Merger and Portfolio Acquisitions

(a) DFT Merger

We completed the acquisition of DFT on September 14, 2017. A summary of the fair value of the assets and liabilities acquired for total equity of approximately $6.2 billion is as follows (in thousands):



	Fair Value			Weighted Average Remaining Intangible Amortization Life (in months)
Land	$	312,579
Buildings and improvements	3,677,497
Cash and cash equivalents	20,650
Accounts and other receivables	10,978
Acquired above-market leases	162,333			47
Goodwill	2,592,181
Acquired in-place lease value, deferred leasing costs and intangibles:
Tenant relationship value	980,267			220
Acquired in-place lease value	557,128			70
Tenant origination costs	44,990			80
Global revolving credit facility, net ⁽¹⁾	(450,697		)
Unsecured term loans ⁽¹⁾	(250,000		)
Unsecured senior notes, net ⁽²⁾	(886,831		)
Mortgage loans ⁽¹⁾	(105,000		)
Acquired below-market leases	(185,543		)	137
Accounts payable and other accrued liabilities	(248,259		)
Other working capital, net	(22,640		)
Total equity consideration for DFT merger	$	6,209,633


(1)	Debt was paid off in full at closing of the DFT merger.


(2)	Approximately $621 million of fair value debt was paid off prior to September 30, 2017. The remainder was paid off in October 2017.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired and tangible and intangible liabilities assumed in the merger.

The strategic benefits of the merger include the Company’s ability to grow its presence in strategic, high-demand metropolitan areas with strong growth prospects, expand our hyper-scale product offering and further enhance the credit quality of our existing customer base. These factors contributed to the goodwill that was recorded upon consummation of the transaction. The Company does not believe that any of the goodwill recorded as a result of the DFT merger will be deductible for federal income tax purposes.

The unaudited pro forma financial information set forth below is based on our historical condensed consolidated income statements for the years ended December 31, 2017 and 2016, adjusted to give effect to the DFT Merger as if it occurred on January 1, 2016. The pro forma adjustments primarily relate to transaction expenses, depreciation expense on acquired buildings and improvements, amortization of acquired intangibles, and estimated interest expense related to financing transactions, the proceeds of which were used to fund the repayment of DFT debt in connection with the DFT merger.



Digital Realty Trust, Inc.	Pro forma (unaudited)
	(in thousands, except per share data)
	Year Ended December 31,
	2017		2016
Total revenue	$	2,860,454	$	2,670,914
Net income available to common stockholders ⁽¹⁾	$	51,717	$	99,653
Income per share, diluted ⁽²⁾	$	0.25	$	0.51



Digital Realty Trust, L.P.	Pro forma (unaudited)
	(in thousands, except per unit data)
	Year Ended December 31,
	2017		2016
Total revenue	$	2,860,454	$	2,670,914
Net income available to common unitholders ⁽¹⁾	$	53,786	$	103,639
Income per unit, diluted ⁽²⁾	$	0.25	$	0.51


(1)	Pro forma net income available to common stockholders was adjusted to exclude $43.0 million of merger-related costs incurred by the Company during the year ended December 31, 2017 and to include these charges in 2016.


(2)	Adjusted to give effect to the issuance of approximately 43.2 million shares of Digital Realty Trust, Inc. common stock in the DFT merger.

The Company recorded transaction expenses of approximately $43.0 million in the accompanying 2017 consolidated income statement in connection with the DFT merger. Revenues of approximately $177.8 million and net income of approximately $5.4 million associated with properties acquired in the DFT merger are included in the consolidated income statement for the year ended December 31, 2017.

(b) European Portfolio Acquisition

On July 5, 2016, the Company completed the acquisition of a portfolio of eight high-quality, carrier-neutral data centers in Europe from Equinix, which we refer to as the European Portfolio Acquisition. The purchase price was $818.9 million in the aggregate (based on the exchange rate at the date of acquisition). The final purchase price allocation was completed in early 2017. The final adjustments to the preliminary purchase price allocation were not material. The following table summarizes the amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands):



Investments in real estate	$	270,195
Goodwill	442,975
Tenant relationship value	249,070
Acquired in-place lease value	18,807
Above/below-market lease value, net	4,817
Capital lease and other long-term obligations	(118,923		)
Deferred taxes	(48,037		)
Total purchase price	$	818,904

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired and tangible and intangible liabilities assumed in the acquisition. As shown above, we recorded approximately $443.0 million of goodwill related to the European Portfolio Acquisition. The strategic benefits of the acquisition include the Company’s ability to continue its strategy to provide foundational data center real estate solutions on a global basis with a diversified product offering of both small and large footprint deployments as well as interconnection services. These factors contributed to the goodwill that was recorded upon consummation of the transaction.

The Company recorded transaction expenses of approximately $6.9 million in the accompanying 2016 consolidated income statement in connection with the European Portfolio Acquisition. Actual results in 2016 included total revenues and operating expenses of the acquired properties of $55.3 million and $20.1 million, respectively.