qts_Current_Folio_10Q

Table of Contents

 

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                      

 

Commission File Number 001-36109


 

QTS Realty Trust, Inc.

 

QualityTech, LP

(Exact name of registrant as specified in its charter)


 

Maryland (QTS Realty Trust, Inc.)

46-2809094

Delaware (QualityTech, LP)

(State or other jurisdiction of

incorporation or organization)

27-0707288

(I.R.S. Employer

Identification No.)

 

 

12851 Foster Street, Overland Park, Kansas

66213

(Address of principal executive offices)

(Zip Code)

 

(Registrant’s telephone number, including area code) (913) 312-5503

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 

 

QTS Realty Trust, Inc.  Yes  ☒     No  ☐

QualityTech, LP   Yes  ☒     No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

 

 

 

QTS Realty Trust, Inc.  Yes  ☒     No  ☐

QualityTech, LP   Yes  ☒     No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

QTS Realty Trust, Inc.

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

☐  (Do not check if a smaller reporting company)

Smaller reporting company

 

 

QualityTech, LP

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

☒  (Do not check if a smaller reporting company)

Smaller reporting company

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 

 

QTS Realty Trust, Inc.  Yes  ☐     No  ☒

QualityTech, LP   Yes  ☐     No  ☒

 

There were 47,705,495 shares of Class A common stock, $0.01 par value per share, and 133,000 shares of Class B common stock, $0.01 par value per share, of QTS Realty Trust, Inc. outstanding on November 4, 2016.

 

 

 


 

Table of Contents

EXPLANATORY NOTE

 

This report combines the quarterly reports on Form 10-Q of QTS Realty Trust, Inc. (“QTS”) and QualityTech, LP, a Delaware limited partnership, which is our operating partnership (the “Operating Partnership”).  This report also includes the financial statements of QTS and those of the Operating Partnership, although it presents only one set of combined notes for QTS’ financial statements and those of the Operating Partnership.

 

Substantially all of QTS’ assets are held by, and its operations are conducted through, the Operating Partnership.  QTS is the sole general partner of the Operating Partnership, and, as of September 30, 2016, its only material asset consisted of its ownership of approximately 87.6% of the Operating Partnership. Management operates QTS and the Operating Partnership as one business. The management of QTS consists of the same employees as the management of the Operating Partnership. QTS does not conduct business itself, other than acting as the sole general partner of the Operating Partnership and issuing public equity from time to time. QTS has not issued or guaranteed any indebtedness. Except for net proceeds from public equity issuances by QTS, which are contributed to the Operating Partnership in exchange for units of limited partnership interest of the Operating Partnership, the Operating Partnership generates all remaining capital required by our business through its operations, the direct or indirect incurrence of indebtedness, and the issuance of partnership units. Therefore, as general partner with control of the Operating Partnership, QTS consolidates the Operating Partnership for financial reporting purposes.

 

We believe, therefore, that a combined presentation with respect to QTS and the Operating Partnership, including providing one set of notes for the financial statements of QTS and the Operating Partnership, provides the following benefits:

 

·

enhances investors’ understanding of QTS and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

 

·

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this report applies to both QTS and the Operating Partnership; and

 

·

creates time and cost efficiencies through the preparation of one presentation instead of two separate presentations.

 

In addition, in light of these combined disclosures, we believe it is important for investors to understand the few differences between QTS and the Operating Partnership in the context of how QTS and the Operating Partnership operate as a consolidated company. With respect to balance sheets, the presentation of stockholders’ equity and partners’ capital are the main areas of difference between the consolidated balance sheets of QTS and those of the Operating Partnership. On the Operating Partnership’s consolidated balance sheets, partners’ capital includes partnership units that are owned by QTS and other partners. On QTS’ consolidated balance sheets, stockholders’ equity includes common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated dividends in excess of earnings. The remaining equity reflected on QTS’s consolidated balance sheet is the portion of net assets that are retained by partners other than QTS, referred to as noncontrolling interests. With respect to statements of operations, the primary difference in QTS’ Statements of Operations and Comprehensive Income is that for net income (loss), QTS retains its proportionate share of the net income (loss) based on its ownership of the Operating Partnership, with the remaining balance being retained by the Operating Partnership.

 

In order to highlight the few differences between QTS and the Operating Partnership, there are sections and disclosure in this report that discuss QTS and the Operating Partnership separately, including separate financial statements, separate controls and procedures sections, separate Exhibit 31 and 32 certifications, and separate presentation of certain accompanying notes to the financial statements, including Note 7 – Partners’ Capital, Equity and Incentive Compensation Plans. In the sections that combine disclosure for QTS and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of “we,” “our,” “us,” “our company” and “the Company.” Although the Operating Partnership is generally the entity that enters into contracts, holds assets and issues debt, we believe that these general references to “we,” “our,” “us,” “our company” and “the Company” in this context are appropriate because the business is one enterprise operated through the Operating Partnership.

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Table of Contents

QTS Realty Trust, Inc.

QualityTech, LP

Form 10-Q

For the Quarterly Period Ended September 30, 2016

 

INDEX

 

 

 

 

 

 

 

 

Page

PART I. 

FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1. 

Financial Statements of QTS Realty Trust, Inc.

 

4

 

 

 

 

 

Financial Statements of QualityTech, LP

 

9

 

 

 

 

 

Notes to QTS Realty Trust, Inc. and QualityTech, LP Financial Statements

 

14

 

 

 

 

ITEM 2. 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

36

 

 

 

 

ITEM 3. 

Quantitative and Qualitative Disclosures About Market Risk

 

60

 

 

 

 

ITEM 4. 

Controls and Procedures

 

61

 

 

 

 

PART II. 

OTHER INFORMATION

 

 

 

 

 

 

ITEM 1. 

Legal Proceedings

 

62

 

 

 

 

ITEM 1A. 

Risk Factors

 

62

 

 

 

 

ITEM 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

 

62

 

 

 

 

ITEM 3. 

Defaults Upon Senior Securities

 

63

 

 

 

 

ITEM 4. 

Mine Safety Disclosures

 

63

 

 

 

 

ITEM 5. 

Other Information

 

63

 

 

ITEM 6. 

Exhibits

 

63

 

 

 

Signatures

 

66

 

 

3


 

Table of Contents

PART I. FINANCIAL INFORMATION 

 

ITEM 1. Financial Statements 

 

QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(in thousands except share data)

 

 

 

 

 

 

 

 

 

 

    

September 30, 2016

    

December 31, 2015

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Real Estate Assets

 

 

 

 

 

 

 

Land

 

$

73,968

 

$

57,112

 

Buildings, improvements and equipment

 

 

1,449,376

 

 

1,180,386

 

Less: Accumulated depreciation

 

 

(295,879)

 

 

(239,936)

 

 

 

 

1,227,465

 

 

997,562

 

Construction in progress

 

 

320,650

 

 

345,655

 

Real Estate Assets, net

 

 

1,548,115

 

 

1,343,217

 

Cash and cash equivalents

 

 

11,769

 

 

8,804

 

Rents and other receivables, net

 

 

34,192

 

 

28,233

 

Acquired intangibles, net

 

 

135,306

 

 

115,702

 

Deferred costs, net

 

 

35,714

 

 

30,042

 

Prepaid expenses

 

 

9,835

 

 

6,502

 

Goodwill

 

 

173,843

 

 

181,738

 

Other assets, net

 

 

37,813

 

 

33,101

 

TOTAL ASSETS

 

$

1,986,587

 

$

1,747,339

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Unsecured credit facility, net

 

$

529,395

 

$

520,956

 

Senior notes, net of discount and debt issuance costs

 

 

291,842

 

 

290,852

 

Capital lease and lease financing obligations

 

 

41,825

 

 

49,761

 

Accounts payable and accrued liabilities

 

 

84,053

 

 

95,924

 

Dividends and distributions payable

 

 

19,653

 

 

15,378

 

Advance rents, security deposits and other liabilities

 

 

20,655

 

 

18,798

 

Deferred income taxes

 

 

16,018

 

 

18,813

 

Deferred income

 

 

18,403

 

 

16,991

 

TOTAL LIABILITIES

 

 

1,021,844

 

 

1,027,473

 

EQUITY

 

 

 

 

 

 

 

Common stock, $0.01 par value, 450,133,000 shares authorized, 47,857,646 and 41,225,784 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively

 

 

479

 

 

412

 

Additional paid-in capital

 

 

930,128

 

 

670,275

 

Accumulated dividends in excess of earnings

 

 

(85,378)

 

 

(52,732)

 

Total stockholders’ equity

 

 

845,229

 

 

617,955

 

Noncontrolling interests

 

 

119,514

 

 

101,911

 

TOTAL EQUITY

 

 

964,743

 

 

719,866

 

TOTAL LIABILITIES AND EQUITY

 

$

1,986,587

 

$

1,747,339

 

 

See accompanying notes to financial statements.

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Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

    

2016

    

2015

    

2016

    

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

77,005

 

$

62,744

 

$

217,101

 

$

164,270

 

Recoveries from customers

 

 

8,703

 

 

6,158

 

 

20,306

 

 

17,404

 

Cloud and managed services

 

 

16,243

 

 

18,573

 

 

52,148

 

 

32,588

 

Other

 

 

1,514

 

 

1,415

 

 

7,365

 

 

4,131

 

Total revenues

 

 

103,465

 

 

88,890

 

 

296,920

 

 

218,393

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating costs

 

 

36,288

 

 

30,925

 

 

100,715

 

 

72,292

 

Real estate taxes and insurance

 

 

2,566

 

 

1,462

 

 

6,326

 

 

4,421

 

Depreciation and amortization

 

 

32,699

 

 

24,486

 

 

91,693

 

 

58,791

 

General and administrative

 

 

19,942

 

 

19,440

 

 

61,836

 

 

47,893

 

Transaction and integration costs

 

 

3,465

 

 

1,482

 

 

9,385

 

 

6,256

 

Total operating expenses

 

 

94,960

 

 

77,795

 

 

269,955

 

 

189,653

 

Operating income

 

 

8,505

 

 

11,095

 

 

26,965

 

 

28,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

1

 

 

3

 

 

2

 

Interest expense

 

 

(6,179)

 

 

(5,418)

 

 

(17,034)

 

 

(15,559)

 

Other expense, net

 

 

1

 

 

 —

 

 

1

 

 

(83)

 

Income before taxes

 

 

2,328

 

 

5,678

 

 

9,935

 

 

13,100

 

Tax benefit of taxable REIT subsidiaries

 

 

4,210

 

 

2,560

 

 

9,269

 

 

5,695

 

Net income

 

 

6,538

 

 

8,238

 

 

19,204

 

 

18,795

 

Net income attributable to noncontrolling interests

 

 

(808)

 

 

(1,229)

 

 

(2,485)

 

 

(3,072)

 

Net income attributable to QTS Realty Trust, Inc.

 

$

5,730

 

$

7,009

 

$

16,719

 

$

15,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

$

0.17

 

$

0.37

 

$

0.43

 

Diluted

 

 

0.12

 

 

0.17

 

 

0.36

 

 

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

47,854,516

 

 

40,994,387

 

 

45,651,421

 

 

36,354,738

 

Diluted

 

 

55,687,665

 

 

48,733,417

 

 

53,420,326

 

 

44,181,583

 

 

See accompanying notes to financial statements.

 

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Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF EQUITY

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Total

 

 

 

 

 

 

 

 

 

Common stock

 

Additional

 

dividends in

 

stockholders'

 

Noncontrolling

 

 

 

 

 

    

Shares

    

Amount

    

paid-in capital

    

excess of earnings

    

equity

    

interests

    

Total

 

Balance January 1, 2016

 

41,226

 

$

412

 

$

670,275

 

$

(52,732)

 

$

617,955

 

$

101,911

 

$

719,866

 

Net share activity through equity award plan

 

307

 

 

3

 

 

(3)

 

 

 —

 

 

 —

 

 

(1,251)

 

 

(1,251)

 

Equity-based compensation expense

 

 —

 

 

 —

 

 

6,866

 

 

 —

 

 

6,866

 

 

1,021

 

 

7,887

 

Net proceeds from equity offering

 

6,325

 

 

64

 

 

252,990

 

 

 —

 

 

253,054

 

 

22,781

 

 

275,835

 

Dividends to shareholders

 

 —

 

 

 —

 

 

 —

 

 

(49,365)

 

 

(49,365)

 

 

 —

 

 

(49,365)

 

Distributions to noncontrolling interests

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(7,433)

 

 

(7,433)

 

Net income

 

 —

 

 

 —

 

 

 —

 

 

16,719

 

 

16,719

 

 

2,485

 

 

19,204

 

Balance September 30, 2016

 

47,858

 

$

479

 

$

930,128

 

$

(85,378)

 

$

845,229

 

$

119,514

 

$

964,743

 

 

See accompanying notes to financial statements.

 

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QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the nine months ended September 30, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Cash flow from operating activities:

 

 

 

 

 

Net income

 

$

19,204

 

$

18,795

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

89,104

 

 

57,347

 

Amortization of deferred loan costs

 

 

2,424

 

 

2,372

 

Amortization of senior notes discount

 

 

194

 

 

184

 

Equity-based compensation expense

 

 

7,887

 

 

5,206

 

Bad debt expense

 

 

1,201

 

 

640

 

Write off of deferred loan costs

 

 

 —

 

 

83

 

Deferred tax benefit

 

 

(9,298)

 

 

(5,695)

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Rents and other receivables, net

 

 

(9,191)

 

 

(2,382)

 

Prepaid expenses

 

 

(2,854)

 

 

(4,713)

 

Other assets

 

 

(967)

 

 

(352)

 

Accounts payable and accrued liabilities

 

 

3,359

 

 

(2,427)

 

Advance rents, security deposits and other liabilities

 

 

984

 

 

(437)

 

Deferred income

 

 

1,448

 

 

3,698

 

Net cash provided by operating activities

 

 

103,495

 

 

72,319

 

Cash flow from investing activities:

 

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(122,981)

 

 

(288,865)

 

Additions to property and equipment

 

 

(197,751)

 

 

(252,156)

 

Net cash used in investing activities

 

 

(320,732)

 

 

(541,021)

 

Cash flow from financing activities:

 

 

 

 

 

 

 

Credit facility proceeds

 

 

267,000

 

 

420,162

 

Debt repayment

 

 

(259,002)

 

 

(260,000)

 

Payment of deferred financing costs

 

 

(35)

 

 

(577)

 

Payment of cash dividends

 

 

(45,371)

 

 

(32,756)

 

Distribution to noncontrolling interests

 

 

(7,189)

 

 

(6,652)

 

Payments to net settle equity awards

 

 

(1,252)

 

 

 —

 

Principal payments on capital lease obligations

 

 

(9,612)

 

 

(4,415)

 

Mortgage principal debt repayments

 

 

 —

 

 

(16,600)

 

Equity proceeds, net of costs

 

 

275,663

 

 

369,482

 

Net cash provided by financing activities

 

 

220,202

 

 

468,644

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

2,965

 

 

(58)

 

Cash and cash equivalents, beginning of period

 

 

8,804

 

 

10,788

 

Cash and cash equivalents, end of period

 

$

11,769

 

$

10,730

 

 

See accompanying notes to financial statements.

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Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the nine months ended September 30, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

Cash paid for interest (excluding deferred financing costs and amounts capitalized)

 

$

18,659

 

$

17,785

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

Accrued capital additions

 

$

40,344

 

$

48,540

 

Capital lease and lease financing obligations assumed

 

$

 —

 

$

43,832

 

 

 

 

 

 

 

 

 

Acquisitions, net of cash acquired:

 

 

 

 

 

 

 

Land

 

$

7,440

 

$

1,130

 

Buildings, improvements and equipment

 

 

80,390

 

 

78,898

 

Construction in Progress

 

 

13,900

 

 

12,127

 

Rents and other receivables, net

 

 

(2,033)

 

 

13,704

 

Acquired intangibles

 

 

34,281

 

 

93,400

 

Deferred costs

 

 

4,391

 

 

 —

 

Prepaid expenses

 

 

479

 

 

1,653

 

Goodwill

 

 

(7,895)

 

 

174,697

 

Other assets

 

 

303

 

 

633

 

Capital lease and lease financing obligations

 

 

 —

 

 

(43,832)

 

Accounts payable and accrued liabilities

 

 

(922)

 

 

(8,586)

 

Advance rents, security deposits and other liabilities

 

 

(1,343)

 

 

(2,468)

 

Deferred income

 

 

35

 

 

(10,818)

 

Deferred income taxes

 

 

(6,045)

 

 

(21,673)

 

Total acquisitions, net of cash acquired

 

$

122,981

 

$

288,865

 

 

See accompanying notes to financial statements.

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Table of Contents

QUALITYTECH, LP 

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

 

 

 

    

September 30, 2016

    

December 31, 2015

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

Real Estate Assets

 

 

 

 

 

 

 

Land

 

$

73,968

 

$

57,112

 

Buildings, improvements and equipment

 

 

1,449,376

 

 

1,180,386

 

Less: Accumulated depreciation

 

 

(295,879)

 

 

(239,936)

 

 

 

 

1,227,465

 

 

997,562

 

Construction in progress

 

 

320,650

 

 

345,655

 

Real Estate Assets, net

 

 

1,548,115

 

 

1,343,217

 

Cash and cash equivalents

 

 

11,769

 

 

8,804

 

Rents and other receivables, net

 

 

34,192

 

 

28,233

 

Acquired intangibles, net

 

 

135,306

 

 

115,702

 

Deferred costs, net

 

 

35,714

 

 

30,042

 

Prepaid expenses

 

 

9,835

 

 

6,502

 

Goodwill

 

 

173,843

 

 

181,738

 

Other assets, net

 

 

37,813

 

 

33,101

 

TOTAL ASSETS

 

$

1,986,587

 

$

1,747,339

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Unsecured credit facility, net

 

$

529,395

 

$

520,956

 

Senior notes, net of discount and debt issuance costs

 

 

291,842

 

 

290,852

 

Capital lease and lease financing obligations

 

 

41,825

 

 

49,761

 

Accounts payable and accrued liabilities

 

 

84,053

 

 

95,924

 

Dividends and distributions payable

 

 

19,653

 

 

15,378

 

Advance rents, security deposits and other liabilities

 

 

20,655

 

 

18,798

 

Deferred income taxes

 

 

16,018

 

 

18,813

 

Deferred income

 

 

18,403

 

 

16,991

 

TOTAL LIABILITIES

 

 

1,021,844

 

 

1,027,473

 

PARTNERS' CAPITAL

 

 

 

 

 

 

 

Partners' capital

 

 

964,743

 

 

719,866

 

TOTAL LIABILITIES AND PARTNERS' CAPITAL

 

$

1,986,587

 

$

1,747,339

 

 

See accompanying notes to financial statements.

 

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QUALITYTECH, LP 

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

    

2016

    

2015

    

2016

    

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental

 

$

77,005

 

$

62,744

 

$

217,101

 

$

164,270

 

Recoveries from customers

 

 

8,703

 

 

6,158

 

 

20,306

 

 

17,404

 

Cloud and managed services

 

 

16,243

 

 

18,573

 

 

52,148

 

 

32,588

 

Other

 

 

1,514

 

 

1,415

 

 

7,365

 

 

4,131

 

Total revenues

 

 

103,465

 

 

88,890

 

 

296,920

 

 

218,393

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating costs

 

 

36,288

 

 

30,925

 

 

100,715

 

 

72,292

 

Real estate taxes and insurance

 

 

2,566

 

 

1,462

 

 

6,326

 

 

4,421

 

Depreciation and amortization

 

 

32,699

 

 

24,486

 

 

91,693

 

 

58,791

 

General and administrative

 

 

19,942

 

 

19,440

 

 

61,836

 

 

47,893

 

Transaction and integration costs

 

 

3,465

 

 

1,482

 

 

9,385

 

 

6,256

 

Total operating expenses

 

 

94,960

 

 

77,795

 

 

269,955

 

 

189,653

 

Operating income

 

 

8,505

 

 

11,095

 

 

26,965

 

 

28,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

1

 

 

3

 

 

2

 

Interest expense

 

 

(6,179)

 

 

(5,418)

 

 

(17,034)

 

 

(15,559)

 

Other expense, net

 

 

1

 

 

 —

 

 

1

 

 

(83)

 

Income before taxes

 

 

2,328

 

 

5,678

 

 

9,935

 

 

13,100

 

Tax benefit of taxable REIT subsidiaries

 

 

4,210

 

 

2,560

 

 

9,269

 

 

5,695

 

Net income

 

$

6,538

 

$

8,238

 

$

19,204

 

$

18,795

 

 

See accompanying notes to financial statements.

 

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QUALITYTECH, LP

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited Partners' Capital

 

General Partner's Capital

 

 

 

 

 

    

Units

    

Amount

    

Units

    

Amount

    

Total

 

Balance January 1, 2016

 

48,023

 

$

719,866

 

1

 

$

 —

 

$

719,866

 

Net share activity through equity award plan

 

307

 

 

(1,251)

 

 —

 

 

 —

 

 

(1,251)

 

Equity-based compensation expense

 

 —

 

 

7,887

 

 —

 

 

 —

 

 

7,887

 

Net proceeds from QTS Realty Trust, Inc. equity offering

 

6,325

 

 

275,835

 

 —

 

 

 —

 

 

275,835

 

Dividends to QTS Realty Trust, Inc.

 

 —

 

 

(49,365)

 

 —

 

 

 —

 

 

(49,365)

 

Partnership distributions

 

 —

 

 

(7,433)

 

 —

 

 

 —

 

 

(7,433)

 

Net income

 

 —

 

 

19,204

 

 —

 

 

 —

 

 

19,204

 

Balance September 30, 2016

 

54,655

 

$

964,743

 

1

 

$

 —

 

$

964,743

 

 

See accompanying notes to financial statements.

 

11


 

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