Acquisitions

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

3. Acquisitions

Business Combination in 2023

InfraBridge

In February 2023, the Company acquired the global infrastructure equity investment management business of AMP Capital Investors International Holdings Limited, which was rebranded as InfraBridge at closing. Consideration for the acquisition consisted of a $313.2 million upfront cash consideration (net of cash assumed), subject to customary post-closing working capital adjustments, plus a contingent amount based upon achievement of future fundraising targets for InfraBridge's new global infrastructure funds. The estimated fair value of the contingent consideration is subject to remeasurement each reporting period, as discussed in Note 11.

Asset Acquisitions in 2022

Vantage SDC Hyperscale Data Centers

In connection with the Company's acquisition of Vantage SDC in July 2020 and an additional data center in September 2021, the Company and its co-investors committed to acquire the future build-out of expansion capacity, along with lease-up of the expanded capacity and existing inventory, the costs of which are borne by the previous owners of Vantage SDC. As of March 31, 2023, the remaining consideration for the incremental lease-up acquisitions is estimated to be approximately $185 million, of which $122 million is due by September 2024. Most, if not all, of the cost of the expansion capacity has been or is expected to be funded by Vantage SDC from borrowings under its credit facilities and/or cash from operations. Pursuant to this arrangement, Vantage SDC had 15 new tenant leases related to a portion of the expansion capacity that commenced during 2022 for aggregate consideration of $161.3 million. All of these payments were made to the previous owners of Vantage SDC and are treated as asset acquisitions. There were no new tenant leases that commenced in the first quarter of 2023.

DataBank

Acquisitions by DataBank in 2022 were as follows:

•Four colocation data centers in Houston, Texas in March 2022 for $678 million, funded by a combination of $262.5 million of debt and $415.5 million of equity, of which the Company's share was $88.7 million.

•A data center each in Atlanta, Georgia in May 2022 for $10.9 million, and in Denver, Colorado in February 2022 that was previously leased by its zColo subsidiary for $17.6 million.

Tower Assets

In June 2022, the Company acquired the mobile telecommunications tower business (“TowerCo”) of Telenet Group Holding NV (Euronext Brussels: TNET) for €740.1 million or $791.3 million (including transaction costs). In December 2022, our interest in the temporarily warehoused TowerCo investment was transferred to the Company's new sponsored fund (Note 16) and TowerCo was deconsolidated. The TowerCo assets acquired had included owned tower sites, tower sites subject to third party leases that gave rise to right-of-use lease assets and corresponding lease liabilities, equipment, as well as customer relationships related primarily to a master lease agreement with Telenet as lessee. The acquisition had been funded through $326.1 million of debt, $278.1 million of equity from the Company, and $213.8 million in third party equity. In addition to the purchase price, the funds had been used to finance transaction costs, debt issuance costs, working capital and as operating cash. Prior to transfer, TowerCo was presented within Corporate and Other.

Allocation of Consideration Transferred

The following table summarizes the consideration and allocation to assets acquired, liabilities assumed and noncontrolling interests at acquisition. In an asset acquisition, the cost of assets acquired, which includes capitalized transaction costs, is allocated to individual assets within the group based on their relative fair values and does not give rise to goodwill. With respect to business combinations, the estimated fair values and allocation of the consideration are subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed at time of acquisition.


	Business Combination		Asset Acquisitions
	2023		2022
(In thousands)	InfraBridge		TowerCo		Acquisitions by DataBank		Vantage SDC Expansion Capacity
Consideration
Cash	$	364,338	$	791,254	$	706,514	$	161,302
Estimated fair value of contingent consideration	10,874		—		—		—
	375,212		791,254		706,514		161,302
Assets acquired and liabilities assumed
Cash	51,174		—		—		—
Principal investments	130,810		—		—		—
Real estate	—		363,121		627,474		140,140

Intangible assets	50,800		673,218		77,885		21,162
Lease right-of-use ("ROU") and other assets	27,682		234,462		3,994		—

Deferred tax liabilities	(10,198)		(243,223)		—		—
Intangible, lease and other liabilities	(21,625)		(236,324)		(2,839)		—
Fair value of net assets acquired	228,643		791,254		706,514		161,302

Goodwill	$	146,569	$	—	$	—	$	—

•Principal investments represent acquired interests in InfraBridge funds, valued at their most recent net asset value ("NAV").

•Real estate was valued based upon (i) current replacement cost for buildings in an as-vacant state and improvements, estimated using construction cost guidelines; (ii) current replacement cost for data center infrastructure by applying an estimated cost per kilowatt based upon current capacity of each location and also considering the associated indirect costs such as design, engineering, construction and installation; (iii) current replacement cost for towers in consideration of their remaining economic life; and (iv) recent comparable sales or current listings for land. Useful lives of real estate acquired range from 35 to 50 years for buildings and improvements, 5 to 15 years for site improvements, 11 to 71 years for towers and related equipment, and 11 to 20 years for data center infrastructure.

•The investment management intangible assets of InfraBridge were composed of the following:

•Management contracts are valued based upon estimated net cash flows expected to be generated from the contracts, with remaining term of the contracts ranging between 1 and 4 years, discounted at 8.0%.

•Investor relationships represent the fair value of potential investment management fees, net of operating costs, to be generated from repeat InfraBridge investors in future sponsored vehicles, with a weighted average estimated useful life of 12 years, discounted at 14.0%.

•Lease-related intangibles for real estate acquisitions were composed of the following:

•In-place leases reflect the value of rental income forgone if the properties had been acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, discounted at rates between 4.75% and 6.8%, with remaining lease terms ranging between 1 and 15 years.

•Above- and below-market leases represent the rent differential for the remaining lease term between contractual rents of acquired leases and market rents at the time of acquisition, discounted at rates between 6.0% and 11.25% with remaining lease terms ranging between 1 and 4 years.

•Tenant relationships represent the estimated net cash flows attributable to the likelihood of lease renewal by an existing tenant relative to the cost of obtaining a new lease, taking into consideration the estimated time it would require to execute a new lease or backfill a vacant space, discounted at rates between 4.75% and 11.25%, with estimated useful lives between 5 and 15 years.

•Customer service contracts were valued based upon estimated net cash flows generated from the zColo customer service contracts that would have been forgone if such contracts were not in place, taking into consideration the time it would require to execute a new contract, with remaining term of the contracts ranging between 1 and 6 years.

•Customer relationships for towers were valued as the estimated future cash flows to be generated over the life of the tenant relationships based upon rental rates, operating costs, expected renewal terms and attrition, discounted at 6.8%, with estimated useful lives between 19 and 45 years.

•Deferred tax liabilities were recognized for the book-to-tax basis differences associated with the acquisitions of InfraBridge and TowerCo, net of deferred tax assets assumed where applicable.

•Other assets acquired and liabilities assumed include primarily lease ROU assets associated with leasehold ground space hosting tower communication sites, along with corresponding lease liabilities. Lease liabilities were measured based upon the present value of future lease payments over the lease term, discounted at the incremental borrowing rate of the respective acquiree entities. Included in the InfraBridge acquisition were also management fee receivable and compensation payable associated with the pre-acquisition period.

•Goodwill is the value of the business acquired that is not already captured in identifiable assets, largely represented by the synergies from combining the capital raising resources of DBRG and the mid-market infrastructure specialization of the InfraBridge team.