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Business Combinations | 9 Months Ended
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Sep. 30, 2022
Business Combinations |
Business Combinations | 3. Business Combinations On August 1, 2022, we completed the acquisition of a 61.1% indirect controlling interest in Teraco, a leading carrier-neutral data center and interconnection services provider in South Africa (the “Teraco Acquisition”). The total purchase price was $1.7 billion cash, funded by our Global Revolving Credit Facility and partial settlement of our forward equity sale agreements described under Note 11. “Equity and Capital—Forward Equity Sale.” Teraco controls (and consolidates) the Teraco Connect Trust (“the Trust”) that was created as part of the Broad Based Black Economic Empowerment Program in South Africa. The Trust owns a 10% interest in Teraco’s primary operating company, however, this ownership percentage is not included as part of noncontrolling interest, because Teraco (and the Company) consolidates the Trust. If the Trust was not controlled by Teraco, the Company’s ownership interest in Teraco would have been approximately 55%. As of September 30, 2022, the fair values of acquired assets, assumed liabilities and redeemable noncontrolling interests were provisional estimates, based on the best information available. Therefore, these provisional estimates are subject to change as we complete all remaining steps in finalizing the purchase price allocation, and it is reasonably possible there could be significant changes to the preliminary values below. We expect to finalize the valuation of all assets and liabilities by December 31, 2022. The following table summarizes the provisional fair value amounts recorded at the acquisition date (in thousands): ​
​ | ​ | ​ | ​
​ | ​ | Provisional Fair Value
​ | ​ | Amounts
Building and improvements | ​ | $ | 1,376,128
Construction in progress and space held for development | ​ | ​ | 521,153
Operating lease right-of-use assets | ​ | ​ | 2,784
Assumed cash and cash equivalents | ​ | ​ | 5,528
Goodwill | ​ |  | 1,625,994
Customer relationship value and other intangibles (weighted-average amortization life of 7 years) | ​ |  | 720,126
Debt assumed | ​ | ​ | (355,688)
Operating lease liabilities | ​ |  | (4,031)
Deferred tax liabilities, net | ​ | ​ | (632,841)
Redeemable noncontrolling interests | ​ | ​ | (1,530,090)
Working capital assets, net | ​ | ​ | 1,112
Total purchase consideration | ​ | $ | 1,730,176
​ Goodwill — The purchase price of the Teraco Acquisition exceeded the fair value of net tangible and intangible assets acquired and liabilities assumed by $1.6 billion. This amount was recorded as goodwill. We believe the strategic benefits of the acquisition support the value of goodwill recorded. Specifically, Teraco has numerous cross-connects, cloud on-ramps and data centers in addition to direct access to multiple subsea cables. The acquisition of Teraco adds South Africa to the Company’s three existing markets on the continent, including Kenya, Mozambique, and Nigeria. The strategic importance of these markets has been enhanced by the recent and ongoing implementation of new subsea cable networks encircling Africa. When combined with the Company’s highly connected facilities in Marseille, France, and across EMEA, our customers will now have a range of strategic connectivity hubs from which to serve all corners of the African market. ​ Redeemable Noncontrolling Interest (“Redeemable NCI”) — As part of the Teraco Acquisition, the Company and certain of its subsidiaries entered into a put/call agreement with the owners of the interest in Teraco that was not acquired by the Company (the “Put/Call Agreement”). The interest retained by these owners is hereafter referred to as the “Remaining Teraco Interest” and the owners of such interest are hereafter referred to as the “Rollover Shareholders”. Pursuant to the Put/Call Agreement, the Rollover Shareholders have the right to sell all or a portion of the Remaining Teraco Interest to the Company for a two-year period beginning on February 1, 2026, and the Company has the right to purchase all or a portion of the Remaining Teraco Interest from the Rollover Shareholders for a one-year period beginning on February 1, 2028. Per the terms of the agreement, the purchase price of the Remaining Teraco Interest for the put right and the call right can be settled by the Company with cash, shares in the Company, or a combination of cash and shares. In the event the Company elects to settle a put or call in whole or in part with shares of Digital Realty Trust, Inc.’s common stock, such shares will be issued in a private placement transaction with customary accompanying registration rights. Since the Rollover Shareholders can redeem the put right at their discretion and such redemption, which could be in cash, is outside the Company’s control, the Company recorded the noncontrolling interest as Redeemable NCI and classified it in temporary equity within its condensed consolidated balance sheets. The Redeemable NCI was initially recorded at its acquisition-date fair value and will be adjusted each reporting period for income (or loss) attributable to the noncontrolling interest (a $3.5 million net loss for the period from August 1, 2022 to September 30, 2022). If the contractual redemption value of the Redeemable NCI is greater than its carrying value, an adjustment is made to reflect Redeemable NCI at the higher of its contractual redemption value or its carrying value each reporting period. Changes to the redemption value are recognized immediately in the period the change occurs. If the redemption value of the Redeemable NCI is equal to or less than the fair market value of the Remaining Teraco Interest, the change in the redemption value will be adjusted through Additional Paid in Capital. If the redemption value is greater than the fair market value of the Remaining Teraco Interest, the change in redemption value will be adjusted through Retained Earnings. These adjustments are not reflected on the Company’s income statement, but are instead reflected as adjustments to the net income component of the Company’s earnings per share calculations. When calculating earnings per share attributable to Digital Realty Trust, Inc., the Company adjusts net income attributable to Digital Realty Trust, Inc. to the extent the redemption value exceeds the fair value of the Redeemable NCI on a cumulative basis. For the period from August 1, 2022 to September 30, 2022, no such adjustment was required.

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