Equity Method Investments

3 Months Ended

Mar. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

The following table summarizes the equity method investments (in thousands):


Investee	Ownership Percentage		March 31, 2021		December 31, 2020
EMEA Joint Venture with GIC	20	%	$	105,532	$	101,892
Asia-Pacific Joint Venture with GIC	20	%	50,347		43,432
Other	Various		16,517		17,747
Total			$	172,396	$	163,071

EMEA Joint Venture

In 2019, we entered into a joint venture in the form of a limited liability partnership with GIC Private Limited, Singapore's sovereign wealth fund ("GIC") (the "EMEA Joint Venture"), to develop and operate xScale™ data centers in Europe. The EMEA Joint Venture is not a variable interest entity ("VIE") because its equity investors 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. During the three months ended March 31, 2021, we made additional equity contributions of $7.1 million to the EMEA Joint Venture. Our share of income and losses of equity method investments from this joint venture, which is attributable to our EMEA region, was insignificant for the three months ended March 31, 2021 and 2020 and was included in other income on the condensed consolidated statement of operations.

We committed to make future equity contributions to the EMEA Joint Venture for funding its future development. As of March 31, 2021, we had future equity contribution commitments of $24.9 million.

Variable Interest Entity

Asia-Pacific Joint Venture

On December 17, 2020, we entered into a second joint venture with GIC (the "Asia-Pacific Joint Venture") to develop and operate xScale™ data centers in Asia-Pacific. We provide certain management services to the Asia-Pacific Joint Venture operations and earn fees based on those services and performance. The Asia-Pacific Joint Venture requires additional funding from its partners in order to sustain its current operations. As a result, it was determined to be a VIE. The power to direct the activities of the Asia-Pacific Joint Venture that most significantly impact economic performance is shared equally by both partners. 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 GIC and us. We concluded that neither party is deemed to have predominant control over the Asia-Pacific Joint Venture and neither party is its primary beneficiary. Upon closing the Asia-Pacific Joint Venture, we recorded our initial 20% partnership interest at fair value of $42.6 million in total at the exchange rate in effect on December 17, 2020. During the three months ended March 31, 2021, we made additional equity contributions of $11.2 million to the Asia-Pacific Joint Venture. For the three months ended March 31, 2021, our share of income and losses of equity method investments from this joint venture, which was attributable to our Asia-Pacific region, was not significant and was included in other income on the condensed consolidated statement of operations.

In addition to the investment in the Asia-Pacific Joint Venture, we also had $14.2 million of receivables from the Asia-Pacific Joint Venture relating to purchase price adjustments on the sale of data center assets as well as amounts due under commercial service agreements, which were presented within accounts receivable, net on the condensed consolidated balance sheet as of March 31, 2021. During the three months ended March 31, 2021, the total revenue recorded from these services was insignificant.

Concurrent with the closing of the Asia-Pacific Joint Venture, the Asia-Pacific Joint Venture entered into a credit facility agreement and a bond agreement with a group of lenders for secured debt facilities of $305.2 million in total at the exchange rate in effect on December 31, 2020. The Asia-Pacific Joint Venture’s debt is secured by net assets of the Asia-Pacific Joint Venture and is without recourse to the partners. Under the Asia-Pacific Joint Venture agreement and pursuant to the credit facility and bond agreements, both our joint venture partner GIC and us are also required to make additional equity contributions proportionately upon occurrences such as an interest shortfall, cost-overrun or a capital shortfall needed to complete certain construction phases.

We committed to make future equity contributions to the Asia-Pacific Joint Venture for funding its future development. As of March 31, 2021, we had future equity contribution commitments of $7.8 million.

Our maximum exposure to loss related to this unconsolidated VIE is limited to our equity investments in the VIE, outstanding receivables including any unpaid service and performance fees earned, and future funding commitments including those that may be required pursuant to the credit facility and bond agreements. As of March 31, 2021, our maximum exposure to loss related to the Asia-Pacific Joint Venture was approximately $72.3 million.

Related Party Transactions

In connection with the sale of the PA9 data center to the EMEA Joint Venture, we also have a commitment to the EMEA Joint Venture to complete a residual portion of the PA9 center for an estimated cost of $22.4 million in total, which is reimbursable in full upon completion. As March 31, 2021, we had contract assets, current of $17.1 million, in relation to the progress in completing this commitment.

The contingent consideration from the sales of xScaleTM data centers to the EMEA Joint Venture 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 March 31, 2021 and December 31, 2020, the total fair value of the contingent consideration was $42.4 million and $44.2 million, respectively, which was included in other current assets on the condensed consolidated balance sheets. Changes in the fair value of the contingent consideration were recorded in gain (loss) on asset sales on the condensed consolidated statement of operations.

We also have a sub-lease agreement with the EMEA 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. For the three months ended March 31, 2021 and 2020, we recorded approximately $4.5 million and $3.4 million, respectively, of rent expense for the LD10-2 data center. As of March 31, 2021 and December 31, 2020, we had a finance lease ROU assets of $128.2 million and $127.2 million, respectively and a finance lease ROU liability of $ 132.5 million and $130.8 million, respectively.

We provide various services to the EMEA Joint Venture through multiple agreements, including sales and marketing, development management, facilities management, and asset management services. As of March 31, 2021 and December 31, 2020, we had $7.7 million and $6.5 million, respectively, of total receivables from the EMEA Joint Ventures. For the three months ended March 31, 2021 and 2020, total revenues from these contracts were $7.2 million and $4.6 million, respectively. The transactions with the EMEA Joint Venture are generally considered to have been negotiated arm's length.

Additionally, we have an agreement to lease to the EMEA Joint Venture a portion of land for the Frankfurt 9 xScaleTM data center and a new building that is under construction on the land. As of March 31, 2021, the lease has not commenced yet and we recorded approximately $17.2 million of other liabilities in connection with the construction of the Frankfurt 9 xScaleTM data center.

As previously described above, we provide various services to the Asia-Pacific Joint Venture, including portfolio management, sales and marketing, development, and facilities management services, which give rise receivables. The transactions with the Asia-Pacific Joint Venture are generally considered to have been negotiated arm's length.