Equity Method Investments

6 Months Ended

Jun. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

We hold various equity method investments, primarily joint venture or partnership arrangements, in order to invest in certain entities that are in line with our business development objectives, including the development and operation of xScale data centers. Some of these xScale joint ventures are classified as Variable Interest Entities ("VIEs"), as discussed further below. The Asia-Pacific 1, Asia-Pacific 2, Asia-Pacific 3 and EMEA 2 Joint Ventures (the "VIE Joint Ventures") share a similar purpose, design and nature of assets. The following table summarizes our equity method investments (in thousands), which were included in other assets on the condensed consolidated balance sheets:


Investee	Ownership Percentage	June 30, 2022		December 31, 2021
EMEA 1 Joint Venture with GIC	20%	$	127,008	$	131,516
VIE Joint Ventures	20%	156,307		95,052
Other	Various	18,634		18,481
Total		$	301,949	$	245,049

Non - VIE Joint Venture

EMEA 1 Joint Venture

In 2019, we entered into a joint venture in the form of a limited liability partnership with GIC (the "EMEA 1 Joint Venture"), to develop and operate xScale data centers in Europe. The EMEA 1 Joint Venture is not a VIE given that both equity investors' interests have the characteristics of a controlling financial interest and it is sufficiently capitalized to sustain its operations, requiring additional funding from its partners only when expanding operations. Our share of income and losses of equity method investments from this joint venture was insignificant for the three and six months ended June 30, 2022 and 2021 and was included in other income (expense) on the condensed consolidated statement of operations.

We committed to make future equity contributions to the EMEA 1 Joint Venture for funding its future development. As of June 30, 2022, we had future equity contribution commitments of $33.0 million.

VIE Joint Ventures

In 2020, we entered into a joint venture in the form of a limited liability partnership with GIC (the "Asia-Pacific 1 Joint Venture") to develop and operate xScale data centers in Asia-Pacific.

In 2021, we entered into the EMEA 2 Joint Venture with GIC to develop and operate additional xScale data centers in Europe and the Americas (see Note 5 above).

On March 11, 2022, we entered into the Asia-Pacific 2 Joint Venture with PGIM to develop and operate additional xScale data centers in Asia-Pacific (see Note 5 above).

On April 6, 2022, we entered into a joint venture in the form of a limited liability partnership with GIC (the "Asia-Pacific 3 Joint Venture") to develop and operate additional xScale data centers in Seoul, Korea. Upon closing, we contributed $17.0 million in exchange for a 20% partnership interest in the joint venture.

The VIE Joint Ventures are considered VIEs because they do not have sufficient funds from operations to be self-sustaining. While we provide certain management services to their operations and earn fees for the performance of such services, the power to direct the activities of these joint ventures that most significantly impact economic performance is shared equally between us and either GIC or PGIM, as applicable. These activities include data center construction and operations, sales and marketing, financing, and real estate purchases or sales. Decisions about these activities require the consent of both Equinix and either GIC or PGIM, as applicable. We concluded that neither party is deemed to have predominant control over the VIE Joint Ventures and neither party is considered to be the primary beneficiary. During the three and six months ended June 30, 2022, our share of income and losses of equity method investments from these joint ventures was insignificant both individually and in aggregate, and was included in other income (expense) on the condensed consolidated statement of operations.

The following table summarizes our maximum exposure to loss related to the VIE Joint Ventures as of June 30, 2022 (in thousands):


	VIE Joint Ventures
Equity Investment	$	156,307
Outstanding Receivables	16,204
Future Equity Contribution Commitments (1)	71,357
Maximum Future Payments under Debt Guarantees (2)	55,433
Total	$	299,301

(1)The joint ventures' partners are required to make additional equity contributions proportionately upon certain occurrences, such as a shortfall in capital necessary to complete certain construction phases or make interest payments on their outstanding debt.

(2)In connection with our 20% equity investment in the EMEA 2 Joint Venture, we provided the lenders with our guarantees covering 20% of all payments of principal and interest due under EMEA 2 Joint Venture's credit facility agreements (see Note 11).

Other Related Party Transactions

We have lease arrangements and provide various services to the EMEA 1 Joint Venture and the VIE Joint Ventures (the "Joint Ventures") through multiple agreements, including sales and marketing, development management, facilities management, and asset management. These transactions are generally considered to have been negotiated at arm's length. The following table presents the revenues and expenses from these arrangements with the Joint Ventures in our condensed consolidated statements of operations (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
Related Party	Nature of Transaction	2022		2021		2022		2021
EMEA 1 Joint Venture	Revenues	$	18,880	$	13,230	$	25,182	$	18,849
EMEA 1 Joint Venture	Expenses (1)	(916)		2,101		3,412		4,604
VIE Joint Ventures	Revenues	13,185		12,187		20,187		14,445

(1)We have a sub-lease agreement with the EMEA 1 Joint Venture to sub-lease a portion of London ("LD") 10-2 data center or former LD10 data center, for a total of 15 years. Balances primarily consist of rent expenses for the LD10-2 data center.

The following table presents the assets and liabilities from related party transactions with the Joint Ventures in our condensed consolidated balance sheets (in thousands):


Related Party	Balance Sheet Line Item	June 30, 2022		December 31, 2021
EMEA 1 Joint Venture	Receivables	$	33,399	$	32,077
	Contract Assets (1)	55,795		54,503
	Finance Lease Right of Use Assets	104,842		118,817
	Other Liabilities and Payables	2,277		2,483
	Other Liabilities and Payables - construction obligation (2)	35,936		39,382
	Deferred Revenue	15,563		16,886
	Finance Lease Right of Use Liabilities	110,829		124,918
VIE Joint Ventures	Receivables	16,204		29,077
	Contract Assets	5,050		1,492
	Payables	—		1,876

(1)A portion of the contract asset balance relates to commitments to complete a residual portion of the Paris 9 data center sold to the EMEA 1 Joint Venture, which is reimbursable in full upon completion.

(2)The balance primarily relates to the obligation to pay for future construction for certain sites sold as a part of the EMEA 1 Joint Venture transaction.

We received contingent consideration from separate sales of xScale data centers to the EMEA 1 Joint Venture, which become receivable upon completion of certain performance milestones, primarily contingent on the local regulatory approvals for certain sites. The contingent consideration are considered derivatives and are remeasured at fair value each reporting period using inputs such as probabilities of payment, discount rates, foreign currency forward rates and projected payment dates. The fair value measurements were based on significant inputs that are not observable in the market and thus represent Level 3 measurements. As of June 30, 2022 and December 31, 2021, the total fair value of the remaining contingent consideration which was included in other current assets on the condensed consolidated balance sheets was not significant. Changes in the fair value of the contingent consideration were recorded in gain (loss) on asset sales on the condensed consolidated statement of operations.