Investments in Properties

3 Months Ended

Mar. 31, 2024

Investments in Properties

Investments in Properties

2. Investments in Properties

A summary of our investments in properties is below (in thousands):

Property Type	As of March 31, 2024		As of December 31, 2023
Land	$	1,098,238	$	1,087,278
Acquired ground lease		89		91
Buildings and improvements		25,179,025		25,388,788
Tenant improvements		845,444		830,211
		27,122,796		27,306,368
Accumulated depreciation and amortization		(7,976,093)		(7,823,685)
Investments in operating properties, net		19,146,703		19,482,683
Construction in progress and space held for development		4,496,840		4,635,215
Land held for future development		114,240		118,190
Investments in properties, net	$	23,757,783	$	24,236,088

Acquisitions

In January 2024, we acquired a 16-acre site in Paris for $80 million. Prior to the acquisition, we leased the land, which consisted of two completed data centers and two data centers under construction. As a result of the land acquisition, we derecognized the right-of-use assets and lease liabilities of $145 million and $150 million, respectively.

Dispositions

On January 11, 2024, we formed a joint venture with Blackstone Inc. to develop four hyperscale data center campuses across Frankfurt, Paris and Northern Virginia. The campuses are planned to support the construction of 10 data centers with approximately 500 megawatts of potential IT load capacity. The first phase of the joint venture closed on hyperscale data center campuses in Paris and Northern Virginia, while the second phase is scheduled to close later in 2024, upon obtaining the required approvals. We received approximately $231 million of net proceeds from the contribution of our data centers to the first phase of the joint venture and retained a 20% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a loss on disposition of approximately $0.3 million.

In January 2024, we closed on the sale of our interest in four data centers to Brookfield Infrastructure Partners L.P., or Brookfield, for approximately $271 million. Two of the data centers were consolidated by us; while two of the data centers were owned by Digital Core REIT (see Note 5. “Investments in Unconsolidated Entities”). The sale was completed subsequent to Brookfield’s November 2023 acquisition of one of our tenants, Cyxtera Technologies. The acquisition was part of Cyxtera’s plan of reorganization under its Chapter 11 bankruptcy proceedings. In conjunction with the sale, we bought out Cyxtera’s leases in three data centers located in Singapore and Frankfurt for approximately $57 million. In addition, Brookfield assumed the leases on three facilities previously leased to Cyxtera and amended the leases on three additional data centers in North America, accelerating the expiration date to September 2024. As a result of the sale, we recognized a total gain on disposition of approximately $203.1 million, of which $194.2 million is included within Gain on disposition of properties, net and $8.9 million is included within Equity in (loss) earnings of unconsolidated entities on our condensed consolidated income statements.

On March 1, 2024, we formed a joint venture with Mitsubishi Corporation, or Mitsubishi, to support the development of two data centers in the Dallas metro area. The facilities were 100% pre-leased prior to construction. We contributed the two data center buildings at a contribution value of approximately $261 million. We received approximately $153 million of gross proceeds from the contribution of our data centers to the joint venture and retained a 35% interest in the joint venture. Mitsubishi paid such cash in exchange for a 65% interest in the joint venture. As a result of transferring control, we derecognized the data centers and recognized a gain on disposition of approximately $7.1 million.

On April 16, 2024, we expanded our existing joint venture with GI Partners with the sale to GI Partners of a 75% interest in a data center in the Chicago metro area. We received approximately $385 million of net proceeds from the contribution of our data centers to the joint venture and the associated financing and retained a 25% interest in the joint venture. The disposition of a portion of our interest in the data center met the criteria under ASC 360 for the assets to qualify as held for sale and contribution as of March 31, 2024. However, the operations are not classified as discontinued operations as a result of our continuing interest in the joint venture. The data center was not representative of a significant component of our portfolio, nor did the sale represent a significant shift in our strategy.