Investments in Real Estate

A summary of our investments in properties as of December 31, 2015 and 2014 is as follows:



	As of December 31, 2015
	(in thousands)
Property Type	Land		Acquired Ground Lease		Building and Improvements (1)		Tenant Improvements		Accumulated Depreciation and Amortization			Net Investment in Properties
Internet Gateway Data Centers	$	109,389	$	—	$	1,441,749	$	95,185	$	(608,153	)	$	1,038,170
Corporate Data Centers	551,372		11,317		8,055,059		433,682		(1,586,509		)	7,464,921
Technology Manufacturing	20,199		1,322		56,254		6,333		(22,677		)	61,431
Technology Office	5,368		—		43,154		1,459		(18,564		)	31,417
Other	3,245		—		80,211		75		(15,365		)	68,166
	$	689,573	$	12,639	$	9,676,427	$	536,734	$	(2,251,268	)	$	8,664,105



	As of December 31, 2014
	(in thousands)
Property Type	Land		Acquired Ground Lease		Building and Improvements(1)		Tenant Improvements		Accumulated Depreciation and Amortization			Net Investment in Properties
Internet Gateway Data Centers	$	112,265	$	—	$	1,459,930	$	99,864	$	(541,023	)	$	1,131,036
Corporate Data Centers	525,192		12,196		7,117,789		368,837		(1,286,024		)	6,737,990
Technology Manufacturing	25,471		—		67,238		4,764		(20,506		)	76,967
Technology Office	5,368		—		42,356		1,459		(14,759		)	34,424
Other	3,306		—		136,501		76		(11,742		)	128,141
	$	671,602	$	12,196	$	8,823,814	$	475,000	$	(1,874,054	)	$	8,108,558


(1)	Balance includes, as of December 31, 2015 and 2014, $0.7 billion and $0.8 billion of direct and accrued costs associated with development in progress, respectively.

Telx Acquisition

On October 9, 2015, we acquired Telx pursuant to the terms an Agreement and Plan of Merger (the "Merger Agreement"). The purchase price, which was determined through negotiations between us and the sellers, was approximately $1.886 billion (subject to certain adjustments contemplated by the Merger Agreement). Telx is a leading national provider of data center colocation, interconnection and cloud enablement solutions within 13 strategic North American metropolitan areas. Telx operates a total of 20 data center facilities, including six in the New York/New Jersey metropolitan area, two in Chicago, two in Dallas, four in California (one in each of Los Angeles and San Francisco and two in Santa Clara), two in the Pacific Northwest (one in each of Seattle and Portland) and one in each of Atlanta, Miami, Phoenix and Charlotte. Telx leases more than half of its facilities from the Company and was our customer for over eight years prior to the Telx Acquisition. In our consolidated financial statements, the historical results of the Company are included for the entire period presented and the results of Telx are included for the period subsequent to the Telx Acquisition.

As of December 31, 2015 the Company had not completed its final allocation of the fair value of the net assets of Telx as the Company is waiting for additional information to finalize the valuation of certain of the real estate and intangible assets acquired as well as certain tax related matters including the amount of Telx net operating losses and other deferred tax items that will carry over to the Company. The final purchase price allocation is expected to be completed in early 2016. As such, the estimates used as of December 31, 2015 are subject to change. The following table summarizes the preliminary amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):



Investments in real estate	$	604,870
Goodwill	316,309
Intangibles:
Tenant relationship value	734,800
Acquired in-place lease value	252,269
Trade name	7,300
Above/below market lease value, net	(13,100		)
Capital lease and other long-term obligations	(63,962		)
Other working capital accounts and adjustments, net	47,514
Total purchase price	$	1,886,000

The Company determined the preliminary fair value of the real estate acquired using a combination of market comparable transactions, replacement cost estimates and discounted cash flow models. These methods were significantly impacted by estimates related to comparable land values, market rents, and discount rates.

The acquisition date fair value of the intangible assets related to tenant relationship value, acquired in-place lease value and trade name were estimated using a discounted cash flow method. These measurements were significantly impacted by estimates related to forecast revenue growth rates, customer attrition rates, market rents, and expected expense synergies.

The above/below market lease value was estimated based on comparison of the contractual rents and current market rents for similar space.

Capital lease liabilities were valued based on the discounted cash flows of the subject leases using a market discount rate for debt with similar terms and maturities.

The acquisition date fair values of the working capital related assets and liabilities were recorded based on their carrying values as of the acquisition date given the short-term nature of these items.

Goodwill is the excess consideration remaining after allocating the fair value of the other acquired assets and liabilities and represents the expected future economic benefits and synergies to be achieved by combining the Company and Telx’s product and service offerings.

Prior to the acquisition, Telx leased space in several of the Company’s datacenter properties, thus in connection with the acquisition, the Company recognized a gain and additional goodwill of approximately $14.4 million related to the settlement of these pre-existing lease contracts. This gain was offset by the write-off of $75.3 million in deferred rent receivables related to the settled Telx lease contracts. The net loss on settlement related to these items is included in other operating expenses in the accompanying 2015 consolidated income statement.

The Company recorded transaction expenses of approximately $17.4 million in the accompanying 2015 consolidated income statement in connection with the Telx acquisition

Pro forma Information (unaudited)

The following unaudited pro forma financial information presents our results as though the Telx Acquisition, as well as the transactions that were used to fund the Telx Acquisition, had been consummated as of January 1, 2014. The pro forma information does not necessarily reflect the actual results of operations had the transactions been consummated at the beginning of the period indicated nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any cost synergies or other operating efficiencies that could result from the Telx Acquisition and also does not include any transaction and integration expenses. The pro forma results for 2015 include approximately three months of actual results for Telx and nine months of pro forma adjustments. Actual results in 2015 included rental revenues and operating expenses of the acquired properties of $81.1 million and $71.3 million, respectively.



(amounts in thousands, except for per share amounts)	2015		2014
Total revenues	$	1,978,405	$	1,873,526
Net income (loss) available to common stockholders	$	92,812	$	(19,749	)
Net income (loss) per share available to common stockholders - basic and diluted	$	0.63	$	(0.14	)

Acquisitions

We acquired the following real estate properties during the years ended December 31, 2015 and 2014:

2015 Acquisitions



Location	Metropolitan Area	Date Acquired	Amount (in millions) ⁽¹⁾
Deer Park 3 ⁽²⁾	Melbourne	April 15, 2015	$	1.6
3 Loyang Way ⁽³⁾⁽⁴⁾	Singapore	June 25, 2015	45.0
Digital Loudoun 3 ⁽²⁾	Northern Virginia	November 16, 2015	43.0
Digital Frankfurt ⁽²⁾	Frankfurt	December 18, 2015	5.6
			$	95.2

2014 Acquisitions



Location	Metropolitan Area	Date Acquired	Amount (in millions) ⁽¹⁾
Crawley 2 ⁽²⁾	London	September 16, 2014	$	23.0


(1)	Purchase prices are all in U.S. dollars and exclude capitalized closing costs on land acquisitions. Purchase prices for acquisitions outside the United States are based on the exchange rate at the date of acquisition.


(2)	Represents currently vacant land which is not included in our operating property count.


(3)	Represents a development property with an existing shell, which is included in our operating property count. This acquisition lacked key inputs to qualify as a business combination under purchase accounting guidance, and has therefore been accounted for as an asset acquisition, not a business combination.


(4)	Property is subject to a ground lease, which expires in February 2024, with a renewal provision for an additional 28 years upon satisfaction of certain requirements.

Dispositions

We sold the following real estate properties during the years ended December 31, 2015 and 2014:

2015 Dispositions



Location	Metropolitan Area	Date Sold	Gross Proceeds (in millions)			Gain (Loss) on Sale (in millions)
100 Quannapowitt Parkway	Boston	February 5, 2015	$	31.1		$	10.1
3300 East Birch Street	Los Angeles	March 31, 2015	14.2			7.5
833 Chestnut Street	Philadelphia	April 30, 2015	160.8		⁽¹⁾	77.1
650 Randolph Road	New York Metro	December 30, 2015	9.2			(0.1		)
			$	215.3		$	94.6

2014 Dispositions

Location

Metropolitan Area

Date Sold

Gross Proceeds (in millions)

Gain on Sale (in millions)

6 Braham Street

London

April 7, 2014

41.5

15.9


(1)	Gross proceeds includes a $9.0 million note receivable, which was collected prior to year-end.

On January 21, 2016, the Operating Partnership closed on the sale of 47700 Kato Road and 1055 Page Avenue, two adjacent non-data center properties totaling 199,000 square feet in Fremont, California for $37.5 million. The sale generated net proceeds of $35.8 million, and we will recognize a gain on the sale of approximately $1.2 million in the first quarter of 2016. The properties were identified as held for sale as of December 31, 2015. 47700 Kato Road and 1055 Page Avenue were not a significant component of our U.S. portfolio nor does the sale represent a significant shift in our strategy.

We have identified certain non-core investment properties we intend to sell as part of our capital recycling strategy. Our capital recycling program is designed to identify non-strategic and underperforming assets that can be sold to generate proceeds that will support the funding of our core investment activity. We expect our capital recycling initiative will likewise have a meaningfully positive impact on overall return on invested capital. In addition, our capital recycling program does not represent a strategic shift, as we are not entirely exiting regions or property types. During this process, we are evaluating the carrying value of certain investment properties identified for potential sale to ensure the carrying value is recoverable in light of a potentially shorter holding period. As a result of our evaluation, during the year ended December 31, 2014, we recognized $126.5 million of impairment losses on five properties located in the Midwest, Northeast and West regions. The fair value of the five properties were primarily based on discounted cash flow analysis, and in certain cases, we supplemented the analysis by obtaining broker opinions of value. As of December 31, 2014, three of these five properties met the criteria to be classified as held for sale.

As of December 31, 2015, the Company has taken the necessary actions to conclude that an additional five properties (in addition to the three properties referenced above) to be disposed of as part of our capital recycling strategy met the criteria to be classified as held for sale. As of December 31, 2015, these eight properties had an aggregate carrying value of $180.1 million within total assets and $5.8 million within total liabilities and are shown as assets held for sale and obligations associated with assets held for sale on the consolidated balance sheet. The eight properties are not representative of a significant component of our portfolio, nor do the potential sales represent a significant shift in our strategy.