otherwise set forth in or contemplated in the 
 
7 

Prospectus, the mortgages and deeds of trust encumbering the Properties described in the Prospectus are not convertible into debt or equity securities of the Company or the Operating Partnership and such mortgages and deeds of trust are not cross-defaulted or cross-collateralized to any property not owned directly or indirectly by the Company or its subsidiaries; (iii) neither the Company nor any of its subsidiaries has received from any governmental authority any written notice of any condemnation of or zoning change affecting the Properties or any part thereof, and none of the Company or any subsidiary knows of any such condemnation or zoning change which is threatened and which if consummated would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; (iv) each of the Properties complies with all applicable codes, laws and regulations (including without limitation, building and zoning codes, laws and regulations and laws relating to access to the Properties), except if and to the extent disclosed in the Prospectus and except for such failures to comply that would not individually or in the aggregate reasonably be expected to materially affect the value of such Property or interfere in any material respect with the use made and proposed to be made of such Property by the Company or any subsidiary; (v) the Company or a subsidiary has obtained a title insurance policy on, or a so-called “fairway endorsement” on existing title policies (in states where such endorsement is available) covering, the fee interests (or leasehold interests in the case of the ASM Lithography property) from a title insurance company, or, if such title insurance policy has not yet been issued, a binding commitment by such title insurance company to issue such a policy, in any event covering each Property, with coverage in an amount at least equal to 80% of the cost of acquisition of such Property, including the principal amount of any indebtedness assumed with respect to the Property, provided that for any coverage less than 100% of such Property’s cost (including the principal amount of any indebtedness to be assumed with respect to the Property), such policy includes a so-called “tie-in endorsement” in states where such endorsement is available; (vi) true, correct and complete copies of the leases, exhibits, schedules or other documents that comprise the leases described in the “Business and Properties” section of the Prospectus where the tenant has been specifically identified (the “Major Leases”) have been provided to the Underwriters or their counsel; (vii) except as set forth in the Prospectus, neither the Company nor any subsidiary holds any Property under a ground lease; and (viii) to the knowledge of the Company and the Operating Partnership, except as set forth in or contemplated in the Prospectus, reflected in the pro forma financial statements or as disclosed in any tenant estoppel certificates, and, with respect to (A), (B) and (C) below, except as would not individually or in the aggregate reasonably be expected to materially affect the value of such Property or interfere in any material respect with the use made and proposed to be made of such Property by the Company or any subsidiary: (A) no rentals or other amounts due under the Major Leases have been paid more than one (1) month in advance; (B) no tenant has asserted in writing any defense or set-off against the payment of rent in connection with the Major Leases nor has any tenant contested any tax, operating cost or other escalation payment or occupancy charge, or any other amounts payable under its Major Leases; (C) all tenants, licensees, franchisees or other parties under the Major Leases are in possession of their respective premises; (D) none of the 
 
8 

Major Leases has been assigned, mortgaged, pledged, sublet, hypothecated or otherwise encumbered, except for Liens securing indebtedness described in the Prospectus; (E) neither the Company nor the Operating Partnership has waived in writing any material provision under any Major Lease; (F) there are no uncured events of default, or events that with the giving of notice or passage of time, or both, would constitute an event of default, by any tenant under any of the terms and provisions of the Major Leases; and (G) no tenant under any of the leases at the Properties has a right of first refusal to purchase the premises demised under such lease. 
 
(p) The Company and its subsidiaries own, possess, license or have other rights to use, on reasonable terms, all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the “Intellectual Property”) reasonably necessary for the conduct of the Company’s and the Operating Partnership’s business as now conducted or as proposed in the Prospectus to be conducted. Except as set forth in the Prospectus; (i) to the Company’s or the Operating Partnership’s best knowledge, there is no material infringement by third parties of any such Intellectual Property and (ii) there is no pending or, to the Company’s or the Operating Partnership’s best knowledge, threatened action, suit, proceeding or claim by others that the Company or the Operating Partnership infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. 
 
(q) Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter, bylaws or other organizational or governing documents, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, except, in the case of clauses (ii) or (iii) above, for such violations or defaults that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(r) KPMG LLP, who have certified the financial statements and supporting schedules included in the Prospectus and delivered their reports with respect to the audited financial statements and schedules included in the Prospectus, are independent public accountants within the meaning of the Act and the applicable published rules and regulations thereunder. 
 
(s) The Company and each of its subsidiaries has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not reasonably be expected to 
 
9 

have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such tax, assessment, fine or penalty that is currently being contested in good faith or as would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(t) No material labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent. 
 
(u) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(v) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends or distributions to the Company, from making any other distribution on such subsidiary’s capital stock or equity interests, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except with respect to Global Stanford Place III, LLC or except pursuant to the terms of any indebtedness set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(w) The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except for such licenses, 
 
10 

certificates, permits and other authorizations the absence of which, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business; and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(x) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 
 
(y) The Company has not taken, directly or indirectly, any action designed to or that would constitute or that would reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. 
 
(z) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability under any Environmental Laws, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, reasonably be expected to have a material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). Except as set forth in the Prospectus, neither the Company nor any of the subsidiaries has been notified that it has been named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. Except as otherwise set forth in the Prospectus, and except as would not individually or in the aggregate reasonably be expected to materially affect the value of such Property or interfere in any material respect with the 
 
11 

use made and proposed to be made of such Property by the Company or any subsidiary, to the knowledge of the Company and the Operating Partnership, there have been no and are no (i) aboveground or underground storage tanks; (ii) polychlorinated biphenyls (“PCBs”) or PCB-containing equipment; (iii) asbestos or asbestos containing materials; (iv) lead based paints; (v) mold or other airborne contaminants; or (vi) dry-cleaning facilities in, on, under, or about any Property owned by the Company, the Operating Partnership or their subsidiaries. 
 
(aa) In the ordinary course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(bb) Neither the Company nor any of its subsidiaries maintains or contributes to any “pension plan” (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to Title IV of ERISA or any “multiemployer plan” (within the meaning of Section 4001(a)(3) of ERISA). Each “pension plan” (within the meaning of Section 3(2) of ERISA) maintained by the Company or any of its subsidiaries which is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service that such plan is so qualified. Neither the Company nor any of its subsidiaries maintains or is required to contribute to a “welfare plan” (as defined in Section 3(1) of ERISA) which provides retiree or other post-employment welfare benefits or insurance coverage (other than “continuation coverage” (as defined in Section 602 of ERISA) or as otherwise required by applicable law). Each “employee benefit plan” (within the meaning of Section 3(3) of ERISA) established or maintained by the Company and/or one or more of its subsidiaries is in compliance with the currently applicable provisions of ERISA except for such failures to comply that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(cc) There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with any applicable provision of the Sarbanes Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes Oxley Act”) except for such failures to comply that would not individually or in the aggregate reasonably be expected to have 
 
12 

a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(dd) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (“FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company, its subsidiaries and, to the knowledge of the Company and the Operating Partnership, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith except for such violations or failures to comply that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(ee) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened except for such failures to comply, actions, suits or proceedings that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(ff) Except as would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly 
 
13 

or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC. 
 
(gg) Except as set forth in the Prospectus, the Company and its subsidiaries have good and marketable title to all personal property owned by them, free and clear of all encumbrances and defects; and all personal property held under lease by the Company or any subsidiary are held by it under valid, subsisting and enforceable leases, in each case, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property by the Company or the subsidiary. 
 
(hh) No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, or shareholders of the Company on the other hand, which is required to be described in the Prospectus and which is not so described. 
 
(ii) The statistical and market-related data included in the Prospectus and the Registration Statement are based on or derived from sources that the Company believes to be reliable and accurate. 
 
(jj) Commencing with its taxable year ending December 31, 2004, the Company will be organized and operated in conformity with the requirements for qualification and taxation as a real estate investment trust (a “REIT”) under the Internal Revenue Code 1986, as amended (the “Code”), and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Code. Each of the Company’s corporate subsidiaries qualifies as a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code and all applicable regulations under the Code. 
 
(kk) The Company and Operating Partnership and each of their subsidiaries (including any predecessor entities) have not distributed, and prior to the later of the Closing Date and the completion of the distribution of the Underwritten Securities, will not distribute, any offering material in connection with the offering or sale of the Underwritten Securities other than the Registration Statement, the Prospectus or any other materials, if any, permitted by the Act. 
 
(ll) Furthermore, the Company and the Operating Partnership represent and warrant to Citigroup Global Markets Inc. that (i) the Registration Statement, the Prospectus and any preliminary prospectus comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program, and that (ii) no authorization, approval, consent, license, order, registration or qualification of or with any government, governmental instrumentality or court, other than such as have been obtained, is necessary under the securities laws and regulations of foreign jurisdictions in which the Directed Shares are offered outside the United States. The Company has not offered, or caused the Underwriters to offer, Securities to any 
 
14 

person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a tenant or vendor of the Company or the Operating Partnership to alter the tenant’s or vendor’s level or type of business with the Company or the Operating Partnership, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its properties. 
 
Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities pursuant to this Agreement shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter. 
 
2. Purchase and Sale. 
 
(a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $     per share, the amount of the Underwritten Securities set forth opposite such Underwriter’s name in Schedule I hereto. 
 
(b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to          Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time on or before the 30th day after the date of the Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. The number of Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional shares. 
 
3. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third Business Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on         , 2004, or at such time on such later date not more than three Business Days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Underwritten Securities and the Option Securities shall be made 
 
15 

through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct. 
 
If the option provided for in Section 2(b) hereof is exercised after the third Business Day prior to the Closing Date, the Company will deliver the Option Securities (at the expense of the Company) to the Representatives, at 388 Greenwich Street, New York, New York, on the date specified by the Representatives (which shall be within three Business Days after exercise of said option) for the respective accounts of the several Underwriters, against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof. 
 
4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus. 
 
5. Agreements. The Company agrees with the several Underwriters that: 
 
(a) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement to the Prospectus or any Rule 462(b) Registration Statement unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Prospectus is otherwise required under Rule 424(b), the Company will cause the Prospectus, properly completed, and any supplement thereto to be filed in a form to which the Representatives do not reasonably object with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (1) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (2) when the Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration Statement shall have been filed with the Commission, (3) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (4) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Prospectus or for any additional information, (5) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (6) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding 
 
16 

for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof. 
 
(b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus to comply with the Act or the rules thereunder, the Company promptly will (1) notify the Representatives of any such event, (2) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance; and (3) supply any supplemented Prospectus to you in such quantities as you may reasonably request. 
 
(c) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. 
 
(d) The Company will furnish to the Representatives and counsel for the Underwriters signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of each Preliminary Prospectus and the Prospectus and any supplement thereto as the Representatives may reasonably request. 
 
(e) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject. 
 
(f) Except as set forth in the Prospectus, the Company will not, without the prior written consent of the Representatives, for a period of 180 days after the date of this Agreement, offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any transaction which is designed to, or would reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any person controlled by the Company directly or indirectly, including the filing (or participation in the filing) of a registration statement (except for a registration statement on Form S-8 relating to the 2004 Incentive Award Plan or a registration statement on Form S-4 relating to an acquisition of a real property company) with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning 
 
17 

of Section 16 of the Exchange Act, any other shares of Common Stock or any securities convertible into, or exercisable, or exchangeable for, shares of Common Stock, or publicly announce an intention to effect any such transaction, provided, however, that the Company may (i) grant stock options, restricted stock or long-term incentive units to employees, consultants or directors pursuant to the terms of a plan in effect at the Execution Time, (ii) issue Common Stock pursuant to: (A) the exercise of such options; (B) the redemption of Units issued upon conversion of such long-term incentive units; (C) the exercise of any employee stock options outstanding at the Execution Time; or (D) the redemption of Units issued upon conversion of long-term incentive units outstanding at the Execution Time, (iii) issue Common Stock pursuant to the Company’s dividend reinvestment plan (if any), and (iv) issue Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock in connection with other acquisitions of real property or real property companies. 
 
Notwithstanding the foregoing, if: (x) during the last 17 days of the 180-day lock-up period the Company issues an earnings release or material news or a material event relating to the Company occurs; or (y) prior to the expiration of the 180-day lock-up period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 180-day lock-up period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. 
 
(g) Until and including the Closing Date or the settlement date for the Option Securities (whichever is later), the Company will comply with all applicable securities and other applicable laws, rules and regulations, including, without limitation, the Sarbanes Oxley Act, and will use its reasonable best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes Oxley Act, except for such failures to comply that would not individually or in the aggregate reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business. 
 
(h) The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. 
 
(i) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each Preliminary Prospectus, the Prospectus, and each amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in 
 
18 

connection with the offering and sale of the Securities; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, including any stamp or transfer taxes in connection with the original issuance and sale of the Securities; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Securities; (v) the registration of the Securities under the Exchange Act and the listing of the Securities on the New York Stock Exchange; (vi) any registration or qualification of the Securities for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such registration and qualification); (vii) any filings required to be made with the National Association of Securities Dealers, Inc. (“NASD”) (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such filings); (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Securities; (ix) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder. 
 
(j) The Company and the Operating Partnership will use the net proceeds received by the Company from the sale of the Securities in the manner specified in the Prospectus under the caption “Use of Proceeds.” 
 
(k) The Company will use its best efforts to meet the requirements to qualify, for the taxable year ending December 31, 2004, for taxation as a REIT under the Code. 
 
(l) The Company agrees to pay (i) all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program, (ii) all costs and expenses incurred by the Underwriters in connection with the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of copies of the Directed Share Program material and (iii) all stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program. 
 
Furthermore, the Company covenants with Citigroup Global Markets Inc. that the Company will comply with all applicable securities and other applicable laws, rules and regulations in each foreign jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program. 
 
6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3 hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: 
 
19 

(a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representatives agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 9:30 AM on the Business Day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; if filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. 
 
(b) The Company shall have requested and caused Latham & Watkins LLP, counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 
 
(i) Based solely on certificates from public officials, such counsel confirms that the Company is qualified to do business in the States of California and ; 
 
(ii) Based solely on certificates from public officials, such counsel confirms that the Operating Partnership is qualified to do business in the States of California and ; 
 
(iii) Each Material Subsidiary (as defined therein) is a limited liability company or limited partnership, as the case may be, under the Corporations Code of the State of California, the Limited Liability Company Act of the State of Delaware or the Revised Uniform Limited Partnership Act of the State of Delaware, with the limited liability company or limited partnership power and authority to own its properties and to conduct its business as described in the Registration Statement and the Prospectus; 
 
(iv) Based on certificates from public officials, such counsel confirms that each Material Subsidiary is validly existing and in good standing under the laws of the State of California or the State of Delaware, as the case may be, and is qualified to do business in the States listed on Schedule C thereto. With the consent of the Representatives based solely on an officer’s certificate, such counsel confirms that the Subsidiary Operating Agreement (as defined therein) of each Material Subsidiary is in full force and effect; 
 
(v) No registration of the options to purchase shares of Common Stock or the long-term incentive units of the Operating Partnership (the “LTI Units”) under the Act or qualification thereof under the California Corporate Securities Law of 1968 is required for the issuance of the options or the LTI Units to certain executive officers and directors of the Company in the manner contemplated by the Employment Agreements listed on Schedule B thereto; 
 
20 

(vi) No registration of the limited partnership units of the Operating Partnership (the “OP Units”) under the Act or qualification thereof under the California Corporate Securities Law of 1968 is required for the issuance of the OP Units in the manner contemplated by the Contribution Agreements listed on Schedule A thereto and the Option Agreement (as defined therein); 
 
(vii) To the best of such counsel’s knowledge, there are no contracts or documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed; 
 
(viii) To the best of such counsel’s knowledge, there are no legal or governmental proceedings of a character required to be described in the Registration Statement or Prospectus that are not so described; 
 
(ix) The statements in the Prospectus under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Provisions of Consolidated Indebtedness to be Outstanding After the Offering,” “Management—Employment Agreements,” “—Executive Chairman Agreement,” “Certain Relationships and Related Transactions—GI Partners Contribution Agreement,” “— eBay Data Center Purchase Agreement,” “—200 Paul Avenue and 1100 Space Park Drive Contribution Agreement,” “—Carrier Center Option and Right of First Offer Agreements,” “—Non-Competition Agreement with Global Innovation Partners, LLC,” “Shares Eligible for Future Sale,” and “ERISA Considerations,” insofar as they purport to describe or summarize certain provisions of the agreements, statutes or regulations referred to therein, are accurate descriptions or summaries in all material respects; 
 
(x) The Registration Statement has become effective under the Act. With the consent of the Representatives, based solely on a telephonic confirmation by a member of the Staff of the Commission on         , no stop order suspending the effectiveness of the Registration Statement has been issued under the Act and no proceedings therefor have been initiated by the Commission. Any required filing of the Prospectus pursuant to Rule 424 under the Act has been made in accordance with Rule 424 under the Act; 
 
(xi) The Registration Statement, as of the date it was declared effective, and the Prospectus, as of its date and as of the date hereof, appeared on their face to be appropriately responsive in all material respects to the requirements for registration statements on Form S-11 under the Act and the rules and regulations of the Commission thereunder; it being understood, however, that such counsel need express no opinion with respect to Regulation S-T or the financial statements, schedules, or other financial data, included in or omitted from, the Registration Statement or the Prospectus. For purposes of this paragraph, such counsel may assume that the statements made in the Registration Statement and the Prospectus are correct and complete; 
 
21 

(xii) With the consent of the Representatives based solely on a certificate of an officer of the Company as to factual matters, each of the Company and the Operating Partnership is not, and immediately after giving effect to the sale of the Securities in accordance with this Agreement and the application of the proceeds as described in the Prospectus under the caption “Use of Proceeds,” will not be required to be registered as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended; 
 
(xiii) The execution and delivery of this Agreement by the Company and the Operating Partnership, the issuance and sale of the Securities by the Company to the Representatives and the other Underwriters pursuant to this Agreement, the execution and delivery by each of the Company and the Operating Partnership which is a party thereto of the Contribution Agreements, the eBay Purchase Agreement and the Option Agreement (each as defined therein) and the consummation by the Company and the Operating Partnership of the transactions contemplated by the Contribution Agreements, the eBay Purchase Agreement, and the Option Agreement, on the date hereof do not: 
 
(A) violate the provisions of any Subsidiary Operating Agreement; or 
 
(B) result in the breach of or a default under any of the Material Agreements (as defined therein); or 
 
(C) violate any federal or California statute, rule or regulation applicable to the Company, the Operating Partnership or the Material Subsidiaries; or 
 
(D) require any consents, approvals, or authorizations to be obtained by the Company, the Operating Partnership or any Material Subsidiary from, or any registrations, declarations or filings to be made by the Company, the Operating Partnership or any Material Subsidiary with, any governmental authority under any federal or California statute, rule or regulation applicable to the Company, the Operating Partnership or any Material Subsidiary, that have not been obtained or made; 
 
(xiv) With the consent of the Representatives based solely on a certificate of an officer of the Company as to factual matters and a review of the Material Agreements, neither the Company nor the Operating Partnership nor any Material Subsidiary is a party to any agreement that would require the inclusion in the Registration Statement of shares or other securities owned by any person or entity other than the Company; 
 
(xv) Each of the Contribution Agreements, the eBay Purchase Agreement and the Option Agreement is the legally valid and binding agreement of each of the Company and the Operating Partnership which is a party thereto, enforceable against each of them which is a party thereto in accordance with its terms; and 
 
22 

(xvi) With the consent of the Representatives based solely on a written advice from the New York Stock Exchange, the Securities to be issued by the Company and sold pursuant to this Agreement have been listed, subject to official notice of issuance, on the New York Stock Exchange. 
 
In rendering such opinion, such counsel may (A) assume the accuracy, as to matters involving the application of laws of any jurisdiction other than the State of California or the Federal laws of the United States, of the opinion of other counsel of good standing who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, may rely on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (b) shall also include any supplements thereto at the Closing Date. 
 
In addition, such counsel shall separately state that: 
 
No facts came to the attention of such counsel that caused them to believe that the Registration Statement, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus, as of its date, or as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no belief with respect to the financial statements, schedules, or other financial data included in, or omitted from, the Registration Statement or the Prospectus. 
 
(c) The Company shall have requested and caused Latham & Watkins LLP, tax counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 
 
(i) the statements included in the Prospectus under the headings “Federal Income Tax Considerations” and “Restrictions on Ownership of our Stock,” insofar as such statements purport to summarize certain provisions of the agreements, statutes and regulations referred to therein, are accurate summaries in all material respects; and 
 
(ii) commencing with its taxable year ending December 31, 2004, the Company will be organized in conformity with the requirements for qualification as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Code. 
 
In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of California or the 
 
23 

Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (c) shall also include any supplements thereto at the Closing Date. 
 
(d) The Company shall have requested and caused Venable LLP, Maryland counsel for the Company, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 
 
(i) the Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland, with full corporate power to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Prospectus under the caption “Business and Properties”; 
 
(ii) the Operating Partnership is a limited partnership duly formed and existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland, with full limited partnership power to own or lease, as the case may be, and to operate its properties and to conduct its business as described in the Prospectus under the caption “Business and Properties”. The Company is the sole general partner of the Operating Partnership and the aggregate percentage interests of the Company and the limited partners in the Operating Partnership are as set forth in the Prospectus under the caption “Structure and Formation of Our Company”; 
 
(iii) the Company’s authorized equity capitalization is as set forth in the Prospectus under the caption “Capitalization”; the stock of the Company conforms in all material respects to the description thereof contained in the Prospectus under the caption “Description of Securities”; the issuance of the outstanding shares of Common Stock has been duly authorized and such shares are validly issued, fully paid and nonassessable; the issuance of the Securities has been duly authorized and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, the Securities will be validly issued, fully paid and nonassessable; the certificates for the Securities comply in all material respects with the Maryland General Corporation Law; the holders of outstanding shares of stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities arising under the Maryland General Corporation Law or the charter or bylaws of the Company; and, based solely on a certificate executed by an officer of the Company and upon any facts otherwise known to such counsel, and except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for shares of stock of or ownership interests in the Company are outstanding; 
 
24 

(iv) the issuance of the Units issued in connection with the Formation Transactions, including, without limitation, the Units to be issued to the Company, has been duly authorized and such Units are validly issued, fully paid and nonassessable; the holders of outstanding Units are not entitled to preemptive or other rights to subscribe for the Securities arising under the Maryland Revised Uniform Limited Partnership Act or the Operating Partnership Agreement; based solely on a certificate executed by an officer of the Company and upon any facts otherwise known to such counsel, and except as set forth in the Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for Units or ownership interests in the Operating Partnership are outstanding; the terms of the Units conform in all material respects to the description thereof contained in the Prospectus under the caption “Description of the Partnership Agreement of Digital Realty Trust, L.P.”; 
 
(v) the statements included in the Prospectus under the headings “Risk Factors—Risks Related to Our Organizational Structure—Conflicts of interest exist or could arise in the future with holders of units in our operating partnership,” “Risk Factors—Risks Related to Our Organizational Structure—Our charter and Maryland law contain provisions that may delay, defer or prevent a change of control transaction,” “Risk Factors—Risks Related to Our Organizational Structure—Our rights and the rights of our stockholders to take action against our directors and officers are limited,” “Policies with Respect to Certain Activities—Interested Director and Officer Transactions,” “Description of the Partnership Agreement of Digital Realty Trust, L.P.,” “Description of Securities” and “Material Provisions of Maryland Law and of Our Charter and Bylaws,” insofar as such statements purport to summarize or describe matters of or legal conclusions relating to Maryland law, the charter or bylaws of the Company, or the Operating Partnership Agreement, are accurate and fair summaries of such matters, legal conclusions, the charter or bylaws of the Company, or the Operating Partnership Agreement in all material respects; 
 
(vi) this Agreement and each of the Formation Transaction Documents to which the Company or the Operating Partnership is a party have been duly authorized, executed and delivered by the Company and the Operating Partnership; the Operating Partnership Agreement constitutes the legal, valid and binding obligation of each of the Company and the Operating Partnership, enforceable against each of the Company and the Operating Partnership in accordance with its terms; 
 
(vii) no consent, approval or authorization of, filing with or order of any court or governmental agency or body in the State of Maryland is required in connection with the transactions contemplated herein or the transactions contemplated by the Formation Transaction Documents, except such as have been obtained or made; and 
 
25 

(viii) neither the issuance and sale of the Securities, nor the consummation of any other transactions herein contemplated, nor the consummation of the transactions contemplated by the Formation Transaction Documents, nor the fulfillment of the terms hereof or thereof, will conflict with or result in a breach or violation of (A) the charter or bylaws of the Company or the Operating Partnership Agreement or (B) any Maryland statute or law or any rule, regulation, judgment, order or decree applicable to the Company or the Operating Partnership of any court, regulatory body, administrative agency, governmental body, or other authority of the State of Maryland having jurisdiction over the Company or the Operating Partnership or any of their properties. 
 
In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Maryland, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (d) shall also include any supplements thereto at the Closing Date. 
 
(e) The Company shall have requested and caused Gibson, Dunn & Crutcher LLP, counsel to Global Innovation Partners, LLC (the “Contributor”), to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 
 
(i) The Transaction Documents (as defined therein) have been duly executed and delivered by the Contributor and are the legal, valid and binding obligations of the Contributor, enforceable against the Contributor in accordance with their terms. 
 
In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Delaware or the Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (e) shall also include any supplements thereto at the Closing Date. 
 
(f) The Company shall have requested and caused Richards, Layton & Finger, P.A., Delaware counsel to the Contributor, to have furnished to the Representatives their opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 
 
(i) The Contributor is validly existing in good standing as a limited liability company under the laws of the State of Delaware; 
 
26 

(ii) Under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq. (the “LLC Act”), and the LLC Agreement (as defined therein), the Contributor has all necessary limited liability company power and authority to execute and deliver the Transaction Documents (as defined therein), and to perform its obligations thereunder; 
 
(iii) Under the LLC Act and the LLC Agreement, the execution and delivery by the Contributor of the Transaction Documents, and the performance by the Contributor of its obligations thereunder, have been duly authorized by all necessary limited liability company action on the part of the Company, including by all approvals of the members required under the LLC Agreement; and 
 
(iv) The execution and delivery by the Contributor of the Transaction Documents, and the performance by the Contributor of its obligations thereunder, do not violate (i) any Delaware law, rule or regulation, or (ii) the LLC Certificate or the LLC Agreement. 
 
In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Delaware, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Contributor and public officials. References to the Prospectus in this paragraph (f) shall also include any supplements thereto at the Closing Date. 
 
(g) The Representatives shall have received from Goodwin Procter LLP, counsel for the Underwriters, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Registration Statement, the Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. 
 
(h) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Executive Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus, any supplements to the Prospectus and this Agreement and that: 
 
(i) the representations and warranties of the Company and the Operating Partnership in this Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date and the Company and the Operating Partnership have complied with all the agreements and satisfied all the conditions on their part to be performed or satisfied at or prior to the Closing Date; 
 
27 

(ii) the Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company’s knowledge, threatened; and 
 
(iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto), there has been no material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). 
 
(i) The Company shall have requested and caused KPMG LLP to have furnished to the Representatives, at the Execution Time and at the Closing Date, letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance reasonably satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the applicable rules and regulations adopted by the Commission thereunder and that they have performed a review of the unaudited interim financial information of the Company for the six-month period ended June 30, 2004, and as at June 30, 2004 in accordance with Statement on Auditing Standards No. 100 and stating in effect that: 
 
(i) in their opinion the audited financial statements and financial statement schedules included in the Registration Statement and the Prospectus and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the Commission; 
 
(ii) on the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; their limited review, in accordance with standards established under Statement on Auditing Standards No. 100, of the unaudited interim financial information for the six-month period ended June 30, 2004, and as at June 30, 2004; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and board committees of the Company and the subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries as to transactions and events subsequent to June 30, 2004, nothing came to their attention which caused them to believe that: 
 
(1) any unaudited financial statements included in the Registration Statement and the Prospectus do not comply as to form in all material respects with applicable accounting requirements of the Act and with the related rules and regulations adopted by the Commission with 
 
28 

respect to registration statements on Form S-11; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the Prospectus; 
 
(2) with respect to the period subsequent to June 30, 2004 there were any changes, at a specified date not more than five days prior to the date of the letter, in the long-term debt of the Company and its subsidiaries or capital stock of the Company or decreases in the stockholders’ equity of the Company as compared with the amounts shown on the June 30, 2004 consolidated balance sheet included in the Registration Statement and the Prospectus, or for the period from July 1, 2004 to such specified date there were any decreases, as compared with the amounts shown on the statement of operations for the corresponding period in the previous year, in revenues or in total net income of the Company and its subsidiaries, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; and 
 
(3) the information included in the Registration Statement and Prospectus in response to Regulation S-K, Item 301 (Selected Financial Data) and Item 402 (Executive Compensation) is not in conformity with the applicable disclosure requirements of Regulation S-K; 
 
(iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth in the Registration Statement and the Prospectus agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation; and 
 
(iv) on the basis of a reading of the unaudited pro forma financial statements included in the Registration Statement and the Prospectus (the “pro forma financial statements”); carrying out certain specified procedures; inquiries of certain officials of the Company who have responsibility for financial and accounting matters; and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial statements, nothing came to their attention which caused them to believe that the pro forma financial statements do not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such statements. 
 
29 

References to the Prospectus in this paragraph (h) include any supplement thereto at the date of the letter. 
 
(j) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (h) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto). 
 
(k) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. 
 
(l) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change. 
 
(m) The Securities shall have been listed and admitted and authorized for trading on the New York Stock Exchange, and satisfactory evidence of such actions shall have been provided to the Representatives. 
 
(n) The NASD, upon review of the terms of the public offering of the Securities, shall not have objected to such offering, such terms or the Underwriters’ participation in same. 
 
(o) The Company shall have furnished to the Representatives a letter in the form of Exhibit A hereto from each director and executive officer of the Company named in the Registration Statement and the Prospectus. 
 
(p) An ALTA Owner’s Extended Coverage Policy or, in the case of any Property to be owned after the Closing by the same titleholding entity listed on an existing title policy, a so-called “fairway endorsement” on such existing title policy shall have been issued to the Company or a subsidiary for each of the Properties with coverage in an amount at least equal to 80% of the cost of acquisition of such Property in states where such endorsement is available. 
 
(q) shall have issued its UCC 9 Insurance Policy or the equivalent for each of the Property Partnerships. 
 
30 

(r) The Formation Transactions shall have been, or will be concurrently, consummated. 
 
(s) The Credit Facility and other refinancing transactions shall have been, or will be concurrently, consummated. 
 
If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing. 
 
The documents required to be delivered by this Section 6 shall be delivered at the office of Latham & Watkins LLP, counsel for the Company, at 633 West 5th Street, Suite 4000, Los Angeles, California 90071, on the Closing Date. 
 
7. Reimbursement of Underwriters’ Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company or the Operating Partnership to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through Citigroup Global Markets Inc. on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 
 
8. Indemnification and Contribution. 
 
(a) The Company and the Operating Partnership, jointly and severally, agree to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company and the Operating Partnership will not be liable in any such case to the extent 
 
31 

that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company and the Operating Partnership may otherwise have. 
 
(b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company and the Operating Partnership, each of the Company’s directors, each of the Company’s officers who signs the Registration Statement, and each person who controls the Company and the Operating Partnership within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company and the Operating Partnership to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company and the Operating Partnership acknowledge that the statements set forth in (i) the penultimate paragraph of the cover page regarding delivery of the Securities, (ii) the list of Underwriters and their respective participation in the sale of the Securities under the caption “Underwriting”, (iii) the sentences related to concessions and reallowances under the caption “Underwriting”, (iv) the three bullet-points in the eighth paragraph under the caption “Underwriting” related to stabilization, syndicate covering transactions and penalty bids, (v) the ninth paragraph under the caption “Underwriting” relating to penalty bids and (vi) the last paragraph under the caption “Underwriting” relating to online distribution in any Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus or the Prospectus. 
 
(c) The Company and the Operating Partnership agree to indemnify and hold harmless Citigroup Global Markets Inc., the directors, officers, employees and agents of Citigroup Global Markets Inc. and each person, who controls Citigroup Global Markets Inc. within the meaning of either the Act or the Exchange Act (“Citigroup Entities”), from and against any and all losses, claims, damages and liabilities to which they may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim), insofar as such losses, claims damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the prospectus wrapper material prepared by or with the consent of the Company for distribution in foreign jurisdictions in connection with the Directed Share Program attached to the Prospectus or any preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein, when considered in conjunction with the Prospectus or any applicable preliminary prospectus, not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of the securities which immediately following the Effective Date 
 
32 

of the Registration Statement, were subject to a properly confirmed agreement to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, except that this clause (iii) shall not apply to the extent that such loss, claim, damage or liability is finally judicially determined to have resulted primarily from the gross negligence or willful misconduct of the Citigroup Entities. 
 
(d) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a), (b) or (c) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a), (b) or (c) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. Notwithstanding the foregoing, it is understood that the Company and the Operating Partnership shall, in connection with any action or related actions in the same jurisdiction, bear the fees, costs and expenses of only one such separate counsel (in addition to any local counsel) for all the Underwriters, the directors, officers, employees and agents of the Underwriters and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act (collectively, the “Underwriter Indemnified Parties”), provided, however, the Company and the Operating Partnership shall bear the fees, costs and expenses of more than one separate counsel (in addition to any local counsel) if the use of only one separate counsel for all the Underwriter Indemnified Parties would present such counsel with a conflict of interest with respect to one or more of the Underwriter Indemnified Parties. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending 
 
33 

or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (A) includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to paragraph (c) of this Section 8 in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for Citigroup Global Markets Inc., the directors, officers, employees and agents of Citigroup Global Markets Inc., and all persons, if any, who control Citigroup Global Markets Inc. within the meaning of either the Act or the Exchange Act for the defense of any losses, claims, damages and liabilities arising out of the Directed Share Program. 
 
(e) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company, the Operating Partnership and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively “Losses”) to which the Company, the Operating Partnership and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities; provided, however, that in no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company, the Operating Partnership and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Operating Partnership on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company and the Operating Partnership shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company or by the Operating Partnership on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company, the Operating Partnership and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable 
 
34 

considerations referred to above. Notwithstanding the provisions of this paragraph (e), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company or the Operating Partnership within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company and the Operating Partnership, subject in each case to the applicable terms and conditions of this paragraph (e). 
 
9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter, the Company or the Operating Partnership. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder. 
 
10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the New York Stock Exchange or trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such Exchange, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Prospectus (exclusive of any supplement thereto). 
 
35 

11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company, the Operating Partnership or the officers of the Company and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company, the Operating Partnership or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement. 
 
12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Citigroup Global Markets Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Citigroup Global Markets Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General Counsel, and to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, New York, New York 10080, Attention: General Counsel, with a copy to Goodwin Procter LLP, attention Ettore A. Santucci (fax no.: (617) 523-1231) and confirmed to it at Goodwin Procter LLP, 53 State Street, Boston, Massachusetts, 02109, Attention: Ettore A. Santucci; or, if sent to the Company or the Operating Partnership, will be mailed, delivered or telefaxed to Digital Realty Trust, Inc. (fax no.: (650) 233-3601) and confirmed to it at Digital Realty Trust, Inc., 2370 Sand Hill Road, Suite 280, Menlo Park, California 94025, Attention: Michael F. Foust, with a copy to Latham & Watkins LLP, attention Julian T.H. Kleindorfer (fax no.: (213) 891-8763) and confirmed to it at Latham & Watkins LLP, 633 West 5th Street, Suite 4000, Los Angeles, California 90071, Attention: Julian T.H. Kleindorfer. 
 
13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder. 
 
14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 
 
15. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. 
 
16. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 
 
17. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated. 
 
“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. 
 
36 

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. 
 
“Commission” shall mean the Securities and Exchange Commission. 
 
“Effective Date” shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or become effective. 
 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. 
 
“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto. 
 
“Preliminary Prospectus” shall mean any preliminary prospectus referred to in Section 1(a) above and any preliminary prospectus included in the Registration Statement at the Effective Date that omits Rule 430A Information. 
 
“Prospectus” shall mean the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Securities included in the Registration Statement at the Effective Date. 
 
“Registration Statement” shall mean the registration statement referred to in Section 1(a) above, including exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the Closing Date, shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. 
 
“Rule 424”, “Rule 430A” and “Rule 462” refer to such rules under the Act. 
 
“Rule 430A Information” shall mean information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. 
 
“Rule 462(b) Registration Statement” shall mean a registration statement and any amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the registration statement referred to in Section 1(a) hereof. 
 
“subsidiary” shall mean each direct and indirect subsidiary of the Company, including, without limitation, the Operating Partnership and the Property Partnerships contributed to Operating Partnership pursuant to the Formation Transactions. 
 
37 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company, the Operating Partnership and the several Underwriters. 

Very truly yours,
 
DIGITAL REALTY TRUST, INC.	
		
By:	 	 	
 	 	Name:
Title:	

			
DIGITAL REALTY TRUST, L.P.
 
By:   Digital Realty Trust, Inc., its General Partner	
		
By:	 	 	
 	 	Name:
Title:	
 
38 

The foregoing Agreement is hereby 
confirmed and accepted as of the 
date first above written. 

CITIGROUP GLOBAL MARKETS INC.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
 
By:   Citigroup Global Markets Inc.	
		
By:	 	 	
 	 	Name:
Title:	
 
For themselves and the other 
several Underwriters named in 
Schedule I to the foregoing 
Agreement. 
 
39 

SCHEDULE I 

Underwriters
	 	Number of Underwritten Securities to be Purchased
	
Citigroup Global Markets Inc.	 	 	
Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated	 	 	
Credit Suisse First Boston LLC	 	 	
UBS Securities LLC	 	 	
RBC Capital Markets Corporation	 	 	
KeyBanc Capital Markets, a division of
    McDonald Investments Inc.	 	 	
JMP Securities LLC	 	 	
 	 		
Total	 	 	

40 
Exhibit 4.1 
 
TEMPORARY CERTIFICATE—EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY 
 
NUMBER 
T 
 
COMMON STOCK 
PAR VALUE $0.01 
 
[LOGO] 
 
DIGITAL REALTY TRUST, INC. 
 
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND 
 
SHARES 
CUSIP 253868 10 3 
 
SEE REVERSE FOR CERTAIN RESTRICTIONS 
 
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY 
 
THIS CERTIFIES THAT 
IS THE OWNER OF 
FULLY-PAID AND NON-ASSESSABLE COMMON STOCK, PAR VALUE $0.01 OF DIGITAL REALTY, INC. (the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Articles of Amendment and Restatement of the Corporation (the “Charter”) and the Bylaws of the Corporation and any amendments thereto. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. In Witness Whereof, the Corporation has caused this Certificate to be executed on its behalf by its duly authorized officers. 
 
Dated: 
 
COUNTERSIGNED AND REGISTERED: 
 
AMERICAN STOCK TRANSFER & TRUST COMPANY 
(NEW YORK, NY) TRANSFER AGENT 
AND REGISTRAR 
 
BY 
 
AUTHORIZED SIGNATURE 
 
[SEAL] 

/s/
	
A. WILLIAM STEIN	
CHIEF FINANCIAL OFFICER	
	
/s/
	
MICHAEL F. FOUST	
CHIEF EXECUTIVE OFFICER AND SECRETARY	
 
DIGITAL REALTY TRUST, INC. 
 
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE CORPORATION’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (“REIT”) UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CORPORATION’S ARTICLES OF AMENDMENT AND RESTATEMENT, (I) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK OF THE CORPORATION IN EXCESS OF 9.8% OF THE VALUE OF THE TOTAL OUTSTANDING SHARES OF CAPITAL STOCK OF THE CORPORATION AND NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION’S COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE CORPORATION; (II) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE CORPORATION BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (III) NO PERSON MAY TRANSFER SHARES OF CAPITAL STOCK IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF 

THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP SET FORTH IN (I) OR (II) IS VIOLATED, THE SHARES OF COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES, AND ANY TRANSFER THAT WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS SHALL BE VOID AB INITIO. IN ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE CHARTER OF THE CORPORATION SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE CHARTER OF THE CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE. 
 
TEN COM - as tenants in common 
TEN ENT - as tenants by the entireties 
JT TEN - as joint tenants with right of survivorship and not as tenants in common 
UNIF GIFT/TRANS MIN ACT - (Cust) Custodian (Minor) under Uniform Gifts/Transfers to Minors Act (State) 
 
Additional abbreviations may also be used though not in the above list. 
 
FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO 
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE 

(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee) 
shares of the shares represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises. 
 
Dated 
 
NOTICE: The Signature To This Assignment Must Correspond With The Name As Written Upon The Face Of The Certificate In Every Particular, Without Alteration Or Enlargement Or Any Change Whatever. 
 
SIGNATURE(S) GUARANTEED: 
 
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. 
 
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE. 
Exhibit 10.3 
 
DIGITAL REALTY TRUST, INC., 
DIGITAL SERVICES, INC. AND 
DIGITAL REALTY TRUST, L.P. 
FORM OF 
2004 INCENTIVE AWARD PLAN 
 
ARTICLE 1 
 
PURPOSE 
 
The purpose of the Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan (the “Plan”) is to promote the success and enhance the value of Digital Realty Trust, Inc., a Maryland corporation (the “Company”), Digital Services, Inc., a Maryland corporation (the “Services Company”), and Digital Realty Trust, L.P. (the “Partnership”) by linking the personal interests of Employees, Consultants, members of the Board, and Services Company Directors to those of the Company’s stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company, the Services Company, the Partnership and their subsidiaries in their ability to motivate, attract, and retain the services of those individuals upon whose judgment, interest, and special effort the successful conduct of the Company’s, the Service Company’s and the Partnership’s operation is largely dependent. 
 
ARTICLE 2 
 
DEFINITIONS AND CONSTRUCTION 
 
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates. 
 
2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, a Profits Interest Unit award, an Other Incentive Award, a Performance Bonus Award, or a Performance-Based Award granted to a Participant pursuant to the Plan. 
 
2.2 “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award. 
 
2.3 “Board” means the Board of Directors of the Company. 
 
2.4 “Change in Control” means the occurrence of any of the following events: 
 
(a) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent 35% or more of the combined voting power of the Company’s then outstanding voting securities, other than 

(i) an acquisition of securities by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or 
 
(ii) an acquisition of securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or 
 
(iii) an acquisition of securities pursuant to a transaction described in Section 2.4(c) below that would not be a Change in Control under Section 2.4(c), or 
 
(iv) any direct or indirect acquisition of securities by Global Innovation Partners, LLC or California Public Employees’ Retirement System (CALPERS), or any affiliate thereof; 
 
Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this Section 2.4(a): an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a person or group to represent 35% or more of the combined voting power of the Company’s then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of 35% or more of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change in Control; 
 
(b) individuals who, as of the date of the closing of the initial public offering of the Stock, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election by the Company’s stockholders, or nomination for election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; 
 
(c) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction 
 
(i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or 
 
2 

by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and 
 
(ii) after which no person or group, other than Global Innovation Partners, LLC or California Public Employees’ Retirement System (CALPERS), or any affiliate thereof, beneficially owns voting securities representing 35% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 35% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or 
 
(d) approval by the Company’s stockholders of a liquidation or dissolution of the Company. 
 
For purposes of Section 2.4(a) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of the Company’s stockholders, and for purposes of Section 2.4(c) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of the Company’s stockholders. The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto. 
 
2.5 “Code” means the Internal Revenue Code of 1986, as amended. 
 
2.6 “Committee” means the committee of the Board described in Article 12. 
 
2.7 “Company Consultant” means any consultant or adviser if: 
 
(a) The consultant or adviser renders bona fide services to the Company or Company Subsidiary; 
 
(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and 
 
(c) The consultant or adviser is a natural person who has contracted directly with the Company or Company Subsidiary to render such services. 
 
2.8 “Company Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or of any Company Subsidiary. 
 
2.9 “Company Subsidiary” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is 
 
3 

owned, directly or indirectly, by the Company or by one or more Company Subsidiaries or by the Company and one or more Company Subsidiaries, (ii) any partnership or limited liability company of which 50% or more of the capital and profits interests is owned, directly or indirectly, by the Company or by one or more Company Subsidiaries or by the Company and one or more Company Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Company or by one or more other Company Subsidiaries or by the Company and one or more Company Subsidiaries; provided, however, that “Company Subsidiary” shall not include the Services Company, any Services Company Subsidiary, the Partnership or any Partnership Subsidiary. 
 
2.10 “Consultant” means any Company Consultant, Services Company Consultant or Partnership Consultant. 
 
2.11 “Covered Employee” means a Company Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code. 
 
2.12 “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Article 8. 
 
2.13 “Disability” means that the Participant qualifies to receive long-term disability payments under the Company’s or the Partnership’s long-term disability insurance program, as it may be amended from time to time. 
 
2.14 “Dividend Equivalents” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Stock) of dividends paid on Stock. 
 
2.15 “Effective Date” shall have the meaning set forth in Section 13.1. 
 
2.16 “Eligible Individual” means any person who is an Employee, a Consultant, a member of the Board or a Services Company Director, as determined by the Committee. 
 
2.17 “Employee” means any Company Employee, Services Company Employee or Partnership Employee. 
 
2.18 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 
2.19 “Fair Market Value” means, as of any given date, the fair market value of a share of Stock on the immediately preceding date determined by such methods or procedures as may be established from time to time by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of a share of Stock as of any date shall be the average of the high and low trading prices for a share of Stock as reported on the New York Stock Exchange (or on any national securities exchange on which the Stock is then listed) for the immediately preceding date or, if no such prices are reported for that date, the average of the high and low trading prices on the next preceding date for which such prices were reported; provided, however, that the Fair Market Value of a share of Stock granted on the Public Trading Date shall equal the initial public offering price per share of Stock. 
 
4 

2.20 “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. 
 
2.21 “Independent Director” means a member of the Board who is not an Employee. 
 
2.22 “Non-Employee Director” means a member of the Board who qualifies as a “non-employee director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor definition adopted by the Board. 
 
2.23 “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option or which is designated as an Incentive Stock Option but does not conform to the applicable provisions of Section 422 of the Code. 
 
2.24 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option. 
 
2.25 “Other Incentive Award” means an Award granted, based upon or denominated in Stock or units of Stock pursuant to Section 8.8 of the Plan. 
 
2.26 “Participant” means a person who, as an Employee, Consultant, member of the Board, or Services Company Director, has been granted an Award pursuant to the Plan. 
 
2.27 “Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership of Digital Realty Trust, L.P., as the same may be amended, modified or restated from time to time. 
 
2.28 “Partnership Consultant” means any consultant or advisor if: 
 
(a) The consultant or adviser renders bona fide services to the Partnership or Partnership Subsidiary; 
 
(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Partnership’s securities; and 
 
(c) The consultant or adviser is a natural person who has contracted directly with the Partnership or Partnership Subsidiary to render such services. 
 
2.29 “Partnership Employee” means any employee (as defined in accordance with Section 3401(c) of the Code) of the Partnership or any entity which is then a Partnership Subsidiary. 
 
2.30 “Partnership Participant Purchased Shares” has the meaning set forth in Section 5.6. 
 
2.31 “Partnership Purchase Price” has the meaning set forth in Section 5.6. 
 
5 

2.32 “Partnership Purchased Shares” has the meaning set forth in Section 5.6. 
 
2.33 “Partnership Subsidiary” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is owned, directly or indirectly, by the Partnership or by one or more Partnership Subsidiaries or by the Partnership and one or more Partnership Subsidiaries, (ii) any partnership or limited liability company of which 50% or more of the capital and profits interests is owned, directly or indirectly, by the Partnership or by one or more Partnership Subsidiaries or by the Partnership and one or more Partnership Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Partnership or by one or more other Partnership Subsidiaries or by the Partnership and one or more Partnership Subsidiaries; provided, however, that “Partnership Subsidiary” shall not include the Services Company or any Services Company Subsidiary. 
 
2.34 “Performance-Based Award” means an Award granted to selected Covered Employees pursuant to Articles 6 and 8, but which is subject to the terms and conditions set forth in Article 9. All Performance-Based Awards are intended to qualify as Qualified Performance-Based Compensation. 
 
2.35 “Performance Bonus Award” has the meaning set forth in Section 8.9. 
 
2.36 “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: net earnings (either before or after interest, taxes, depreciation and amortization), funds from operations, adjusted funds from operations, cash available for distribution, economic value-added (as determined by the Committee), sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share of Stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant. 
 
2.37 “Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall performance of the Company, the Services Company, the Partnership, any Subsidiary, any division or business unit thereof, or an individual. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (i) in the event of, or 
 
6 

in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, the Services Company, the Partnership or any Subsidiary, or the financial statements of the Company, the Services Company, the Partnership or any Subsidiary, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. 
 
2.38 “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based Award. 
 
2.39 “Performance Share” means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee. 
 
2.40 “Performance Stock Unit” means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon achieving certain performance goals established by the Committee. 
 
2.41 “Plan” means this Digital Realty Trust, Inc., Digital Services, Inc. and Digital Realty Trust, L.P. 2004 Incentive Award Plan, as it may be amended from time to time. 
 
2.42 “Pricing Date” has the meaning set forth in Section 8.10(a). 
 
2.43 “Profits Interest Unit” means a “Profits Interest Unit” of the Partnership, as defined in the Partnership Agreement. 
 
2.44 “Public Trading Date” means the first date upon which Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system. 
 
2.45 “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code. 
 
2.46 “REIT” means a real estate investment trust within the meaning of Sections 856 through 860 of the Code. 
 
2.47 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture. 
 
2.48 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6. 
 
2.49 “Services Company” means Digital Services, Inc., a Maryland corporation. 
 
7 

2.50 “Services Company Consultant” means any consultant or advisor if: 
 
(a) The consultant or adviser renders bona fide services to the Services Company or Services Company Subsidiary; 
 
(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and 
 
(c) The consultant or adviser is a natural person who has contracted directly with the Services Company or Services Company Subsidiary to render such services. 
 
2.51 “Services Company Director” means a member of the Board of Directors of the Services Company. 
 
2.52 “Services Company Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Services Company or of any corporation, partnership or limited liability company which is then a Services Company Subsidiary. 
 
2.53 “Services Company Participant Purchased Shares” has the meaning set forth in Section 5.7. 
 
2.54 “Services Company Purchase Price” has the meaning set forth in Section 5.7. 
 
2.55 “Services Company Purchased Shares” has the meaning set forth in Section 5.7. 
 
2.56 “Services Company Subsidiary” means (i) a corporation, association or other business entity of which 50% or more of the total combined voting power of all classes of capital stock is owned, directly or indirectly, by the Services Company or by one or more Services Company Subsidiaries or by the Services Company and one or more Services Company Subsidiaries, (ii) any partnership or limited liability company of which 50% or more of the capital and profits interests is owned, directly or indirectly, by the Services Company or by one or more Services Company Subsidiaries or by the Services Company and one or more Services Company Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii) above of which 50% or more of the ownership and the power, pursuant to a written contract or agreement, to direct the policies and management or the financial and the other affairs thereof, are owned or controlled by the Services Company or by one or more other Services Company Subsidiaries or by the Services Company and one or more Services Company Subsidiaries. 
 
2.57 “Stock” means the common stock of the Company, par value $0.01 per share, and such other securities of the Company that may be substituted for Stock pursuant to Article 11. 
 
2.58 “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement. 
 
2.59 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8. 
 
8 

2.60 “Subsidiary” means any Company Subsidiary, Services Company Subsidiary or Partnership Subsidiary. 
 
ARTICLE 3 
 
SHARES SUBJECT TO THE PLAN 
 
3.1 Number of Shares. 
 
(a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards (including, without limitation, Incentive Stock Options) under the Plan shall be 4,474,102. Each Profits Interest Unit issued pursuant to an Award shall count as one share of Stock for purposes of calculating the aggregate number of shares of Stock available for issuance under the Plan as set forth in this Section 3.1(a) and for purposes of calculating the share limitation set forth in Section 3.3. 
 
(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards), and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. Notwithstanding the foregoing, no shares shall become available pursuant to this Section 3.1(b) to the extent that (x) the transaction resulting in the return of shares occurs more than ten years after the date of the most recent shareholder approval of the Plan, or (y) such return of shares would constitute a “material revision” of the Plan subject to stockholder approval under then applicable rules of the New York Stock Exchange (or any other applicable exchange or quotation system). 
 
3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market. 
 
3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the contrary, and subject to Article 11, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during a rolling three-year period (measured from the date of any grant) shall be 1,118,526; provided, 
 
9 

however, that the foregoing limitation shall not apply prior to the Public Trading Date and, following the Public Trading Date, the foregoing limitation shall not apply until the earliest of: (a) the first material modification of the Plan (including any increase in the number of shares reserved for issuance under the Plan in accordance with Section 3.1); (b) the issuance of all of the shares of Stock reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the first meeting of stockholders at which members of the Board are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration of an equity security of the Company under Section 12 of the Exchange Act; or (e) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. 
 
ARTICLE 4 
 
ELIGIBILITY AND PARTICIPATION 
 
4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan. 
 
4.2 Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award pursuant to this Plan. 
 
4.3 Foreign Participants. In order to assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Sections 3.1 and 3.3 of the Plan. 
 
ARTICLE 5 
 
STOCK OPTIONS 
 
5.1 General. The Committee is authorized to grant Options to Participants on the following terms and conditions: 
 
(a) Exercise Price. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided that the exercise price for any Option shall not be less than 85% of the Fair Market Value of a share of Stock on the date of grant. 
 
(b) Time and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part; provided that the term of any Option granted under the Plan shall not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. 
 
10 

(c) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, (i) cash, (ii) shares of Stock held for such period of time as may be required by the Committee in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (iii) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company upon settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would violate Section 13(k) of the Exchange Act. 
 
(d) Evidence of Grant. All Options shall be evidenced by a written Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee. 
 
5.2 Incentive Stock Options. The terms of any Incentive Stock Options granted pursuant to the Plan must comply with the conditions and limitations contained in Section 13.2 and this Section 5.2: 
 
(a) Eligibility. Incentive Stock Options may be granted only to Company Employees or to Employees of a Subsidiary which constitutes a “subsidiary corporation” within the meaning of Section 424(f) of the Code. 
 
(b) Exercise Price. The exercise price per share of Stock subject to an Incentive Stock Option shall be set by the Committee but shall not be less than 100% of the Fair Market Value on the date of grant. 
 
(c) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options. 
 
(d) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant. 
 
11 

(e) Notice of Disposition. The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option if such disposition occurs within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the Participant. 
 
(f) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant. 
 
5.3 Substitution of Stock Appreciation Rights. The Committee may provide in the Award Agreement evidencing the grant of an Option that the Committee, in its sole discretion, shall have to right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option, subject to the provisions of Section 7.2 hereof; provided that such Stock Appreciation Right shall be exercisable for the same number of shares of Stock as such substituted Option would have been exercisable for. 
 
5.4 Granting of Options to Independent Directors. The Board may from time to time, in its sole discretion, and subject to the limitations of the Plan: 
 
(a) Select from among the Independent Directors (including Independent Directors who have previously been granted Options under the Plan) such of them as in its opinion should be granted Options; 
 
(b) Subject to Section 3.3, determine the number of shares of Stock that may be purchased upon exercise of the Options granted to such selected Independent Directors; and 
 
(c) Subject to the provisions of this Article 5, determine the terms and conditions of such Options, consistent with the Plan 
 
5.5 Transfer of Shares to a Company Employee, Consultant or Independent Director. As soon as practicable after receipt by the Company of payment for the shares with respect to which an Option (which in the case of a Company Employee, Company Consultant or Independent Director was issued to and is held by such Participant in such capacity), or portion thereof, is exercised by a Participant who is a Company Employee, Company Consultant or Independent Director, then, with respect to each such exercise, the Company shall transfer to the Participant the number of shares equal to: 
 
(a) The amount of the payment made by the Participant to the Company pursuant to Section 5.1(c), divided by 
 
(b) The price per share of the shares subject to the Option as determined pursuant to Section 5.1(a) or 5.2(a), as applicable. 
 
5.6 Transfer of Shares to a Partnership Employee or Consultant. As soon as practicable after receipt by the Company, pursuant to Section 5.1(c), of payment for the shares with respect to which an Option (which was issued to and is held by a Partnership Employee or Partnership Consultant in such capacity), or portion thereof, is exercised by a Participant who is a Partnership Employee or Partnership Consultant, then, with respect to each such exercise: 
 
12 

(a) the Company shall transfer to the Participant the number of shares equal to (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) divided by (B) the Fair Market Value of a share of Common Stock at the time of exercise (the “Partnership Participant Purchased Shares”); 
 
(b) the Company shall sell to the Partnership the number of shares (the “Partnership Purchased Shares”) equal to the excess of (i) the amount obtained by dividing (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) by (B) the price per share of the shares subject to the Option as determined pursuant to Section 5.1(a), over (ii) the Partnership Participant Purchased Shares. The price to be paid by the Partnership to the Company for the Partnership Purchased Shares (the “Partnership Purchase Price”) shall be an amount equal to the product of (x) the number of Partnership Purchased Shares multiplied by (y) the Fair Market Value of a share of Common Stock at the time of the exercise; and 
 
(c) as soon as practicable after receipt of the Partnership Purchased Shares by the Partnership, the Partnership shall transfer such shares to the Participant at no additional cost, as additional compensation. 
 
5.7 Transfer of Shares to a Services Company Employee, Consultant or Director. As soon as practicable after receipt by the Company, pursuant to Section 5.1(c), of payment for the shares with respect to which an Option (which was issued to and is held by a Services Company Employee, Services Company Director or Services Company Consultant in such capacity), or portion thereof, is exercised by a Participant who is a Services Company Employee, Services Company Director or Services Company Consultant, then, with respect to each such exercise: 
 
(a) the Company shall transfer to the Participant the number of shares equal to (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) divided by (B) the Fair Market Value of a share of Common Stock at the time of exercise (the “Services Company Participant Purchased Shares”); 
 
(b) the Company shall sell to the Services Company the number of shares (the “Services Company Purchased Shares”) equal to the excess of (i) the amount obtained by dividing (A) the amount of the payment made by the Participant to the Company pursuant to Section 5.1(c) by (B) the price per share of the shares subject to the Option as determined pursuant to Section 5.1(a), over (ii) the Services Company Participant Purchased Shares. The price to be paid by the Services Company to the Company for the Services Company Purchased Shares (the “Services Company Purchase Price”) shall be an amount equal to the product of (x) the number of Services Company Purchased Shares multiplied by (y) the Fair Market Value of a share of Common Stock at the time of the exercise; and 
 
(c) as soon as practicable after receipt of the Services Company Purchased Shares by the Services Company, the Services Company shall transfer such shares to the Participant at no additional cost, as additional compensation. 
 
5.8 Transfer of Payment to the Partnership. As soon as practicable after receipt by the Company of the amounts described in Sections 5.1(c), 5.6(b) and 5.7(b), the Company shall contribute to the Partnership an amount of cash equal to such payments and the Partnership shall issue an additional interest in the Partnership on the terms set forth in the Partnership Agreement. 
 
13 

ARTICLE 6 
 
RESTRICTED STOCK AWARDS 
 
6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of Restricted Stock to any Participant selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by a written Restricted Stock Award Agreement. 
 
6.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. 
 
6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock. 
 
6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company, the Services Company or the Partnership, as applicable, may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse. 
 
ARTICLE 7 
 
STOCK APPRECIATION RIGHTS 
 
7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement. 
 
14 

7.2 Coupled Stock Appreciation Rights. 
 
(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable. 
 
(b) A CSAR may be granted to a Participant for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled. 
 
(c) A CSAR shall entitle the Participant (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company the unexercised portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company, the Partnership or the Services Company, as applicable, in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Stock on the date of exercise of the CSAR by the number of shares of Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose. 
 
7.3 Independent Stock Appreciation Rights. 
 
(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Stock as the Committee may determine. The exercise price per share of Stock subject to each ISAR shall be set by the Committee; provided that the exercise price for any ISAR shall not be less than 100% of the Fair Market Value on the date of grant; and provided, further, that, the Committee in its sole and absolute discretion may provide that the ISAR may be exercised subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or Disability, or otherwise. 
 
(b) An ISAR shall entitle the Participant (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company, the Partnership or the Services Company, as applicable, an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Stock on the date of exercise of the ISAR by the number of shares of Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose. 
 
7.4 Payment and Limitations on Exercise. 
 
(a) Payment of the amounts determined under Sections 7.2(c) and 7.3(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee. 
 
(b) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options. 
 
15 

ARTICLE 8 
 
OTHER TYPES OF AWARDS 
 
8.1 Performance Share Awards. Any Participant selected by the Committee may be granted one or more Performance Share awards which shall be denominated in a number of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. 
 
8.2 Performance Stock Units. Any Participant selected by the Committee may be granted one or more Performance Stock Unit awards which shall be denominated in units of value including dollar value of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. 
 
8.3 Dividend Equivalents. 
 
(a) Any Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. 
 
(b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised. 
 
8.4 Stock Payments. Any Participant selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter. 
 
8.5 Deferred Stock. Any Participant selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued. 
 
16 

8.6 Restricted Stock Units. Any Participant selected by the Committee may be granted an award of Restricted Stock Units in such amount and subject to such terms and conditions as may be determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall become vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company, the Services Company or the Partnership, as applicable, shall transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company, the Services Company or the Partnership, as applicable, for such shares of Stock. 
 
8.7 Profits Interest Units. Any Participant selected by the Committee may be granted an award of Profits Interest Units in such amount and subject to such terms and conditions as may be determined by the Committee; provided, however, that Profits Interest Units may only be issued to a Participant for the performance of services to or for the benefit of the Partnership in the Participant’s capacity as a partner of the Partnership. At the time of grant, the Committee shall specify the date or dates on which the Profits Interest Units shall vest and become nonforfeitable, and may specify such conditions to vesting as it deems appropriate. Profits Interest Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose. These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Partnership for the Profits Interest Units. 
 
8.8 Other Incentive Awards. Any Participant selected by the Committee may be granted one or more Awards that provide Participants with shares of Stock or the right to purchase shares of Stock or that have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise based on or payable in shares of Stock (including, without limitation, convertible or exchangeable securities), in each case on a specified date or dates or over any period or periods determined by the Committee. Other Incentive Awards may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee. 
 
8.9 Performance Bonus Awards. Any Participant selected by the Committee may be granted one or more Performance-Based Awards in the form of a cash bonus (a “Performance Bonus Award”) payable upon the attainment of Performance Goals that are established by the Committee and relate to one or more of the Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Committee. Any such Performance Bonus Award paid to a Covered Employee shall be based upon objectively determinable bonus formulas established in accordance with Article 9. The maximum amount of any Performance Bonus Award payable to a Covered Employee with respect to any fiscal year of the Company shall not exceed $2,000,000. 
 
17 

8.10 Granting of Profits Interest Units to Independent Directors. 
 
(a) During the term of the Plan, each person who is an Independent Director as of the effective date of the Registration Statement on Form S-11 with respect to the initial public offering of shares of Stock (the “Pricing Date”) automatically shall be granted (i) 6,448 Profits Interest Units on the Pricing Date, and (ii) 1,612 Profits Interest Units on the date of each annual meeting of stockholders after the Public Trading Date at which the Independent Director is reelected to the Board, commencing with the third annual meeting after the Public Trading Date. During the term of the Plan, each person who is initially elected to the Board after the Pricing Date and who is an Independent Director at the time of such initial election automatically shall be granted (I) 6,448 Profits Interest Units on the date of such initial election, and (II) 1,612 Profits Interest Units on the date of each annual meeting of stockholders after such initial election at which the Independent Director is reelected to the Board, commencing with the third annual meeting after such initial election. Members of the Board who are employees of the Company, the Partnership, the Services Company, or any Subsidiary who subsequently retire from employment with such entities and remain on the Board will not receive an initial Award of Profits Interest Units pursuant to clause (I) of the preceding sentence, but to the extent they are otherwise eligible, will receive, after retirement from such employment, an Award of Profits Interest Units as described in clause (ii) above or clause (II) of the preceding sentence, as applicable. Notwithstanding the foregoing, in the event that an Independent Director does not qualify as an “accredited investor” within the meaning of Regulation D of the Securities Act of 1933, as amended, on the date of any grant of Profits Interest Units to such Independent Director pursuant to this Section 8.10, then such Independent Director shall not receive such grant of Profits Interest Units, and in lieu thereof shall automatically be granted an equivalent number of fully vested shares of Restricted Stock at a per share purchase price equal to the par value of the Stock. 
 
(b) The Profits Interest Units awarded pursuant to subsection (a) above shall be vested in full as of the date of grant. Consistent with the foregoing, the terms and conditions of the Profits Interest Units (including, without limitation, transfer restrictions with respect thereto) shall be set forth in an Award Agreement to be entered into by the Company and each Independent Director which shall evidence the grant of the Profits Interest Units. 
 
8.11 Term. Except as otherwise provided herein, the term of any Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units, Profits Interest Units or Other Incentive Award shall be set by the Committee in its discretion. 
 
8.12 Exercise or Purchase Price. The Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock Payments, Restricted Stock Units or Other Incentive Award; provided, however, that such price shall not be less than the par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state law. 
 
18 

8.13 Exercise Upon Termination of Employment or Service. An Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments, Restricted Stock Units, Profits Interest Units and Other Incentive Award shall only be exercisable or payable while the Participant is an Employee, Consultant, a member of the Board or a Services Company Director, as applicable; provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units, Profits Interest Units or Other Incentive Award may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or Disability, or otherwise; provided further, that any such provision with respect to Performance Shares or Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based Compensation. 
 
8.14 Form of Payment. Payments with respect to any Award granted under this Article 8, other than Profits Interest Units, shall be made in cash, in Stock or a combination of both, as determined by the Committee. 
 
8.15 Award Agreement. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by a written Award Agreement. 
 
ARTICLE 9 
 
PERFORMANCE-BASED AWARDS 
 
9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8; provided, however, that the Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9. 
 
9.2 Applicability. This Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period. 
 
9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 and 8 which may 
 
19 

be granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period. 
 
9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company or a Company Subsidiary, the Partnership or a Partnership Subsidiary, or the Services Company or a Services Company Subsidiary, on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved. 
 
9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 
 
ARTICLE 10 
 
PROVISIONS APPLICABLE TO AWARDS 
 
10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards. 
 
10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. 
 
20 

10.3 Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company, the Services Company, the Partnership or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company, the Services Company, the Partnership or a Subsidiary. Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution. The Committee by express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or entities related to the Participant, including but not limited to members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s termination of employment or service with the Company, the Services Company, the Partnership or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities. 
 
10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee. 
 
10.5 Certificates; Book Entry Procedures. 
 
(a) Notwithstanding anything herein to the contrary, neither the Company, the Services Company, nor the Partnership shall be required to issue or deliver any certificates evidencing shares of Stock or other securities pursuant to the grant or exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock or other securities are listed or traded. All certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the 
 
21 

such securities are listed, quoted, or traded. The Committee may place legends on any certificate to reference restrictions applicable to the Stock or other securities. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee. 
 
(b) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, neither the Company, the Services Company, nor the Partnership shall deliver to any Participant certificates evidencing shares of Stock or other securities issued in connection with any Award and instead such shares of Stock or other securities shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). 
 
ARTICLE 11 
 
CHANGES IN CAPITAL STRUCTURE 
 
11.1 Adjustments. 
 
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock, the Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (i) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3); (ii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable Performance Goals or Performance Criteria with respect thereto); and (iii) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code. 
 
(b) In the event of any transaction or event described in Section 11.1(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in applicable laws, regulations or accounting principles, the Committee, in its sole discretion and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: 
 
22 

(i) To provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable or payable or fully vested (and, for the avoidance of doubt, if the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction or event described in this Section 11.1(b), then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion; 
 
(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock or securities of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; 
 
(iii) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of shares subject to outstanding Restricted Stock or Deferred Stock Awards and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future 
 
(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares or other securities covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and 
 
(v) To provide that the Award cannot vest, be exercised or become payable after such event. 
 
11.2 Acceleration Upon Certain Changes in Control. Notwithstanding Section 11.1, if a Change in Control occurs and a Participant’s Awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company, the Services Company, the Partnership or any Subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 11.2, this Section 11.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect. 
 
11.3 Outstanding Awards – Other Changes. In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 11, the Committee may, in its absolute discretion, make such adjustments in the number 
 
23 

and kind of shares or other securities subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights. 
 
11.4 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock or other securities subject to an Award or the grant or exercise price of any Award. 
 
ARTICLE 12 
 
ADMINISTRATION 
 
12.1 Committee. Unless and until the Board delegates administration of the Plan to a Committee as set forth below, the Plan shall be administered by the full Board, and for such purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any other applicable rule or regulation, shall delegate administration of the Plan to a Committee. The Committee shall consist solely of two or more members of the Board each of whom is both an “outside director,” within the meaning of Section 162(m) of the Code, and a Non-Employee Director. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 12.5. Appointment of Committee members shall be effective upon acceptance of appointment. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board. 
 
12.2 Action by the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company, the Services Company, the Partnership or any Subsidiary, the independent certified public accountants of the Company, the Services Company or the Partnership, or any executive compensation consultant or other professional retained by the Company, the Services Company or the Partnership to assist in the administration of the Plan. 
 
24 

12.3 Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to: 
 
(a) Designate Participants to receive Awards; 
 
(b) Determine the type or types of Awards to be granted to each Participant; 
 
(c) Determine the number of Awards to be granted and the number of shares of Stock or other securities to which an Award will relate; 
 
(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines; provided, however, that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards; 
 
(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered; 
 
(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant; 
 
(g) Decide all other matters that must be determined in connection with an Award; 
 
(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; 
 
(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; 
 
(j) In the case of Awards to Service Company Employees, Service Company Consultants, Partnership Employees or Partnership Consultants, determine the mechanics for the transfer of rights under such Awards; and 
 
(k) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan. 
 
12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. 
 
12.5 Delegation of Authority. To the extent permitted by applicable law, the Committee may from time to time delegate to a committee of one or more members of the Board 
 
25 

or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or members of the Board) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Committee. 
 
ARTICLE 13 
 
EFFECTIVE AND EXPIRATION DATE 
 
13.1 Effective Date. The Plan is effective as of the date the Plan is approved by the Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by the stockholders if it receives the affirmative vote of the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable provisions of the Company’s Bylaws. 
 
13.2 Expiration Date. The Plan will expire on, and no Incentive Stock Option or other Award may be granted pursuant to the Plan after, the earlier of the tenth anniversary of (i) the Effective Date or (ii) the date this Plan is approved by the Board. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement. 
 
ARTICLE 14 
 
AMENDMENT, MODIFICATION, AND TERMINATION 
 
14.1 Amendment, Modification, And Termination. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that (i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 11), (ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value on the date of grant, or (iii) permits the Committee to extend the exercise period for an Option beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the Company, no Option may be amended to reduce the per share exercise price of the shares subject to such Option below the per share exercise price as of the date the Option is granted and, except as permitted by Article 11, no Option may be granted in exchange for, or in connection with, the cancellation or surrender of an Option having a higher per share exercise price. 
 
14.2 Awards Previously Granted. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant. 
 
26 

ARTICLE 15 
 
GENERAL PROVISIONS 
 
15.1 No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and none of the Company, the Services Company, the Partnership or the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly. 
 
15.2 No Stockholders Rights. Except as otherwise provided herein, no Participant shall have any of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock. 
 
15.3 Withholding. The Company, the Services Company, the Partnership or any Subsidiary, as applicable, shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, the Services Company, the Partnership or any Subsidiary, as applicable, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company, the Services Company, the Partnership or any Subsidiary, as applicable, withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income. 
 
15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company, the Services Company, the Partnership or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company, the Services Company, the Partnership or any Subsidiary. 
 
15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company, the Services Company, the Partnership or any Subsidiary. 
 
27 

15.6 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company, the Services Company and/or the Partnership from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company, the Services Company and the Partnership an opportunity, at their own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company, the Services Company and/or the Partnership may have to indemnify them or hold them harmless. 
 
15.7 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company, the Services Company, the Partnership or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder. 
 
15.8 Expenses. The expenses of administering the Plan shall be borne by the Company, the Services Company, the Partnership and their Subsidiaries. 
 
15.9 Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 
 
15.10 Fractional Shares. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate. 
 
15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 
 
15.12 Government and Other Regulations. The obligation of the Company, the Services Company and the Partnership to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act of 1933, as amended, any of the shares of Stock or other securities paid pursuant 
 
28 

to the Plan. If the shares or other securities paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act of 1933, as amended, the Company, the Services Company and the Partnership may restrict the transfer of such shares or other securities in such manner as it deems advisable to ensure the availability of any such exemption. 
 
15.13 Section 83(b) Election Prohibited. No Participant may make an election under Section 83(b) of the Code with respect to any Award under the Plan without the consent of the Company, which the Company may grant or withhold in its sole discretion. 
 
15.14 Grant of Awards to Certain Employees or Consultants. The Company, the Services Company, the Partnership or any Subsidiary may provide through the establishment of a formal written policy or otherwise for the method by which shares of Stock or other securities and/or payment therefor may be exchanged or contributed between the Company and such other party, or may be returned to the Company upon any forfeiture of Stock or other securities by the Participant, for the purpose of ensuring that the relationship between the Company and the Services Company, the Partnership or such Subsidiary remains at arm’s-length. 
 
15.15 Restrictions on Awards. This Plan shall be interpreted and construed in a manner consistent with the Company’s status as a REIT. No Award shall be granted or awarded, and with respect to an Award already granted under the Plan, such Award shall not be exercisable: 
 
(a) to the extent that the grant or exercise of such Award could cause the Participant to be in violation of the Common Stock Ownership Limit or the Aggregate Stock Ownership Limit (each as defined in the Company’s Articles of Incorporation, as amended from time to time); or 
 
(b) if, in the discretion of the Committee, the grant or exercise of such Award could impair the Company’s status as a REIT. 
 
15.16 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of California. 
 
29 

* * * * * 
 
I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Digital Realty Trust, Inc. on                           , 2004. 
 
* * * * * 
 
I hereby certify that the foregoing Plan was approved by the stockholders of Digital Realty Trust, Inc. on                          , 2004. 
 
Executed on this      day of                     , 2004. 

	
Corporate Secretary	
 
30 
Exhibit 10.37 
$200,000,000 
 
FORM OF REVOLVING CREDIT AGREEMENT 
 
Dated as of                         , 2004 
 
among 
 
DIGITAL REALTY TRUST, L.P., 
 
as Borrower, 
 
DIGITAL REALTY TRUST, INC., 
 
as Parent Guarantor, 
 
THE SUBSIDIARY GUARANTORS NAMED HEREIN, 
 
as Subsidiary Guarantors, 
 
THE INITIAL LENDERS, INITIAL ISSUING BANK AND 
SWING LINE BANK NAMED HEREIN, 
 
as Initial Lenders, Initial Issuing Bank and Swing Line Bank 
 
CITICORP NORTH AMERICA, INC., 
 
as Administrative Agent, 
 
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, 
 
as Syndication Agent, 
 
and 
 
CITIGROUP GLOBAL MARKETS INC. 
and 
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, 
 
as Joint Lead Arrangers and Joint Book Running Managers 

T A B L E   O F   C O N T E N T S 

Section	 	 	  	Page	
 	 	ARTICLE I	  	 	
 	 	DEFINITIONS AND ACCOUNTING TERMS	  	 	
SECTION 1.01.	 	Certain Defined Terms	  	1	
SECTION 1.02.	 	Computation of Time Periods; Other Definitional Provisions	  	24	
SECTION 1.03.	 	Accounting Terms	  	24	
			
 	 	ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT	  	 	
			
SECTION 2.01.	 	The Advances and the Letters of Credit	  	25	
SECTION 2.02.	 	Making the Advances	  	26	
SECTION 2.03.	 	Issuance of and Drawings and Reimbursement Under Letters of Credit	  	28	
SECTION 2.04.	 	Repayment of Advances	  	29	
SECTION 2.05.	 	Termination or Reduction of the Commitments	  	30	
SECTION 2.06.	 	Prepayments	  	31	
SECTION 2.07.	 	Interest	  	32	
SECTION 2.08.	 	Fees	  	33	
SECTION 2.09.	 	Conversion of Advances	  	34	
SECTION 2.10.	 	Increased Costs, Etc.	  	34	
SECTION 2.11.	 	Payments and Computations	  	36	
SECTION 2.12.	 	Taxes	  	38	
SECTION 2.13.	 	Sharing of Payments, Etc.	  	40	
SECTION 2.14.	 	Use of Proceeds	  	40	
SECTION 2.15.	 	Evidence of Debt	  	40	
SECTION 2.16.	 	Extension of Termination Date	  	41	
SECTION 2.17.	 	Cash Collateral Account	  	41	
			
 	 	ARTICLE III
CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT	  	 	
			
SECTION 3.01.	 	Conditions Precedent to Initial Extension of Credit	  	43	
SECTION 3.02.	 	Conditions Precedent to Each Borrowing, Issuance and Renewal	  	46	
SECTION 3.03.	 	Determinations Under Section 3.01	  	47	
			
 	 	ARTICLE IV
REPRESENTATIONS AND WARRANTIES	  	 	
			
SECTION 4.01.	 	Representations and Warranties of the Loan Parties	  	47	
			
 	 	ARTICLE V
COVENANTS OF THE LOAN PARTIES	  	 	
			
SECTION 5.01.	 	Affirmative Covenants	  	53	
SECTION 5.02.	 	Negative Covenants	  	57	
SECTION 5.03.	 	Reporting Requirements	  	64	
 
i 

SECTION 5.04.	 	Financial Covenants	  	66	
			
 	 	ARTICLE VI
EVENTS OF DEFAULT	  	 	
SECTION 6.01.	 	Events of Default	  	68	
SECTION 6.02.	 	Actions in Respect of the Letters of Credit upon Default	  	70	
			
 	 	ARTICLE VII
GUARANTY	  	 	
			
SECTION 7.01.	 	Guaranty; Limitation of Liability	  	71	
SECTION 7.02.	 	Guaranty Absolute	  	71	
SECTION 7.03.	 	Waivers and Acknowledgments	  	72	
SECTION 7.04.	 	Subrogation	  	73	
SECTION 7.05.	 	Guaranty Supplements	  	74	
SECTION 7.06.	 	Indemnification by Guarantors	  	74	
SECTION 7.07.	 	Subordination	  	74	
SECTION 7.08.	 	Continuing Guaranty	  	75	
			
 	 	ARTICLE VIII
THE ADMINISTRATIVE AGENT	  	 	
SECTION 8.01.	 	Authorization and Action	  	75	
SECTION 8.02.	 	Administrative Agent’s Reliance, Etc.	  	76	
SECTION 8.03.	 	CNAI and Affiliates	  	76	
SECTION 8.04.	 	Lender Party Credit Decision	  	76	
SECTION 8.05.	 	Indemnification by Lender Parties	  	77	
SECTION 8.06.	 	Successor Administrative Agents	  	77	
			
 	 	ARTICLE IX
MISCELLANEOUS	  	 	
SECTION 9.01.	 	Amendments, Etc	  	78	
SECTION 9.02.	 	Notices, Etc.	  	78	
SECTION 9.03.	 	No Waiver; Remedies	  	80	
SECTION 9.04.	 	Costs and Expenses	  	80	
SECTION 9.05.	 	Right of Set-off	  	81	
SECTION 9.06.	 	Binding Effect	  	81	
SECTION 9.07.	 	Assignments and Participations	  	82	
SECTION 9.08.	 	Execution in Counterparts	  	84	
SECTION 9.09.	 	No Liability of the Issuing Banks	  	84	
SECTION 9.10.	 	Confidentiality	  	85	
SECTION 9.11.	 	Patriot Act Notification	  	85	
SECTION 9.12.	 	Jurisdiction, Etc.	  	85	
SECTION 9.13.	 	Governing Law	  	86	
SECTION 9.14.	 	WAIVER OF JURY TRIAL	  	86	
 
ii 

SCHEDULES	 	 	
		
Schedule I	 	-        Commitments and Applicable Lending Offices	
Schedule II	 	-        Unencumbered Assets	
Schedule 4.01(b)	 	-        Subsidiaries	
Schedule 4.01(f)	 	-        Disclosed Litigation	
Schedule 4.01(n)	 	-        Existing Debt	
Schedule 4.01(o)	 	-        Surviving Debt	
Schedule 4.01(p)	 	-        Existing Liens	
Schedule 4.01(q)	 	-        Owned Real Property	
Schedule 4.01(r)	 	-        Leased Real Property	
Schedule 4.01(s)	 	-        Environmental Concerns	
Schedule 4.01(x)	 	-        Existing Loans to Directors and Executive Officers	
Schedule 4.01(y)	 	-        Excluded Subsidiaries and Excluded Subsidiary Agreements	
		
EXHIBITS	 	 	
		
Exhibit A	 	-        Form of Note	
Exhibit B	 	-        Form of Notice of Borrowing	
Exhibit C	 	-        Form of Guaranty Supplement	
Exhibit D	 	-        Form of Assignment and Acceptance	
Exhibit E-1	 	-        Form of Opinion of Counsel to the Loan Parties	
Exhibit E-2	 	-        Form of Opinion of Maryland Counsel to the Loan Parties	
Exhibit F	 	-        Form of Unencumbered Assets Certificate	
 
iii 

REVOLVING CREDIT AGREEMENT 
 
REVOLVING CREDIT AGREEMENT dated as of                  , 2004 (this “Agreement”) among DIGITAL REALTY TRUST, L.P., a Maryland limited partnership (the “Borrower”), DIGITAL REALTY TRUST, INC., a Maryland corporation (the “Parent Guarantor”), the entities listed on the signature pages hereof as the guarantors (together with any Additional Guarantors (as hereinafter defined) acceding hereto pursuant to Section 7.05, the “Subsidiary Guarantors” and, together with the Parent Guarantor, the “Guarantors”), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the initial lenders (the “Initial Lenders”), CITIBANK, N.A., as the initial issuer of Letters of Credit (as hereinafter defined) (the “Initial Issuing Bank”), the Swing Line Bank (as hereinafter defined), CITICORP NORTH AMERICA, INC. (“CNAI”), as administrative agent (together with any successor administrative agent appointed pursuant to Article VIII, the “Administrative Agent”) for the Lender Parties (as hereinafter defined), MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (“Merrill Lynch”), as syndication agent, and CITIGROUP GLOBAL MARKETS INC. (“CGMI”) and MERRILL LYNCH, as joint lead arrangers and joint book running managers (the “Arrangers”). 
 
ARTICLE I 
 
DEFINITIONS AND ACCOUNTING TERMS 
 
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 
 
“Additional Guarantor” has the meaning specified in Section 7.05. 
 
“Adjusted EBITDA” means the product of (a) four (4) times (b) (i) EBITDA for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, less (ii) an amount equal to the Capital Expenditure Reserve for all Assets; provided, however, that for purposes of this definition, in the case of any acquisition or disposition of any direct or indirect interest in any Asset (including through the acquisition of Equity Interests) by the Parent Guarantor or any of its Subsidiaries during any fiscal quarter, Adjusted EBITDA will be adjusted (1) in the case of an acquisition, by adding thereto an amount equal to (A) four (4) times (B) the acquired Asset’s actual EBITDA (computed as if such Asset was owned by the Parent or one of its Subsidiaries for the entire fiscal quarter) generated during the portion of such fiscal quarter that such Asset was not owned by the Parent or such Subsidiary and (2) in the case of a disposition, by subtracting therefrom an amount equal to (A) four (4) times (B) the actual EBITDA generated by the Asset so disposed of during such fiscal quarter. 
 
“Adjusted Net Operating Income” means, with respect to any Unencumbered Asset, the product of (a) four (4) times (b) (i) Net Operating Income attributable to such Unencumbered Asset less (ii) the sum of (A) the amount, if any, by which (1) 3% of all rental and other income from the operation of such Unencumbered Asset for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, exceeds (2) all management fees payable in respect of such Unencumbered Asset for such fiscal period plus (B) the total Capital Expenditure Reserve for such Unencumbered Asset. 
 
“Administrative Agent” has the meaning specified in the recital of parties to this Agreement. 

“Administrative Agent’s Account” means the account of the Administrative Agent maintained by the Administrative Agent with Citibank, N.A., at its office at 2 Penns Way, Suite 200, New Castle, Delaware 19720, ABA No. 021000089, Account No. 36852248, Account Name: Agency/Medium Term Finance, Reference: Digital Realty, Attention: Global Loans/Agency, or such other account as the Administrative Agent shall specify in writing to the Lender Parties. 
 
“Advance” means a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance. 
 
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise. 
 
“Agreement” has the meaning specified in the recital of parties to this Agreement. 
 
“Agreement Value” means, for each Hedge Agreement, on any date of determination, an amount determined by the Administrative Agent equal to: (a) in the case of a Hedge Agreement documented pursuant to the Master Agreement (Multicurrency-Cross Border) published by the International Swap and Derivatives Association, Inc. (the “Master Agreement”), the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries to its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) such Loan Party or Subsidiary was the sole “Affected Party”, and (iii) the Administrative Agent was the sole party determining such payment amount (with the Administrative Agent making such determination pursuant to the provisions of the form of Master Agreement); or (b) in the case of a Hedge Agreement traded on an exchange, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent based on the settlement price of such Hedge Agreement on such date of determination, or (c) in all other cases, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not otherwise defined in this definition shall have the respective meanings set forth in the above described Master Agreement. 
 
“Applicable Lending Office” means, with respect to each Lender Party, such Lender Party’s Domestic Lending Office in the case of a Base Rate Advance and such Lender Party’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance. 
 
“Applicable Margin” means, at any date of determination, a percentage per annum determined by reference to the Leverage Ratio as set forth below: 
 
2 

Pricing
Level	  	Leverage Ratio	  	Applicable Margin for Base
Rate Advances	  	Applicable Margin
for Eurodollar Rate Advances	
				
I	  	> 55%	  	0.750%	  	1.750%	
				
II	  	> 45% but £ 55%	  	0.625%	  	1.625%	
				
III	  	> 40% but £ 45%	  	0.500%	  	1.500%	
				
IV	  	£ 40%	  	0.375%	  	1.375%	
 
The Applicable Margin for each Base Rate Advance shall be determined by reference to the Leverage Ratio in effect from time to time and the Applicable Margin for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing shall be determined by reference to the Leverage Ratio in effect on the first day of such Interest Period; provided, however, that (a) the Applicable Margin shall initially be at Pricing Level II on the Closing Date, (b) no change in the Applicable Margin resulting from the Leverage Ratio shall be effective until three Business Days after the date on which the Administrative Agent receives (x) the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and (y) a certificate of the Chief Financial Officer of the Borrower demonstrating the Leverage Ratio, and (c) the Applicable Margin shall be at Pricing Level I for so long as the Borrower has not submitted to the Administrative Agent as and when required under Section 5.03(b) or (c), as applicable, the information described in clause (b) of this proviso. 
 
“Arrangers” has the meaning specified in the recital of parties to this Agreement. 
 
“ASML Ground Lease” means that certain Ground Lease dated as of October 8, 1984 between The Arizona Board of Regents, acting for and on behalf of Arizona State University, as lessor, and Price-Elliott Research Park, Inc., as lessee, the lessee’ s interest in which was assigned to Global ASML, LLC prior to the date hereof. 
 
“ASML Asset” means the Asset subject to the ASML Ground Lease. 
 
“Assets” means Office Assets, Development Assets and Joint Venture Assets. 
 
“Asset Value” means, at any date of determination, (a) in the case of any Office Asset, the Adjusted EBITDA of such Asset divided by 9.5%, (b) in the case of any Development Asset, the book value of such Development Asset as determined in accordance with GAAP, (c) in the case of any Joint Venture Asset that is an Office Asset, the JV Pro Rata Share of the Adjusted EBITDA of such Asset divided by 9.5%, and (d) in the case of any other Joint Venture Asset, the JV Pro Rata Share of the book value of such Joint Venture Asset as determined in accordance with GAAP. 
 
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit D hereto. 
 
“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). 
 
3 

“Bankruptcy Law” means any applicable law governing a proceeding of the type referred to in Section 6.01(f) or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors. 
 
“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.’s base rate and (b) ½ of 1% per annum above the Federal Funds Rate. 
 
“Base Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(i). 
 
“Borrower” has the meaning specified in the recital of parties to this Agreement. 
 
“Borrower’s Account” means the account of the Borrower maintained by the Borrower with [            ] at its office at [            ], ABA No. [            ], Account No. [            ], or such other account as the Borrower shall specify in writing to the Administrative Agent. [Digital Realty to provide account information.] 
 
“Borrowing” means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Lenders or a Swing Line Borrowing. 
 
“Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. 
 
“Capital Expenditure Reserve” means, with respect to any Asset on any date of determination, the product of (A) $0.25 times (B) the total number of square feet within such Asset. 
 
“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases. 
 
“Cash Equivalents” means any of the following, to the extent owned by the Parent Guarantor or any of its Subsidiaries free and clear of all Liens (other than Permitted Liens) and having a maturity of not greater than 90 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) readily marketable direct obligations of any state of the United States or any political subdivision of any such state or any public instrumentality thereof having, at the time of acquisition, the highest rating obtainable from either Moody’s or S&P, (c) certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (d) below, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1,000,000,000, (d) commercial paper in an aggregate amount of not more than $50,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P, or (e) shares of any mutual fund the assets of which are primarily invested in the types of investments referred to in clauses (a) through (d) above. 
 
4 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. 
 
“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. 
 
“CGMI” has the meaning specified in the recital of parties to this Agreement. 
 
“Change of Control” means the occurrence of any of the following (after giving effect to the consummation of the IPO and the Formation Transactions): (a) any Person or two or more Persons acting in concert shall have acquired and shall continue to have following the date hereof beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Interests of the Parent Guarantor (or other securities convertible into such Voting Interests) representing 35% or more of the combined voting power of all Voting Interests of the Parent Guarantor; or (b) during any consecutive twenty-four month period commencing on or after the date hereof, individuals who at the beginning of such period constituted the Board of Directors of the Parent Guarantor (together with any new directors whose election by the Board of Directors or whose nomination for election by the Parent Guarantor stockholders was approved by a vote of at least a majority of the members of the Board of Directors then in office who either were members of the Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office, except for any such change resulting from (x) death or disability of any such member, (y) satisfaction of any requirement for the majority of the members of the Board of Directors of the Parent Guarantor to qualify under applicable law as independent directors, or (z) the replacement of any member of the Board of Directors who is an officer or employee of the Parent Guarantor with any other officer or employee of the Parent Guarantor or any of its Affiliates ; or (c) any Person or two or more Persons acting in concert shall have acquired and shall continue to have following the date hereof, by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to direct, directly or indirectly, the management or policies of the Parent Guarantor; or (d) the Parent Guarantor ceases to be the general partner of the Borrower; or (e) the Parent Guarantor ceases to be the legal and beneficial owner of all of the general partnership interests of the Borrower; or (f) the Parent Guarantor shall create, incur, assume or suffer to exist any Lien on the Equity Interests in the Borrower owned by it. 
 
“Closing Date” means                     , 2004 or such other date as may be agreed upon by the Borrower and the Administrative Agent. 
 
“CNAI” has the meaning specified in the recital of parties to this Agreement. 
 
“Commitment” means a Revolving Credit Commitment, a Swing Line Commitment or a Letter of Credit Commitment. 
 
“Communications” has the meaning specified in Section 9.02(b). 
 
“Confidential Information” means information that any Loan Party furnishes to the Administrative Agent or any Lender Party in writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or 
 
5 

becomes available to such Agent or such Lender Party from a source other than the Loan Parties or the Administrative Agent or any other Lender Party. 
 
“Consolidated” refers to the consolidation of accounts in accordance with GAAP. 
 
“Contingent Obligation” means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith, all as recorded on the balance sheet or on the footnotes to the most recent financial statements of such Person in accordance with GAAP. 
 
“Contributing Entities” means Global Innovation Partners, LLC, Pacific-Bryan Partners, L.P., San Francisco Wave eXchange, LLC, eXchange colocation, LLC and Santa Clara Wave eXchange, LLC. 
 
“Conversion”, “Convert” and “Converted” each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.07(d), 2.09 or 2.10. 
 
“Customary Carve-Out Agreement” has the meaning specified in the definition of Non-Recourse Debt. 
 
“Debt” of any Person means, without duplication for purposes of calculating financial ratios, (a) all Debt for Borrowed Money of such Person, (b) all Obligations of such Person for the deferred purchase price of property or services other than trade payables incurred in the ordinary course of business and not overdue by more than 60 days, (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment (but excluding for the 
 
6 

avoidance of doubt (i) regular quarterly dividends and (ii) special year-end dividends made in connection with maintaining the Parent Guarantor’s status as a REIT) in respect of any Equity Interests in such Person or any other Person (other than Preferred Interests that are issued by any Loan Party or Subsidiary thereof and classified as either equity or minority interests pursuant to GAAP) or any warrants, rights or options to acquire such Equity Interests, (h) all Obligations of such Person in respect of Hedge Agreements, valued at the Agreement Value thereof, (i) all Contingent Obligations of such Person and (j) all indebtedness and other payment Obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations; provided, however, that in the case of the Parent Guarantor and its Subsidiaries “Debt” shall also include, without duplication, the JV Pro Rata Share of Debt for each Joint Venture. 
 
“Debt for Borrowed Money” of any Person means all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person; provided, however, that in the case of the Parent Guarantor and its Subsidiaries “Debt for Borrowed Money” shall also include, without duplication, the JV Pro Rata Share of Debt for Borrowed Money for each Joint Venture; and provided further, however, that as used in the definition of “Fixed Charge Coverage Ratio”, in the case of any acquisition or disposition of any direct or indirect interest in any Asset (including through the acquisition of Equity Interests) by the Parent Guarantor or any of its Subsidiaries during the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, the term “Debt for Borrowed Money” (a) shall include, in the case of an acquisition, an amount equal to (i) four (4) times (ii) the Debt for Borrowed Money directly relating to such Asset existing immediately following such acquisition (computed as if such indebtedness in respect of such Asset was in existence for the Parent Guarantor or such Subsidiary for the entire fiscal quarter), and (b) shall exclude, in the case of a disposition, an amount equal to (i) four (4) times (ii) the actual Debt for Borrowed Money to which such Asset was subject to the extent such Debt for Borrowed Money was repaid or otherwise terminated upon the disposition of such Asset during such fiscal quarter. 
 
“Debt Rating” means, as of any date, the lowest rating that has been most recently assigned by either S&P or Moody’s, as the case may be, to the long-term senior unsecured non-credit enhanced debt of the Parent Guarantor or, if applicable, to the “implied rating” of the Parent Guarantor’s long-term senior unsecured credit enhanced debt. For purposes of the foregoing, (a) if any rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (b) if S&P or Moody’s shall change the basis on which ratings are established, each reference to the Parent Guarantor’s Debt Rating announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be. 
 
“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 
 
“Default Termination Notice” has the meaning specified in Section 2.01(b). 
 
“Development Asset” means Real Property acquired for development into an Office Asset that, in accordance with GAAP, would be classified as a development property on a 
 
7 

Consolidated balance sheet of the Parent Guarantor and its Subsidiaries. For the avoidance of any doubt, Development Assets shall not constitute Office Assets. 
 
“Digital Realty Predecessor” means the real estate activities and holdings of Global Innovation Partners, LLC related to the Real Property, as more particularly described in and as such term is defined in, the Registration Statement. 
 
“Disclosed Litigation” has the meaning specified in Section 3.01(f). 
 
“Domestic Lending Office” means, with respect to any Lender Party, the office of such Lender Party specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent. 
 
“EBITDA” means, for any period, (a) the sum of (i) net income (or net loss) (excluding gains (or losses) from extraordinary and unusual items, one-time expenses related to the Formation Transactions and the non-cash component of non-recurring items), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense and (v) amortization expense, in each case of the Parent Guarantor and its Subsidiaries determined on a Consolidated basis and in accordance with GAAP for such period, plus (b) with respect to each Joint Venture, the JV Pro Rata Share of the sum of (i) net income (or net loss) (excluding gains (or losses) from extraordinary and unusual items), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense and (v) amortization expense of such Joint Venture, in each case determined on a Consolidated basis and in accordance with GAAP for such period. 
 
“Effective Date” means the first date on which the conditions set forth in Article III shall be satisfied. 
 
“Eligible Assignee” means (a) with respect to the Revolving Credit Facility, (i) a Lender; (ii) an Affiliate or Fund Affiliate of a Lender and (iii) any other Person approved by the Administrative Agent and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Borrower, each such approval not to be unreasonably withheld or delayed, and (b) with respect to the Letter of Credit Facility, a Person that is approved by the Administrative Agent and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition. 
 
“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. 
 
“Environmental Law” means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, 
 
8 

safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. 
 
“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law. 
 
“Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination. 
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. 
 
“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code. 
 
“ERISA Event” means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan. 
 
“Eurocurrency Liabilities” has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. 
 
“Eurodollar Lending Office” means, with respect to any Lender Party, the office of such Lender Party specified as its “Eurodollar Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent. 
 
9 

“Eurodollar Rate” means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period or, if for any reason such rate is not available, the average (rounded upward, if necessary, to the nearest 1/100 of 1%, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank’s Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period (or, if such Reference Bank shall not have such a Eurodollar Rate Advance, U.S.$1,000,000) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. 
 
“Eurodollar Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(ii). 
 
“Eurodollar Rate Reserve Percentage” means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. 
 
“Events of Default” has the meaning specified in Section 6.01. 
 
“Existing Debt” means Debt of each Loan Party and its Subsidiaries outstanding immediately before giving effect to the Formation Transactions. 
 
“Excluded Subsidiary” at any time means (a) any direct or indirect Subsidiary of the Borrower that is unable to guaranty the Obligations of the Loan Parties under the Loan Documents at such time because (i) it is party to one or more Excluded Subsidiary Agreements that prohibit such Excluded Subsidiary from entering into the Guaranty set forth in Article VII or a Guaranty Supplement or (ii) entering into the Guaranty set forth in Article VII or a Guaranty Supplement would cause a default under an Excluded Subsidiary Agreement, (b) any direct or indirect Subsidiary of the Borrower listed on Part B of Schedule 4.01(y) on the Effective Date or hereafter designated as an “Excluded Subsidiary” by Borrower and approved by the Administrative Agent and the Required Lenders, in their sole discretion, and (c) any Foreign Subsidiary. 
 
“Excluded Subsidiary Agreement” for each Excluded Subsidiary means any agreement set forth opposite the name of such Excluded Subsidiary on Schedule 4.01(x) hereto (as such Schedule may be supplemented from time to time pursuant to Sections 5.01(j)(i) and 5.01(j)(ii)) and any agreement pursuant to which such Excluded Subsidiary (or a Subsidiary related thereto) 
 
10 

incurs Refinancing Debt with regard to the Debt, if any, incurred pursuant to such Excluded Subsidiary Agreement. 
 
“Extension Date” has the meaning specified in Section 2.16. 
 
“Facility” means the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Facility. 
 
“Facility Exposure” means, at any date of determination, the sum of the aggregate principal amount of all outstanding Advances and the Available Amount under all outstanding Letters of Credit. 
 
“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. 
 
“Fee Letter” means the fee letter dated September 28, 2004 among the Borrower, CNAI, CGMI, Merrill Lynch and MLCC, as the same may be amended from time to time. 
 
“Fiscal Year” means a fiscal year of the Parent Guarantor and its Consolidated Subsidiaries ending on December 31 in any calendar year. 
 
“Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of (a) (i) Adjusted EBITDA, to (b) the product of (i) four times (ii) the sum of (A) interest (including capitalized interest) payable on, and amortization of debt discount in respect of, all Debt for Borrowed Money plus (B) scheduled amortization of principal amounts of all Debt for Borrowed Money payable (not including balloon maturity amounts) plus (C) all cash dividends payable on any Preferred Interests plus (D) all rentals paid under leases of real property, in each case, of or by the Parent Guarantor and its Subsidiaries for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be; provided, however, that at any date of determination occurring during the fiscal quarter of the Parent Guarantor ending December 31, 2004, the Fixed Charge Coverage Ratio shall be determined on a pro forma basis after having given effect to the IPO and the Formation Transactions. 
 
“Foreign Lender” has the meaning specified in Section 2.12(e). 
 
“Foreign Subsidiary” means any Subsidiary of the Borrower (a) that is not incorporated or organized under the laws of any State of the United States or the District of Columbia, and (b) the principal assets, if any, of which are not located in the United States. 
 
“Formation Transactions” means (a) the contribution of certain assets by the Contributing Entities to the Borrower in exchange for cash and limited partnership units in the Borrower and (b) following completion of the IPO, the pro rata allocation by Global Innovation Partners, LLC to its investors of limited partnership units in the Borrower and the purchase by the Parent Guarantor of such limited partnership units in the Borrower for cash, in each case, as more 
 
11 

fully described in the Registration Statement and otherwise on terms reasonably acceptable to the Administrative Agent. 
 
“Fund Affiliate” means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. 
 
“Funds From Operations” means net income (or loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property and extraordinary and unusual items, plus depreciation and amortization, and after adjustments for unconsolidated Joint Ventures, provided that the determination of Funds From Operations shall be made on a pro forma basis after giving effect to the IPO and the Formation Transactions. Adjustments for unconsolidated Joint Ventures will be calculated to reflect funds from operations on the same basis. 
 
“GAAP” has the meaning specified in Section 1.03. 
 
“Good Faith Contest” means the contest of an item as to which: (a) such item is contested in good faith, by appropriate proceedings, (b) reserves that are adequate are established with respect to such contested item in accordance with GAAP and (c) the failure to pay or comply with such contested item during the period of such contest is not reasonably likely to result in a Material Adverse Effect. 
 
“Guaranteed Hedge Agreement” means any Hedge Agreement required or not prohibited under Article V that is entered into by and between any Loan Party and any Hedge Bank. 
 
“Guaranteed Obligations” has the meaning specified in Section 7.01. 
 
“Guarantors” means the Parent Guarantor and the Subsidiary Guarantors. 
 
“Guaranty” means the Guaranty by the Guarantors pursuant to Article VII, together with any and all Guaranty Supplements required to be delivered pursuant to Section 5.01(j). 
 
“Guaranty Supplement” means a supplement entered into by an Additional Guarantor in substantially the form of Exhibit C hereto. 
 
“Hazardous Materials” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls, radon gas and mold and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. 
 
“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements. 
 
“Hedge Bank” means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Guaranteed Hedge Agreement. 
 
“Indemnified Costs” has the meaning specified in Section 8.05(a). 
 
12 

“Indemnified Party” has the meaning specified in Section 7.06(a). 
 
“Information Memorandum” means the information memorandum dated September, 2004 used by the Arrangers in connection with the syndication of the Commitments. 
 
“Initial Extension of Credit” means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder. 
 
“Initial Issuing Bank” has the meaning specified in the recital of parties to this Agreement. 
 
“Initial Lenders” has the meaning specified in the recital of parties to this Agreement. 
 
“Insufficiency” means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, but utilizing the actuarial assumptions used in such Plan’s most recent valuation report. 
 
“Interest Period” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 12:00 Noon (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: 
 
(a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance that ends after the Termination Date; 
 
(b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; 
 
(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and 
 
(d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. 
 
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. 
 
13 

“Investment” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of “Debt” in respect of such Person. 
 
“IPO” means the initial public offering of common stock in the Parent Guarantor and its registration as a public company with the Securities and Exchange Commission. 
 
“Issuing Bank” means the Initial Issuing Bank and any other Lender approved as an Issuing Bank by the Administrative Agent and the Borrower and any Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 9.07 so long as each such Lender or each such Eligible Assignee expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Letter of Credit Commitment (which information shall be recorded by the Administrative Agent in the Register) for so long as such Initial Issuing Bank, Lender or Eligible Assignee, as the case may be, shall have a Letter of Credit Commitment. 
 
“Joint Venture” means any joint venture (a) in which the Parent Guarantor or any of its Subsidiaries holds any Equity Interest, (b) that is not a Subsidiary of the Parent Guarantor or any of its Subsidiaries and (c) the accounts of which would not appear on the Consolidated financial statements of the Parent Guarantor. 
 
“Joint Venture Assets” means, with respect to any Joint Venture at any time, the assets owned by such Joint Venture at such time. 
 
“JV Pro Rata Share” means, with respect to any Joint Venture at any time, the fraction, expressed as a percentage, obtained by dividing (a) the total book value of all Equity Interests in such Joint Venture held by the Parent Guarantor and any of its Subsidiaries by (b) the total book value of all outstanding Equity Interests in such Joint Venture at such time. 
 
“L/C Account Collateral” has the meaning specified in Section 2.17(a). 
 
“L/C Cash Collateral Account” means the account of the Borrower to be maintained with the Administrative Agent, in the name of the Administrative Agent and under the sole control and dominion of the Administrative Agent and subject to the terms of this Agreement. 
 
“L/C Related Documents” has the meaning specified in Section 2.04(c)(ii)(A). 
 
“Lender Party” means any Lender, the Swing Line Bank or any Issuing Bank. 
 
“Lenders” means the Initial Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement. 
 
“Letter of Credit Advance” means an advance made by any Issuing Bank or any Lender pursuant to Section 2.03(c). 
 
14 

“Letter of Credit Agreement” has the meaning specified in Section 2.03(a). 
 
“Letter of Credit Commitment” means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank’s name on Schedule I hereto under the caption “Letter of Credit Commitment” or, if such Issuing Bank has entered into one or more Assignment and Acceptances, set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Issuing Bank’s “Letter of Credit Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05. 
 
“Letter of Credit Facility” means, at any time, an amount equal to the lesser of (a) the aggregate amount of the Issuing Banks’ Letter of Credit Commitments at such time, and (b) $30,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.05. 
 
“Letters of Credit” has the meaning specified in Section 2.01(b). 
 
“Leverage Ratio” means, at any date of determination, the ratio, expressed as a percentage, of (a) Consolidated Debt of the Parent Guarantor and its Subsidiaries to (b) Total Asset Value, in each case as at the end of the most recently ended fiscal quarter of the Parent Guarantor for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be. 
 
“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. 
 
“Limited Subsidiary” has the meaning specified in Section 5.01(j)(ii). 
 
“Loan Documents” means (a) this Agreement, (b) the Notes, (c) the Fee Letter, (d) each Letter of Credit Agreement, (e) each Guaranty Supplement and (f) each Guaranteed Hedge Agreement, in each case, as amended. 
 
“Loan Parties” means the Borrower and the Guarantors. 
 
“Margin Stock” has the meaning specified in Regulation U. 
 
“Material Adverse Change” means any material adverse change in the business, condition (financial or otherwise), results of operations or prospects of the Borrower or the Borrower and its Subsidiaries, taken as a whole. 
 
“Material Adverse Effect” means a material adverse effect on (a) the business, condition (financial or otherwise), operations or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party. 
 
“Material Contract” means each contract to which the Borrower or any of its Subsidiaries is a party involving aggregate consideration payable to or by the Borrower or such Subsidiary in an amount of $5,000,000 or more per annum or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its Subsidiaries, taken as a whole. 
 
15 

“Material Debt” means Debt of any Loan Party or any Subsidiary of a Loan Party that is outstanding in a principal amount (or, in the case of any Hedge Agreement, an Agreement Value) of $10,000,000 or more, either individually or in the aggregate; in each case (a) whether the primary obligation of one or more of the Loan Parties or their respective Subsidiaries, (b) whether the subject of one or more separate debt instruments or agreements, and (c) exclusive of Debt outstanding under this Agreement. 
 
“Merrill Lynch” has the meaning specified in the recital of parties to this Agreement. 
 
“MLCC” means Merrill Lynch Capital Corporation. 
 
“Moody’s” means Moody’s Investors Services, Inc. and any successor thereto. 
 
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. 
 
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, in which (a) any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates are contributing sponsors or (b) any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates were previously contributing sponsors if such Loan Party or ERISA Affiliate could reasonably be expected to have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. 
 
“Negative Pledge” means, with respect to any asset, any provision of a document, instrument or agreement (other than a Loan Document) which prohibits or purports to prohibit the creation or assumption of any Lien on such asset as security for Obligations under or in respect of the Loan Documents. 
 
“Net Asset Sale Proceeds” has the meaning specified in Section 5.02(e). 
 
“Net Operating Income” means, with respect to any Unencumbered Asset, the total rental revenue and other income from the operation of such Unencumbered Asset for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, minus (i) all expenses and other proper charges incurred by the applicable Loan Party in connection with the operation and maintenance of such Unencumbered Asset during such fiscal period, including, without limitation, management fees, repairs, real estate and chattel taxes and bad debt expenses, but before payment or provision for debt service charges, income taxes and depreciation, amortization and other non-cash expenses, all as determined in accordance with GAAP, provided that there shall be no rent leveling adjustments made (and only actual cash rents will be used) when computing Net Operating Income. 
 
“Non-Recourse Debt” means Debt for Borrowed Money with respect to which recourse for payment is limited to (a) any building(s) or parcel(s) of real property or any related assets encumbered by a Lien securing such Debt for Borrowed Money and/or (b) the general credit of the Property-Level Subsidiary that has incurred or guaranteed such Debt for Borrowed Money and/or the Equity Interests therein and/or the general credit of the immediate parent entity of such Property-Level Subsidiary provided that such parent entity’s assets consist solely of Equity 
 
16 

Interests in one or more Property-Level Subsidiaries or immediate parent entities thereof, it being understood that the instruments governing such Debt may include customary carve-outs to such limited recourse (any such customary carve-outs or agreements limited to such customary carve-outs, being a “Customary Carve-Out Agreement”) such as, for example, personal recourse to the Parent Guarantor or any Subsidiary of the Parent Guarantor for fraud, willful misrepresentation, misapplication or misappropriation of cash, waste, environmental claims, damage to properties, non-payment of taxes or other liens despite the existence of sufficient cash flow, interference with the enforcement of loan documents upon maturity or acceleration, violation of loan document prohibitions against voluntary or involuntary bankruptcy filings, transfer of properties or ownership interests therein and liabilities and other circumstances customarily excluded at the time of the incurrence of such Debt by lenders from exculpation provisions and/or included in separate indemnification agreements in non-recourse financings of real estate. 
 
“Note” means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender. 
 
“Notice” has the meaning specified in Section 9.02(c). 
 
“Notice of Borrowing” has the meaning specified in Section 2.02(a). 
 
“Notice of Issuance” has the meaning specified in Section 2.03(a). 
 
“Notice of Renewal” has the meaning specified in Section 2.01(b). 
 
“Notice of Swing Line Borrowing” has the meaning specified in Section 2.02(b). 
 
“Notice of Termination” has the meaning specified in Section 2.01(b). 
 
“NPL” means the National Priorities List under CERCLA. 
 
“Obligation” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. 
 
“OECD” means the Organization for Economic Cooperation and Development. 
 
“Office Asset” means Real Property (other than any Joint Venture Asset) that operates or is intended to operate as a telecommunications infrastructure building, information technology infrastructure building, technology manufacturing building or technology office/corporate 
 
17 

headquarter building, in each case, as more particularly described in the Information Memorandum. 
 
“Other Taxes” has the meaning specified in Section 2.12(b). 
 
“Parent Guarantor” has the meaning specified in the recital of parties to this Agreement. 
 
“Patriot Act” has the meaning specified in Section 9.12. 
 
“PBGC” means the Pension Benefit Guaranty Corporation (or any successor). 
 
“Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet delinquent or which are the subject of a Good Faith Contest; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) individually or together with all other Permitted Liens outstanding on any date of determination do not materially adversely affect the use of the property to which they relate unless, in the case of (i) or (ii) above, such liens are the subject of a Good Faith Contest; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) easements, zoning restrictions, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use or value of such property for its present purposes; (e) Tenancy Leases and other interests of lessees and lessors under leases or real or personal property made in the ordinary course of business that do not materially and adversely affect the use of the Real Property encumbered thereby for its intended purpose or the value thereof; and (f) Liens in favor of any Secured Party pursuant to any Loan Document. 
 
“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. 
 
“Plan” means a Single Employer Plan or a Multiple Employer Plan. 
 
“Platform” has the meaning specified in Section 9.02(b). 
 
“Post Petition Interest” has the meaning specified in Section 7.07(c). 
 
“Preferred Interests” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation. 
 
“Property-Level Subsidiary” means any Subsidiary of the Borrower or any Joint Venture that holds a direct fee or leasehold interest in any single building (or group of related buildings, including, without limitation, buildings pooled for purposes of a Non-Recourse Debt financing) or parcel (or group of related parcels, including, without limitation, parcels pooled for purposes of a Non-Recourse Debt financing) of real property and related assets and not in any other building or parcel of real property. 
 
18 

“Proposed Unencumbered Asset” has the meaning specified in Section 5.01(j)(iii). 
 
“Pro Rata Share” of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the Revolving Credit Facility at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, the Revolving Credit Facility as in effect immediately prior to such termination). 
 
“Qualifying Ground Lease” means a lease of Real Property containing the following terms and conditions: (a) a remaining term (including any unexercised extension options as to which there are no conditions precedent to exercise thereof other than the giving of a notice of exercise) of 30 years or more from the Closing Date; (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor; (c) the obligation of the lessor to give the holder of any mortgage Lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so; (d) reasonable transferability of the lessee’s interest under such lease, including ability to sublease; and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of a leasehold estate demised pursuant to a ground lease; provided, however, that (i) the ASML Ground Lease shall be deemed to constitute a Qualifying Ground Lease on the Closing Date, (ii) the Borrower shall use its best efforts to obtain, within 180 days after the Closing Date (which time period may be extended, in the sole discretion of the Administrative Agent, for not more than 90 additional days without the consent of the Required Lenders), an agreement from the lessor under the ASML Ground Lease addressing the matters described in clauses (b), (c) and (e) above in form and substance satisfactory to the Administrative Agent, and (iii) if the Borrower shall fail to obtain the agreement referred to in the foregoing clause (ii) within the applicable time period set forth therein, the ASML Ground Lease shall be deemed not to be a Qualifying Ground Lease and the Unencumbered Asset Value attributable to the ASML Asset shall be deemed to be $0. 
 
“Real Property” means all right, title and interest of the Borrower and each of its Subsidiaries in and to any land and any improvements located thereon, together with all equipment, furniture, materials, supplies and personal property in which such Person has an interest now or hereafter located on or used in connection with such land and improvements, and all appurtenances, additions, improvements, renewals, substitutions and replacements thereof now or hereafter acquired by such Person, in each case to the extent of such Person’s interest therein. 
 
“Recourse Debt” means Debt for Borrowed Money for which the Borrower or any of its Subsidiaries has personal or recourse liability in whole or in part, exclusive of any such Debt for which such personal or recourse liability is limited to obligations under Customary Carve-Out Agreements. 
 
“Redeemable” means, with respect to any Equity Interest, any Debt or any other right or Obligation, any such Equity Interest, Debt, right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. 
 
19 

“Reference Banks” means Citibank, N.A., Bank of America, N.A. and Key Bank National Association. 
 
“Refinancing Debt” means, with respect to any Debt, any Debt extending the maturity of, or refunding or refinancing, in whole or in part, such Debt, provided that (a) the terms of any Refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, do not provide for any Lien on any Unencumbered Assets and are otherwise not prohibited by the Loan Documents, (b) the principal amount of such Debt shall not be increased above the principal amount thereof outstanding immediately prior to such extension, refunding or refinancing plus the amount of any applicable premium and expenses, and the direct and contingent obligors therefor shall not be changed (other than to include new and/or additional Excluded Subsidiaries as obligors), as a result of or in connection with such extension, refunding or refinancing and (c) the provisions relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material provisions taken as a whole, of any such Refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, are on then current market terms, and (d) the interest rate applicable to any such Refinancing Debt does not exceed the then applicable market interest rate. 
 
“Register” has the meaning specified in Section 9.07(d). 
 
“Registration Statement” means the Parent’s Form S-11 Registration Statement filed with the Securities and Exchange Commission in connection with the IPO. 
 
“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. 
 
“REIT” means a Person that is qualified to be treated for tax purposes as a real estate investment trust under Sections 856-860 of the Internal Revenue Code. 
 
“Required Lenders” means, at any time, Lenders owed or holding greater than 50% of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) the aggregate Unused Revolving Credit Commitments at such time. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Revolving Lenders ratably in accordance with their respective Revolving Credit Commitments. 
 
“Responsible Officer” means any executive officer (including a vice president) of, or any executive officer (including a vice president) of any general partner or managing member or manager of, any Loan Party or any of its Subsidiaries. 
 
“Revolving Credit Advance” has the meaning specified in Section 2.01(a). 
 
“Revolving Credit Commitment” means, (a) with respect to any Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “Revolving Credit Commitment” or (b) if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender’s “Revolving Credit Commitment”, as such amount may be reduced at or prior to such time pursuant to Section 2.05. 
 
20 

“Revolving Credit Facility” means, at any time, the aggregate amount of the Lenders’ Revolving Credit Commitments at such time. 
 
“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto. 
 
“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002, as amended. 
 
“Secured Debt Leverage Ratio” means, at any date of determination, the ratio, expressed as a percentage, of (a) Consolidated secured Debt of the Parent Guarantor and its Subsidiaries to (b) Total Asset Value, in each case as at the end of the most recently ended fiscal quarter of the Parent Guarantor for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be. 
 
“Secured Parties” means the Administrative Agent, the Lender Parties and the Hedge Banks. 
 
“Securities Act” means the Securities Act of 1933, as amended to the date hereof and from time to time hereafter, and any successor statute. 
 
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended to the date hereof and from time to time hereafter, and any successor statute. 
 
“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, in which (a) any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates is a contributing sponsor or (b) any Loan Party or any ERISA Affiliate, and no Person other than the Loan Parties and the ERISA Affiliates, is a contributing sponsor if such Loan Party or ERISA Affiliate could reasonably be expected to have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. 
 
“Solvent” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person, on a going-concern basis, is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person, on a going-concern basis, is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time (including, without limitation, after taking into account appropriate discount factors for the present value of future contingent liabilities), represents the amount that can reasonably be expected to become an actual or matured liability. 
 
“Standby Letter of Credit” means any Letter of Credit issued under the Letter of Credit Facility, other than a Trade Letter of Credit. 
 
“Subordinated Obligations” has the meaning specified in Section 7.07(a). 
 
21 

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate (i) of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate, in each case, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries, or (ii) the accounts of which would appear on the Consolidated financial statements of such Person in accordance with GAAP. 
 
“Subsidiary Guarantor” has the meaning specified in the recital of parties to this Agreement. 
 
“Surviving Debt” means Debt of each Loan Party and its Subsidiaries outstanding immediately before and after giving effect to the Formation Transactions. 
 
“Swing Line Advance” means an advance made by (a) the Swing Line Bank pursuant to Section 2.01(c) or (b) any Lender pursuant to Section 2.02(b). 
 
“Swing Line Bank” means CNAI, in its capacity as the Lender of Swing Line Advances, and its successors and permitted assigns in such capacity. 
 
“Swing Line Borrowing” means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank pursuant to Section 2.01(c) or the Lenders pursuant to Section 2.02(b). 
 
“Swing Line Commitment” means, with respect to the Swing Line Bank, the amount of the Swing Line Facility set forth in Section 2.01(b), as such amount may be reduced at or prior to such time pursuant to Section 2.05. 
 
“Swing Line Facility” has the meaning specified in Section 2.01(c). 
 
“Taxes” has the meaning specified in Section 2.12(a). 
 
“Tenancy Leases” means operating leases, subleases, licenses, occupancy agreements and rights-of-use entered into by the Borrower or any of its Subsidiaries in its capacity as a lessor or a similar capacity in the ordinary course of business that do not materially and adversely affect the use of the Real Property encumbered thereby for its intended purpose. 
 
“Termination Date” means the earlier of (a) the third anniversary of the Closing Date, subject to the extension thereof pursuant to Section 2.16, and (b) the date of termination in whole of the Revolving Credit Commitments, the Letter of Credit Commitments and the Swing Line Commitment pursuant to Section 2.05 or 6.01. 
 
“Total Asset Value” means, on any date of determination, the sum of the Asset Values for all Assets at such date. 
 
“Total Unencumbered Asset Value” means an amount equal to the sum of the Unencumbered Asset Values of all Unencumbered Assets; provided, however, that, if at any time (a) there shall be fewer than three Unencumbered Assets, (b) the sum of the Unencumbered Asset 
 
22 

Values of all Unencumbered Assets shall not be equal to or greater than $115,000,000 or (c) the weighted average occupancy of all Unencumbered Assets shall not be greater than or equal to 85%, “Total Unencumbered Asset Value” shall be $0. 
 
“Trade Letter of Credit” means any Letter of Credit that is issued under the Letter of Credit Facility for the benefit of a supplier of inventory to the Borrower or any of its Subsidiaries to effect payment for such Inventory. 
 
“Transfer” has the meaning specified in Section 5.02(e). 
 
“Type” refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. 
 
“UCC” means the Uniform Commercial Code as in effect, from time to time, in the State of New York, provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest under any Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority. 
 
“Unencumbered Asset Conditions” means, with respect to any Proposed Unencumbered Asset, that such Proposed Unencumbered Asset (a) is an Office Asset located in the United States of America, (b) is owned in fee simple absolute or subject to a Qualifying Ground Lease, (d) is income-producing, at least 80% occupied and not more than 20% of which is under development or redevelopment; (e) is free of all structural defects or material architectural deficiencies, title defects, environmental conditions or other matters (including a casualty event or condemnation) that would have a material adverse affect on the value, use or ability to sell or refinance such Asset, (f) is operated by a property manager reasonably acceptable to the Administrative Agent, (g) is not subject to mezzanine Debt financing, (h) is not subject to any Lien (other than Permitted Liens) or any Negative Pledge, (i) to the extent owned by a Loan Party that is a Subsidiary of the Borrower, none of the Borrower’s direct or indirect Equity Interests in such Subsidiary owner is subject to any Lien (other than Permitted Liens) or any Negative Pledge, and (j) the Borrower directly, or indirectly through such Subsidiary owner, has the right to take the following actions without the need to obtain the consent of any Person: (i) to create Liens on such Asset as security for the Obligations of the Loan Parties under or in respect of the Loan Documents, and (ii) to sell, transfer or otherwise dispose of such Asset. 
 
“Unencumbered Asset Value” means, at any date of determination, for any Unencumbered Asset, the Adjusted Net Operating Income of such Unencumbered Asset divided by 9.5%. 
 
“Unencumbered Assets” means (a) Office Assets for which the applicable conditions (as may be determined by the Administrative Agent in its sole discretion) in Section 3.01 and, if applicable, 5.01(j)(iv) have been satisfied and as the Administrative Agent or the Required Lenders, in their sole discretion, shall from time to time elect to consider Unencumbered Assets for purposes of this Agreement, and (b) the Office Assets listed on Schedule II hereto (as supplemented from time to time pursuant to Section 5.01(j)(iv)). 
 
23 

“Unencumbered Assets Certificate” means a certificate in substantially the form of Exhibit F hereto, duly certified by the Chief Financial Officer or other Responsible Officer of the Parent Guarantor. 
 
“Unencumbered Assets Debt Service Coverage Ratio” means, at any date of determination, the ratio of (a) the aggregate Adjusted Net Operating Income for all Unencumbered Assets to (b) four times the greater of (i) the actual interest expense of the Borrower under this Agreement for the fiscal quarter of the Parent Guarantor most recently ended for which financial statements are required to be delivered pursuant to Section 5.03(b) or (c), as the case may be and (ii) the interest that would have been required to be paid by the Borrower under this Agreement for such fiscal period had the applicable interest rate been equal to (A) the Applicable Margin for Eurodollar Rate Advances plus (B) the greater of (1) 3.0% and (2) the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) as published on Reuters Page ISDAFIX1 (or any successor page) as the International Swaps and Derivatives Association mid-market par 3-year swap rate, in each case, in effect at such date of determination. 
 
“Unused Fee” has the meaning specified in Section 2.08(a). 
 
“Unused Revolving Credit Commitment” means, with respect to any Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time plus (ii) such Lender’s Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such time and (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(c) and outstanding at such time. 
 
“Voting Interests” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. 
 
“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA. 
 
SECTION 1.02. Computation of Time Periods; Other Definitional Provisions. In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”. References in the Loan Documents to any agreement or contract “as amended” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms. 
 
SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements of the Parent Guarantor referred to in the Registration Statement (“GAAP”). 
 
24 

ARTICLE II 
 
AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT 
 
SECTION 2.01. The Advances and the Letters of Credit. (a) The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a “Revolving Credit Advance”) to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an amount for each such Advance not to exceed such Lender’s Unused Revolving Credit Commitment at such time. Each Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $500,000 in excess thereof and shall consist of Revolving Credit Advances made simultaneously by the Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Lender’s Unused Revolving Credit Commitment in effect from time to time and prior to the Termination Date, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(a). 
 
(b) Letters of Credit. Each Issuing Bank severally agrees, on the terms and conditions hereinafter set forth, to issue (or cause its Affiliate that is a commercial bank to issue on its behalf) letters of credit (the “Letters of Credit”), for the account of the Borrower from time to time on any Business Day during the period from the date hereof until 60 days before the Termination Date in an aggregate Available Amount (i) for all Letters of Credit not to exceed at any time the Letter of Credit Facility at such time, (ii) for all Letters of Credit issued by such Issuing Bank not to exceed such Issuing Bank’s Letter of Credit Commitment at such time, and (iii) for each such Letter of Credit not to exceed the Unused Revolving Credit Commitments of the Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date and (A) in the case of a Standby Letter of Credit one year after the date of issuance thereof, but may by its terms be renewable annually upon notice (a “Notice of Renewal”) given to the Issuing Bank that issued such Standby Letter of Credit and the Administrative Agent on or prior to any date for notice of renewal set forth in such Letter of Credit but in any event at least three Business Days prior to the date of the proposed renewal of such Standby Letter of Credit and upon fulfillment of the applicable conditions set forth in Article III unless such Issuing Bank has notified the Borrower (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Standby Letter of Credit (a “Notice of Termination”) and (B) in the case of a Trade Letter of Credit, 60 days after the date of issuance thereof; provided, however, that the terms of each Standby Letter of Credit that is automatically renewable annually shall (x) require the Issuing Bank that issued such Standby Letter of Credit to give the beneficiary named in such Standby Letter of Credit notice of any Notice of Termination, (y) permit such beneficiary, upon receipt of such notice, to draw under such Standby Letter of Credit prior to the date such Standby Letter of Credit otherwise would have been automatically renewed and (z) not permit the expiration date (after giving effect to any renewal) of such Standby Letter of Credit in any event to be extended to a date later than 60 days before the Termination Date. If either a Notice of Renewal is not given by the Borrower or a Notice of Termination is given by the relevant Issuing Bank pursuant to the immediately preceding sentence, such Standby Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed; provided, however, that even in the absence of receipt of a Notice of Renewal the relevant Issuing Bank may in its discretion, unless instructed to the contrary by the Administrative Agent or the Borrower, deem that a Notice of Renewal had been timely delivered and in such case, a Notice of Renewal shall be deemed to have been so delivered for all purposes under this Agreement. Each Standby Letter of Credit shall contain a provision authorizing the Issuing Bank that issued such Letter of Credit to deliver to the beneficiary of such Letter of Credit, upon the occurrence and during the continuance of an Event of Default, a notice (a “Default Termination Notice”) terminating such Letter of Credit and giving such beneficiary 15 days to draw such Letter of Credit. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit 
 
25 

under this Section 2.01(b), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.03(c) and request the issuance of additional Letters of Credit under this Section 2.01(b). 
 
(c) The Swing Line Advances. The Borrower may request the Swing Line Bank to make, and the Swing Line Bank agrees to make, on the terms and conditions hereinafter set forth, Swing Line Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to exceed at any time outstanding $5,000,000 (the “Swing Line Facility”) and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $250,000 or an integral multiple of $250,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Section 2.01(c), repay pursuant to Section 2.04(b) or prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c). 
 
SECTION 2.02. Making the Advances. (a) Except as otherwise provided in Section 2.03, each Borrowing shall be made on notice, given not later than [1:00] P.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or not later than [12:00] P.M. (New York City time) on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telex or telecopier. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be by telephone, confirmed immediately in writing, or telex or telecopier or e-mail, in each case in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before [1:00] P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances and [2:00] P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Base Rate Advances, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Borrowing in accordance with the respective Commitments of such Lender and the other Lenders. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account; provided, however, that the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances made by the Swing Line Bank or any Issuing Bank, as the case may be, and by any other Lender and outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank or such Issuing Bank, as the case may be, and such other Lenders for repayment of such Swing Line Advances and Letter of Credit Advances. 
 
(b) Each Swing Line Borrowing shall be made on notice, given not later than [1:00] P.M. (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a “Notice of Swing Line Borrowing”) shall be by telephone, confirmed immediately in writing or by telecopier or e-mail, in each case specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the earlier of (A) the seventh day after the requested date of such Borrowing and (B) the Termination Date). The Swing Line Bank shall, before [2:00] P.M. (New York City time) on the date of such Swing Line Borrowing, 
 
26 

make the amount thereof available to the Administrative Agent at the Administrative Agent’s Account, in same day funds. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower’s Account. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Lender, such other Lender’s Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank, provided that notice of such demand is given not later than [1:00] P.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Swing Line Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. 
 
(c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for the initial Borrowing hereunder or for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.07(d)(ii), 2.09 or 2.10 and (ii) there may not be more than seven (7) separate Borrowings outstanding at any time. 
 
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. 
 
(e) Unless the Administrative Agent shall have received notice from a Lender prior to (x) the date of any Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 Noon (New York City time) on the date of any Borrowing consisting of Base Rate Advances that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this 
 
27 

Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender’s Advance as part of such Borrowing for all purposes. 
 
(f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. 
 
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than 12:00 Noon (New York City time) on the fifth Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to any Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telex, telecopier or e-mail or by means of the Platform. Each such notice of issuance of a Letter of Credit (a “Notice of Issuance”) shall be by telephone, confirmed immediately in writing, telex, telecopier or e-mail, in each case specifying therein the requested (i) date of such issuance (which shall be a Business Day), (ii) Available Amount of such Letter of Credit, (iii) expiration date of such Letter of Credit, (iv) name and address of the beneficiary of such Letter of Credit and (v) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as such Issuing Bank may specify to the Borrower for use in connection with such requested Letter of Credit (a “Letter of Credit Agreement”). If (y) the requested form of such Letter of Credit is acceptable to such Issuing Bank in its sole discretion and (z) it has not received notice of objection to such issuance from the Required Lenders, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 9.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. 
 
(b) Letter of Credit Reports. Each Issuing Bank shall furnish (i) to each Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit issued by such Issuing Bank and (ii) to the Administrative Agent and each Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. 
 
(c) Drawing and Reimbursement. The payment by any Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. Upon written demand by any Issuing Bank with an outstanding Letter of Credit Advance, with a copy of such demand to the Administrative Agent, each Lender shall purchase from such Issuing Bank, and such Issuing Bank shall sell and assign to each such Lender, such Lender’s Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Issuing Bank, by deposit 
 
28 

to the Administrative Agent’s Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to such Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank which made such Advance, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by an Issuing Bank to any Lender of a portion of a Letter of Credit Advance, such Issuing Bank represents and warrants to such other Lender that such Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by such Issuing Bank shall be reduced by such amount on such Business Day. 
 
(d) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. 
 
SECTION 2.04. Repayment of Advances. (a) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders on the Termination Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding. 
 
(b) Swing Line Advances. The Borrower shall repay to the Administrative Agent for the account of (i) the Swing Line Bank and (ii) each other Lender that has made a Swing Line Advance by purchase from the Swing Line Bank pursuant to Section 2.02(b), the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than the seventh day after the requested date of such Swing Line Borrowing) and the Termination Date. 
 
(c) Letter of Credit Advances. (i) The Borrower shall repay to the Administrative Agent for the account of each Issuing Bank and each other Lender that has made a Letter of Credit Advance on the same day on which such Advance was made the outstanding principal amount of each Letter of Credit Advance made by each of them. 
 
(ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit (and the obligations of each Lender to reimburse the Issuing Bank with respect thereto) shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement 
 
29 

and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: 
 
(A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “L/C Related Documents”); 
 
(B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; 
 
(C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; 
 
(D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; 
 
(E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; 
 
(F) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from the Guaranties or any other guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or 
 
(G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. 
 
SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional. The Borrower may, upon at least three Business Days’ notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the Swing Line Facility, the Letter of Credit Facility and the Unused Revolving Credit Commitments; provided, however, that each partial reduction of a Facility (i) shall be in an aggregate amount of $1,000,000 (or in the case of the Swing Line Facility, $250,000) or an integral multiple of $250,000 in excess thereof and (ii) shall be made ratably among the Lenders in accordance with their Commitments with respect to such Facility. 
 
(b) Mandatory. (i) The Letter of Credit Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. 
 
(ii) The Swing Line Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Swing Line Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. 
 
30 

SECTION 2.06. Prepayments. (a) Optional. The Borrower may, upon same day notice in the case of Base Rate Advances and two Business Days’ notice in the case of Eurodollar Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that (i) each partial prepayment shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $250,000 in excess thereof or, if less, the amount of the Advances outstanding and (ii) if any prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period for such Advance, the Borrower shall also pay any amounts owing pursuant to Section 9.04(c). 
 
(b) Mandatory. (i) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Swing Line Advances and the Letter of Credit Advances and deposit an amount in the L/C Cash Collateral Account in an amount equal to the amount by which (A) the sum of the aggregate principal amount of (1) the Revolving Credit Advances then outstanding, (2) the Swing Line Advances then outstanding and (3) the Letter of Credit Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the lesser of (I) the Revolving Credit Facility and (II) 60% of the Total Unencumbered Asset Value on such Business Day, provided that such deposit shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility. 
 
(ii) The Borrower shall, on each Business Day, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day, provided that such deposit shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility. 
 
(iii) In the event the aggregate Available Amount under all outstanding Letters of Credit shall exceed the aggregate Letter of Credit Commitments of the Lenders, the Borrower shall, within five Business Days after written demand by the Administrative Agent, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day, provided that such deposit shall only be required to be maintained therein for so long as such aggregate Available Amount exceeds the Letter of Credit Facility. 
 
(iv) In accordance with Section 5.02(e), the Borrower shall, within 12 months following the date of receipt of any Net Asset Sales Proceeds by the Borrower or any of its Subsidiaries, prepay an aggregate principal amount of the Advances comprising part of the same Borrowings and deposit an amount in the L/C Cash Collateral Account, in an aggregate amount equal to the amount of such Net Asset Sales Proceeds that have not been reinvested as permitted under Section 5.02(e), provided that such deposit shall only be required to be maintained therein for so long as the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on the date of such prepayment. 
 
(v) Prepayments of the Revolving Credit Facility made pursuant to clauses (i), (ii), (iii) and (iv) above shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such 
 
31 

Advances are paid in full, third applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full and fourth deposited in the L/C Cash Collateral Account to cash collateralize 100% of the Available Amount of the Letters of Credit then outstanding to the extent required under the foregoing clauses. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank or Lenders, as applicable. On the earlier to occur of the (A) Termination Date, (B) the date on which funds are no longer required to be maintained in the L/C Cash Collateral Account pursuant to Section 2.06(b)(ii), (b)(iii) or (b)(iv), as applicable, and (C) the expiration or other termination of any Letters of Credit for which funds are on deposit in the L/C Cash Collateral Account without any drawings thereon, then, in each case, so long as no Default shall have occurred and be continuing, any remaining funds on deposit in the L/C Cash Collateral Account (together with any interest earned thereon) shall be returned to the Borrower. 
 
(vi) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. 
 
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: 
 
(i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last day of each December, March, June and September during such periods and on the date such Base Rate Advance shall be Converted or paid in full. 
 
(ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect on the first day of such Interest Period, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. 
 
(b) Default Interest. Upon the occurrence and during the continuance of an Event of Default of the type described in Section 6.01(a) or (f) or, at the election of the Administrative Agent and the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable under the Loan Documents that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (a)(i) or (a)(ii) above and, in all other cases, on Base Rate Advances pursuant to clause (a)(i) above. 
 
(c) Notice of Interest Period and Interest Rate. Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of Conversion pursuant to Section 2.09 or a notice of selection of an Interest Period pursuant to the terms of the definition of “Interest Period”, the 
 
32 

Administrative Agent shall give notice to the Borrower and each Lender of the applicable Interest Period and the applicable interest rate determined by the Administrative Agent for purposes of clause (a)(i) or (a)(ii) above, and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under clause (a)(ii) above. 
 
(d) Interest Rate Determination. (i) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. 
 
(ii) If Telerate Page 3750 is unavailable and fewer than two Reference Banks are able to furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, 
 
(A) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances, 
 
(B) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and 
 
(C) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. 
 
SECTION 2.08. Fees. (a) Unused Fee. The Borrower shall pay to the Administrative Agent for the account of the Lenders an unused commitment fee (the “Unused Fee”), from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date, payable in arrears quarterly on the last day of each December, March, June and September, commencing December 31, 2004, and on the Termination Date. The Unused Fee payable for the account of each Lender shall be calculated for each period for which the Unused Fee is payable on the average daily Unused Revolving Credit Commitment of such Lender during such period at the rate per annum equal to, (a) for any period in which the average daily Facility Exposure for such period is equal to or exceeds 50% of the aggregate Revolving Credit Commitments, 0.15% per annum, and (b) in all other cases, 0.25% per annum. 
 
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the Administrative Agent for the account of each Lender a commission, payable in arrears, (a) quarterly on the last day of each December, March, June and September, commencing December 31, 2004, and (b) on the earliest to occur of the full drawing, expiration, termination or cancellation of any Letter of Credit, and (c) on the Termination Date, on such Lender’s Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time at the rate per annum equal to the Applicable Margin for Eurodollar Rate Advances in effect from time to time. 
 
(ii) The Borrower shall pay to each Issuing Bank, for its own account, (A) a fronting fee for each Letter of Credit issued by such Issuing Bank in an amount equal to 0.125% of the Available Amount of such Letter of Credit on the date of issuance of such Letter of Credit, payable on such date and (B) such other customary commissions, issuance fees, transfer fees and other fees and charges in 
 
33 

connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree. 
 
(c) Administrative Agent’s Fees. The Borrower shall pay to the Administrative Agent for its own account the fees, in the amounts and on the dates, set forth in the Fee Letter and such other fees as may from time to time be agreed between the Borrower and the Administrative Agent. 
 
(d) Extension Fee. The Borrower shall pay to the Administrative Agent on the Extension Date, for the account of each Lender, a Facility extension fee, in an amount equal to 0.25% of each Lender’s Revolving Credit Commitment then outstanding. 
 
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than [1:00 P.M.] (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.10, Convert all or any portion of the Advances of one Type comprising the same Borrowing into Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made ratably among the Lenders in accordance with their Commitments under such Facility. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower. 
 
(b) Mandatory. (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Advances shall automatically as of the last day of the then applicable Interest Period Convert into Base Rate Advances. 
 
(ii) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. 
 
(iii) Upon the occurrence and during the continuance of any Event of Default, (y) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (z) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. 
 
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances (excluding, for purposes of this Section 2.10, any such increased costs resulting from (y) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (z) changes in the basis of taxation of overall net 
 
34 

income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, within 2 Business Days after demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided, however, that a Lender Party claiming additional amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. 
 
(b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of or participation in the Letters of Credit (or similar contingent obligations), then, within 2 Business Days after demand by such Lender Party or such corporation (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party’s commitment to lend or to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. 
 
(c) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. 
 
(d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided, however, that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would 
 
35 

allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. 
 
SECTION 2.11. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.13), not later than [2:00] P.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent’s Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. 
 
(b) The Borrower hereby authorizes each Lender Party and each of its Affiliates, if and to the extent payment owed to such Lender Party is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time, to the fullest extent permitted by law, against any or all of the Borrower’s accounts with such Lender Party any amount so due. 
 
(c) All computations of interest based on the Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Federal Funds Rate and of fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error. 
 
(d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. 
 
(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent the Borrower shall not have so made such 
 
36 

payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate. 
 
(f) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lender Parties under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lender Parties in the following order of priority: 
 
(i) first, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Administrative Agent (solely in its capacity as Administrative Agent) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Administrative Agent on such date; 
 
(ii) second, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Issuing Banks (solely in their respective capacities as such) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Issuing Banks on such date; 
 
(iii) third, to the payment of all of the indemnification payments, costs and expenses that are due and payable to the Lenders under Section 9.04 and any similar section of any of the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such indemnification payments, costs and expenses owing to the Lenders on such date; 
 
(iv) fourth, to the payment of all of the amounts that are due and payable to the Administrative Agent and the Lender Parties under Sections 2.10 and 2.12 on such date, ratably based upon the respective aggregate amounts thereof owing to the Administrative Agent and the Lender Parties on such date; 
 
(v) fifth, to the payment of all of the fees that are due and payable to the Lenders under Section 2.08(a), (b)(i) and (d) on such date, ratably based upon the respective aggregate Commitments of the Lenders under the Facilities on such date; 
 
(vi) sixth, to the payment of all of the accrued and unpaid interest on the Obligations of the Borrower under or in respect of the Loan Documents that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(b) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date; 
 
(vii) seventh, to the payment of all of the accrued and unpaid interest on the Advances that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(a) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date; 
 
(viii) eighth, to the payment of the principal amount of all of the outstanding Advances and any reimbursement obligations that are due and payable to the Administrative Agent and the Lender Parties on such date, ratably based upon the respective aggregate amounts of all such 
 
37 

principal and reimbursement obligations owing to the Administrative Agent and the Lender Parties on such date, and to deposit into the L/C Cash Collateral Account any contingent reimbursement obligations in respect of outstanding Letters of Credit to the extent required by Section 6.02; and 
 
(ix) ninth, to the payment of all other Obligations of the Loan Parties owing under or in respect of the Loan Documents that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date. 
 
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.11, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and the Administrative Agent, taxes that are imposed on its overall net income by the United States (including branch profits taxes or alternative minimum tax) and taxes that are imposed on its overall net income (and franchise or other similar taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or the Administrative Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise or other similar taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Lender Party’s Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as “Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or the Administrative Agent, (i) the sum payable by the Borrower shall be increased as may be necessary so that after the Borrower and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.12) such Lender Party or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make all such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. 
 
(b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property, intangible, mortgage recording or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement, or any other Loan Document (hereinafter referred to as “Other Taxes”). 
 
(c) The Borrower shall indemnify each Lender Party and the Administrative Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.12, imposed on or paid by such Lender Party or the Administrative Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Administrative Agent (as the case may be) makes written demand therefor. 
 
(d) Within 60 days after the date of any payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment or, if such receipts are not obtainable, other evidence of such payments by the Borrower reasonably satisfactory to the Administrative Agent. For purposes of subsections (d) and 
 
38 

(e) of this Section 2.12, the terms “United States” and “United States person” shall have the meanings specified in Section 7701 of the Internal Revenue Code. 
 
(e) Each Lender Party organized under the laws of a jurisdiction outside the United States (each, a “Foreign Lender”) shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender Party, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as requested in writing by the Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the Borrower (i) two duly completed and signed copies of either Internal Revenue Service Form W-8BEN (claiming an exemption from or a reduction in United States withholding tax under an applicable treaty) or its successor form or Form W-8ECI (claiming an exemption from United States withholding tax as effectively connected income) or its successor from and related applicable forms, as the case may be; or (ii) in the case of a Foreign Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code and that cannot comply with the requirements of clause (i) hereof, (x) a statement to the effect that such Lender is eligible for a complete exemption from withholding of United States Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8BEN or successor and related applicable form. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) of this Section 2.12 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W8-ECI or W8-BEN or the statement set forth in (ii)(x) above, that the applicable Lender Party reasonably considers to be confidential, such Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Upon the request of the Borrower, any Lender that is a United States person and is not an exempt recipient for United States backup withholding purposes shall deliver to the Borrower two copies of Internal Revenue Service form W-9 (or any successor form). 
 
(f) For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form described in subsection (e) above (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.12 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such reasonable steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. 
 
(g) Any Lender Party claiming any additional amounts payable pursuant to this Section 2.12 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter 
 
39 

accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. 
 
(h) If any Lender Party or the Administrative Agent receives a refund of Taxes or Other Taxes paid by the Borrower or for which the Borrower has indemnified any Lender Party or the Administrative Agent, as the case may be, pursuant to this Section 2.12, then such Lender Party or the Administrative Agent, as applicable, shall pay such amount, net of any expenses incurred by such Lender Party or the Administrative Agent, to the Borrower within 30 days of the receipt of such Taxes or Other Taxes. Notwithstanding the foregoing, (i) the Borrower shall not be entitled to review the tax records or financial information of any Lender Party or the Administrative Agent and (ii) neither the Administrative Agent nor any Lender Party shall have any obligation to pursue (and no Loan Party shall have any right to assert) any refund of Taxes or Other Taxes that may be paid by the Borrower. 
 
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party’s ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party’s ratable share (according to the proportion of (i) the amount of such other Lender Party’s required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such interest or participating interest, as the case may be. 
 
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) solely for the acquisition and development of Assets, for working capital and the general corporate purposes of the Borrower and its Subsidiaries. 
 
SECTION 2.15. Evidence of Debt. (a) Each Lender Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender 
 
40 

Party resulting from each Advance owing to such Lender Party from time to time, including the amounts of principal and interest payable and paid to such Lender Party from time to time hereunder. The Borrower agrees that upon notice by any Lender Party to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender Party to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender Party, the Borrower shall promptly execute and deliver to such Lender Party, with a copy to the Administrative Agent, a Note, in substantially the form of Exhibit A hereto, payable to the order of such Lender Party in a principal amount equal to the Revolving Credit Commitment of such Lender Party. All references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued hereunder. 
 
(b) The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder, and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender Party’s share thereof. 
 
(c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such Lender Party to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement. 
 
SECTION 2.16. Extension of Termination Date. At least 30 days but not more than 90 days prior to the Termination Date, the Borrower, by written notice to the Administrative Agent, may request, with respect to the Commitments then outstanding, a single one-year extension of the Termination Date. The Administrative Agent shall promptly notify each Lender of such request and the Termination Date in effect at such time shall, effective as at the Termination Date (the “Extension Date”), be extended for an additional one year period, provided that, on the Extension Date the following statements shall be true and the Administrative Agent shall have received for the account of each Lender Party a certificate signed by a duly authorized officer of the Borrower, dated the Extension Date, stating that: (x) the representations and warranties contained in Section 4.01 are true and correct on and as of the Extension Date (except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date)), and (y) no Default has occurred and is continuing or would result from such extension. In the event that an extension is effected pursuant to this Section 2.16, the aggregate principal amount of all Advances shall be repaid in full ratably to the Lenders on the Termination Date as so extended. As of the Extension Date, any and all references in this Agreement, the Notes, if any, or any of the other Loan Documents to the “Termination Date” shall refer to the Termination Date as so extended. 
 
SECTION 2.17. Cash Collateral Account. (a) Grant of Security. The Borrower hereby pledges to the Administrative Agent, as collateral agent for the ratable benefit of the Secured Parties, and hereby grants to the Administrative Agent, as collateral agent for the ratable benefit of the Secured Parties, a security interest in, the Borrower’s right, title and interest in and to the L/C Cash Collateral Account and all (i) funds and financial assets from time to time credited thereto (including, without 
 
41 

limitation, all Cash Equivalents), all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such funds and financial assets, and all certificates and instruments, if any, from time to time representing or evidencing the L/C Cash Collateral Account, (ii) and all promissory notes, certificates of deposit, deposit accounts, checks and other instruments from time to time delivered to or otherwise possessed by the Administrative Agent, as collateral agent for or on behalf of the Borrower, in substitution for or in addition to any or all of the then existing L/C Account Collateral and (iii) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing L/C Account Collateral, in each of the cases set forth in clauses (i), (ii) and (iii) above, whether now owned or hereafter acquired by the Borrower, wherever located, and whether now or hereafter existing or arising (all of the foregoing, collectively, the “L/C Account Collateral”). 
 
(b) Maintaining the L/C Account Collateral. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding, any Guaranteed Hedge Agreement shall be in effect or any Lender Party shall have any Commitment: 
 
(i) the Borrower will maintain all L/C Account Collateral only with the Administrative Agent, as collateral agent; and 
 
(ii) the Administrative Agent shall have the sole right to direct the disposition of funds with respect to the L/C Cash Collateral Account subject to the provisions of this Agreement, and it shall be a term and condition of such L/C Cash Collateral Account that, except as otherwise provided herein, notwithstanding any term or condition to the contrary in any other agreement relating to the L/C Cash Collateral Account, as the case may be, that no amount (including, without limitation, interest on Cash Equivalents credited thereto) will be paid or released to or for the account of, or withdrawn by or for the account of, the Borrower or any other Person from the L/C Cash Collateral Account; and 
 
(iii) the Administrative Agent may (with the consent of the Required Lenders), at any time and without notice to, or consent from, the Borrower, transfer, or direct the transfer of, funds from the L/C Account Collateral to satisfy the Borrower’s Obligations under the Loan Documents if an Event of Default shall have occurred and be continuing. 
 
(c) Investing of Amounts in the L/C Cash Collateral Account. The Administrative Agent will, from time to time invest (i)(A) amounts received with respect to the L/C Cash Collateral Account in such Cash Equivalents credited to the L/C Cash Collateral Account as the Borrower may select and the Administrative Agent, as collateral agent, may approve in its reasonable discretion, and (B) interest paid on the Cash Equivalents referred to in clause (i)(A) above, and (ii) reinvest other proceeds of any such Cash Equivalents that may mature or be sold, in each case in such Cash Equivalents credited in the same manner. Interest and proceeds that are not invested or reinvested in Cash Equivalents as provided above shall be deposited and held in the L/C Cash Collateral Account. In addition, the Administrative Agent shall have the right at any time to exchange such Cash Equivalents for similar Cash Equivalents of smaller or larger determinations, or for other Cash Equivalents, credited to the L/C Cash Collateral Account. 
 
(d) Release of Amounts. So long as no Event of Default under the Credit Agreement shall have occurred and be continuing, the Administrative Agent will pay and release to the Borrower or at its order or, at the request of the Borrower, to the Administrative Agent to be applied to the Obligations 
 
42 

of the Borrower under the Loan Documents such amount, if any, as is then on deposit in the L/C Cash Collateral Account. 
 
(e) Remedies. Upon the occurrence and during the continuance of any Event of Default, in addition to the rights and remedies available pursuant to Article VI hereof and under the other Loan Documents, (i) the Administrative Agent may exercise in respect of the L/C Account Collateral all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected L/C Account Collateral), and (ii) the Administrative Agent may, without notice to the Borrower, except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Obligations of the Borrower under the Loan Documents against any funds held with respect to the L/C Account Collateral or in any other deposit account. 
 
ARTICLE III 
 
CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT 
 
SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The obligation of each Lender to make an Advance or of any Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: 
 
(a) The Administrative Agent shall have received on or before the day of the Initial Extension of Credit the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and (except for the items specified in clauses (i) and (ii) below) in sufficient copies for each Lender Party: 
 
(i) A Note payable to the order of each Lender requesting the same. 
 
(ii) Completed requests for information, dated on or before the date of the Initial Extension of Credit, listing all effective financing statements filed in the jurisdictions that the Administrative Agent may deem necessary or desirable that name any Loan Party as debtor, together with copies of such other financing statements, and evidence that all other actions that the Administrative Agent may deem reasonably necessary or desirable have been taken (including, without limitation, receipt of duly executed payoff letters and UCC termination statements). 
 
(iii) As to each Unencumbered Asset: 
 
(A) A current record owner and lien search performed by a title insurer acceptable to the Administrative Agent showing that the applicable Loan Party identified in Schedule II is the current record title holder of such Unencumbered Asset and showing no Liens on record other than Permitted Liens, 
 
(B) An American Land Title Association/American Congress on Surveying and Mapping form survey for which all necessary fees have been paid, dated no more than 90 days before the date of their delivery to the Administrative Agent and reasonably acceptable to the Administrative Agent with respect to each Unencumbered Asset referred to in clause (A) above of this Section 3.01(a)(iii), showing a metes and bounds description of such property, all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such 
 
43 

improvements or on to such property, and other defects, other than encroachments and other defects reasonably acceptable to the Administrative Agent, 
 
(C) engineering, soils, environmental and other similar reports, in form and substance and from professional firms reasonably acceptable to the Administrative Agent, and 
 
(D) evidence of the insurance required by Section 5.01(d). 
 
(iv) Certified copies of the resolutions of the Board of Directors, general partner or managing member, as applicable, of each Loan Party and of each general partner or managing member (if any) of each Loan Party approving the transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the transactions under the Loan Documents and each Loan Document to which it is or is to be a party. 
 
(v) A copy of a certificate of the Secretary of State (or equivalent authority) of the jurisdiction of incorporation, organization or formation of each Loan Party and of each general partner or managing member (if any) of each Loan Party, dated reasonably near the Closing Date, certifying, if and to the extent such certification is generally available for entities of the type of such Loan Party, (A) as to a true and correct copy of the charter, certificate of limited partnership, limited liability company agreement or other organizational document of such Loan Party, general partner or managing member, as the case may be, and each amendment thereto on file in such Secretary’s office and (B) that (1) such amendments are the only amendments to the charter, certificate of limited partnership, limited liability company agreement or other organizational document, as applicable, of such Loan Party, general partner or managing member, as the case may be, on file in such Secretary’s office and (2) such Loan Party, general partner or managing member, as the case may be, has paid all franchise taxes to the date of such certificate and (C) such Loan Party, general partner or managing member, as the case may be, is duly incorporated, organized or formed and in good standing or presently subsisting under the laws of the jurisdiction of its incorporation, organization or formation. 
 
(vi) A copy of a certificate of the Secretary of State (or equivalent authority) of each jurisdiction in which any Loan Party or any general partner or managing member of a Loan Party owns or leases property or in which the conduct of its business requires it to qualify or be licensed as a foreign corporation except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect, dated reasonably near (but prior to) the Closing Date, stating, with respect to each such Loan Party, general partner or managing member, that such Loan Party, general partner or managing member, as the case may be, is duly qualified and in good standing as a foreign corporation, limited partnership or limited liability company in such State and has filed all annual reports required to be filed to the date of such certificate. 
 
(vii) A certificate of each Loan Party and of each general partner or managing member (if any) of each Loan Party, signed on behalf of such Loan Party, general partner or managing member, as applicable, by its President or a Vice President and its Secretary or any Assistant Secretary (or those of its general partner or managing member, if 
 
44 

applicable), dated the Closing Date (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the constitutive documents of such Loan Party, general partner or managing member, as applicable, since the date of the certificate referred to in Section 3.01(a)(vi), (B) a true and correct copy of the bylaws, operating agreement, partnership agreement or other governing document of such Loan Party, general partner or managing member, as applicable, as in effect on the date on which the resolutions referred to in Section 3.01(a)(v) were adopted and on the date of the Initial Extension of Credit, (C) the due incorporation, organization or formation and good standing or valid existence of such Loan Party, general partner or managing member, as applicable, as a corporation, limited liability company or partnership organized under the laws of the jurisdiction of its incorporation, organization or formation and the absence of any proceeding for the dissolution or liquidation of such Loan Party, general partner or managing member, as applicable, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default. 
 
(viii) A certificate of the Secretary or an Assistant Secretary of each Loan Party (or Responsible Officer of the general partner or managing member of any Loan Party) and of each general partner or managing member (if any) of each Loan Party certifying the names and true signatures of the officers of such Loan Party, or of the general partner or managing member of such Loan Party, authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. 
 
(ix) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have reasonably requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements for the year ending December 31, 2003 of the Contributing Entities, interim financial statements dated the end of the most recent fiscal quarter for which financial statements are available (or, in the event the Lender Parties’ due diligence review reveals material changes since such financial statements, as of a later date within 45 days of the day of the Initial Extension of Credit). 
 
(x) Evidence of insurance (which may consist of binders or certificates of insurance with respect to the blanket policies of insurance maintained by the Loan Parties with respect to property, commercial general liability and terrorism risks) with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Lender Parties. 
 
(xi) An opinion of Latham & Watkins LLP, counsel for the Loan Parties, in substantially the form of Exhibit E-1 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. 
 
(xii) An opinion of Venable LLP, Maryland counsel for the Loan Parties, in substantially the form of Exhibit E-2 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. 
 
45 

(xiii) An opinion of Shearman & Sterling LLP, counsel for the Administrative Agent, in form and substance satisfactory to the Administrative Agent. 
 
(xiv) A Notice of Borrowing or Notice of Issuance, as applicable, and an Unencumbered Assets Certificate relating to the Initial Extension of Credit. 
 
(b) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of each Loan Party and its Subsidiaries, including the terms and conditions of the charter and bylaws, operating agreement, partnership agreement or other governing document of each of them. 
 
(c) The Lender Parties shall be satisfied that all Existing Debt, other than Surviving Debt, has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished and that all Surviving Debt shall be on terms and conditions satisfactory to the Lender Parties. 
 
(d) (i) The Formation Transactions and the IPO shall have been, substantially concurrently herewith, consummated, (ii) the Parent Guarantor shall have received gross cash proceeds from the IPO in an amount not less than $[            ], and (iii) the common shares of the Parent Guarantor shall have been listed on the New York Stock Exchange. 
 
(e) Before and after giving effect to the transactions contemplated by the Loan Documents, there shall have occurred no material adverse change in the business, condition (financial or otherwise) results of operations or prospects of Digital Realty Predecessor since December 31, 2003. 
 
(f) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 4.01(f) hereto (the “Disclosed Litigation”) or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, and there shall have been no material adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. 
 
(g) All material governmental and third party consents and approvals necessary in connection with the transactions contemplated by the Loan Documents shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lender Parties that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Loan Documents. 
 
(h) The Borrower shall have paid all accrued fees of the Administrative Agent and the Lender Parties and all reasonable, out-of-pocket expenses of the Administrative Agent (including the reasonable fees and expenses of counsel to the Administrative Agent, subject to the terms of the Fee Letter). 
 
SECTION 3.02. Conditions Precedent to Each Borrowing, Issuance and Renewal. The obligation of each Lender to make an Advance (other than a Letter of Credit Advance made by an Issuing Bank or a Lender pursuant to Section 2.03(c) and a Swing Line Advance made by a Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing), the obligation of each Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit, 
 
46 

the extension of Commitments pursuant to Section 2.16 and the right of the Borrower to request a Swing Line Borrowing shall be subject to the further conditions precedent that on the date of such Borrowing, issuance, renewal or extension the following statements shall be true and the Administrative Agent shall have received for the account of such Lender, the Swing Line Bank or such Issuing Bank (x) an Unencumbered Assets Certificate dated the date of such Borrowing, issuance or renewal and (y) a certificate signed by a duly authorized officer of the Borrower, dated the date of such Borrowing, issuance, renewal or extension, stating that: 
 
(i) the representations and warranties contained in each Loan Document are true and correct on and as of such date, before and after giving effect to (A) such Borrowing, issuance, renewal or extension and (B) in the case of any Borrowing or issuance or renewal, the application of the proceeds therefrom, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date)); 
 
(ii) no Default or Event of Default has occurred and is continuing, or would result from (A) such Borrowing, issuance, renewal or extension or (B) in the case of any Borrowing or issuance or renewal, from the application of the proceeds therefrom; and 
 
(iii) for each Revolving Credit Advance or Swing Line Advance made by the Swing Line Bank or issuance or renewal of any Letter of Credit, (A) 60% of the Total Unencumbered Asset Value equals or exceeds the Facility Exposure that will be outstanding after giving effect to such Advance, issuance or renewal, respectively, and (B) before and after giving effect to such Advance, issuance or renewal, the Parent Guarantor shall be in compliance with the covenants contained in Section 5.04, together with supporting information in form satisfactory to the Administrative Agent showing the computations used in determining compliance with such covenants; 
 
and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Lender Party through the Administrative Agent may reasonably request in order to confirm (i) the accuracy of the Loan Parties’ representations and warranties contained in the Loan Documents, (ii) the Loan Parties’ timely compliance with the terms, covenants and agreements set forth in the Loan Documents, (iii) the absence of any Default and (iv) the rights and remedies of the Secured Parties or the ability of the Loan Parties to perform their Obligations. 
 
SECTION 3.03. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Initial Extension of Credit specifying its objection thereto and, if the Initial Extension of Credit consists of a Borrowing, such Lender Party shall not have made available to the Administrative Agent such Lender Party’s ratable portion of such Borrowing. 
 
ARTICLE IV 
 
REPRESENTATIONS AND WARRANTIES 
 
SECTION 4.01. Representations and Warranties of the Loan Parties. Each Loan Party represents and warrants as follows: 
 
47 

(a) Each Loan Party and each general partner or managing member, if any, of each Loan Party (i) is a corporation, limited liability company or partnership duly incorporated, organized or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, (ii) is duly qualified and in good standing as a foreign corporation, limited liability company or partnership in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate, limited liability company or partnership power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. Commencing with its taxable year ending December 31, 2004, the Parent Guarantor will be organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code. All of the outstanding Equity Interests in the Parent Guarantor have been validly issued, are fully paid and non-assessable, all of the general partner Equity Interests in the Borrower are owned by the Parent Guarantor, and all such general partner Equity Interests are owned by the Parent Guarantor free and clear of all Liens. 
 
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, organization or formation, the number of shares (or the equivalent thereof) of each class of its Equity Interests authorized, and the number outstanding, on the date hereof and the percentage of each such class of its Equity Interests owned (directly or indirectly) by such Loan Party and the number of shares (or the equivalent thereof) covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding Equity Interests in each Loan Party’s Subsidiaries have been validly issued, are fully paid and non-assessable and, to the extent owned by such Loan Party or one or more of its Subsidiaries, are owned by such Loan Party or Subsidiaries free and clear of all Liens. 
 
(c) The execution and delivery by each Loan Party and of each general partner or managing member (if any) of each Loan Party of each Loan Document to which it is or is to be a party, and the performance of its obligations thereunder, and the consummation of the IPO, the Formation Transactions and the other transactions contemplated by the Loan Documents, are within the corporate, limited liability company or partnership powers of such Loan Party, general partner or managing member, have been duly authorized by all necessary corporate, limited liability company or partnership action, and do not (i) contravene the charter or bylaws, operating agreement, partnership agreement or other governing document of such Loan Party, general partner or managing member, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any Material Contract binding on or affecting any Loan Party or any of its Subsidiaries or any of their properties, or any general partner or managing member of any Loan Party or (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such Material Contract, the violation or breach of which would be reasonably likely to have a Material Adverse Effect. 
 
48 

(d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery, recordation, filing or performance by any Loan Party or any general partner or managing member of any Loan Party of any Loan Document to which it is or is to be a party or for the consummation of the IPO, the Formation Transactions or the other transactions contemplated by the Loan Documents and the exercise by the Administrative Agent or any Lender Party of its rights under the Loan Documents, except for authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect. 
 
(e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party and general partner or managing member (if any) of each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party and general partner or managing member (if any) of each Loan Party party thereto, enforceable against such Loan Party, general partner or managing member, as the case may be, in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity. 
 
(f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries or any general partner or managing member (if any) of any Loan Party, including any Environmental Action, pending or, to any Loan Party’s knowledge, threatened before any court, governmental agency or arbitrator that (i) could reasonably be expected to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) could reasonably be expected to affect the legality, validity or enforceability of any Loan Document or the consummation of the IPO, the Formation Transactions or the other transactions contemplated by the Loan Documents, and there has been no material adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries or any general partner or managing member (if any) of any Loan Party, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. 
 
(g) The Consolidated balance sheet of Digital Realty Predecessor as at December 31, 2003 and the related Consolidated statement of income and Consolidated statement of cash flows of Digital Realty Predecessor for the fiscal year then ended, accompanied by an unqualified opinion of KPMG LLP, independent public accountants, and the Consolidated balance sheet of Digital Realty Predecessor as at June 30, 2004, and the related Consolidated statement of income and Consolidated statement of cash flows of Digital Realty Predecessor for the six months then ended, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of such balance sheet as at June 30, 2004, and such statements of income and cash flows for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of Digital Realty Predecessor as at such dates and the Consolidated results of operations of Digital Realty Predecessor for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis, and since December 31, 2003, there has been (i) with respect to the period prior to the Closing Date, no material adverse change in the business, condition (financial or otherwise) results of operations or prospects of Digital Realty Predecessor, and (ii) with respect to any period after the Closing Date, no Material Adverse Change. 
 
(h) The Consolidated forecasted balance sheets, statements of income and statements of cash flows of the Parent Guarantor and its Subsidiaries delivered to the Lender Parties pursuant to 
 
49 

Section 3.01(a)(ix) or 5.03 were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Parent Guarantor’s best estimate of its future financial performance. 
 
(i) Neither the Information Memorandum nor any other information, exhibit or report furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender Party in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. 
 
(j) No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. 
 
(k) Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party, as applicable, is an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended. Without limiting the generality of the foregoing, each Loan Party and each of its Subsidiaries and each general partner or managing member of any Loan Party, as applicable: (i) is primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of (A) investing, reinvesting, owning, holding or trading in securities or (B) issuing face-amount certificates of the installment type; (ii) is not engaged in, does not propose to engage in and does not hold itself out as being engaged in the business of (A) investing, reinvesting, owning, holding or trading in securities or (B) issuing face-amount certificates of the installment type; (iii) does not own or propose to acquire investment securities (as defined in the Investment Company Act of 1940, as amended) having a value exceeding forty percent (40%) of the value of such company’s total assets (exclusive of government securities and cash items) on an unconsolidated basis; (iv) has not in the past been engaged in the business of issuing face-amount certificates of the installment type; and (v) does not have any outstanding face-amount certificates of the installment type. Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party or Subsidiary of a Loan Party that is a partnership or a limited liability company, as applicable, is a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. 
 
(l) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter, corporate, partnership, membership or other governing restriction that would be reasonably likely to have a Material Adverse Effect (absent a material default under a Material Contract). 
 
(m) Each of the Assets listed on Schedule II hereto satisfies all Unencumbered Asset Conditions. The Loan Parties are the legal and beneficial owners of the Unencumbered Assets free and clear of any Lien, except for the Liens permitted under the Loan Documents. 
 
50 

(n) Set forth on Schedule 4.01(n) hereto is a complete and accurate list of all Existing Debt (other than Surviving Debt), showing as of the date hereof the obligor and the principal amount outstanding thereunder. 
 
(o) Set forth on Schedule 4.01(o) hereto is a complete and accurate list of all Surviving Debt, showing as of the date hereof the obligor and the principal amount outstanding thereunder, the maturity date thereof and the amortization schedule therefor. 
 
(p) Set forth on Schedule 4.01(p) hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party or, with respect to Debt for Borrowed Money, any of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto. 
 
(q) Set forth on Schedule 4.01(q) hereto is a complete and accurate list of all material Real Property owned by any Loan Party or any of its Subsidiaries, showing as of the date hereof, and as of each other date such Schedule 4.01(q) is required to be supplemented pursuant to Section 5.03(i), the street address, county or other relevant jurisdiction, state, record owner and book value thereof. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such Real Property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents. 
 
(r) Set forth on Schedule 4.01(r) hereto is a complete and accurate list of all leases of material Real Property under which any Loan Party or any of its Subsidiaries is the lessee, showing as of the date hereof, and as of each other date such Schedule 4.01(r) is required to be supplemented pursuant to Section 5.03(i), the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof. Each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. 
 
(s) (i) Except as otherwise set forth on Part I of Schedule 4.01(s) hereto, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances exist that could be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. 
 
(ii) Except as otherwise set forth on Part II of Schedule 4.01(s) hereto, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or any analogous foreign, state or local list or is adjacent to any such property; there are no and, to the best of each Loan Party’s knowledge, never have been any underground or above ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries or, to the best of its knowledge, on any property formerly owned or operated by any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries. 
 
51 

(iii) Except as otherwise set forth on Part III of Schedule 4.01(s) hereto, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries. 
 
(t) Each Loan Party and each Subsidiary is in compliance with the requirements of all Laws (including, without limitation, the Securities Act and the Securities Exchange Act, and the applicable rules and regulations thereunder, state securities law and “Blue Sky” laws) applicable to it and its business, where the failure to so comply could reasonably be expected to have a Material Adverse Effect. 
 
(u) Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect. 
 
(v) Each Loan Party has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement (and in the case of the Guarantors, to give the guaranty under this Agreement) and each other Loan Document to which it is or is to be a party, and each Loan Party has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party. 
 
(w) Each Loan Party is, individually and together with its Subsidiaries, Solvent. 
 
(x) Except as set forth on Schedule 4.01(x), no Loan Party has made any extension of credit to any of its directors or executive officers in contravention of any applicable restrictions set forth in Section 402(a) of Sarbanes-Oxley. 
 
(y) Set forth on Part A of Schedule 4.01(y) hereto is a complete and accurate list of all Excluded Subsidiaries and their respective Excluded Subsidiary Agreements existing on the date hereof. 
 
(z) (i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan that has resulted in or is reasonably expected to result in a material liability of any Loan Party or any ERISA Affiliate. 
 
(ii) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service, is complete and accurate in all material respects and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. 
 
52 

(iii) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan, except as would not reasonably be expected to result in a Material Adverse Effect. 
 
(iv) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA, in each case, except as would not reasonably be expected to result in a Material Adverse Effect. 
 
ARTICLE V 
 
COVENANTS OF THE LOAN PARTIES 
 
SECTION 5.01. Affirmative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each Loan Party will: 
 
(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970; provided, however that the failure to comply with the provisions of this Section 5.01(a) shall not constitute a default hereunder so long as such non-compliance is the subject of a Good Faith Contest. 
 
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Loan Parties nor any of their Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is the subject of a Good Faith Contest, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. 
 
(c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits, except where such non-compliance could not reasonably expected to result in a Material Adverse Effect; obtain and renew and cause each of its Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Loan Parties nor any of their Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is the subject of a Good Faith Contest. 
 
(d) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Loan Party or such Subsidiaries operate. 
 
53 

(e) Preservation of Partnership or Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence (corporate or otherwise), legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises, except, in the case of Subsidiaries of the Borrower only, if in the reasonable business judgment of such Subsidiary it is in its best economic interest not to preserve and maintain such rights or franchises and such failure to preserve such rights or franchises is not reasonably likely to result in a Material Adverse Effect (it being understood that the foregoing shall not prohibit, or be violated as a result of, any transactions by or involving any Loan Party or Subsidiary thereof otherwise permitted under Section 5.02(d) or (e) below). 
 
(f) Visitation Rights. At any reasonable time and from time to time, permit the Administrative Agent, or any agent or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, any Loan Party and any of its Subsidiaries, and to discuss the affairs, finances and accounts of any Loan Party and any of its Subsidiaries with any of their general partners, managing members, officers or directors. 
 
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Loan Party and each such Subsidiary in accordance with GAAP. 
 
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted and will from time to time make or cause to be made all appropriate repairs, renewals and replacement thereof except where failure to do so would not have a Material Adverse Effect. 
 
(i) Transactions with Affiliates and Excluded Subsidiaries. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates (other than transactions exclusively among or between the Loan Parties) or with any Excluded Subsidiary on terms that are fair and reasonable and no less favorable to such Loan Party or such Subsidiary than it would obtain at the time in a comparable arm’s-length transaction with a Person not an Affiliate. 
 
(j) Covenant to Guarantee Obligations. Each applicable Loan Party shall, in each case at its expense: 
 
(i) Within 15 days after any Excluded Subsidiary Agreement terminates or otherwise becomes ineffective as to the Excluded Subsidiary party to such agreement, cause such Excluded Subsidiary to duly execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the Obligations of the other Loan Parties under the Loan Documents, unless such Excluded Subsidiary (or a related Excluded Subsidiary) shall incur Non-Recourse Debt permitted under Section 5.02(b)(ii)(G) within 60 days after the termination of such Excluded Subsidiary Agreement, and in such case the agreement in respect of such Non-Recourse Debt shall be deemed to be an Excluded Subsidiary Agreement and the Borrower shall, or cause such Excluded Subsidiary to, promptly deliver to the Administrative Agent (x) a copy of such agreement in respect of such Non-Recourse 
 
54 

Debt and (y) an amended Schedule 4.01(y) that sets forth such agreement in respect of such Non-Recourse Debt opposite the name of such Excluded Subsidiary. 
 
(ii) Within 15 days after the formation or acquisition of any new direct or indirect Subsidiary (other than a Foreign Subsidiary) by any Loan Party, cause each such Subsidiary (other than a Subsidiary (x) that is prohibited by the terms of any loan agreement or indenture or other agreement to which it or a related Excluded Subsidiary is a party (or a default under any such agreement would result therefrom) from providing guarantees of the Obligations of the Loan Parties under the Loan Documents, (y) that is being formed with the intent to incur Non-Recourse Debt permitted under Section 5.02(b)(ii)(G) in respect of Assets that are not Unencumbered Assets, or (z) that is inactive or holds de minimis assets (any Subsidiary described in clauses (x), (y) or (z) of this parenthetical, a “Limited Subsidiary”)), and cause each direct and indirect parent of such Subsidiary that is not a Limited Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ Obligations under the Loan Documents, provided that upon the formation or acquisition of any Limited Subsidiary, each such Limited Subsidiary shall be deemed to be an Excluded Subsidiary and each such loan agreement or indenture or other material agreement that restricts such Limited Subsidiary from providing guarantees of the Obligations of the Loan Parties under the Loan Documents shall be deemed to be an Excluded Subsidiary Agreement, and the Borrower shall, or cause such Limited Subsidiary to, promptly deliver to the Administrative Agent (1) copies of such agreements or indentures in respect of such Non-Recourse Debt and (2) an amended Schedule 4.01(y) that sets forth such agreements or indentures in respect of such Non-Recourse Debt opposite the name of such Limited Subsidiary. 
 
(iii) Upon the request by the Borrower that any Asset (a “Proposed Unencumbered Asset”) be added as an Unencumbered Asset, in each case at the Borrower’s expense: 
 
(A) within 10 days after such request, furnish to the Administrative Agent the following items: 
 
(1) a description, in detail reasonably satisfactory to the Administrative Agent, of the Proposed Unencumbered Asset, 
 
(2) a certificate of the Chief Financial Officer (or other Responsible Officer) of the Borrower confirming that (x) such Asset satisfies all Unencumbered Asset Conditions, and (y) the addition of such Proposed Unencumbered Asset as an Unencumbered Asset shall not cause or result in a Default or Event of Default, 
 
(3) confirmation that the Loan Parties are in compliance with the covenants contained in Section 5.04 (both immediately before and on a pro forma basis immediately after the addition of such Proposed Unencumbered Asset as an Unencumbered Asset), evidenced by a certificate of the Chief Financial Officer (or other Responsible Officer) of the Borrower delivered to the Administrative Agent prior to such addition demonstrating such compliance, 
 
55 

(4) each of the items set forth in Sections 3.01(a)(iii) and, if applicable, (x), mutatis mutandis, in each case in respect of such Proposed Unencumbered Asset, and 
 
(5) a revised Schedule II hereto reflecting the addition of such Proposed Unencumbered Asset, provided that for purposes of the definition of the term Unencumbered Assets (and subject to the proviso immediately following below), such revised Schedule II shall become effective only upon satisfaction of each of the conditions set forth in this Section 5.01(j)(iii); 
 
provided, however, that the failure to comply with one or more of the Unencumbered Asset Conditions or clause (4) above shall not preclude the addition of any Proposed Unencumbered Asset as an Unencumbered Asset so long as the Administrative Agent or the Required Lenders shall have expressly consented to the addition of such Asset as an Unencumbered Asset notwithstanding the failure to satisfy either or both of such conditions; and 
 
(B) as promptly as possible, furnish to the Administrative Agent such other approvals or documents as any Lender Party through the Administration Agent may reasonably request. 
 
(k) Further Assurances. Promptly upon request by the Administrative Agent, or any Lender Party through the Administrative Agent, correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof. 
 
(l) Performance of Material Contracts. Perform and observe in all material respects all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect, enforce in all material respects each such Material Contract in accordance with its terms, take all such action to such end as may be from time to time reasonably requested by the Administrative Agent and, upon request of the Administrative Agent, make to each other party to each such Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract, and cause each of its Subsidiaries to do so. 
 
(m) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property to which the Borrower or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, except, in the case of Subsidiaries of the Borrower only, if in the reasonably business judgment of such Subsidiary it is in its best economic interest not to maintain such lease or prevent such lapse, termination, forfeiture or cancellation and such failure to maintain such lease or prevent such lapse, termination, forfeiture or cancellation is not in respect of a Qualifying Ground Lease for an Unencumbered Asset and is not otherwise reasonably likely to result in a Material Adverse Effect, notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so. 
 
(n) Interest Rate Hedging. Enter into within 30 days after the Closing Date, and maintain at all times thereafter, interest rate Hedge Agreements (i) with Persons reasonably 
 
56 

acceptable to the Administrative Agent, (ii) providing either an interest-rate swap for a fixed rate of interest reasonably acceptable to the Administrative Agent or an interest-rate cap at an interest rate reasonably acceptable to the Administrative Agent, (iii) covering a notional amount equal to the amount, if any, by which (A) 66 2/3% of Consolidated Debt for Borrowed Money of the Parent and its Subsidiaries exceeds (B) all Consolidated Debt for Borrowed Money of the Parent and its Subsidiaries then accruing interest at a fixed rate acceptable to the Administrative Agent and (iv) otherwise on terms and conditions reasonably acceptable to the Administrative Agent. 
 
(o) Maintenance of REIT Status. In the case of the Parent Guarantor, at all times, conduct its affairs and the affairs of its Subsidiaries in a manner so as to continue to qualify as a REIT and elect to be treated as a REIT under all applicable laws, rules and regulations. 
 
(p) NYSE Listing. In the case of the Parent Guarantor, at all times cause its common shares to be duly listed on the New York Stock Exchange or other national stock exchange. 
 
(q) Sarbanes-Oxley. Comply at all times with all applicable provisions of Section 402(a) of Sarbanes-Oxley. 
 
(r) Certain Excluded Subsidiaries. After the Closing Date, (i) use best efforts to obtain such consents of lenders as may be required to permit those Subsidiaries presently designated as Excluded Subsidiaries solely on the basis of restrictive provisions in their charters to become Guarantors hereunder, and (ii) within 10 days after obtaining any such required consents, (x) cause the applicable Subsidiary to execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties’ Obligations under the Loan Documents, and (y) deliver or cause the applicable Subsidiary to deliver an amended Schedule 4.01(y) that no longer lists such Subsidiary as an Excluded Subsidiary. 
 
SECTION 5.02. Negative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, no Loan Party will, at any time: 
 
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement (other than such financing statements filed solely as a precaution in respect of true leases entered in the ordinary course of business) that names such Loan Party or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except, in the case of the Loan Parties (other than the Parent Guarantor) and their respective Subsidiaries: 
 
(i) Permitted Liens; 
 
(ii) Liens described on Schedule 4.01(p) hereto; 
 
(iii) purchase money Liens upon or in equipment acquired or held by such Loan Party or any of its Subsidiaries in the ordinary course of business to secure the 
 
57 

purchase price of such equipment or to secure Debt incurred solely for the purpose of financing the acquisition of any such equipment to be subject to such Liens, or Liens existing on any such equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this clause (iii) shall not exceed the amount permitted under Section 5.02(b)(ii)(B) at any time outstanding; 
 
(iv) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(ii)(C), provided that no such Lien shall extend to or cover any assets other than the assets subject to such Capitalized Leases; 
 
(v) Liens on property of a Person existing at the time such Person is acquired by, merged into or consolidated with any Loan Party or any Subsidiary of any Loan Party or becomes a Subsidiary of any Loan Party, provided that such Liens were not created in contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person so merged into or consolidated with such Loan Party or such Subsidiary or acquired by such Loan Party or such Subsidiary; 
 
(vi) other Liens securing Non-Recourse Debt permitted under Section 5.02(b)(ii)(G); 
 
(vii) the replacement, extension or renewal of any Lien permitted by clause (iii) or (v) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal of the Debt secured thereby; and 
 
(viii) other Liens incurred in the ordinary course of business with respect to obligations in an amount not to exceed $1,000,000 in the aggregate at any time. 
 
(b) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except: 
 
(i) in the case of any Loan Party or any Subsidiary of a Loan Party, Debt owed to any other Loan Party or any wholly-owned Subsidiary of any Loan Party (other than an Excluded Subsidiary), provided that, in each case, such Debt (y) shall be on terms acceptable to the Administrative Agent and (z) shall be evidenced by promissory notes in form and substance satisfactory to the Administrative Agent, which promissory notes shall (unless payable to the Borrower) by their terms be subordinated to the Obligations of the Loan Parties under the Loan Documents; 
 
(ii) in the case of each Loan Party (other than the Parent Guarantor) and its Subsidiaries, 
 
(A) Debt under the Loan Documents, 
 
(B) Debt secured by Liens permitted by Section 5.02(a)(iii) not to exceed in the aggregate $5,000,000 at any time outstanding, 
 
58 

(C) (1) Capitalized Leases (other than with respect to Real Property) not to exceed in the aggregate $5,000,000 at any time outstanding, and (2) in the case of Capitalized Leases (other than with respect to Real Property) to which any Subsidiary of a Loan Party is a party, Debt of such Loan Party of the type described in clause (i) of the definition of “Debt” guaranteeing the Obligations of such Subsidiary under such Capitalized Leases, 
 
(D) the Surviving Debt described on Schedule 4.01(o) hereto and any Refinancing Debt, extending, refunding or refinancing such Surviving Debt, 
 
(E) Debt in respect of Hedge Agreements entered into by the Borrower and designed to hedge against fluctuations in interest rates or foreign exchange rates incurred in the ordinary course of business and consistent with prudent business practice, 
 
(F) unsecured Debt incurred in the ordinary course of business for borrowed money, maturing within one year from the date created, and aggregating, on a Consolidated basis, not more than $5,000,000 at any one time outstanding, 
 
(G) Non-Recourse Debt (including, without limitation, the JV Pro Rata Share of Non-Recourse Debt of any Joint Venture) in respect of Assets other than Unencumbered Assets, the incurrence of which would not result in a Default under Section 5.04 or any other provision of this Agreement, and 
 
(H) Recourse Debt in an amount not to exceed in the aggregate the sum of (1) 5% of Total Asset Value, plus (2) the amount, if any, by which $200,000,000 exceeds the aggregate amount of the Revolving Credit Facility; provided, however, that if at any time the Parent Guarantor shall maintain a Debt Rating from S&P of at least BBB—or a Debt Rating from Moody’s of at least Baa3, then the limitation set forth above in this clause (H) shall not apply and Recourse Debt shall be permitted to the extent the incurrence of such Recourse Debt would not result in a Default or Event of Default by the Parent Guarantor in respect of its financial covenants in Section 5.04(a); 
 
(iii) in the case of the Parent Guarantor or any of its Subsidiaries, Debt under Customary Carve-Out Agreements; and 
 
(iv) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. 
 
(c) Change in Nature of Business. Engage in, or permit any of its Subsidiaries to engage in, any material new line of business different from those lines of business conducted by the Borrower or any of its Subsidiaries on the Closing Date (after giving effect to the Formation Transactions, the IPO and the other transactions contemplated by the Loan Documents), including the ownership, acquisition, development, construction, rental and management of Real Property (including all Assets), and activities substantially related, necessary or incidental thereto 
 
(d) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or permit any of its 
 
59 

Subsidiaries to do so; provided, however, that (i) any Subsidiary of a Loan Party may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of a Loan Party (provided that if one or more of such Subsidiaries is also a Loan Party, a Loan Party shall be the surviving entity) or any other Loan Party (provided that such Loan Party or, in the case of any Loan Party other than the Borrower, another Loan Party shall be the surviving entity), and (ii) any Loan Party may merge with any Person that is not a Loan Party so long as such Loan Party or another Loan Party is the surviving entity, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. Notwithstanding any other provision of this Agreement, (y) any Subsidiary of a Loan Party (other than the Borrower and any Subsidiary that is the direct owner of an Unencumbered Asset) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and the assets or proceeds from the liquidation or dissolution of such Subsidiary are transferred to the Borrower or any Subsidiary thereof, which Subsidiary shall be a Loan Party if the Subsidiary being liquidated or dissolved is a Loan Party, provided that no Default or Event of Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom, and (z) any Loan Party or Subsidiary of a Loan Party shall be permitted to effect any Transfer of Unencumbered Assets through the sale or transfer of the direct or indirect Equity Interests in the Subsidiary of such Loan Party that owns such Unencumbered Assets so long as Section 5.02(e) would otherwise permit the Transfer of all Unencumbered Assets owned by such Subsidiary at the time of such sale or transfer of such Equity Interests. Upon the sale or transfer of Equity Interests in any Subsidiary or Subsidiaries of a Loan Party permitted under clause (z) above, the Administrative Agent shall, upon the request of the Borrower, release such Subsidiary or Subsidiaries from the Guaranty. 
 
(e) Sales, Etc. of Assets. (i) In the case of the Parent Guarantor, sell, lease, transfer or otherwise dispose of, or grant any option or other right to purchase, lease or otherwise acquire any assets and (ii) in the case of the Loan Parties (other than the Parent Guarantor), sell, lease (other than enter into Tenancy Leases), transfer or otherwise dispose of, or grant any option or other right to purchase, lease (other than any option or other right to enter into Tenancy Leases) or otherwise acquire, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, or grant any option or other right to purchase, lease or otherwise acquire (each action described in clause (ii) of this subsection (e) being a “Transfer”), any Unencumbered Asset or Unencumbered Assets (or any direct or indirect Equity Interests in the owner thereof) other than the following Transfers, which shall be permitted hereunder only so long as no Default or Event of Default shall exist or would result therefrom: 
 
(A) the Transfer of any Unencumbered Asset or Unencumbered Assets from any Loan Party to another Loan Party or from a Subsidiary of a Loan Party to another Subsidiary of such Loan Party or any other Loan Party, and 
 
(B) the Transfer of any Unencumbered Asset or Unencumbered Assets to any Person, or the designation of an Unencumbered Asset or Unencumbered Assets as a non-Unencumbered Asset or non-Unencumbered Assets, in each case with the intention that such Unencumbered Asset or Unencumbered Assets, upon consummation of such Transfer or upon such designation, shall no longer constitute an Unencumbered Asset or Unencumbered Assets for purposes of this Agreement, provided, that (x) the remaining Unencumbered Assets continue to satisfy all Unencumbered Asset Conditions and (y) the Loan Parties shall be in compliance with the covenants contained in Section 5.04 both immediately before and on a pro forma basis immediately after giving effect to such Transfer, provided, further, that compliance with the foregoing proviso shall be evidenced 
 
60 

by a certificate of the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Borrower delivered to the Administrative Agent prior to the date of such Transfer demonstrating such compliance, together with supporting information in detail reasonably satisfactory to the Administrative Agent. 
 
If, at any time after the designation in accordance with the foregoing clause (B) of all Unencumbered Assets of any Property-Level Subsidiary as non-Unencumbered Assets, such Subsidiary shall incur any Debt not prohibited by Section 5.02(b) pursuant to an agreement that could qualify as an Excluded Subsidiary Agreement hereunder, (i) the Administrative Agent shall, upon the request of the Borrower, release such Subsidiary (and any other Subsidiary related thereto to the extent reasonably requested by the Borrower) from the Guaranty, (ii) such Subsidiary or Subsidiaries shall constitute Excluded Subsidiaries hereunder and such agreement shall constitute an Excluded Subsidiary Agreement hereunder, and (iii) the Borrower shall, or cause such Excluded Subsidiaries to, promptly deliver to the Administrative Agent (x) a copy of such Excluded Subsidiary Agreement in respect of such Debt and (y) an amended Schedule 4.01(y) that sets forth such Excluded Subsidiary Agreement opposite the name of such Excluded Subsidiaries. 
 
(f) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person other than: 
 
(i) Investments by the Loan Parties and their Subsidiaries in their Subsidiaries outstanding on the date hereof and additional Investments in Subsidiaries and, in the case of the Loan Parties (other than the Parent Guarantor) and their Subsidiaries, Investments in Assets (including by asset or Equity Interest acquisitions), in each case subject, where applicable, to the limitations set forth in Section 5.02(f)(iv); 
 
(ii) Investments in Cash Equivalents; 
 
(iii) Investments consisting of intercompany Debt permitted under Section 5.02(b)(i); 
 
(iv) Investments consisting of the following items so long as (y) the aggregate amount outstanding, without duplication, of all Investments described in this subsection does not exceed, at any time, 25% of Total Asset Value at such time, and (z) the aggregate amount of each of the following items of Investments does not exceed the specified percentage of Total Asset Value set forth below: 
 
(A) Investments in land and Development Assets (including such assets that such Person has contracted to purchase for development with or without options to terminate the purchase agreement), so long as the aggregate amount of such Investments, calculated on the basis of the greater of actual cost or budgeted cost, does not at any time exceed 5.0% of Total Asset Value at such time; provided, however, that the limitation set forth in this clause (A) shall not apply to any Development Asset that is 90% pre-leased pursuant to duly executed Tenancy Leases and all completion and performance guarantees pertaining to such Development Asset are reasonably satisfactory to the Administrative Agent, and 
 
61 

(B) Investments in Joint Ventures of any Loan Party so long as the aggregate amount of such Investments outstanding does not at any time exceed 25% of Total Asset Value of the Parent Guarantor and its Subsidiaries, as determined in accordance with GAAP, at such time; 
 
(v) Investments by the Borrower in Hedge Agreements permitted under Section 5.02(b)(ii)(E); 
 
(vi) To the extent permitted by applicable law, advances to officers, directors and employees of any Loan Party or any Subsidiary of any Loan Party in the ordinary course of business, for travel, entertainment, relocation and analogous ordinary business purposes; 
 
(vii) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit extended in the ordinary course of business in an aggregate amount not to exceed $5,000,000; and 
 
(viii) Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss. 
 
(g) Restricted Payments. In the case of the Parent Guarantor, declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such; provided, however, that the Parent Guarantor may declare and pay dividends or make other distributions of common stock or cash only (i) so long as no Event of Default under Sections 6.01(a), (c) or (e) shall have occurred and be continuing, (y) in an aggregate amount not to exceed during any four consecutive fiscal quarters of the Parent Guarantor 95% of Funds From Operations for such four fiscal quarter period, or (z) as may otherwise be required to avoid the imposition of income or excise taxes on the Parent Guarantor, and (ii) so long as no Event of Default of the type described in Sections 6.01(a) or (e) shall have occurred and be continuing, as may be required to comply with Section 5.01(o). 
 
(h) Amendments of Constitutive Documents. Amend, or permit any of its Subsidiaries to amend, in each case in any material respect, its limited liability company agreement, certificate of incorporation or bylaws or other constitutive documents, provided that any amendment to any such constitutive document that would be adverse to any of the Lender Parties shall be deemed “material” for purposes of this Section; and provided further that any amendment to any such constitutive document that would designate such Subsidiary as a “special purpose entity” or otherwise confirm such Subsidiary’s status as a “special purpose entity” shall be deemed “not material” for purposes of this Section. 
 
(i) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles, or (ii) Fiscal Year. 
 
(j) Speculative Transactions. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions. 
 
62 

(k) Payment Restrictions Affecting Subsidiaries. Directly or indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, the Borrower or any Subsidiary of the Borrower (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents, (ii) any agreement or instrument evidencing Surviving Debt or Refinancing Debt, (iii) any agreement evidencing any Non-Recourse Debt permitted under this Agreement so long as any such limiting agreement or arrangement in such agreement may be triggered only by a default or event of default under the terms of such agreement or is on customary terms otherwise satisfactory to the Administrative Agent; (iv) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower and (v) any Excluded Subsidiary Agreement. 
 
(l) Amendment, Etc. of Material Contracts. Cancel or terminate any Material Contract or consent to or accept any cancellation or termination thereof, amend or otherwise modify any Material Contract or give any consent, waiver or approval thereunder, waive any default under or breach of any Material Contract, agree in any manner to any other amendment, modification or change of any term or condition of any Material Contract or take any other action in connection with any Material Contract that would materially impair the value of the interest or rights of any Loan Party thereunder or that would impair or otherwise materially adversely affect the interest or rights of the Administrative Agent or any Lender Party, or permit any of its Subsidiaries to do any of the foregoing. 
 
(m) Negative Pledge. Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets (including, without limitation, any Unencumbered Assets), except (i) pursuant to the Loan Documents, (ii) pursuant to any Excluded Subsidiary Agreement, or (iii) in connection with (A) any Surviving Debt and any Refinancing Debt extending, refunding or refinancing such Surviving Debt, (B) any purchase money Debt permitted by Section 5.02(b)(ii)(B) solely to the extent that the agreement or instrument governing such Debt prohibits a Lien on the property acquired with the proceeds of such Debt, (C) any Capitalized Lease permitted by Section 5.02(b)(ii)(C) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto, or (D) any Debt outstanding on the date any Subsidiary of the Borrower becomes such a Subsidiary (so long as such agreement was not entered into solely in contemplation of such Subsidiary becoming a Subsidiary of the Borrower). 
 
(n) Parent Guarantor as Holding Company. In the case of the Parent Guarantor, not enter into or conduct any business, or engage in any activity (including, without limitation, any action or transaction that is required or restricted with respect to the Borrower and its Subsidiaries under Sections 5.01 and 5.02 without regard to any of the enumerated exceptions to such covenants), other than (i) the holding of the Equity Interests of the Borrower; (ii) the performance of its duties as general partner of the Borrower; (iii) the performance of its Obligations (subject to the limitations set forth in the Loan Documents) under each Loan Document to which it is a party; (iv) the making of equity Investments in the Borrower and its Subsidiaries, provided each such Investment (A) shall be on terms acceptable to the Administrative Agent and (B) shall be evidenced by stock certificates, promissory notes or instruments in form and substance satisfactory to the Administrative Agent; (v) engaging in any activity necessary or desirable to continue to qualify as a REIT and (vi) activities incidental to each of the foregoing. 
 
63 

(o) Excluded Subsidiaries. Enter into or suffer to exist, or permit any Excluded Subsidiary to enter into or suffer to exist, any agreement prohibiting or conditioning (i) the guaranty by such Excluded Subsidiary of the Obligations of the Loan Parties under the Loan Documents or (ii) the creation or assumption of any Lien upon any of such Excluded Subsidiary’s property or assets, except (x) as would be permitted under Section 5.02(m) or 5.01(e), (y) pursuant to an Excluded Subsidiary Agreement in effect on the later of the Effective Date and the date on which such Excluded Subsidiary becomes a Subsidiary of such Loan Party or (z) in connection with the incurrence by such Excluded Subsidiary (or Subsidiary of the Borrower directly related Subsidiary thereto) of Debt permitted under Section 5.02(b)(ii)(G) or 5.02(b)(ii)(H). 
 
SECTION 5.03. Reporting Requirements. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will furnish to the Administrative Agent for transmission to the Lender Parties in accordance with Section 9.02(b): 
 
(a) Default Notice. As soon as possible and in any event within three days after a Responsible Officer obtains knowledge of the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect, in each case, if continuing on the date of such statement, a statement of the Chief Financial Officer (or other Responsible Officer) of the Parent Guarantor setting forth details of such Default or such event, development or occurrence and the action that the Parent Guarantor has taken and proposes to take with respect thereto. 
 
(b) Annual Financials. As soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Parent Guarantor and its Subsidiaries, including therein Consolidated balance sheets of the Parent Guarantor and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for such Fiscal Year (it being acknowledged that a copy of the annual audit report filed by the Parent Guarantor with the Securities and Exchange Commission shall satisfy the foregoing requirements), in each case accompanied by an opinion reasonably acceptable to the Administrative Agent of KPMG LLP or other independent public accountants of recognized standing reasonably acceptable to the Administrative Agent, together with (i) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Parent Guarantor and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default with respect to Section 5.04 has occurred and is continuing, or if, in the opinion of such accounting firm, a Default with respect to Section 5.04 has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Parent Guarantor shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (iii) a certificate of the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Parent Guarantor stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto. 
 
64 

(c) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated balance sheets of the Parent Guarantor and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Parent Guarantor as having been prepared in accordance with GAAP (it being acknowledged that a copy of the quarterly financials filed by the Parent Guarantor with the Securities and Exchange Commission shall satisfy the foregoing requirements), together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto and (ii) a schedule in form reasonably satisfactory to the Administrative Agent of the computations used by the Parent Guarantor in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Parent Guarantor shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP, provided further, that items that would otherwise be required to be furnished pursuant to this Section 5.03(c) prior to the 45th day after the Closing Date shall be furnished on or before the 45th day after the Closing Date. 
 
(d) Unencumbered Assets Certificate. As soon as available and in any event within 30 days after the end of each month, an Unencumbered Assets Certificate, as at the end of such month, certified by the Chief Financial Officer (or other Responsible Officer performing similar functions) of the Parent Guarantor. 
 
(e) Unencumbered Assets Financials. As soon as available and in any event within 30 days after the end of each month, financial information in respect of all Unencumbered Assets, in form and detail satisfactory to the Administrative Agent. 
 
(f) Annual Budgets. As soon as available and in any event no later than 45 days after the end of each Fiscal Year, forecasts prepared by management of the Parent Guarantor, in form satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements on a monthly basis for the then current Fiscal Year and on an annual basis for each Fiscal Year thereafter until the Termination Date. 
 
(g) Material Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), and promptly after the occurrence thereof, notice of any material adverse change in the status or the financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. 
 
(h) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to 
 
65 

the holders of its Equity Interests, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange. 
 
(i) Real Property. As soon as available and in any event within 30 days after the end of each Fiscal Year, a report supplementing Schedules 4.01(q) and 4.01(r) hereto, including an identification of all owned and leased real property disposed of by any Loan Party or any of its Subsidiaries during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all Real Property acquired or leased by any Loan Party or any of its Subsidiaries during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete. 
 
(j) Environmental Conditions. Give notice in writing to the Administrative Agent (i) promptly upon obtaining knowledge of any material violation of any Environmental Law affecting any Asset or the operations thereof or the operations of any of its Subsidiaries, (ii) promptly upon obtaining knowledge of any known release, discharge or disposal of any Hazardous Materials at, from, or into any Asset which it reports in writing or is reportable by it in writing to any governmental authority and which is material in amount or nature or which could reasonably be expected to materially adversely affect the value of such Asset, (iii) promptly upon its receipt of any notice of material violation of any Environmental Laws or of any material release, discharge or disposal of Hazardous Materials in violation of any Environmental Laws or any matter that may result in an Environmental Action, including a notice or claim of liability or potential responsibility from any third party (including without limitation any federal, state or local governmental officials) and including notice of any formal inquiry, proceeding, demand, investigation or other action with regard to (A) such Loan Party’s or any other Person’s operation of any Asset, (B) contamination on, from or into any Asset, or (C) investigation or remediation of off-site locations at which such Loan Party or any of its predecessors are alleged to have directly or indirectly disposed of Hazardous Materials, or (iv) upon such Loan Party’s obtaining knowledge that any expense or loss has been incurred by such governmental authority in connection with the assessment, containment, removal or remediation of any Hazardous Materials with respect to which such Loan Party or any Joint Venture may be liable or for which a Lien may be imposed on any Asset, provided that any of the events described in clauses (i) through (iv) above would have a Material Adverse Effect or could reasonably be expected to result in an Environmental Action with respect to any Unencumbered Asset. 
 
(k) Unencumbered Asset Conditions. Promptly after discovery of any condition or event which causes any of the Assets listed as Unencumbered Assets on Schedule II hereto to no longer comply with the requirements set forth in the definition of Unencumbered Asset Conditions, provide the Administrative Agent with notice thereof. 
 
(l) Other Information. Promptly, such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as the Administrative Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request. 
 
SECTION 5.04. Financial Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be 
 
66 

outstanding or any Lender Party shall have, at any time after the Initial Extension of Credit, any Commitment hereunder, the Parent Guarantor will: 
 
(a) Parent Guarantor Financial Covenants. 
 
(i) Maximum Total Leverage Ratio: Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance and the issuance or renewal of any Letter of Credit occurring during any of the periods indicated below (both before and after giving effect to such Advance), a Leverage Ratio not greater than the correlative ratio indicated: 

Period	 	Leverage Ratio	
		
9/30/04 through 6/30/06	 	65.0%	
		
7/1/06 and thereafter	 	60%	
 
(ii) Minimum Fixed Charge Coverage Ratio. Maintain (A) at the end of each fiscal quarter of the Parent Guarantor and (B) on the date of each Advance (both before and after giving effect to such Advance), a Fixed Charge Coverage Ratio of not less than 1.75:1.00. 
 
(iii) Maximum Secured Debt Leverage Ratio: Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance and the issuance or renewal of any Letter of Credit occurring during any of the periods set forth below (both before and after giving effect to such Advance), a Secured Debt Leverage Ratio not greater than the correlative ratio indicated: 

Period	 	Secured Debt Leverage Ratio	
		
9/30/04 through 6/30/06	 	55.0%	
		
7/1/06 and thereafter	 	45%	
 
(iv) Minimum Tangible Net Worth: Maintain at all times an excess of Total Asset Value minus Total Debt, in each case, of the Parent Guarantor and its Subsidiaries, of not less than the sum of $[            ] plus an amount equal to 75% of the proceeds of all primary issuances or primary sales of Equity Interests of the Parent Guarantor or the Borrower consummated following the Closing Date. 
 
(b) Unencumbered Assets Financial Covenants. 
 
(i) Maximum Facility Exposure to Total Unencumbered Asset Value: Not permit at any time the Facility Exposure to be greater than 60% of the Total Unencumbered Asset Value at such time. 
 
(ii) Minimum Unencumbered Assets Debt Service Coverage Ratio: Maintain (A) at the end of each fiscal quarter of the Parent Guarantor and (B) at the time of each Advance (both before and after giving effect to such Advance) an Unencumbered Assets Debt Service Coverage Ratio of not less than 2.00:1.00. 
 
67 

All calculations described above in Sections 5.04(a) and 5.04(b) which pertain to the fiscal quarters of the Parent Guarantor ending September 30, 2004 or December 31, 2004 shall be made on a pro forma basis after giving effect to the IPO and Formation Transactions. To the extent any calculations described in Sections 5.04(a) or 5.04(b) are required to be made on any date of determination other than the last day of a fiscal quarter of the Parent Guarantor, such calculations shall be made on a pro forma basis to account for any acquisitions or dispositions of Assets, and the incurrence or repayment of any Debt for Borrowed Money relating to such Assets, that have occurred since the last day of the fiscal quarter of the Parent Guarantor most recently ended. All such calculations shall be reasonably acceptable to the Administrative Agent. 

ARTICLE VI 
 
EVENTS OF DEFAULT 
 
SECTION 6.01. Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing: 
 
(a) (i) the Borrower shall fail to pay any principal of any Advance when the same shall become due and payable or (ii) the Borrower shall fail to pay any interest on any Advance, or any Loan Party shall fail to make any other payment under any Loan Document when due and payable, in each case under this clause (ii) within three Business Days after the same becomes due and payable; or 
 
(b) any representation or warranty made by any Loan Party (or any of its officers or the officers of its general partner or managing member, as applicable) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or 
 
(c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.14, 5.01(d), (e), (f), (i), (j), (n), (o), (p) or (q), 5.02, 5.03 or 5.04; or 
 
(d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender Party; or 
 
(e) (i) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Material Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Debt, if (A) the effect of such event or condition is to permit the acceleration of the maturity of such Material Debt or otherwise permit the holders thereof to cause such Material Debt to mature, and (B) such event or condition shall remain unremedied or otherwise uncured for a period of 30 days; or (iii) the maturity of any such Material Debt shall be accelerated or any such Material Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Debt shall be required to be made, in each case prior to the stated maturity thereof; or 
 
(f) any Loan Party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the 
 
68 

benefit of creditors; or any proceeding shall be instituted by or against any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or 
 
(g) any judgments or orders, either individually or in the aggregate, for the payment of money in excess of $10,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided, however, that any such judgment or order shall not give rise to an Event of Default under this Section 6.01(g) if and so long as (A) the amount of such judgment or order which remains unsatisfied is covered by a valid and binding policy of insurance between the respective Loan Party and the insurer covering full payment of such unsatisfied amount and (B) such insurer, which shall be rated at least “A” by A.M. Best Company, has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order; or 
 
(h) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that could have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or 
 
(i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing; or 
 
(j) a Change of Control shall occur; 
 
(k) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $10,000,000; 
 
(l) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $10,000,000 or requires payments exceeding $2,000,000 per annum; or 
 
69 

(m) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $2,000,000; 
 
then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, (B) by notice to each party required under the terms of any agreement in support of which a Letter of Credit is issued, request that all Obligations under such agreement be declared to be due and payable and (C) by notice to each Issuing Bank, direct such Issuing Bank to deliver a Default Termination Notice to the beneficiary of each Letter of Credit issued by it, and each Issuing Bank shall deliver such Default Termination Notices; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under any Bankruptcy Law, (y) the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit shall automatically be terminated and (z) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 
 
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or 2.17(e) or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent’s office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Administrative Agent or the Issuing Bank determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lender Parties with respect to the Obligations of the Loan Parties under the Loan Documents, or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent, as the case may be, determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank or Lenders, as applicable, to the extent permitted by applicable law. 
 
70 

ARTICLE VII 
 
GUARANTY 
 
SECTION 7.01. Guaranty; Limitation of Liability. (a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of the Borrower and each other Loan Party now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Obligations being the “Guaranteed Obligations”), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or any other Secured Party in enforcing any rights under this Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Secured Party under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party. This Guaranty is a guaranty of payment and not merely of collection. 
 
(b) Each Guarantor, the Administrative Agent and each other Lender Party and, by its acceptance of the benefits of this Guaranty, each other Secured Party, hereby confirms that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Guarantors, the Administrative Agent, the other Lender Parties and, by their acceptance of the benefits of this Guaranty, the other Secured Parties hereby irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. 
 
(c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Secured Party under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Secured Parties under or in respect of the Loan Documents. 
 
SECTION 7.02. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement and the other Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any other Secured Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of this Agreement or the other the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following: 
 
71 

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; 
 
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower, any other Loan Party or any of their Subsidiaries or otherwise; 
 
(c) any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations; 
 
(d) any manner of application of any assets of any Loan Party or any of its Subsidiaries, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any assets of any Loan Party or any of its Subsidiaries for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents; 
 
(e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries; 
 
(f) any failure of the Administrative Agent or any other Secured Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to the Administrative Agent or such other Secured Party (each Guarantor waiving any duty on the part of the Administrative Agent and each other Secured Party to disclose such information); 
 
(g) the failure of any other Person to execute or deliver this Agreement, any other Loan Document, any Guaranty Supplement (as hereinafter defined) or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or 
 
(h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Administrative Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety. 
 
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had not been made. 
 
SECTION 7.03. Waivers and Acknowledgments. (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice (except as expressly provided under the Loan Documents) with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Administrative Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person. 
 
72 

(b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. 
 
(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent or any other Secured Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder. 
 
(d) Each Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by nonjudicial sale, and each Guarantor hereby waives any defense to the recovery by the Administrative Agent and the other Secured Parties against such Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law. 
 
(e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent or any other Secured Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower, any other Loan Party or any of their Subsidiaries now or hereafter known by the Administrative Agent or such other Secured Party. 
 
(f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by this Agreement and the other Loan Documents and that the waivers set forth in Section 7.02 and this Section 7.03 are knowingly made in contemplation of such benefits. 
 
SECTION 7.04. Subrogation. Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty, this Agreement or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against the Borrower, any other Loan Party or any other insider guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit shall have expired or been terminated, all Guaranteed Hedge Agreements shall have expired or been terminated and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the Termination Date and (c) the latest date of expiration or termination of all Letters of Credit and all Guaranteed Hedge Agreements, such amount shall be received and held in trust for the benefit of the Secured Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the 
 
73 

Loan Documents. If (i) any Guarantor shall make payment to any Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) the Termination Date shall have occurred and (iv) all Letters of Credit and all Guaranteed Hedge Agreements shall have expired or been terminated, the Administrative Agent and the other Secured Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty. 
 
SECTION 7.05. Guaranty Supplements. Upon the execution and delivery by any Person of a Guaranty Supplement, (i) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Agreement to a “Guarantor” or a “Loan Party” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to “this Agreement”, “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Agreement and this Guaranty, and each reference in any other Loan Document to the “Loan Agreement”, “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Agreement and this Guaranty, shall mean and be a reference to this Agreement and this Guaranty as supplemented by such Guaranty Supplement. 
 
SECTION 7.06. Indemnification by Guarantors. (a) Without limitation on any other Obligations of any Guarantor or remedies of the Administrative Agent or the Secured Parties under this Agreement, this Guaranty or the other Loan Documents, each Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless the Administrative Agent, each other Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of any Loan Party enforceable against such Loan Party in accordance with their terms. 
 
(b) Each Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any of the Guarantors or any of their respective officers, directors, employees, agents and advisors, and each Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents. 
 
SECTION 7.07. Subordination. (a) Each Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 7.07. 
 
(b) Prohibited Payments, Etc. Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive payments in the ordinary course of business from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), however, unless the Administrative Agent 
 
74 

otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations. 
 
(c) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to any other Loan Party, each Guarantor agrees that the Secured Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before such Guarantor receives payment of any Subordinated Obligations. 
 
(d) Turn-Over. After the occurrence and during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Secured Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. 
 
(e) Administrative Agent Authorization. After the occurrence and during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest). 
 
SECTION 7.08. Continuing Guaranty. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the Termination Date and (iii) the latest date of expiration or termination of all Letters of Credit and all Guaranteed Hedge Agreements, (b) be binding upon the Guarantors, their successors and assigns and (c) inure to the benefit of and be enforceable by the Administrative Agent and the other Secured Parties and their successors, transferees and assigns. 

ARTICLE VIII 
 
THE ADMINISTRATIVE AGENT 
 
SECTION 8.01. Authorization and Action. Each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable) and as an Issuing Bank (if applicable) and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided, however, that the Administrative 
 
75 

Agent shall not be required to take any action that exposes it to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Notwithstanding anything to the contrary in any Loan Document, no Person identified as a syndication agent, documentation agent, senior manager, joint lead arranger or joint book running manager, in such Person’s capacity as such, shall have any obligations or duties to any Loan Party, the Administrative Agent or any other Secured Party under any of such Loan Documents. 
 
SECTION 8.02. Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (a) in the case of the Administrative Agent, may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any other Agent, such Agent has received notice from the Administrative Agent that it has received and accepted such Assignment and Acceptance, as provided in Section 9.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or the existence at any time of any Default under the Loan Documents or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex or other electronic communication) believed by it to be genuine and signed or sent by the proper party or parties. 
 
SECTION 8.03. CNAI and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, CNAI shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not the Administrative Agent; and the term “Lender Party” or “Lender Parties” shall, unless otherwise expressly indicated, include CNAI in its individual capacity. CNAI and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any Subsidiary of any Loan Party and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if CNAI were not the Administrative Agent and without any duty to account therefor to the Lender Parties. 
 
SECTION 8.04. Lender Party Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. 
 
76 

SECTION 8.05. Indemnification by Lender Parties. (a) Each Lender Party severally agrees to indemnify the Administrative Agent (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents (collectively, the “Indemnified Costs”); provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 8.05 applies whether any such investigation, litigation or proceeding is brought by any Lender Party or any other Person. 
 
(b) Each Lender Party severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse such Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower. 
 
(c) For purposes of this Section 8.05, the Lender Parties’ respective ratable shares of any amount shall be determined, at any time, according to their respective Revolving Credit Commitments at such time. The failure of any Lender Party to reimburse the Administrative Agent or any Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Agent or such Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Agent or such Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse such Agent or such Issuing Bank, as the case may be, for such other Lender Party’s ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. 
 
SECTION 8.06. Successor Administrative Agents. The Administrative Agent may resign at any time by giving 30 days’ prior written notice thereof to the Lender Parties and the Borrower and may be removed at any time with or without cause by the Required Lenders; provided, however, that any removal of the Administrative Agent will not be effective until it (or its Affiliate) has been replaced as an Issuing Bank and released from all obligations in respect thereof. Upon any such resignation or 
 
77 

removal, the Required Lenders shall have the right to appoint a successor Agent, which appointment shall, provided that no Default has occurred and is continuing, be subject to the consent of the Borrower, such consent not to be unreasonably withheld or delayed. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Agent’s resignation or removal under this Section 8.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Agent’s resignation or removal shall become effective, (ii) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent’s resignation or removal hereunder as an Agent shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. 
 
ARTICLE IX 
 
MISCELLANEOUS 
 
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following at any time: (i) change the number of Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (ii) release the Borrower with respect to the Obligations or reduce or limit the obligations of any Guarantor under Article VII or release such Guarantor or otherwise limit such Guarantor’s liability with respect to the Guaranteed Obligations (except as otherwise permitted under the Loan Documents), (iii) amend this Section 9.01, (iv) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (v) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (vi) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder or (vii) extend the Termination Date, other than as provided by Section 2.16; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or each Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Banks, as the case may be, under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or the other Loan Documents. 
 
SECTION 9.02. Notices, Etc. (a) All notices and other communications provided for hereunder shall be either (x) in writing (including telecopier or telegraphic communication) and mailed, telecopied, telegraphed or delivered, (y) as and to the extent set forth in Section 9.02(b) and in the proviso to this Section 9.02(a), in an electronic medium and delivered as set forth in Section 9.02(b) or (z) as and 
 
78 

to the extent expressly permitted in this Agreement, transmitted by e-mail, provided that such e-mail shall in all cases include an attachment (in PDF format or similar format) containing a legible signature of the person providing such notice, if to the Borrower, at its address at 2730 Sand Hill Road, Suite 280, Menlo Park, California 94025, Attention: Jason Holloway (and in the case of transmission by e-mail, with a copy by e-mail to jason@gipartners.com) and a courtesy copy by U.S. mail to the attention of Jennifer Saunders at Latham & Watkins LLP, 633 West Fifth Street, Suite 4000, Los Angeles, CA 90071; if to any Initial Lender, at its Domestic Lending Office or, if applicable, at the e-mail address specified opposite its name on Schedule I hereto (and in the case of a transmission by e-mail, with a copy by U.S. mail to its Domestic Lending Office); if to any other Lender Party, at its Domestic Lending Office or, if applicable, at the e-mail address specified in the Assignment and Acceptance pursuant to which it became a Lender Party (and in the case of a transmission by e-mail, with a copy by U.S. mail to its Domestic Lending Office); if to the Initial Issuing Bank, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department, or, if applicable, at [E-MAIL]@citigroup.com (and in the case of a transmission by e-mail, with a copy by U.S. mail to Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department); and if to the Administrative Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department, or, if applicable, at [E-MAIL]@citigroup.com (and in the case of a transmission by e-mail, with a copy by U.S. mail to Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department) or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or e-mailed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by e-mail, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VIII shall not be effective until received by the Administrative Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. 
 
(b) So long as CNAI is the Administrative Agent, materials required to be delivered pursuant to Section 5.03(a), (b), (c) and (g) shall be delivered to the Administrative Agent in an electronic medium in a format acceptable to the Administrative Agent and the Lender Parties by e-mail at oploanswebadmin@citigroup.com. The Borrower agrees that the Administrative Agent may make such materials, as well as any other written information, documents, instruments and other material relating to the Borrower, any Loan Party, any of their Subsidiaries or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the “Communications”) available to the Lender Parties by posting such notices on Intralinks or a substantially similar electronic transmission system (the “Platform”). The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform. 
 
(c) Each Lender Party agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender Party for purposes of this Agreement, provided that if requested by any Lender Party, the Administrative Agent shall deliver a copy 
 
79 

of the Communications to such Lender Party by e-mail or telecopier. Each Lender Party agrees (i) to notify the Administrative Agent in writing of such Lender Party’s e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender Party becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender Party) and (ii) that any Notice may be sent to such e-mail address. 
 
SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender Party or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 
 
SECTION 9.04. Costs and Expenses. (a) Each Loan Party agrees jointly and severally to pay on demand (i) all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses, (B) the reasonable fees and expenses of counsel for such Agent with respect thereto (subject to the terms of the Fee Letter with respect to counsel fees incurred by the Administrative Agent through the Closing Date) with respect to advising such Agent as to its rights and responsibilities (including, without limitation, with respect to reviewing and advising on any matters required to be completed by the Loan Parties on a post-closing basis), or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto and (C) the reasonable fees and expenses of counsel for such Agent with respect to the preparation, execution, delivery and review of any documents and instruments at any time delivered pursuant to Section 5.01(j)) and (ii) all reasonable out-of-pocket costs and expenses of the Administrative Agent and each Lender Party in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally (including, without limitation, the reasonable fees and expenses of counsel for such Agent and each Lender Party with respect thereto). 
 
(b) Each Loan Party agrees to indemnify, defend and save and hold harmless each Indemnified Party from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party, whether or not any Indemnified Party is 
 
80 

otherwise a party thereto and whether or not the transactions contemplated by the Loan Documents are consummated. Each Loan Party also agrees not to assert any claim against the Administrative Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents. 
 
(c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance. 
 
(d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion. 
 
(e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower and the other Loan Parties contained in Sections 2.10 and 2.12, Section 7.06 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents. 
 
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, the Administrative Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender Party or such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the Obligations of the Borrower or such Loan Party now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. The Administrative Agent and each Lender Party agrees promptly to notify the Borrower or such Loan Party after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each Lender Party and their respective Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have. 
 
SECTION 9.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, each Guarantor named on the signature pages hereto and the 
 
81 

Administrative Agent shall have been notified by each Initial Lender and each Initial Issuing Bank that such Initial Lender or such Initial Issuing Bank, as the case may be, has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Guarantors named on the signature pages hereto and the Administrative Agent and each Lender Party and their respective successors and assigns, except that neither the Borrower nor any other Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. 
 
SECTION 9.07. Assignments and Participations. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of one or more of the Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or a Fund Affiliate of any Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 under each Facility or an integral multiple of $1,000,000 in excess thereof (or such lesser amount as shall be approved by the Administrative Agent and, so long as no Default shall have occurred and be continuing at the time of effectiveness of such assignment, the Borrower), (iii) each such assignment shall be to an Eligible Assignee, (iv) no such assignments shall be permitted (A) until the Administrative Agent shall have notified the Lender Parties that syndication of the Commitments hereunder has been completed, without the consent of the Administrative Agent, and (B) at any other time without the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and (v) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except if such assignment is being made by a Lender to an Affiliate or Fund Affiliate of such Lender, a processing and recordation fee of $3,500. 
 
(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.10, 2.12, 7.06, 8.05 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender’s or Issuing Bank’s rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto). 
 
(c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its 
 
82 

obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. 
 
(d) The Administrative Agent on behalf of Borrower shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or the Administrative Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. 
 
(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower and each other Agent. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall, if requested by the applicable Lender, execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes, if any, shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. 
 
(f) Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank’s rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 and shall be in an integral multiple of $1,000,000 in excess thereof, (ii) each such assignment shall be to an Eligible Assignee and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and 
 
83 

recordation fee of $3,500, provided that such fee shall not be payable if the assigning Issuing Bank is making such assignment simultaneously with the assignment in its capacity as a Lender of all or a portion of its Revolving Credit Commitment to the same Eligible Assignee. 
 
(g) Each Lender Party may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it); provided, however, that (i) such Lender Party’s obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, and (vi) if, at the time of such sale, such Lender Party was entitled to payments under Section 2.12(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to such participant on such date, provided that such participant complies with the requirements of Section 2.12(e) as if it were a Lender. 
 
(h) Any Lender Party may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party. 
 
(i) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. 
 
SECTION 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement. 
 
SECTION 9.09. No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, 
 
84 

insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Bank’s willful misconduct or gross negligence as determined in a final, non appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. 
 
SECTION 9.10. Confidentiality. Neither the Administrative Agent nor any Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to such Administrative Agent’s or such Lender Party’s Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, Federal or foreign authority or examiner regulating such Lender Party and (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Lender Party. 
 
SECTION 9.11. Patriot Act Notification. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Parent Guarantor and the Borrower shall, and shall cause each of their Subsidiaries to, provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act. 
 
SECTION 9.12. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction. 
 
(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying 
 
85 

of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 
 
SECTION 9.13. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. 
 
SECTION 9.14. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE OTHER LOAN PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDER PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. 
 
[Balance of page intentionally left blank] 
 
86 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. 
 
BORROWER: 

DIGITAL REALTY TRUST, L.P.	
By:	 	DIGITAL REALTY TRUST, INC., its sole general partner	
			
 	 	By:	 	 	
 	 	 	 	Name:
Title:	
 
GUARANTORS: 

	
DIGITAL REALTY TRUST, INC.	
		
By:	 	 	
 	 	Name:
Tile:

	
DIGITAL SERVICES, INC.	
		
By:	 	 	
 	 	Name:	
 	 	Title:	
	
GLOBAL ASML, LLC	
		
By:	 	 	
 	 	Name:	
 	 	Title:

GLOBAL LAFAYETTE STREET	
HOLDING COMPANY, LLC	
		
By:	 	 	
 	 	Name:	
 	 	Title:

Signature Page 

	
GLOBAL LAFAYETTE STREET, LLC	
		
By:	 	 	
 	 	Name:	
 	 	Title:

GIP FAIRMONT HOLDING COMPANY, LLC	
		
By:	 	 	
 	 	Name:	
 	 	Title:

GIP FAIRMONT, LLC	
		
By:	 	 	
 	 	Name:	
 	 	Title:

Signature Page 

	
ADMINISTRATIVE AGENT, INITIAL ISSUING BANK, SWING LINE BANK AND INITIAL LENDER:	
	
CITICORP NORTH AMERICA, INC.	
		
By:	 	 	
 	 	Name:
Tile:

	
INITIAL ISSUING BANK:	
	
CITIBANK, N.A.	
		
By:	 	 	
 	 	Name:	
 	 	Title:	
	
INITIAL LENDERS:	
	
MERRILL LYNCH CAPITAL CORPORATION	
		
By:	 	 	
 	 	Name:	
 	 	Title:
 	
 	 	[                                                     ]

By:	 	 	
 	 	Name:	
 	 	Title:
 	
 	 	[                                                     ]

By:	 	 	
 	 	Name:	
 	 	Title:

 
Signature Page 
Exhibit 21.1 
 
List of Subsidiaries of Digital Realty Trust, Inc. 

Name
	 	Jurisdiction of Formation / Incorporation
	
Digital Realty Trust, L.P.	 	Maryland	
Digital Services, Inc.	 	Maryland	
Global Kato HG, LLC	 	California	
GIP Stoughton, LLC	 	Delaware	
Global Riverside, LLC	 	Delaware	
Global Miami Acquisition Company, LLC	 	Delaware	
Global Brea Holding Company, LLC	 	Delaware	
Global Brea, LLC	 	Delaware	
Global Stanford Place II, LLC	 	Delaware	
Global Weehawken Holding Company, LLC	 	Delaware	
Global Weehawken Acquisition Company, LLC	 	Delaware	
GIP Granite Manager, LLC	 	Delaware	
GIP Granite, L.P.	 	Texas	
Global Granite Limited Partner, LLC	 	Delaware	
Global ASML, LLC	 	California	
GIP Bryan Street, LLC	 	California	
Global – Bryan Street, LLC	 	California	
Bryan Street Acquisition Partnership, L.P.	 	California	
Global Innovations Sunshine Holdings LLC	 	Delaware	
Asbury Park Holdings Limited	 	United Kingdom	
Dreamframe Limited	 	United Kingdom	
Dreamleaf Enterprises Limited	 	United Kingdom	
Global Marsh Member, LLC	 	Delaware	
Global Marsh General Partner, LLC	 	Delaware	
Global Marsh Limited Partner, LLC	 	Delaware	
Global Marsh Property Owner, L.P.	 	Texas	
GIP 7th Street Holding Company, LLC	 	Delaware	
GIP 7th Street, LLC	 	Delaware	
GIP Wakefield Holding Company, LLC	 	Delaware	
GIP Wakefield, LLC	 	Delaware	
Global Webb, LLC	 	Delaware	
Global Webb, L.P.	 	Texas	
Global Lafayette Street Holding Company, LLC	 	Delaware	
Global Lafayette Street, LLC	 	California	
GIP Alpha General Partner, LLC	 	Delaware	
GIP Alpha Limited Partner, LLC	 	Delaware	
GIP Alpha, L.P.	 	Texas	
GIP Fairmont Holding Company, LLC	 	Delaware	
GIP Fairmont, LLC	 	Delaware	
200 Paul Holding Company, LLC	 	Delaware	
200 Paul, LLC	 	Delaware	
Global Gold Camp Holdings, LLC	 	Delaware	
Global Gold Camp, LLC	 	Delaware	
EXHIBIT 23.3 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We consent to the use of our report with respect to the balance sheet of Digital Realty Trust, Inc. as of March 31, 2004, included herein and to the reference to our firm under the heading “Experts” in the registration statement and related prospectus. 
 
/s/ KPMG LLP 
Los Angeles, California 
October 25, 2004 
EXHIBIT 23.4 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We consent to the use of our report with respect to the combined balance sheets of Digital Realty Predecessor as of December 31, 2003 and 2002, and the related combined statements of operations, owner’s equity and comprehensive income (loss) and cash flows for the years then ended and for the period from February 28, 2001 (inception) through December 31, 2001, included herein and to the reference to our firm under the heading “Experts”, “Summary Selected Financial Data” and “Selected Financial Data” in the registration statement and related prospectus. 
 
/s/ KPMG LLP 
Los Angeles, California 
October 25, 2004 
EXHIBIT 23.5 
 
CONSENT OF INDEPENDENT AUDITORS 
 
The Board of Directors 
Digital Realty Trust, Inc.: 
 
We consent to the use of our reports with respect to the statements of revenue and certain expenses of Ardenwood Corporate Park, ASM Lithography Facility, AT&T Web Hosting Facility, Granite Tower, and Stanford Place II for the year ended December 31, 2002 and the statements of revenue and certain expenses of 100 Technology Center Drive, Carrier Center, Comverse Technology Building, Savvis Data Center, Webb at LBJ, AboveNet Data Center, 200 Paul Avenue, and 1100 Space Park Drive for the year ended December 31, 2003, included herein and to the reference to our firm under the heading “Experts” in the registration statement and related prospectus. Our reports refer to the fact that the statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are not intended to be a complete presentation of revenue and expenses. 
 
/s/ KPMG LLP 
Los Angeles, California 
October 25, 2004 

 	  	505 Montgomery Street, Suite 1900
San Francisco, California 94111-2562
Tel: (415) 391-0600 Fax: (415) 395-8095
www.lw.com
 
FIRM / AFFILIATE OFFICES	

 
 
October 26, 2004	  	Boston
Brussels
Chicago
Frankfurt
Hamburg
Hong Kong
London
Los Angeles
Milan
Moscow	  	New Jersey
New York
Northern Virginia
Orange County
Paris
San Diego
San Francisco
Silicon Valley
Singapore
Tokyo
Washington, D.C.                	
VIA EDGAR AND VIA HAND DELIVERY	  	 
File No. 038284-0001	
 
Elaine Wolff, Special Counsel 
Division of Corporation Finance 
Securities and Exchange Commission 
450 Fifth Street, N.W. 
Washington, DC 20549 
 
Re:	 	Digital Realty Trust, Inc. 	
           Amendment No. 4 to Registration Statement on 
           Form S-11 Filed October 26, 2004 
           File No. 333-117865 
 
Dear Ms. Wolff: 
 
On behalf of Digital Realty Trust, Inc. (the “Company”), enclosed herewith is Amendment No. 4 to the Company’s Registration Statement on Form S-11 (the “Registration Statement”), as filed with the Securities and Exchange Commission on October 26, 2004 (the “Amendment”). The Company has amended the Registration Statement in response to comments contained in the letter from the Staff, dated October 25, 2004 (the “Comment Letter”), and addressed to Mr. Michael F. Foust, Chief Executive Officer of the Company. The responses in this letter are based on representations made by the Company to Latham & Watkins LLP for the purpose of preparing this letter. We will separately deliver copies of the Amendment, marked to show changes responsive to the Comment Letter, to members of the Staff specified in the Comment Letter. 
 
For ease of review, we have set forth the numbered comments of the Comment Letter and the Company’s responses thereto. 

Elaine Wolff 
October 26, 2004 
Page 2 

 
 
General 
 
1.	 	We note your response to our prior comment 2. Please provide supplemental support for the statement on page 73 that “[s]ince inception, our predecessor has made selective acquisitions … at prices which are at or below the replacement cost.” [emphasis added] 	
 
Response: The Company respectfully submits that, according to Gartner and the Company’s own industry knowledge, the cost to construct telecommunications and information technology infrastructure properties can range from $300 to $1,000 per square foot. These amounts exceed the $165 per square foot average purchase price paid by the Digital Realty Predecessor for the telecommunications and information technology infrastructure properties located in the U.S. that it will contribute to the Company. An excerpt from the Gartner report was included in the supplemental binder of support materials provided to the Staff in response to comment 4 to the Staff’s letter dated September 2, 2004 and a consent to use the information from the Gartner report is filed as Exhibit 99.3 to the Registration Statement. 
 
The following table lists the net rentable square feet, acquisition cost and cost per square foot of the U.S. telecommunications and information technology infrastructure properties acquired by the Digital Realty Predecessor: 

Building	  	Net
Rentable
SF	  	Acquisition
Cost	  	Cost/SF	
Univision Tower	  	477,107	  	$	92,500,000.00	  	$	193.88	
Carrier Center	  	449,254	  	$	75,000,000.00	  	$	166.94	
36 Northeast Second Street	  	162,140	  	$	31,000,000.00	  	$	191.19	
VarTec Building	  	135,250	  	$	12,000,000.00	  	$	88.72	
Hudson Corporate Center	  	311,950	  	$	57,030,000.00	  	$	182.82	
Savvis Data Center	  	300,000	  	$	60,000,000.00	  	$	200.00	
AboveNet Data Center	  	179,489	  	$	36,500,000.00	  	$	203.36	
Webb at LBJ	  	365,449	  	$	45,850,000.00	  	$	125.46	
NTT/Verio Premier Data Center	  	130,752	  	$	28,500,000.00	  	$	217.97	
eBay Data Center	  	62,957	  	$	14,300,000.00	  	$	227.14	
Brea Data Center	  	68,807	  	$	10,150,000.00	  	$	147.51	
AT&T Web Hosting Facility	  	250,191	  	$	13,500,000.00	  	$	53.96	
				
Totals	  	2,893,346	  	$	476,330,000.00	  	$	164.63	

Elaine Wolff 
October 26, 2004 
Page 3 

 
 
Prospectus Summary, page 1 
 
Material Benefits to Related Parties, page 11 
 
2.	 	We note your new disclosure in the third bullet. Please disclose that the customary prorations relate to the apportionment of rents, taxes, utilities and other operating costs. 	
 
Response: In response to the Staff’s comment, the Company has revised the referenced bullet to provide the requested disclosure. 
 
Unsecured Credit Facility, page 13 
 
3.	 	Please supplementally provide us a copy of the credit facility commitment. 	
 
Response: In response to the Staff’s comment, the Company is supplementally providing the Staff the credit facility commitment letter. In addition, the Company has filed the form of Credit Facility as new Exhibit 10.37 with the Amendment. 
 
Dilution, page 45 
 
4.	 	Expand footnote (1), (2) and (4) to show your calculation of the numerator and denominator used in the calculation of net tangible book value per share amounts presented in the table since they are not readily determinable from the pro forma financial statements 	
 
Response: In response to the Staff’s comment, the Company has revised the referenced footnotes to provide the requested disclosure. 
 
Financial Statements 
 
Pro Forma Condensed Financial Statements, pages F-4 through F-18 
 
5.	 	Revise the pro forma financial statements to give effect to the PEO agreement described on page 114 or advise us why it is not appropriate to do so under Article 11 of Regulation S-X. 	
 
Response: The Company respectfully submits that the historical asset management fee reflected in note (FF) to the pro forma financial statements already includes the Company’s historical human resources expenses. Although it is not possible to specifically identify and remove the portion of the historical asset management fee attributable to such human resources expenses, the Company does not believe that such amount is materially different from the costs the Company will incur post-offering, including costs under the PEO agreement. Accordingly, additionally giving pro forma effect to the PEO Agreement would effectively double-count the Company’s human resources expenses and it is therefore not necessary to do so under Article 11 of Regulation S-X. 

Elaine Wolff 
October 26, 2004 
Page 4 

 
Note 3 Investments in Real Estate, Page F-33 
 
6.	 	We have read and considered your response to comment 15. We note your conclusion that the missing elements taken as a whole are more than minor. Explain to us how you reached this conclusion. Separately address the uniqueness or scarcity of each inputs, processes and outputs that were not acquired that are necessary in order for the property to be self-sustaining, the time frame, the level of effort, and the cost required to obtain them relative to the fair value of the properties acquired quantified to the extent possible. Refer to EITF 98-3. 	
 
Response: EITF Issue No. 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business, provides guidance on determining whether an asset group constitutes a business. Based on the discussion included in EITF 98-3, the Company concludes that its acquisitions of real estate do not constitute acquisitions of businesses; rather they are acquisitions of productive assets. Paragraph 6 of EITF 98-3 states: 
 
The determination of whether a transferred set of assets and activities is or is not a business is a three-step process. First, one must identify the elements included in the transferred set. Second, one must compare the identified elements in the transferred set to the complete set of elements necessary for the transferred set to conduct normal operations in order to identify any missing elements. Third, if there are missing elements, one must make an assessment as to whether the missing elements cause one to conclude that the transferred set is not a business. That assessment is based on the degree of difficulty or the level of investment (relative to the fair value of the transferred set) necessary to obtain access to or to acquire the missing elements. If the degree of difficulty and level of investment necessary to obtain access to or to acquire the missing elements are not significant, then the missing elements are considered minor and their absence would not cause one to conclude that the transferred set is not a business. The determination of the degree of difficulty or level of investment necessary to obtain access to or to acquire the missing elements requires significant judgment and is dependent on the particular facts and circumstances. 
 
Paragraph 6 of EITF 98-3 also states, “The assessment of whether excluded items are only minor should be made without regard to the attributes of the transferee and should consider such factors as the uniqueness or scarcity of the missing element, the time frame, the level of effort, and the cost required to obtain the missing element.” 
 
Below is an analysis of the Company’s acquisition of properties, following the methodology set forth in Paragraph 6 of EITF 98-3: 

Elaine Wolff 
October 26, 2004 
Page 5 

 
 
Step 1—Included Elements 
 
The set of elements acquired when the Company purchases properties consist primarily of: 
 
 	·	 	long-lived assets – land, buildings and improvements 	
 
 	·	 	in-place leases. 	
 
Step 2—Missing Elements 
 
The set of elements generally not acquired when the Company purchases properties consist of, among other things: 
 
 	·	 	employees 	
 
 	·	 	processes, including 	
 
 	o	 	computers and software 	
 
 	o	 	processes for leasing, cash receipts, cash disbursements, procurement, and other property and asset management processes 	
 
 	o	 	accounting, payroll and human resources management 	
 
 	o	 	legal (leasing, property management, litigation management and other) 	
 
 	o	 	risk management 	
 
 	o	 	maintenance and construction management 	
 
 	o	 	strategic management 	
 
 	·	 	relationships with prospective tenants, real estate brokers and others that provide access to potential tenants. 	
 
Step 3—Assessment 
 
Operational Sustainability. The set of elements acquired in a real property purchase by the Company is not sufficient to enable the Company to continue to operate the properties as an ongoing business. The properties that the Company purchased did not have any employees to operate the properties, provide repairs and maintenance for the properties, collect rents, pay for goods, services and capital improvements, lease vacant space, identify prospective tenants, negotiate leases with prospective tenants, and provide accounting services. The missing employees were not simply senior management, but every level of functionality, including janitorial, maintenance, property management and operations, leasing, construction management, accounting, finance, and legal. The properties also do not have computers, software, processes for leasing, cash receipts, cash disbursements, procurement, and other property and asset management processes. Finally, the properties are not purchased with the relationships with prospective tenants and real estate brokers necessary to drive future revenues after existing leases expire. 
 
Cost and Time. The cost to acquire the missing elements identified above is significant, as is the amount of time and effort required to acquire them. The Company has historically paid over $3.2 million per year to a subsidiary of CB Richard Ellis (“CB”) to 

Elaine Wolff 
October 26, 2004 
Page 6 

 
provide asset management services related to the Company’s properties and also paid property management fees to CB and third party property managers of approximately $1.0 million for the year ended December 31, 2003. Additionally, the Company engaged CB and third party leasing agents who charged leasing commissions for services rendered to lease vacant space of $1.7 million in the aggregate for the year ended December 31, 2003. In summary, the Company paid a total of $5.9 million for only a subset of the “excluded items” during the year ended December 31, 2003 and this total would have been higher if the required assets and employees were not already in place. This sum is 9.4% of the Company’s revenues for the year ended December 31, 2003, 12.3% of the Company’s total expenses for the year ended December 31, 2003 and 19.0% of the Company’s total expenses before depreciation and amortization for the year ended December 31, 2003. In other words, significant expenditures that are greater than minor are required to put in place the missing elements to run a real property as an ongoing business. Moreover, there are relatively few providers of asset management and property management services that are competent to service the Company’s specialized telecommunications and information technology infrastructure and technology manufacturing properties. The Company was historically able to secure CB’s services in this regard solely because of CB’s equity investment in its predecessor. The Company believes that CB, in turn, developed the expertise and functionality to manage properties such as the Company’s only after many years in the business. 
 
Scarcity. The operation, management, leasing, improvement and marketing of telecommunications and technology infrastructure properties and technology manufacturing facilities requires specialized industry knowledge and expertise and a unique set of relationships with real estate brokers and prospective tenants in the industry. The Company believes that employees with these specialized skill sets and attributes to manage, lease, and operate these specialized facilities are not widely available, and that it would require significant time and expense to hire such employees. 
 
Conclusion 
 
The set of elements acquired by the Company in a property purchase are not able to continue normal operations and sustain a revenue stream on a stand-alone basis. In fact, the Company does not anticipate that any of its properties will ever become self-sustaining. The missing inputs, processes and outputs required to transform a real property purchase into a sustainable business operation would be costly and time consuming for a transferee to put in place, and certain elements, including employees with specialized expertise, would be difficult to find at all. Accordingly, the set of elements acquired in the Company’s purchase of its real properties is not a business. 

Elaine Wolff 
October 26, 2004 
Page 7 

 
 
Exhibits 
 
7.	 	Please supplementally describe the nature of the publications containing the information for which consents have been filed as exhibits 99.2-5 and 99.9. In particular, please confirm that the information is not derived from reports or opinions specifically prepared for or at the request of the company. 	
 
Response: The Company supplementally confirms that the publications containing the information for which consents have been filed were prepared for the real estate or technology industry generally and were not specifically prepared for or at the request of the Company. 
 
*    *    *    * 
 
We hope the foregoing answers are responsive to your comments. Please do not hesitate to contact me by telephone at (213) 891-8371 or Keith Benson at (415) 646-8307 with any questions or comments regarding this correspondence. 
 
Very truly yours, 

 
/s/    Julian Kleindorfer 
Julian Kleindorfer 
of LATHAM & WATKINS LLP 
 
Enclosures 
 
cc:	 	Michael McTiernan, Esq., United States Securities and Exchange Commission 	
            Michael	 	F. Foust, Digital Realty Trust, Inc.