qts_Ex99

Consolidated Balance Sheets

(unaudited and in thousands except share data)


	June 30,		December 31,
	2019 (1)		2018 (1)
ASSETS
Real Estate Assets
Land	$	107,307	$	105,541
Buildings, improvements and equipment		2,087,374		1,917,251
Less: Accumulated depreciation		(523,040)		(467,644)
		1,671,641		1,555,148
Construction in progress (2)		856,005		790,064
Real Estate Assets, net		2,527,646		2,345,212
Investments in unconsolidated entity		32,797		—
Operating lease right-of-use assets, net		59,946		—
Cash and cash equivalents		10,638		11,759
Rents and other receivables, net		60,754		55,093
Acquired intangibles, net		89,226		95,451
Deferred costs, net (3) (4)		46,662		45,096
Prepaid expenses		8,224		6,822
Goodwill		173,843		173,843
Assets held for sale		—		71,800
Other assets, net (5)		57,217		56,893
TOTAL ASSETS	$	3,066,953	$	2,861,969

LIABILITIES
Unsecured credit facility, net (4)	$	949,816	$	945,657
Senior notes, net of debt issuance costs (4)		395,167		394,786
Finance leases and mortgage notes payable		48,211		4,674
Operating lease liabilities		67,457		—
Accounts payable and accrued liabilities		90,211		99,166
Dividends and distributions payable		33,247		29,633
Advance rents, security deposits and other liabilities		47,987		32,679
Liabilities held for sale		—		24,349
Deferred income taxes		1,294		1,097
Deferred income		40,033		33,241
TOTAL LIABILITIES		1,673,423		1,565,282

EQUITY
7.125% Series A cumulative redeemable perpetual preferred stock: $0.01 par value (liquidation preference $25.00 per share), 4,600,000 shares authorized, 4,280,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively (6)		103,212		103,212
6.50% Series B cumulative convertible perpetual preferred stock: $0.01 par value (liquidation preference $100.00 per share), 3,162,500 shares authorized, issued and outstanding as of June 30, 2019 and December 31, 2018, respectively (7)		304,223		304,265
Common stock: $0.01 par value, 450,133,000 shares authorized, 55,390,521 and 51,123,417 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively		554		511
Additional paid-in capital		1,219,048		1,062,473
Accumulated other comprehensive income (loss)		(23,310)		2,073
Accumulated dividends in excess of earnings		(316,158)		(278,548)
Total stockholders’ equity		1,287,569		1,193,986
Noncontrolling interests		105,961		102,701
TOTAL EQUITY		1,393,530		1,296,687
TOTAL LIABILITIES AND EQUITY	$	3,066,953	$	2,861,969

(1)

The balance sheet at June 30, 2019 and December 31, 2018, has been derived from the consolidated financial statements at that date, but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements.

(2)

As of June 30, 2019, construction in progress included $200.3 million related to land acquisitions whereby the initiation of development activities has begun to prepare the property for its intended use.

(3)

As of June 30, 2019 and December 31, 2018, deferred costs, net included $6.7 million and $7.7 million of deferred financing costs net of amortization, respectively, and $40.0 million and $37.4 million of deferred leasing costs net of amortization, respectively.

(4)

Debt issuance costs, net related to the Senior Notes and term loan portion of the Company’s unsecured credit facility aggregating $10.7 million and $11.6 million at June 30, 2019 and December 31, 2018, respectively, have been netted against the related debt liability line items for both periods presented.

(5)

As of June 30, 2019 and December 31, 2018, other assets, net included $54.0 million and $48.8 million of corporate fixed assets, respectively, primarily relating to construction of corporate offices, leasehold improvements and product related assets.

(6)

As of June 30, 2019, the total liquidation preference of the Series A Preferred Stock was $107.0 million, calculated as $25.00 liquidation preference per share times 4,280,000 shares outstanding.

(7)

As of June 30, 2019, the total liquidation preference of the Series B Preferred Stock was $316.3 million, calculated as $100.00 liquidation preference per share times 3,162,500 shares outstanding.

Consolidated Statements of Operations

(unaudited and in thousands except share and per share data)


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2019		2019 (1)		2018 (1)		2019		2018 (1)
Revenues:
Rental (2)	$	114,977	$	109,389	$	101,086	$	224,366	$	201,014
Other (3)		4,190		3,300		11,191		7,490		24,960
Total revenues		119,167		112,689		112,277		231,856		225,974
Operating expenses:
Property operating costs		38,570		34,103		36,558		72,673		74,298
Real estate taxes and insurance		3,355		3,367		2,903		6,722		5,808
Depreciation and amortization		41,481		38,788		37,820		80,269		73,733
General and administrative (4)		20,124		19,891		21,031		40,015		43,265
Transaction and integration costs		1,039		1,214		653		2,253		1,573
Restructuring		—		—		11,430		—		19,960
Total operating expenses		104,569		97,363		110,395		201,932		218,637
Gain on sale of real estate, net		—		13,408		—		13,408		—
Operating income		14,598		28,734		1,882		43,332		7,337
Other income and expense:
Interest income		36		45		25		81		26
Interest expense		(6,459)		(7,146)		(8,203)		(13,605)		(16,313)
Other income (expense)		(40)		—		—		(40)		—
Equity in earnings (loss) of unconsolidated entity		(401)		(274)		—		(675)		—
Income (loss) before taxes		7,734		21,359		(6,296)		29,093		(8,950)
Tax benefit (expense) of taxable REIT subsidiaries		(199)		(211)		(137)		(410)		2,265
Net income (loss)		7,535		21,148		(6,433)		28,683		(6,685)
Net (income) loss attributable to noncontrolling interests (5)		(52)		(1,590)		1,002		(1,642)		1,031
Net income (loss) attributable to QTS Realty Trust, Inc.	$	7,483	$	19,558	$	(5,431)	$	27,041	$	(5,654)
Preferred stock dividends		(7,045)		(7,045)		(2,248)		(14,090)		(2,576)
Net income (loss) attributable to common stockholders	$	438	$	12,513	$	(7,679)	$	12,951	$	(8,230)

Net income (loss) per share attributable to common shares:
Basic (6)	$	(0.03)	$	0.20	$	(0.16)	$	0.17	$	(0.17)
Diluted (6)		(0.03)		0.20		(0.16)		0.17		(0.17)

(1)

Pursuant to the Company’s adoption of ASC 842 “Leases” on January 1, 2019 and to remain consistent with revenue presentation across the industry, historical revenue categories have been reclassified to conform to current presentation of two categories. The new categories incorporate a reclassification of straight line rent from the “Other” line item into the “Rental” line item, a reclassification of “Recoveries from Customers” from its own line item into the “Rental” line item and a combination of the “Cloud and managed services” and “Other” line items into a single “Other” line item.

(2)

Represents lease revenue, inclusive of recoveries from customers as well as straight line rent. Recoveries from customers was $12.7 million, $10.8 million, and $10.4 million for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018, respectively, and $23.5 million and $22.0 million for the six months ended June 30, 2019 and 2018, respectively. Straight line rent was $1.0 million, $1.5 million and $1.4 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, and $2.5 million and $4.1 million for the six months ended June 30, 2019 and 2018, respectively.

(3)

Includes revenue from managed services, sales of scrap metals and other unused materials and various other revenue items.

(4)

Includes personnel costs, sales and marketing costs, professional fees, travel costs, product investment costs and other corporate general and administrative expenses. General and administrative expenses were 16.9%, 17.7%, and 18.7% of total revenues for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, and 17.3% and 19.1% of total revenues for the six months ended June 30, 2019 and 2018, respectively.

(5)

The weighted average noncontrolling ownership interest of QualityTech, LP was 10.7%, 11.3% and 11.5% for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, and 11.0% and 11.5% for the six months ended June 30, 2019 and 2018, respectively.

(6)

Basic and diluted net income (loss) per share were calculated using the two-class method.

Consolidated Statements of Comprehensive Income

(unaudited and in thousands)


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2019		2019		2018		2019		2018
Net income (loss)	$	7,535	$	21,148	$	(6,433)	$	28,683	$	(6,685)
Other comprehensive income (loss):
Foreign currency translation adjustment gain		66		—		—		66		—
Increase (decrease) in fair value of derivative contracts		(18,606)		(9,853)		2,563		(28,459)		8,545
Reclassification of other comprehensive income to interest expense (income)		(471)		(494)		91		(965)		493
Comprehensive income (loss)		(11,476)		10,801		(3,779)		(675)		2,353
Comprehensive (income) loss attributable to noncontrolling interests		1,291		(1,217)		431		74		(271)
Comprehensive income (loss) attributable to QTS Realty Trust, Inc.	$	(10,185)	$	9,584	$	(3,348)	$	(601)	$	2,082

Summary of Financial Data

(unaudited and in thousands, except operating portfolio statistics data and per share data)

This summary includes certain non-GAAP financial measures that management believes are helpful in understanding the Company’s business as further described in the Appendix. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information or as an expectation of future performance of the Company’s business. The Company believes that the presentation of non-GAAP financial measures provide meaningful supplemental information to both management and investors that is indicative of the Company’s current operations and its business. The Company has included a reconciliation of this additional information to the most comparable GAAP measure in the selected financial information below.


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
Summary of Results	2019		2019		2018		2019		2018
Total revenue	$	119,167	$	112,689	$	112,277	$	231,856	$	225,974
Net income (loss)	$	7,535	$	21,148	$	(6,433)	$	28,683	$	(6,685)
Net income (loss) attributable to common stockholders	$	438	$	12,513	$	(7,679)	$	12,951	$	(8,230)
Fully diluted weighted average shares outstanding		63,094		59,663		58,080		61,388		58,013
Net income (loss) per basic share	$	(0.03)	$	0.20	$	(0.16)	$	0.17	$	(0.17)
Net income (loss) per diluted share	$	(0.03)	$	0.20	$	(0.16)	$	0.17	$	(0.17)
FFO available to common stockholders & OP unit holders	$	39,779	$	36,937	$	25,162	$	76,716	$	56,639

Note: All 2019 metrics in the following table, with the exception of Total revenue, include QTS’s pro rata share of results from the unconsolidated joint venture. Prior period 2018 balances represent results of the Core business only. See the Appendix for a more detailed description of the Core business.


	Three Months Ended									Six Months Ended
Other Data (including QTS' pro rata share of	June 30,			March 31,			June 30,			June 30,
unconsolidated JV, excl. total revenue)	2019			2019			2018			2019			2018
Total revenue (1)	$	119,167		$	112,689		$	102,549			231,856			202,939
MRR (at period end)	$	32,780		$	31,952		$	29,522		$	32,780		$	29,522
NOI	$	78,084		$	75,453		$	67,639		$	153,537		$	132,431
NOI as a % of revenue		65.5	%		67.0	%		66.0	%		66.2	%		65.3	%
Adjusted EBITDA	$	62,237		$	58,843		$	53,634		$	121,080		$	103,793
Adjusted EBITDA as a % of revenue		52.2	%		52.2	%		52.3	%		52.2	%		51.1	%
Operating FFO available to common stockholders & OP unit holders	$	40,818		$	38,151		$	36,895		$	78,969		$	73,762
Operating FFO per diluted share	$	0.65		$	0.64		$	0.64		$	1.29		$	1.27
Annualized ROIC		12.3	%		12.4	%		12.3	%		12.4	%		12.3	%

(1)

Excludes QTS’s pro rata share of the unconsolidated joint venture revenue. Total unconsolidated JV revenue at the JV’s 100% share was $2.6 million and $0.9 million for the three months ended June 30, 2019 and March 31, 2019, respectively, and $3.5 million for the six months ended June 30, 2019. QTS’s 50% pro rata share of unconsolidated JV revenue was $1.4 million and $0.4 million for the three months ended June 30, 2019 and March 31, 2019, respectively, and $1.8 million for the six months ended June 30, 2019.


	June 30,		December 31,
Balance Sheet Data (including QTS' pro rata share of unconsolidated JV) (1) (2)	2019		2018
Total indebtedness, net of cash and cash equivalents		1,425,952		1,344,915
Indebtedness to last quarter annualized Adjusted EBITDA		5.7x		5.7x
Indebtedness to last quarter annualized Adjusted EBITDA pro forma for the effects of forward equity sale (3)		5.1x		5.7x
Indebtedness to undepreciated real estate assets		46.0%		47.8%
Indebtedness to Implied Enterprise Value		29.9%		34.3%

(1)

All metrics for the applicable periods include QTS’s pro rata share of results from the unconsolidated joint venture.

(2)

The Company has excluded associated debt issuance costs from the Total indebtedness line item for both periods presented. Therefore, the total debt amount, as well as calculations based on the total debt amount, represent the full amount of debt that will be repaid less the amount of cash and cash equivalents on hand.

(3)

Represents the Company’s leverage ratio pro forma for the effects of approximately $147 million in cash (which is subject to certain adjustments) expected to be received at or before March 1, 2020 upon the full physical settlement of, and issuance of 3,762,500 shares of common stock pursuant to the forward equity sale agreement entered into during the first quarter of 2019, assuming such proceeds were used to repay a portion of the Company’s outstanding debt.


Operating Portfolio Statistics	June 30,	December 31,
(including unconsolidated JV at the JV’s 100% share)	2019 (1)	2018
Built out square footage:
Raised floor	1,579,088	1,480,232
Leasable raised floor	1,305,893	1,201,255
Leased raised floor	1,152,270	1,080,355
Data center % occupied	88.2%	89.9%

Total Raw Shell:
Total	6,535,833	6,223,794
Basis-of-design raised floor space (2)	2,888,799	2,730,874

Data center properties	26	25
Basis of design raised floor % developed	54.7%	54.2%

Data center raised floor % owned (3)	95.8%	95.5%

(1)

Represents the Company’s consolidated portfolio in addition to the Company’s unconsolidated joint venture at the JV’s 100% share.

(2)

See definition in Appendix.

(3)

Includes the Santa Clara facility which is subject to a long-term ground lease, includes unconsolidated JV property at the JV's 100% share, and excludes facilities subject to finance lease obligations. Had the Santa Clara facility been excluded as an owned facility, the owned data center raised floor percentage would be 92.0% and 91.7% at June 30, 2019 and December 31, 2018, respectively.

2019 Guidance


	2019 Guidance
($ in millions except per share amounts)	Low		High
Revenue	$	461	$	475
Adjusted EBITDA	$	243.5	$	253.5
Operating FFO per fully diluted share	$	2.61	$	2.71

The Company is reaffirming its Revenue guidance range for 2019 of $461 million to $475 million which assumes annual rental churn as previously announced of between 3% and 6%. The Company is also reaffirming its Adjusted EBITDA guidance range for 2019 of $243.5 million to $253.5 million and reaffirming its Operating FFO per fully diluted share guidance range for 2019 of $2.61 per share to $2.71 per share.

The Company’s 2019 guidance includes the effects of the joint venture, which is reflected as an unconsolidated joint venture on QTS’ reported financial statements. Consistent with GAAP accounting standards, revenue from the unconsolidated joint venture is removed from QTS’ reported GAAP financial statements. Also consistent with GAAP accounting and NAREIT-defined standards, QTS includes its proportionate ownership of EBITDAre and Funds from Operations from the joint venture in its reported EBITDAre and Funds from Operations results, respectively.

QTS does not provide reconciliations for the non-GAAP financial measures included in its guidance provided above due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including net income (loss) and adjustments that could be made for restructuring costs, transaction costs, lease exit costs, asset impairments and loss on disposals and other charges as those amounts are subject to significant variability based on future transactions that are not yet known, the amount of which, based on historical experience, could be significant.

Reconciliations of Return on Invested Capital (ROIC)

(unaudited and in thousands)

Return on Invested Capital (“ROIC”) is a non-GAAP measure that provides additional information to users of the financial statements. Management believes ROIC is a helpful metric for users of the financial statements to gauge the Company's performance of its business against the capital it has invested in the business.


ROIC (including QTS' pro rata share of unconsolidated JV)	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2019		2019		2018 (1)		2019		2018 (1)
NOI (2) (3)	$	78,084	$	75,453	$	67,639	$	153,537	$	132,431
Annualized NOI		312,336		301,812		270,556		307,074		264,862
Average undepreciated real estate assets and other net fixed assets placed in service		2,532,440		2,426,978		2,202,032		2,473,103		2,160,136
Annualized ROIC		12.3%		12.4%		12.3%		12.4%		12.3%

(1)

Balances represent results of the Core business only. See the Appendix for a more detailed description of the Core business.

(2)

Includes facility level G&A expense allocation charges of 4% of cash revenue for all facilities. These allocated charges, with respect to Core operations for the applicable periods, aggregated to $4.6 million, $4.5 million and $4.6 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018 respectively, and $9.0 million and $8.8 for the six months ended June 30, 2019 and 2018, respectively.

(3)

NOI for the applicable periods includes QTS’s pro rata share of NOI from the unconsolidated joint venture.


	As of						As of
Calculation of Average Undepreciated Real Estate	June 30,		March 31,		June 30,		June 30,
Assets and Other Net Fixed Assets Placed in Service	2019		2019		2018 (1)		2019		2018 (1)
Real Estate Assets, net	$	2,527,646	$	2,446,467	$	2,148,849	$	2,527,646	$	2,148,849
Less: Construction in progress		(856,005)		(803,888)		(649,766)		(856,005)		(649,766)
Plus: Accumulated depreciation		523,040		494,787		422,346		523,040		422,346
Plus: Goodwill		173,843		173,843		173,843		173,843		173,843
Plus: Other fixed assets, net		40,253		41,163		35,423		40,253		35,423
Plus: Acquired intangibles, net (2)		76,199		79,168		85,511		76,199		85,511
Plus: Leasing Commissions, net		39,987		38,522		36,624		39,987		36,624
Plus: Assets placed in service in unconsolidated JV (3)		40,391		29,464		—		40,391		—
Total as of period end	$	2,565,354	$	2,499,526	$	2,252,830	$	2,565,354	$	2,252,830

Average undepreciated real estate assets and other net fixed assets as of reporting period (4)	$	2,532,440	$	2,426,978	$	2,202,032	$	2,473,103	$	2,160,136

(1)

Calculated using Core amounts only, which excludes Non-Core product related assets. See the Appendix for a more detailed description of the Core business.

(2)

Net of acquired intangible liabilities and deferred tax liabilities.

(3)

Represents QTS’ basis in the assets in the JV which were $40.4 million as of June 30, 2019 (calculated as the cost basis of the assets contributed for in serviced phases of $82.0 million less the equity contribution of the JV partner and the JV partner’s portion of debt of $41.6 million) and $29.5 million as of March 31, 2019 (calculated as the cost basis of the assets contributed for in serviced phases of $58.9 million less the equity contribution of the JV partner and the JV partner’s portion of debt of $29.5 million)

(4)

Calculated by using average quarterly balance of each account.

Implied Enterprise Value and

Weighted Average Shares


	Shares or	Market Price or		Market
	Equivalents	Liquidation Value as of		capitalization
Implied Enterprise Value as of June 30, 2019:	Outstanding	June 30, 2019		(in thousands)
Class A Common Stock	55,262,113	$	46.18	$	2,552,004
Class B Common Stock	128,408		46.18		5,930
Total Shares Outstanding	55,390,521
Units of Limited Partnership Interest (1)	6,713,138		46.18		310,013
Options to purchase Class A Common Stock and performance units (2)	518,535		46.18		23,946
Effect of Class A common stock associated with forward equity sale (3)	572,351		46.18		26,431
Fully Diluted Total Shares and Units of Limited Partnership Interest outstanding as of June 30, 2019	63,194,546
Liquidation value of Series A Preferred Stock	4,280,000		25.00		107,000
Liquidation value of Series B Convertible Preferred Stock	3,162,500		100.00		316,250
Total Equity				$	3,341,574
Total Indebtedness					1,425,952	(4)
Implied Enterprise Value				$	4,767,526

(1)

Includes 44,539 of operating partnership units representing the “in the money” value of Class O LTIP units on an “as if” converted basis as of June 30, 2019.

(2)

Represents options to purchase shares of Class A Common Stock of QTS Realty Trust, Inc. representing the “in the money” value of options on an “as if” converted basis and the value of performance awards on an “as if” converted basis as of June 30, 2019.

(3)

Represents the “in the money” value of the forward equity shares related to the Q1 2019 common stock offering on an “as if” converted basis as of June 30, 2019.

(4)

Excludes all debt issuance costs reflected as a reduction to liabilities at June 30, 2019 representing the full amount of debt that will be repaid, less the amount of cash and cash equivalents on hand. This also includes the Company’s pro rata share of unconsolidated joint venture debt, net of its pro rata share of cash on hand at the joint venture.

The following table presents the weighted average fully diluted shares for the three and six months ended June 30, 2019:


	Three Months Ended	Six Months Ended
	June 30, 2019	June 30, 2019
Weighted average shares outstanding - basic	55,391,631	53,977,221
Effect of Class A partnership units (1)	6,668,599	6,671,257
Effect of Class O units on an "as if" converted basis (1)	44,539	42,727
Effect of options to purchase Class A common stock, restricted Class A common stock and performance units on an "as if" converted basis (2)	489,105	422,709
Effect of Class A common stock associated with forward equity sale (3)	499,773	273,833
Weighted average shares outstanding - diluted (4)	63,093,647	61,387,747

(1)

The Class A units and Class O units represent limited partnership interests in the Operating Partnership.

(2)

The average share price for the three months and six ended June 30, 2019 was $45.15 and $43.32, respectively.

(3)

Represents the “in the money” value of the forward equity shares related to the Q1 2019 common stock offering on an “as if” converted basis as of June 30, 2019.

(4)

Series B Convertible Preferred stock was not incorporated on an “as if” converted basis as the conversion would have been antidilutive for the period presented.

Data Center Properties

The table below presents an overview of the portfolio of data center properties that the Company owns or leases, referred to herein as our data center properties, based on information as of June 30, 2019. The table excludes data center development associated with land acquired in Phoenix, AZ, Ashburn, VA and Hillsboro, OR.


			Net Rentable Square Feet (Operating NRSF) (1)
											Available	Basis of	Current
		Gross									Utility	Design	Raised
	Year	Square	Raised	Office &	Supporting		%		Annualized		Power	("BOD")	Floor as a
Properties	Acquired (2)	Feet (3)	Floor (4)	Other (5)	Infrastructure (6)	Total	Occupied		Rent (7)		(MW) (8)	NRSF	% of BOD
Richmond, VA	2010	1,318,353	167,309	51,093	178,854	397,256	61.9	%	$	36,583,320	110	557,309	30.0	%
Atlanta, GA (Metro)	2006	968,695	486,706	36,953	346,263	869,922	96.2	%	$	106,029,401	72	527,186	92.3	%
Irving, TX	2013	698,000	174,160	6,981	179,083	360,224	94.7	%	$	52,309,657	140	275,701	63.2	%
Princeton, NJ	2014	553,930	58,157	2,229	111,405	171,791	100.0	%	$	10,206,631	22	158,157	36.8	%
Chicago, IL	2014	474,979	56,000	1,786	58,182	115,968	90.2	%	$	13,948,143	24	215,855	25.9	%
Ashburn, VA	2017	445,000	19,500	6,096	31,988	57,584	91.0	%	$	4,921,428	50	178,000	11.0	%
Suwanee, GA	2005	369,822	205,608	8,697	107,128	321,433	91.9	%	$	57,137,846	36	205,608	100.0	%
Piscataway, NJ	2016	360,000	98,820	14,311	100,151	213,282	89.8	%	$	18,374,729	111	176,000	56.1	%
Fort Worth, TX	2016	261,836	29,960	14,106	54,944	99,010	99.6	%	$	4,486,348	50	80,000	37.5	%
Santa Clara, CA*	2007	135,322	59,905	944	45,094	105,943	85.9	%	$	18,972,887	11	80,940	74.0	%
Sacramento, CA	2012	92,644	54,595	2,794	23,916	81,305	36.5	%	$	10,382,712	8	54,595	100.0	%
Dulles, VA	2017	87,159	30,545	5,997	32,892	69,434	65.4	%	$	16,937,885	13	48,270	63.3	%
Leased facilities **	2006 & 2015	192,513	63,862	18,650	41,901	124,413	83.4	%	$	27,108,143	14	84,474	75.6	%
Other ***	Misc.	459,549	51,561	49,337	70,636	171,534	83.6	%	$	11,843,824	97	180,380	28.6	%
Consolidated properties		6,417,802	1,556,688	219,974	1,382,437	3,159,099	88.0	%	$	389,242,954	759	2,822,475	55.2	%

Unconsolidated JV Properties - at the JV's 100% Share (9)
Manassas, VA	2018	118,031	22,400	12,663	39,044	74,107	100.0	%	$	8,235,171	24	66,324	33.8	%

Total properties		6,535,833	1,579,088	232,637	1,421,481	3,233,206	88.2	%	$	397,478,125	783	2,888,799	54.7	%

(1)

Represents the total square feet of a building that is currently leased or available for lease plus developed supporting infrastructure, based on engineering drawings and estimates, but does not include space held for redevelopment or space used for the Company’s own office space.

(2)

Represents the year a property was acquired or, in the case of a property under lease, the year the Company’s initial lease commenced for the property.

(3)

With respect to the Company’s owned properties, gross square feet represents the entire building area. With respect to leased properties, gross square feet represents that portion of the gross square feet subject to our lease. This includes 383,761 square feet of QTS office and support space, which is not included in operating NRSF.

(4)

Represents management’s estimate of the portion of NRSF of the facility with available power and cooling capacity that is currently leased or readily available to be leased to customers as data center space based on engineering drawings.

(5)

Represents the operating NRSF of the facility other than data center space (typically office and storage space) that is currently leased or available to be leased.

(6)

Represents required data center support space, including mechanical, telecommunications and utility rooms, as well as building common areas.

(7)

The Company defines annualized rent as MRR multiplied by 12. The Company calculates MRR as monthly contractual revenue under executed contracts as of a particular date, but excludes customer recoveries, deferred set up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR does not include the impact from booked-not-billed contracts as of a particular date, unless otherwise specifically noted. This amount reflects the annualized cash rental payments. It does not reflect the accounting associated with any free rent, rent abatements or future scheduled rent increases and also excludes operating expense and power reimbursements

(8)

Represents installed utility power and transformation capacity that is available for use by the facility as of June 30, 2019.

(9)

Represents the Company’s unconsolidated joint venture at the JV’s 100% share. QTS’s pro rata share of the JV is 50%.

* Subject to long-term ground lease.

** Includes 9 facilities. All facilities are leased, including those subject to finance leases.

*** Consists of Miami, FL; Lenexa, KS; Overland Park, KS; Eemshaven, Netherlands and Groningen, Netherlands facilities.

Development Costs Summary

(in millions, except NRSF data)

During the second quarter of 2019, the Company brought online approximately three megawatts of gross power and approximately 19,000 net rentable square feet (“NRSF”) of raised floor and customer specific capital at its Fort Worth facility at an aggregate cost of approximately $25 million.

For the six months ended June 30, 2019, the Company brought online approximately 9 megawatts of gross power and approximately 47,000 NRSF of raised floor and customer specific capital at its Forth Worth, Atlanta-Metro, Chicago, Santa Clara, and Ashburn facilities at an aggregate cost of approximately $61 million.

Additionally, the Company brought online the first phase at its Manassas facility in the first quarter of 2019 just prior to its contribution to the joint venture, representing approximately five megawatts of gross power and approximately 11,000 NRSF of raised floor at an aggregate cost of approximately $60 million. The joint venture also brought online the second phase at the Manassas facility during the second quarter of 2019 representing approximately 4 megawatts of gross power and approximately 11,000 NRSF of raised floor at an aggregate cost of approximately $23 million at the joint venture’s 100% share, of which the Company’s pro rata share was approximately $11 million. The joint venture intends to bring additional space and power into service as incremental development at the Manassas facility takes place and future phases are delivered to the customer.

The under construction table below summarizes the Company’s outlook for development projects which it expects to complete by December 31, 2019 (in millions).


	Under Construction Costs (1)
			Estimated Cost to				Expected
Properties	Actual (2)		Completion (3)		Total		Completion date
Fort Worth, TX	$	9	$	1	$	10	Q4 2019
Ashburn, VA		50		4		54	Q3 & Q4 2019
Irving, TX		29		3		32	Q3 & Q4 2019
Chicago, IL		14		5		19	Q3 & Q4 2019
Atlanta, GA (Metro)		17		3		20	Q3 2019
Santa Clara, CA		2		6		8	Q4 2019
Piscataway, NJ		4		1		5	Q3 2019
Totals	$	125	$	23	$	148

(1)

In addition to projects currently under construction, the Company’s near-term development projects are expected to be delivered in a modular manner, and the Company currently expects to invest additional capital to complete these near term projects. The ultimate timing and completion of, and the commitment of capital to, the Company’s future development projects are within the Company’s discretion and will depend upon a variety of factors, including the actual contracts executed, availability of financing and the Company’s estimation of the future market for data center space in each particular market.

(2)

Represents actual costs under construction through June 30, 2019. In addition to the $125 million of construction costs incurred through June 30, 2019 for development expected to be completed by December 31, 2019, as of June 30, 2019 the Company had incurred $731 million of additional costs (including acquisition costs and other capitalized costs) for other development projects that are expected to be completed after December 31, 2019.

(3)

Represents management’s estimate of the additional costs required to complete the current NRSF under development. There may be an increase in costs if customers’ requirements exceed the Company’s current basis of design.

Development Summary

(in millions, except NRSF data)

The following development table presents an overview of the Company’s development pipeline, based on information as of June 30, 2019. This table shows the Company’s ability to increase its raised floor of 1.6 million square feet as of June 30, 2019 to 2.9 million square feet, exclusive of incremental development capacity on adjacent land holdings.


	Raised Floor NRSF
	Overview as of June 30, 2019
	Current				Approximate
	NRSF in	Under	Future	Basis of	Adjacent Acreage
Properties	Service	Construction (1)	Available (2)	Design NRSF	of Land (3)
Richmond, VA	167,309	—	390,000	557,309	111.1
Atlanta, GA (Metro)	486,706	30,418	10,062	527,186	75.5
Irving, TX	174,160	19,400	82,141	275,701	29.4
Princeton, NJ	58,157	—	100,000	158,157	65.0
Chicago, IL	56,000	10,000	149,855	215,855	23.0
Ashburn, VA	19,500	28,460	130,040	178,000	35.3
Suwanee, GA	205,608	—	—	205,608	15.4
Piscataway, NJ	98,820	5,000	72,180	176,000	—
Fort Worth, TX	29,960	8,000	42,040	80,000	26.5
Santa Clara, CA	59,905	—	21,035	80,940	—
Sacramento, CA	54,595	—	—	54,595	—
Dulles, VA	30,545	—	17,725	48,270	—
Leased facilities (4)	63,862	—	20,612	84,474	—
Phoenix, AZ	—	—	—	—	84.2
Hillsboro, OR	—	—	—	—	92.0
Manassas, VA	—	—	—	—	87.1
Other (5)	51,561	—	128,819	180,380	—
Totals as of June 30, 2019	1,556,688	101,278	1,164,509	2,822,475	644.5

Unconsolidated JV Properties - at the JV's 100% Share (6)
Manassas, VA	22,400	—	43,924	66,324	—

Totals as of June 30, 2019	1,579,088	101,278	1,208,433	2,888,799	644.5

(1)

Reflects NRSF at a facility for which the initiation of substantial activities has begun to prepare the property for its intended use on or before December 31, 2019.

(2)

Reflects NRSF at a facility for which the initiation of substantial activities has begun to prepare the property for its intended use after December 31, 2019.

(3)

The total cost basis of adjacent land, which is land available for the future development, is approximately $232.5 million, of which $200.3 million is included in Construction in Progress on the consolidated balance sheet. The Basis of Design NRSF does not include any build-out on the available land.

(4)

Includes 9 facilities. All facilities are leased, including those subject to finance leases.

(5)

Consists of Miami, FL; Lenexa, KS; Overland Park, KS; Eemshaven, Netherlands and Groningen, Netherlands facilities.

(6)

Represents the Company’s unconsolidated joint venture at the JV’s 100% share. QTS’s pro rata share of the JV is 50%.

NOI by Facility and Capital Expenditure Summary

(unaudited and in thousands)

The Company calculates net operating income, or NOI, as net income (loss), excluding: interest expense, interest income, tax expense (benefit) of taxable REIT subsidiaries, depreciation and amortization, write-off of unamortized deferred financing costs, gain (loss) on extinguishment of debt, transaction and integration costs, gain (loss) on sale of real estate, restructuring costs and general and administrative expenses. The Company believes that NOI is another metric that is often utilized to evaluate returns on operating real estate from period to period and also, in part, to assess the value of the operating real estate.

The breakdown of NOI by facility is shown below:


	Three Months Ended						Six Months Ended
	June 30, 2019		March 31, 2019		June 30, 2018 (1)		June 30, 2019		June 30, 2018 (1)
Breakdown of NOI by facility:
Atlanta-Metro data center	$	23,468	$	23,667	$	21,093	$	47,135	$	41,497
Atlanta-Suwanee data center		12,186		11,797		11,611		23,983		23,018
Richmond data center		9,700		8,779		7,070		18,479		14,440
Irving data center		11,364		11,420		10,917		22,784		20,754
Dulles data center		2,830		2,932		2,480		5,762		4,432
Leased data centers (2)		2,084		2,551		1,470		4,635		2,882
Santa Clara data center		2,133		1,681		2,089		3,814		4,212
Piscataway data center		3,483		3,455		3,051		6,938		6,002
Princeton data center		2,473		2,474		2,411		4,947		4,827
Sacramento data center		1,447		1,675		1,839		3,122		3,734
Chicago data center		3,064		2,741		2,339		5,805		4,333
Ashburn data center		535		317		258		852		263
Fort Worth data center		761		265		180		1,026		451
Other facilities (3)		1,714		1,465		831		3,179		1,586
NOI from consolidated operations (4)	$	77,242	$	75,219	$	67,639	$	152,461	$	132,431
Pro rata share of NOI from unconsolidated entity (5)		842		234		—		1,076		—
Total NOI	$	78,084	$	75,453	$	67,639	$	153,537	$	132,431

(1)

Represents results of the Core business only, which excludes Non-Core product related assets. See the Appendix for a more detailed description of the Core business.

(2)

Includes 9 facilities. All facilities are leased, including those subject to finance leases.

(3)

Consists of Miami, FL; Lenexa, KS; Overland Park, KS; and Groningen, Netherlands facilities. In addition, includes management fees and development fees received from the unconsolidated joint venture.

(4)

Includes facility level G&A expense allocation charges of 4% of cash revenue for all facilities. These allocated charges, with respect to Core operations for the applicable periods, aggregated to $4.6 million, $4.5 million and $4.6 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, and $9.0 and $8.8 for the six months ended June 30, 2019 and 2018, respectively.

(5)

QTS’s pro rata share of the JV is 50%.

Our cash paid for capital expenditures is summarized as follows:


	Capital Expenditures
	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2019		2019		2018		2019		2018
Development (1)	$	79,120	$	73,408	$	117,009	$	152,528	$	201,172
Acquisitions		46,155		—		—		46,155		24,626
Maintenance capital expenditures		2,233		709		2,612		2,942		3,542
Other capital expenditures (2)		33,584		18,859		25,295		52,443		44,138
Total capital expenditures	$	161,092	$	92,976	$	144,916	$	254,068	$	273,478

(1)

Includes QTS’ pro rata share of capital expenditures associated with the unconsolidated joint venture. Total capital expenditures at the joint venture were approximately $9 million ($4 million our pro rata share) for the three months ended June 30, 2019, less the equity contribution of the JV partner and the JV partners’ portion of debt of $5 million. Total capital expenditures at the joint venture were approximately $26 million ($13 million our pro rata share) for the three months ended March 31, 2019, less the equity contribution of the JV partner and the JV partners’ portion of debt of $13 million. Total capital expenditures at the joint venture were approximately $35 million ($17 million our pro rata share) for the six months ended June 30, 2019, less the equity contribution of the JV partner and the JV partners’ portion of debt of $18 million.

(2)

Represents capital expenditures for capitalized interest, commissions, personal property, overhead costs and corporate fixed assets. Corporate fixed assets primarily relate to construction of corporate offices, leasehold improvements and product related assets.

Leasing Statistics – Signed Leases

Incremental Annualized Rent, Net of Downgrades reflects net incremental MRR signed during the period for purposes of tracking incremental revenue contribution. The amounts below include renewals when there was a change in square footage rented, but exclude renewals where square footage remained consistent before and after renewal. (See renewal table on page 17 for such renewals). The amounts below include results of the consolidated business, as no leases were signed during the first or second quarter of 2019 associated with the unconsolidated joint venture. Any leasing activity in the future associated with the unconsolidated joint venture will be reported at QTS’ 50% pro rata share of the JV.

During the second quarter of 2019, the Company entered into 404 new and modified leases aggregating to $19.6 million of incremental annualized rent. The Company’s second quarter leasing performance was driven by continued strong performance in its hybrid colocation product offering and continued expansions by strategic hyperscale customers including the signing of a 5+ megawatt, multi-site lease with a hyperscale customer supporting a large federal program. The pricing on new and modified leases signed varies quarter to quarter based on the mix of deals leased, as hyperscale and hybrid colocation vary on a rate per square foot basis. Annualized rent per leased square foot is computed using the total rent associated with all new and modified leases for the respective periods.


						Incremental
				Annualized		Annualized
		Number of		rent per		Rent, Net of
	Period	Leases		leased sq ft		Downgrades (1)
New/modified leases signed (2)	Q2 2019	404	$	544	$	19,624,574
	P4QA*	432		570		13,691,564
	Q1 2019	520		477		11,304,724
	Q4 2018	362		434		12,225,797
	Q3 2018	398		564		18,143,436
	Q2 2018	447		801		13,092,298

Average of prior 4 quarters

(1)

Amounts include incremental MRR only, net of downgrades.

(2)

All statistics for the periods ending on or prior to December 31, 2018 include leases of Core products only. See the Appendix for a more detailed description of the Core business.

NOTE: Figures above do not include cost recoveries.

The following table outlines the booked-not-billed (“BNB”) balance as of June 30, 2019 and how it is expected to affect revenue in 2019 and subsequent years based on the current terms of the applicable contracts.

Note: The following table includes QTS’ 50% pro rata share of BNB revenue from the unconsolidated joint venture.


Booked-not-billed ("BNB") (1)	2019		2020		Thereafter		Total
MRR	$	1,836,981	$	1,407,302	$	2,448,955	$	5,693,238
Incremental revenue (2)		6,691,103		10,252,987		29,150,064
Annualized revenue (3) (4)		22,043,772		16,887,624		29,150,064		68,081,460

(1)

Includes the Company’s consolidated booked-not-billed balance in addition to booked-not-billed revenue associated with the unconsolidated JV at QTS’s pro rata share of the booked-not-billed revenue. Of the $68.1 million annualized BNB revenue, approximately $0.3 million related to QTS’s pro rata share.

(2)

Incremental revenue represents the expected amount of recognized MRR for the business in the period based on when the booked-not-billed leases commence throughout the period.

(3)

Annualized revenue represents the booked-not-billed MRR multiplied by 12, demonstrating how much recognized MRR might have been recognized if the booked-not-billed leases commencing in the period were in place for an entire year.

(4)

As of June 30, 2019, annualized BNB revenue on a GAAP basis (which represents recurring GAAP revenue for executed leases achieved upon full occupancy which have not commenced) was $45.3 million, of which $20.4 million was attributable to 2019, $8.8 million was attributable to 2020, and $16.2 million was attributable to years thereafter.

The Company estimates the remaining cost to provide the space, power, connectivity and other services to the customer contracts which had not billed as of June 30, 2019 to be approximately $100 million. This estimate generally includes customers with newly contracted space of more than 3,300 square feet of raised floor space. The space, power, connectivity and other services provided to customers that contract for smaller amounts of space is generally provided by existing space which was previously developed.

Leasing Statistics – Renewed Leases and Rental Churn

The mix of leasing activity has a significant impact on quarterly rates, both within major product segments and for overall blended renewal rates. The Company’s rate performance will vary quarter to quarter based on the mix of deals leased as hyperscale and hybrid colocation vary on a rate per square foot basis.

Consistent with the Company’s strategy and business model, the renewal rates below reflect total MRR per square foot including all subscribed services. For comparability, the Company includes only those customers that have maintained consistent space footprints in the computations below. All customers with space changes are incorporated into new/modified leasing statistics and rates. The amounts below include results of the consolidated business, as no leases were renewed in the first or second quarter of 2019 associated with the unconsolidated joint venture. Any leasing activity in the future associated with the unconsolidated joint venture will be reported at QTS’ 50% pro rata share of the JV.

The overall blended rate for renewals signed in the second quarter of 2019 was 1.2% higher than the rates for those customers immediately prior to renewal, which is consistent with the Company’s expectation that renewal rates will generally increase in the low to mid-single digits.

Rental Churn (which the Company defines as MRR lost in the period to a customer intending to fully exit the QTS platform in the near term compared to total MRR at the beginning of the period) was 1.0% for the second quarter of 2019. Rental Churn was 2.3% for the six months ended June 30, 2019.


			Annualized
		Number of	rent per		Annualized		Rent
	Period	renewed leases	leased sq ft		Rent		Change (1)
Renewed Leases (2)	Q2 2019	109	$	732	$	13,938,384	1.2	%
	P4QA*	67		332		14,963,461	1.1	%
	Q1 2019	88		988		11,456,028	1.6	%
	Q4 2018	84		292		14,811,940	(6.0)	%	**
	Q3 2018	72		717		11,315,916	2.1	%
	Q2 2018	24		219		22,269,960	5.6	%

* Average of prior 4 quarters

** The decline in the renewal rate of 6.0% was largely due to three customers that signed commitments to significantly expand their respective footprints elsewhere in QTS’ footprint in addition to slight changes in their product mix, the net of which increased QTS’ MRR from these customers by 18%. If the lease renewals from these three customers were excluded from the renewal base, QTS’ renewal rates on a per square foot basis would have represented a 2.3% increase relative to the pre-renewal rate.

(1)

Calculated as the percentage change of the rent per square foot immediately before renewal when compared to the rent per square foot immediately after renewal.

(2)

All statistics for the periods ending on or prior to December 31, 2018 include leases of Core products only. See the Appendix for a more detailed description of the Core business.

Lease Expirations

Hyperscale leases are typically 5-10 years with the majority of hyperscale lease expirations occurring in 2022 and beyond. Hybrid colocation leases are typically 3 years in duration, with the majority of hybrid colocation lease expirations occurring between 2019 and 2021. The following table sets forth a summary schedule of the lease expirations as of June 30, 2019. Unless otherwise stated in the footnotes, the information set forth in the table assumes that customers exercise no renewal options and all early termination rights are exercised.

Note: The table below includes the Company’s pro rata share of leases associated with the unconsolidated joint venture. QTS’s pro rata share of the JV is 50%. In addition, the table below has been calculated pro forma for the effects of two hyperscale anchor tenants’ lease renewals that were signed but not yet commenced as of June 30, 2019. As such, the annualized rent does not reconcile to reported annualized MRR in other sections of this document.


											Hybrid
		Total Raised							Hyperscale as		Colocation as
	Number of	Floor of	% of Portfolio				% of Portfolio		% of Portfolio		% of Portfolio
Year of Lease	Leases	Expiring	Leased Raised		Annualized		Annualized		Annualized		Annualized
Expiration	Expiring (1)	Leases	Floor		Rent (2)		Rent		Rent		Rent
Month-to-Month (3)	611	19,430	2	%	$	20,394,804	5	%	—	%	5	%
2019	856	63,595	6	%		46,961,157	12	%	2	%	10	%
2020	1,431	173,517	15	%		84,920,037	21	%	1	%	20	%
2021	942	217,620	19	%		70,146,301	18	%	5	%	13	%
2022	544	296,020	26	%		83,108,409	21	%	13	%	8	%
2023	180	126,874	11	%		39,646,993	10	%	3	%	7	%
After 2023	168	244,364	21	%		51,422,727	13	%	10	%	3	%
Portfolio Total	4,732	1,141,420	100	%	$	396,600,428	100	%	34	%	66	%

(1)

Represents each agreement with a customer signed as of June 30, 2019 for which billing has commenced; a lease agreement could include multiple spaces and a customer could have multiple leases.

(2)

(3)

Consists of both customer leases whose original contract terms ended on June 30, 2019 and have yet to commence signed renewals, as well as customers whose leases expired prior to June 30, 2019 and have continued on a month-to-month basis.

Largest Customers

As of June 30, 2019, the Company’s portfolio was leased to over 1,100 customers comprised of companies of all sizes representing an array of industries, each with unique and varied business models and needs. The following table sets forth information regarding the ten largest customers in the portfolio based on annualized rent as of June 30, 2019 (does not include rents or maturities associated with booked-not-billed customers or ramps for existing customers which have not yet commenced billing).

Note: The table below includes the Company’s pro rata share of leases associated with the unconsolidated joint venture. QTS’s pro rata share of the JV is 50%. In addition, the largest customers table below has been calculated pro forma for the effects of two hyperscale anchor tenants’ leases that were signed but not yet commenced as of June 30, 2019.


					Weighted
					Average
				% of Portfolio	Remaining
	Number of	Annualized		Annualized	Lease Term
Principal Customer Industry	Locations	Rent (1)		Rent	(Months) (2)
Content & Digital Media	2	$	46,854,454	11.9%	34
Cloud & IT Services	4		23,144,036	5.9%	69
Cloud & IT Services	1		18,801,601	4.7%	33
Content & Digital Media	3		14,655,600	3.7%	35
Cloud & IT Services	3		13,617,564	3.4%	56
Cloud & IT Services	4		7,645,608	1.9%	24
Government & Security	1		6,807,642	1.7%	45
Cloud & IT Services	1		6,354,873	1.6%	45
Financial Services	2		4,915,893	1.2%	45
Financial Services	1		4,853,112	1.2%	61
Total / Weighted Average		$	147,650,383	37.2%	42

(1)

Annualized rent is presented for leases commenced as of June 30, 2019. We define annualized rent as MRR multiplied by 12. We calculate MRR as monthly contractual revenue under signed leases as of a particular date, but excludes customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR does not include the impact from booked-not-billed leases (which represent customer leases that have been executed but for which lease payments have not commenced) as of a particular date. This amount reflects the annualized cash rental payments. It does not reflect any free rent, rent abatements or future scheduled rent increases and also excludes operating expense and power reimbursements.

(2)

Weighted average based on customer’s percentage of total annualized rent expiring and is as of June 30, 2019.

Debt Summary and Debt Maturities

(unaudited and in thousands)

The following tables set forth a summary of the Company’s debt instruments:


	Weighted Average
	Coupon Interest Rate at	Maturities at	Outstanding Balance as of:
	June 30, 2019 (1)	June 30, 2019	June 30, 2019		December 31, 2018
Unsecured Credit Facility (2)
Revolving Credit Facility	3.40%	December 17, 2022	$	255,645	$	252,000
Term Loan I	3.48%	December 17, 2023		350,000		350,000
Term Loan II	3.51%	April 27, 2024		350,000		350,000
Senior Notes (3)	4.75%	November 15, 2025		400,000		400,000
Lenexa Mortgage	4.10%	May 1, 2022		1,775		1,801
Finance Leases	4.34%	2019 - 2038		46,436		2,873
Total consolidated debt	3.86%			1,403,856		1,356,674

QTS’s Pro Rata Share of Unconsolidated JV Debt (4)	4.43%	February 22, 2023	$	34,068	$	—
Total consolidated and unconsolidated debt			$	1,437,924	$	1,356,674

(1)

The coupon interest rates associated with Term Loan I, Term Loan II and debt at the unconsolidated JV level incorporate the effects of interest rate swaps in effect as of June 30, 2019.

(2)

Balances exclude debt issuance costs reflected as offsets to liabilities aggregating $5.8 million and $6.3 million as of June 30, 2019 and December 31, 2018, respectively.

(3)

Balance excludes debt issuance costs reflected as offsets to liabilities aggregating $4.8 million and $5.2 million as of June 30, 2019 and December 31, 2018, respectively.

(4)

Balance excludes QTS’ pro rata share of debt issuance costs reflected as offsets to liabilities aggregating $1.2 million at June 30, 2019.


	Outstanding Balance as of:		% of	Outstanding Balance as of:		% of
	June 30, 2019 (1)		total	December 31, 2018		total
Fixed Rate Debt	$	1,082,279	75.3%	$	1,004,674	74.1%
Floating Rate Debt		355,645	24.7%		352,000	25.9%
	$	1,437,924	100.0%	$	1,356,674	100.0%

(1)

Includes all debt that is currently at a fixed rate and pro forma for an additional $200 million of debt that was swapped to a fixed rate that will become effective January 2, 2020. In addition, the calculation includes the effects of $67.9 million of debt at the joint venture (of which $34.0 million is our share) that is swapped to a fixed rate.

Scheduled debt maturities as of June 30, 2019:


Debt instruments	2019		2020		2021		2022		2023		Thereafter		Total
Unsecured Credit Facility (1)	$	—	$	—	$	—	$	255,645	$	350,000	$	350,000	$	955,645
Senior Notes (2)		—		—		—		—		—		400,000		400,000
Lenexa Mortgage		33		70		73		1,599		—		—		1,775
Finance Leases		1,296		2,579		2,712		2,958		3,229		33,662		46,436
Total consolidated debt		1,329		2,649		2,785		260,202		353,229		783,662		1,403,856

QTS’s Pro Rata Share of Unconsolidated JV Debt		1		4		4		4		33,954		101		34,068
Total consolidated and unconsolidated debt	$	1,330	$	2,653	$	2,789	$	260,206	$	387,183	$	783,763	$	1,437,924

(1)

Balance excludes debt issuance costs reflected as offsets to liabilities aggregating $5.8 million as of June 30, 2019.

(2)

Balance excludes debt issuance costs reflected as offsets to liabilities aggregating $4.8 million as of June 30, 2019.

Interest Summary

(unaudited and in thousands)

A summary of the Company’s interest expense is as follows:


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,		June 30,
	2019		2019		2018		2019		2018
Interest expense and fees	$	13,856	$	13,981	$	13,257	$	27,837	$	25,772
Amortization of deferred financing costs and bond discount		979		978		961		1,957		1,923
Capitalized interest (1)		(8,376)		(7,813)		(6,015)		(16,189)		(11,382)
Total consolidated interest expense		6,459		7,146		8,203	$	13,605	$	16,313

QTS’s pro rata share of unconsolidated JV interest expense		539		173		—		712		—
Total consolidated and unconsolidated interest expense	$	6,998	$	7,319	$	8,203	$	14,317	$	16,313

(1)

The weighted average interest rate for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018 was 4.31%, 4.40%, and 4.52%, respectively.

A reconciliation of net income (loss) to FFO, Operating FFO and Adjusted Operating FFO is presented below (unaudited and in thousands):


	Three Months Ended
	June 30, 2019		March 31, 2019		June 30, 2018
	Total		Total		Core		Non-Core		Total
FFO
Net income (loss)	$	7,535	$	21,148	$	5,397	$	(11,830)	$	(6,433)
Equity in net (income) loss of unconsolidated entity		401		274		—		—		—
Real estate depreciation and amortization		38,544		35,927		33,093		750		33,843
Gain on sale of real estate, net		—		(13,408)		—		—		—
Pro rata share of FFO from unconsolidated entity		344		41		—		—		—
FFO (1)		46,824		43,982		38,490		(11,080)		27,410
Preferred stock dividends		(7,045)		(7,045)		(2,248)		—		(2,248)
FFO available to common stockholders & OP unit holders		39,779		36,937		36,242		(11,080)		25,162

Restructuring costs		—		—		—		11,430		11,430
Transaction and integration costs		1,039		1,214		653		—		653
Tax benefit associated with restructuring, transaction and integration costs		—		—		—		(41)		(41)
Operating FFO available to common stockholders & OP unit holders*		40,818		38,151		36,895		309		37,204

Maintenance Capex		(2,233)		(709)		(2,612)		—		(2,612)
Leasing commissions paid		(6,528)		(6,515)		(7,600)		(71)		(7,671)
Amortization of deferred financing costs and bond discount		979		978		961		—		961
Non real estate depreciation and amortization		2,937		2,861		2,140		1,836		3,976
Straight line rent revenue and expense and other		(979)		(1,422)		(1,300)		67		(1,233)
Tax expense (benefit) from operating results		199		211		178		—		178
Equity-based compensation expense		4,296		3,300		3,999		—		3,999
Adjustments for unconsolidated entity		(42)		22		—		—		—
Adjusted Operating FFO available to common stockholders & OP unit holders*	$	39,447	$	36,877	$	32,661	$	2,141	$	34,802

(1)

FFO for the three months ended June 30, 2018 includes $3.1 million of impairment losses related to certain non-real estate product related assets that were considered incidental to our primary business and were included in the “Restructuring” line item of the consolidated statement of operations. No gains, losses or impairment write-downs associated with assets incidental to our primary business were incurred during the three months ended June 30, 2019 and March 31, 2019, respectively.

The Company’s calculations of Operating FFO and Adjusted Operating FFO may not be comparable to Operating FFO and Adjusted Operating FFO as calculated by other REITs that do not use the same definition.


	Six Months Ended
	June 30, 2019		June 30, 2018
	Total		Core		Non-Core		Total
FFO
Net income (loss)	$	28,683	$	10,480	$	(17,165)	$	(6,685)
Equity in net (income) loss of unconsolidated entity		675		—		—		—
Real estate depreciation and amortization		74,471		64,285		1,615		65,900
Gain on sale of real estate, net		(13,408)		—		—		—
Pro rata share of FFO from unconsolidated entity		385		—		—		—
FFO (1)		90,806		74,765		(15,550)		59,215
Preferred stock dividends		(14,090)		(2,576)		—		(2,576)
FFO available to common stockholders & OP unit holders		76,716		72,189		(15,550)		56,639

Restructuring costs		—		—		19,960		19,960
Transaction and integration costs		2,253		1,573		—		1,573
Tax benefit associated with restructuring, transaction and integration costs		—		—		(1,676)		(1,676)
Operating FFO available to common stockholders & OP unit holders*		78,969		73,762		2,734		76,496

Maintenance Capex		(2,942)		(3,542)		—		(3,542)
Leasing commissions paid		(13,043)		(13,439)		(142)		(13,581)
Amortization of deferred financing costs and bond discount		1,957		1,923		—		1,923
Non real estate depreciation and amortization		5,798		4,288		3,545		7,833
Straight line rent revenue and expense and other		(2,401)		(3,809)		58		(3,751)
Tax expense (benefit) from operating results		410		(589)		—		(589)
Equity-based compensation expense		7,596		7,480		—		7,480
Adjustments for unconsolidated entity		(20)		—		—		—
Adjusted Operating FFO available to common stockholders & OP unit holders*	$	76,324	$	66,074	$	6,195	$	72,269

(1)

FFO for the six months ended June 30, 2018 includes $7.1 million of impairment losses related to certain non-real estate product related assets that were considered incidental to our primary business and were included in the “Restructuring” line item of the consolidated statement of operations. No gains, losses or impairment write-downs associated with assets incidental to our primary business were incurred during the six months ended June 30, 2019.

Monthly Recurring Revenue (MRR) and Recognized MRR

The Company calculates MRR as monthly contractual revenue under signed leases as of a particular date, which includes revenue from its rental and cloud and managed services activities, but excludes customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR is also calculated to include the Company’s pro rata share of monthly contractual revenue under signed leases as of a particular date associated with unconsolidated entities, which includes revenue from the unconsolidated entity’s rental and managed services activities, but excludes the unconsolidated entity’s customer recoveries, deferred set-up fees, variable related revenues, non-cash revenues and other one-time revenues. MRR reflects the annualized cash rental payments. It does not include the impact from booked-not-billed leases as of a particular date, unless otherwise specifically noted.

Separately, the Company calculates recognized MRR as the recurring revenue recognized during a given period, which includes revenue from its rental and cloud and managed services activities, but excludes customer recoveries, deferred set up fees, variable related revenues, non-cash revenues and other one-time revenues.

Management uses MRR and recognized MRR as supplemental performance measures because they provide useful measures of increases in contractual revenue from the Company’s customer leases and customer leases attributable to the Company’s business. MRR and recognized MRR should not be viewed by investors as alternatives to actual monthly revenue, as determined in accordance with GAAP. Other companies may not calculate MRR or recognized MRR in the same manner. Accordingly, the Company’s MRR and recognized MRR may not be comparable to other companies’ MRR and recognized MRR. MRR and recognized MRR should be considered only as supplements to total revenues as a measure of its performance. MRR and recognized MRR should not be used as measures of the Company’s results of operations or liquidity, nor is it indicative of funds available to meet its cash needs, including its ability to make distributions to its stockholders.

For periods in 2018, Core Recognized MRR and MRR are used as supplemental performance measures because they reflect results of the portion of the business the Company retained following completion of the strategic growth plan.

A reconciliation of total revenues to recognized MRR in the period and MRR at period-end on a consolidated, Core and non-Core basis is presented below (unaudited and in thousands):


	Three Months Ended
	June 30, 2019		March 31, 2019		June 30, 2018
	Total		Total		Core		Non-Core		Total
Recognized MRR in the period
Total period revenues (GAAP basis)	$	119,167	$	112,689	$	102,549	$	9,728	$	112,277
Less: Total period variable lease revenue from recoveries		(12,672)		(10,793)		(10,444)		—		(10,444)
Total period deferred setup fees		(3,822)		(3,232)		(3,073)		(130)		(3,203)
Total period straight line rent and other		(5,485)		(3,942)		(2,022)		(2,304)		(4,326)
Recognized MRR in the period		97,188		94,722		87,010		7,294		94,304

MRR at period end
Total period revenues (GAAP basis)	$	119,167	$	112,689	$	102,549	$	9,728	$	112,277
Less: Total revenues excluding last month		(77,863)		(73,809)		(67,701)		(6,861)		(74,562)
Total revenues for last month of period		41,304		38,880		34,848		2,867		37,715
Less: Last month variable lease revenue from recoveries		(4,222)		(3,871)		(3,597)		—		(3,597)
Last month deferred setup fees		(1,322)		(1,242)		(984)		(99)		(1,083)
Last month straight line rent and other		(3,349)		(2,068)		(745)		(1,139)		(1,884)
Add: Pro rata share of MRR at period end of unconsolidated entity		369		253		—		—		—
MRR at period end	$	32,780	$	31,952	$	29,522	$	1,629	$	31,151


	Six Months Ended
	June 30, 2019		June 30, 2018
	Total		Core		Non-Core		Total
Recognized MRR in the period
Total period revenues (GAAP basis)	$	231,856	$	202,939	$	23,035	$	225,974
Less: Total period variable lease revenue from recoveries		(23,465)		(21,957)		—		(21,957)
Total period deferred setup fees		(7,053)		(5,961)		(135)		(6,096)
Total period straight line rent and other		(9,428)		(5,921)		(2,856)		(8,777)
Recognized MRR in the period		191,910		169,100		20,044		189,144

MRR at period end
Total period revenues (GAAP basis)	$	231,856	$	202,939	$	23,035	$	225,974
Less: Total revenues excluding last month		(190,552)		(168,091)		(20,168)		(188,259)
Total revenues for last month of period		41,304		34,848		2,867		37,715
Less: Last month variable lease revenue from recoveries		(4,222)		(3,597)		—		(3,597)
Last month deferred setup fees		(1,322)		(984)		(99)		(1,083)
Last month straight line rent and other		(3,349)		(745)		(1,139)		(1,884)
Add: Pro rata share of MRR at period end of unconsolidated entity		369		—		—		—
MRR at period end	$	32,780	$	29,522	$	1,629	$	31,151

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA,

The Company calculates EBITDAre in accordance with (“NAREIT”). EBITDAre represents net income (loss) (computed in accordance with GAAP), adjusted to exclude gains (or losses) from sales of depreciated property, income tax expense (or benefit), interest expense, depreciation and amortization, impairments of depreciated property and unconsolidated entities, and similar adjustments for unconsolidated entities. The Company’s management uses EBITDAre as a supplemental performance measure because it provides performance measures that, when compared year over year, captures the performance of the Company’s operations by removing the impact of capital structure (primarily interest expense) and asset base charges (primarily depreciation and amortization) from its operating results.

Due to the volatility and nature of certain significant charges and gains recorded in the Company’s operating results that management believes are not reflective of its operating performance, management computes an adjusted measure of EBITDAre, which the Company refers to as Adjusted EBITDA. The Company generally calculates Adjusted EBITDA excluding certain non-routine charges, write off of unamortized deferred financing costs, gains (losses) on extinguishment of debt, restructuring costs, and transaction and integration costs, as well as the Company’s pro-rata share of each of those respective expenses associated with the unconsolidated entity aggregated into one line item categorized as “Adjustments for the unconsolidated entity.” In addition, the Company calculates Adjusted EBITDA excluding certain non-cash recurring costs such as equity-based compensation. The Company believes that Adjusted EBITDA provides investors with another financial measure that may facilitate comparisons of operating performance between periods and, to the extent other REITs calculate Adjusted EBITDA on a comparable basis, between REITs.

Management uses EBITDAre and Adjusted EBITDA as supplemental performance measures as they provide useful measures of assessing the Company’s operating results. Other companies may not calculate EBITDAre or Adjusted EBITDA in the same manner. Accordingly, the Company’s EBITDAre and Adjusted EBITDA may not be comparable to others. EBITDAre and Adjusted EBITDA should be considered only as supplements to net income (loss) as measures of the Company’s performance and should not be used as substitutes for net income (loss), as measures of its results of operations or liquidity or as an indications of funds available to meet its cash needs, including its ability to make distributions to its stockholders.

For periods in 2018, Core EBITDAre and Adjusted EBITDAre are used as supplemental performance measures because they reflect results of the portion of the business of the Company retained following completion of the strategic growth plan.

A reconciliation of net income (loss) to EBITDAre and Adjusted EBITDA on a consolidated, Core and non-Core basis is presented below (unaudited and in thousands):


	Three Months Ended
	June 30, 2019		March 31, 2019		June 30, 2018
	Total		Total		Core		Non-Core		Total
EBITDAre and Adjusted EBITDA
Net income (loss)	$	7,535	$	21,148	$	5,397	$	(11,830)	$	(6,433)
Equity in net (income) loss of unconsolidated entity		401		274		—		—		—
Interest income		(36)		(45)		(25)		—		(25)
Interest expense		6,459		7,146		8,199		4		8,203
Tax expense (benefit) of taxable REIT subsidiaries		199		211		178		(41)		137
Depreciation and amortization		41,481		38,788		35,233		2,586		37,819
(Gain) loss on disposition of depreciated property and impairment write-downs of depreciated property		—		(13,408)		—		3,122		3,122
Pro rata share of EBITDAre from unconsolidated entity		863		215		—		—		—
EBITDAre	$	56,902	$	54,329	$	48,982	$	(6,159)	$	42,823

Equity-based compensation expense		4,296		3,300		3,999		—		3,999
Restructuring costs		—		—		—		8,308		8,308
Transaction and integration costs		1,039		1,214		653		—		653
Adjusted EBITDA	$	62,237	$	58,843	$	53,634	$	2,149	$	55,783


	Six Months Ended
	June 30, 2019		June 30, 2018
	Total		Core		Non-Core		Total
EBITDAre and Adjusted EBITDA
Net income (loss)	$	28,683	$	10,480	$	(17,165)	$	(6,685)
Equity in net (income) loss of unconsolidated entity		675		—		—		—
Interest income		(81)		(26)		—		(26)
Interest expense		13,605		16,302		11		16,313
Tax expense (benefit) of taxable REIT subsidiaries		410		(589)		(1,676)		(2,265)
Depreciation and amortization		80,269		68,573		5,160		73,733
(Gain) loss on disposition of depreciated property and impairment write-downs of depreciated property		(13,408)		—		7,139		7,139
Pro rata share of EBITDAre from unconsolidated entity		1,078		—		—		—
EBITDAre	$	111,231	$	94,740	$	(6,531)	$	88,209

Equity-based compensation expense		7,596		7,480		—		7,480
Restructuring costs		—		—		12,821		12,821
Transaction and integration costs		2,253		1,573		—		1,573
Adjusted EBITDA	$	121,080	$	103,793	$	6,290	$	110,083

Net Operating Income (NOI)

The Company calculates net operating income (“NOI”) as net income (loss) (computed in accordance with GAAP), excluding: interest expense, interest income, tax expense (benefit) of taxable REIT subsidiaries, depreciation and amortization, write off of unamortized deferred financing costs, debt restructuring costs, gain (loss) on extinguishment of debt, transaction and integration costs, gain (loss) on sale of real estate, restructuring costs, general and administrative expenses and similar adjustments for unconsolidated entities. The Company allocates a management fee charge of 4% of cash revenues for all facilities as a property operating cost and a corresponding reduction to general and administrative expense to cover the day-to-day administrative costs to operate our data centers. The management fee charge is reflected as a reduction to net operating income.

Management uses NOI as a supplemental performance measure because it provides a useful measure of the operating results from its customer leases. In addition, management believes it is useful to investors in evaluating and comparing the operating performance of its properties and to compute the fair value of its properties. The Company’s NOI may not be comparable to other REITs’ NOI as other REITs may not calculate NOI in the same manner. NOI should be considered only as a supplement to net income as a measure of the Company’s performance and should not be used as a measure of results of operations or liquidity or as an indication of funds available to meet cash needs, including the ability to make distributions to stockholders. NOI is a measure of the operating performance of the Company’s properties and not of the Company’s performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP.

For periods in 2018, Core NOI is used as a supplemental performance measure because it reflects results of the portion of the business the Company retained following completion of the strategic growth plan.

A reconciliation of net income (loss) to NOI on a consolidated, Core and non-Core basis is presented below (unaudited and in thousands):


	Three Months Ended
	June 30, 2019		March 31, 2019		June 30, 2018
	Total		Total		Core		Non-Core		Total
Net Operating Income (NOI)
Net income (loss)	$	7,535	$	21,148	$	5,397	$	(11,830)	$	(6,433)
Equity in net (income) loss of unconsolidated entity		401		274		—		—		—
Interest income		(36)		(45)		(25)		—		(25)
Interest expense		6,459		7,146		8,199		4		8,203
Depreciation and amortization		41,481		38,788		35,233		2,586		37,819
Other (income) expense		40		—		—		—		—
Tax expense (benefit) of taxable REIT subsidiaries		199		211		178		(41)		137
Transaction and integration costs		1,039		1,214		653		—		653
General and administrative expenses		20,124		19,891		18,004		3,028		21,032
Gain on sale of real estate, net		—		(13,408)		—		—		—
Restructuring		—		—		—		11,430		11,430
NOI from consolidated operations (1)	$	77,242	$	75,219	$	67,639	$	5,177	$	72,816
Pro rata share of NOI from unconsolidated entity		842		234		—		—		—
Total NOI (1)	$	78,084	$	75,453	$	67,639	$	5,177	$	72,816

(1)

Includes facility level general and administrative allocation charges of 4% of cash revenue for all facilities. These allocated charges aggregated to $4.6 million, $4.5 million and $4.6 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively.


	Six Months Ended
	June 30, 2019		June 30, 2018
	Total		Core		Non-Core		Total
Net Operating Income (NOI)
Net income (loss)	$	28,683	$	10,480	$	(17,165)	$	(6,685)
Equity in net (income) loss of unconsolidated entity		675		—		—		—
Interest income		(81)		(26)		—		(26)
Interest expense		13,605		16,302		11		16,313
Depreciation and amortization		80,269		68,573		5,160		73,733
Other (income) expense		40		—		—		—
Tax expense (benefit) of taxable REIT subsidiaries		410		(589)		(1,676)		(2,265)
Transaction and integration costs		2,253		1,573		—		1,573
General and administrative expenses		40,015		36,118		7,147		43,265
Gain on sale of real estate, net		(13,408)		—		—		—
Restructuring		—		—		19,960		19,960
NOI from consolidated operations (1)	$	152,461	$	132,431	$	13,437	$	145,868
Pro rata share of NOI from unconsolidated entity		1,076		—		—		—
Total NOI (1)	$	153,537	$	132,431	$	13,437	$	145,868

(1)Includes facility level general and administrative allocation charges of 4% of cash revenue for all facilities. These allocated charges aggregated to $9.0 million and $8.8 million for the six months ended June 30, 2019 and 2018, respectively.


	June 30, 2019			December 31, 2018
	Annualized Rent (1)		% of Portfolio	Annualized Rent (2)		% of Portfolio
Hyperscale	$	132,834,728	34%	$	126,996,225	34%
Hybrid Colocation	$	260,525,812	66%	$	246,693,987	66%
Portfolio Total	$	393,360,540	100%	$	373,690,212	100%


Overview
Company Profile	3

Financial Statements
Consolidated Balance Sheets	4
Consolidated Statements of Operations	5
Consolidated Statements of Comprehensive Income	6
Summary of Financial Data	7
Reconciliations of Return on Invested Capital (ROIC)	9
Implied Enterprise Value and Weighted Average Shares	10

Operating Portfolio
Data Center Properties	11
Development Costs Summary	12
Development Summary	13
NOI by Facility and Capital Expenditure Summary	14
Leasing Statistics – Signed Leases	15
Leasing Statistics – Renewed and Rental Churn	16
Lease Expirations	17
Largest Customers	18
Industry & Product Diversification	19

Capital Structure
Debt Summary and Debt Maturities	20
Interest Summary	21

Appendix	22