Acquisitions and Dispositions of Properties

12 Months Ended

Dec. 31, 2023

Acquisitions and Dispositions of Properties

Acquisitions and Dispositions of Properties

7. Acquisitions and Dispositions of Properties

Acquisitions of Properties

For the years ended December 31, 2023, 2022 and 2021, acquisitions of properties that did not qualify as business combinations were immaterial to our financial statements – both individually and in the aggregate.

Disposition of Properties to Digital Core REIT

On December 6, 2021, we completed the listing of Digital Core REIT as a standalone real estate investment trust publicly traded on the Singapore Exchange under the ticker symbol “DCRU”. Hereafter, Digital Core REIT and its associated subsidiaries are collectively referred to as the Singapore REIT (“SREIT”). In connection with the listing, the Company contributed a portfolio of 10 operating data center properties to the SREIT. The fair value of these properties was determined to be approximately $1.4 billion based on two separate third party appraisal reports.

In exchange for the contribution of these properties, the Company received: (1) $919 million cash and (2) a 39.4% equity interest in the publicly traded Digital Core REIT entity, while retaining a 10% direct interest in the operating properties that were contributed by the Company to the SREIT. In addition, the Company received approximately $13 million of acquisition fees paid to the Company by Digital Core REIT in the form of additional units in Digital Core REIT.

The Company determined the fair market value of its 10% retained investment in the properties contributed to the SREIT based on its retained ownership percentage applied to the appraised value of the properties. This approach was deemed appropriate because the Company determined that a discount for lack of marketability and/or lack of control associated with its 10% direct interest in the properties was not warranted.

As a result of this transaction, the Company recognized a gain on sale of assets of approximately $1.0 billion – which is summarized below (in millions).

Cash received	$	919.1
Fair market value of retained investment in SREIT		521.4
Acquisition fees paid in Digital Core REIT units		13.0
Tax on acquisition fees		(3.0)
Net book value of assets contributed		(439.3)
Gain on disposition of properties	$	1,011.2

The Company provides property management and other services to the SREIT in exchange for contractual fees that are payable to the Company in cash or in additional units of the SREIT. The Company’s retained investment in the SREIT is accounted for as an equity method investment, based on the conclusion that the Company has significant influence over (but does not control) the SREIT.

On December 13, 2022, we completed the sale of a 25% interest in a data center facility in Frankfurt, Germany to the SREIT for total consideration of approximately $146 million. Because the Company still controls this asset, no gain or loss was recorded on this 25% interest. In connection with this transaction, the SREIT loaned the consolidated subsidiary that owns the data center $79.8 million.

The assets and liabilities sold to the SREIT were not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy.

Disposition of Other Properties

The Company sold the following other real estate properties during the years ended December 31, 2023, 2022 and 2021:

		Date Sold /	Gross Proceeds / Fair Value			Gain on Sale / contribution
Property Type	Metro Area	contributed	(in millions)			(in millions)
Joint venture contributions	Various	2023	$	2,278.5	(1)	$	814.0
Non-core assets	Various	2023		341.3			86.6
Non-core building	Dallas	Aug 8, 2022		203.0			174.0
Other	Various	2022		2.8			2.8
European portfolio	Various	Mar 16, 2021		680.0			332.0
Other	Various	2021		109.6			37.7

(1) Includes GI Partners, Realty Income, and TPG Real Estate.

Joint venture contributions

On July 13, 2023, we formed a joint venture with GI Partners, and GI Partners acquired a 65% interest in two stabilized hyperscale data center buildings in the Chicago metro area that we contributed. We received approximately $0.7 billion of gross proceeds from the contribution of our data centers to the joint venture and the associated financing, and retained a 35% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a gain on disposition of approximately $238 million. We also granted GI Partners an option to purchase an interest in the third facility on the same hyperscale data center campus in Chicago. In addition, GI Partners has a call option to increase their ownership interest in the joint venture from 65% to 80%. The call option top-up election notice was delivered to the Company on December 21, 2023. On January 12, 2024, GI Partners made an additional cash capital contribution in the amount of $68 million, resulting in an additional 15% ownership in the joint venture. Currently, GI Partners has an 80% interest in the joint venture, and we have retained a 20% interest. We perform the day-to-day accounting and property management functions for the joint venture and, as such, will earn a management fee.

On July 25, 2023, we formed a joint venture with TPG Real Estate, and TPG Real Estate acquired an 80% interest in three stabilized hyperscale data center buildings in Northern Virginia that we contributed. We received approximately $1.4 billion of gross proceeds from the contribution of our data centers to the joint venture and the associated financing and retained a 20% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a gain on disposition of approximately $576 million. We perform the day-to-day accounting and property management functions for the joint venture and, as such, will earn a management fee.

On November 10, 2023, we formed a joint venture with Realty Income to support the development of two data centers in Northern Virginia. The facilities were 100% pre-leased prior to construction. We contributed the two data center buildings at a purchase price of $185 million, which represented costs spent through November 10, 2023, to the new joint venture. We received approximately $148 million of gross proceeds from the contribution of our data centers to the joint venture and retained a 20% interest in the joint venture. Realty Income contributed such cash to the joint venture in exchange for an 80% interest in the joint venture. Each partner will fund its pro rata share of the remaining $150 million estimated development cost for the first phase of the project, which is slated for completion in mid-2024. We perform the day-to-day accounting and property management functions for the joint venture and, as such, will earn a management fee.

Non-core assets - In 2023, we closed on the sale of three non-core assets for gross proceeds of approximately $341 million resulting in a net gain on sale in the aggregate of approximately $87 million. The assets and liabilities sold were not representative of a significant component of our portfolio nor did the sale represent a significant shift in our strategy.

Non-core building - On August 8, 2022, we sold a non-core building in Dallas for net proceeds of approximately $203 million resulting in a net gain on sale of approximately $174 million. The assets and liabilities sold were not representative of a significant component of our portfolio nor did the sale represent a significant shift in our strategy.

European portfolio - On March 16, 2021, we sold a portfolio of 11 data centers in Europe (four in the United Kingdom, three in the Netherlands, three in France and one in Switzerland) to Ascendas Reit, a CapitaLand sponsored REIT, for total consideration of approximately $680 million (subject to customary final adjustments for working capital and other items). The total gain recorded during the three months ended March 31, 2021 as a result of this sale was approximately $332 million. The assets and liabilities sold were not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy.