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 June 30, 2017

 

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

QTS Realty Trust, Inc.

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

☐  (Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

QualityTech, LP

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

☒  (Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

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 48,675,777 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 July 28, 2017.

 

 

 


 

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’s 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 June 30, 2017, its only material asset consisted of its ownership of approximately 87.8% 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 voting 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, and accumulated dividends in excess of earnings. The remaining equity reflected on QTS’ 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 is that for net income, QTS retains its proportionate share of the net income 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 audit reports, separate controls and procedures sections, separate Exhibit 31 and 32 certifications, and separate presentation of certain accompanying notes to the financial statements, including Note 8 – 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 June 30, 2017

 

INDEX

 

 

 

 

 

 

 

 

Page

PART I. 

FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1.

Financial Statements of QTS Realty Trust, Inc.

 

4

 

 

 

 

 

Financial Statements of QualityTech, LP

 

10

 

 

 

 

 

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

 

16

 

 

 

 

ITEM 2. 

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

 

37

 

 

 

 

ITEM 3. 

Quantitative and Qualitative Disclosures About Market Risk

 

60

 

 

 

 

ITEM 4. 

Controls and Procedures

 

60

 

 

 

 

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 CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(in thousands except share data)

 

 

 

 

 

 

 

 

 

    

June 30, 2017

    

December 31, 2016

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Real Estate Assets

 

 

 

 

 

 

Land

 

$

86,192

 

$

74,130

Buildings, improvements and equipment

 

 

1,625,254

 

 

1,524,767

Less: Accumulated depreciation

 

 

(354,522)

 

 

(317,834)

 

 

 

1,356,924

 

 

1,281,063

Construction in progress

 

 

363,449

 

 

365,960

Real Estate Assets, net

 

 

1,720,373

 

 

1,647,023

Cash and cash equivalents

 

 

42,604

 

 

9,580

Rents and other receivables, net

 

 

44,033

 

 

41,540

Acquired intangibles, net

 

 

119,384

 

 

129,754

Deferred costs, net

 

 

38,152

 

 

38,507

Prepaid expenses

 

 

8,875

 

 

6,918

Goodwill

 

 

173,843

 

 

173,843

Other assets, net

 

 

59,119

 

 

39,305

TOTAL ASSETS

 

$

2,206,383

 

$

2,086,470

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Unsecured credit facility, net

 

$

744,307

 

$

634,939

Senior notes, net of discount and debt issuance costs

 

 

292,858

 

 

292,179

Capital lease, lease financing obligations and mortgage notes payable

 

 

34,059

 

 

38,708

Accounts payable and accrued liabilities

 

 

84,052

 

 

86,129

Dividends and distributions payable

 

 

21,606

 

 

19,634

Advance rents, security deposits and other liabilities

 

 

31,505

 

 

24,893

Deferred income taxes

 

 

12,207

 

 

15,185

Deferred income

 

 

23,433

 

 

21,993

TOTAL LIABILITIES

 

 

1,244,027

 

 

1,133,660

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Common stock, $0.01 par value, 450,133,000 shares authorized, 48,812,009 and 47,831,250 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively

 

 

488

 

 

478

Additional paid-in capital

 

 

972,370

 

 

931,783

Accumulated other comprehensive loss

 

 

(1,316)

 

 

 —

Accumulated dividends in excess of earnings

 

 

(126,574)

 

 

(97,793)

Total stockholders’ equity

 

 

844,968

 

 

834,468

Noncontrolling interests

 

 

117,388

 

 

118,342

TOTAL EQUITY

 

 

962,356

 

 

952,810

TOTAL LIABILITIES AND EQUITY

 

$

2,206,383

 

$

2,086,470

 

See accompanying notes to financial statements.

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QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

    

2017

    

2016

    

2017

    

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

80,793

 

$

71,670

 

$

159,910

 

$

140,096

Recoveries from customers

 

 

8,774

 

 

6,168

 

 

17,135

 

 

11,603

Cloud and managed services

 

 

16,856

 

 

17,015

 

 

33,821

 

 

35,905

Other

 

 

1,445

 

 

3,834

 

 

2,966

 

 

5,851

Total revenues

 

 

107,868

 

 

98,687

 

 

213,832

 

 

193,455

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Property operating costs

 

 

36,846

 

 

32,646

 

 

72,267

 

 

64,427

Real estate taxes and insurance

 

 

2,946

 

 

2,020

 

 

6,093

 

 

3,760

Depreciation and amortization

 

 

34,527

 

 

30,355

 

 

68,475

 

 

58,994

General and administrative

 

 

22,562

 

 

21,608

 

 

44,759

 

 

41,894

Transaction and integration costs

 

 

161

 

 

3,833

 

 

497

 

 

5,920

Total operating expenses

 

 

97,042

 

 

90,462

 

 

192,091

 

 

174,995

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

10,826

 

 

8,225

 

 

21,741

 

 

18,460

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 —

 

 

 2

 

 

 1

 

 

 2

Interest expense

 

 

(7,647)

 

 

(4,874)

 

 

(14,516)

 

 

(10,855)

Income before taxes

 

 

3,179

 

 

3,353

 

 

7,226

 

 

7,607

Tax benefit of taxable REIT subsidiaries

 

 

1,429

 

 

2,454

 

 

2,950

 

 

5,059

Net income

 

 

4,608

 

 

5,807

 

 

10,176

 

 

12,666

Net income attributable to noncontrolling interests

 

 

(568)

 

 

(707)

 

 

(1,259)

 

 

(1,677)

Net income attributable to QTS Realty Trust, Inc.

 

$

4,040

 

$

5,100

 

$

8,917

 

$

10,989

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

$

0.11

 

$

0.18

 

$

0.25

Diluted

 

 

0.08

 

 

0.10

 

 

0.17

 

 

0.24

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

47,666,086

 

 

47,783,093

 

 

47,561,507

 

 

44,537,769

Diluted

 

 

55,458,429

 

 

55,574,545

 

 

55,336,062

 

 

52,274,198

 

See accompanying notes to financial statements.

 

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Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

    

2017

    

2016

    

2017

    

2016

Net income

 

$

4,608

 

$

5,807

 

$

10,176

 

$

12,666

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in fair value of interest rate swaps

 

 

(1,499)

 

 

 —

 

 

(1,499)

 

 

 —

Comprehensive income

 

 

3,109

 

 

5,807

 

 

8,677

 

 

12,666

Comprehensive income attributable to noncontrolling interests

 

 

(385)

 

 

 —

 

 

(1,076)

 

 

 —

Comprehensive income attributable to QTS Realty Trust, Inc.

 

$

2,724

 

$

5,807

 

$

7,601

 

$

12,666

 

 

See accompanying notes to financial statements.

 

 

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Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF EQUITY

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Accumulated

 

Total

 

 

 

 

 

 

 

Common stock

 

Additional

 

other comprehensive

 

dividends in

 

stockholders'

 

Noncontrolling

 

 

 

 

Shares

    

Amount

    

paid-in capital

 

loss

    

excess of earnings

    

equity

    

interests

    

Total

Balance January 1, 2017

47,831

 

$

478

 

$

931,783

 

$

 -

 

$

(97,793)

 

$

834,468

 

$

118,342

 

$

952,810

Net share activity through equity award plan

235

 

 

 2

 

 

(1,727)

 

 

 -

 

 

 -

 

 

(1,725)

 

 

(243)

 

 

(1,968)

Decrease in fair value of interest rate swaps

 -

 

 

 -

 

 

 -

 

 

(1,316)

 

 

 -

 

 

(1,316)

 

 

(183)

 

 

(1,499)

Equity-based compensation expense

 -

 

 

 -

 

 

5,971

 

 

 -

 

 

 -

 

 

5,971

 

 

843

 

 

6,814

Net proceeds from equity offerings

746

 

 

 8

 

 

36,343

 

 

 -

 

 

 -

 

 

36,351

 

 

2,660

 

 

39,011

Dividends to shareholders

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(37,698)

 

 

(37,698)

 

 

 -

 

 

(37,698)

Distributions to noncontrolling interests

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(5,290)

 

 

(5,290)

Net income

 -

 

 

 -

 

 

 -

 

 

 -

 

 

8,917

 

 

8,917

 

 

1,259

 

 

10,176

Balance June 30, 2017

48,812

 

$

488

 

$

972,370

 

$

(1,316)

 

$

(126,574)

 

$

844,968

 

$

117,388

 

$

962,356

 

 

 

See accompanying notes to financial statements.

 

 

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QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the six months ended June 30, 2017 and 2016

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

 

 

 

 

(as adjusted)

Cash flow from operating activities:

 

 

 

 

Net income

 

$

10,176

 

$

12,666

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

 

 

 

 

 

 

Depreciation and amortization

 

 

66,443

 

 

56,936

Amortization of above and below market leases

 

 

479

 

 

201

Amortization of deferred loan costs

 

 

1,815

 

 

1,626

Amortization of senior notes discount

 

 

136

 

 

128

Equity-based compensation expense

 

 

6,815

 

 

5,250

Bad debt expense

 

 

1,105

 

 

808

Deferred tax benefit

 

 

(2,979)

 

 

(5,059)

Changes in operating assets and liabilities

 

 

 

 

 

 

Rents and other receivables, net

 

 

(3,599)

 

 

(9,834)

Prepaid expenses

 

 

(1,957)

 

 

(1,966)

Other assets

 

 

(595)

 

 

(479)

Accounts payable and accrued liabilities

 

 

(7,640)

 

 

5,390

Advance rents, security deposits and other liabilities

 

 

5,745

 

 

1,484

Deferred income

 

 

1,440

 

 

1,351

Net cash provided by operating activities

 

 

77,384

 

 

68,502

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(5,019)

 

 

(122,981)

Additions to property and equipment

 

 

(139,818)

 

 

(149,303)

Net cash used in investing activities

 

 

(144,837)

 

 

(272,284)

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

Credit facility proceeds

 

 

109,000

 

 

231,000

Debt repayment

 

 

 —

 

 

(259,002)

Debt proceeds

 

 

1,920

 

 

 —

Payment of deferred financing costs

 

 

(38)

 

 

 —

Payment of cash dividends

 

 

(35,958)

 

 

(28,104)

Distribution to noncontrolling interests

 

 

(5,087)

 

 

(4,724)

Proceeds from exercise of stock options

 

 

662

 

 

666

Payment of tax withholdings related to equity based awards

 

 

(2,464)

 

 

(1,301)

Principal payments on capital lease obligations

 

 

(6,547)

 

 

(6,454)

Mortgage principal debt repayments

 

 

(22)

 

 

 —

Equity proceeds, net of issuance costs

 

 

39,011

 

 

275,673

Net cash provided by financing activities

 

 

100,477

 

 

207,754

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

33,024

 

 

3,972

Cash and cash equivalents, beginning of period

 

 

9,580

 

 

8,804

Cash and cash equivalents, end of period

 

$

42,604

 

$

12,776

 

See accompanying notes to financial statements.

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Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the six months ended June 30, 2017 and 2016

 

 

 

 

 

 

 

 

 

    

2017

    

2016

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

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

 

$

11,517

 

$

9,001

Noncash investing and financing activities:

 

 

 

 

 

 

Accrued capital additions

 

$

46,894

 

$

16,988

Increase in other liabilities related to change in fair value of interest rate swaps

 

$

1,499

 

$

 —

Accrued equity issuance costs

 

$

 —

 

$

10

 

 

 

 

 

 

 

Acquisitions, net of cash acquired:

 

 

 

 

 

 

Land

 

$

5,019

 

$

7,439

Buildings, improvements and equipment

 

 

 —

 

 

78,370

Construction in Progress

 

 

 —

 

 

13,900

Rents and other receivables, net

 

 

 —

 

 

(2,033)

Acquired intangibles

 

 

 —

 

 

36,368

Deferred costs

 

 

 —

 

 

4,084

Prepaid expenses

 

 

 —

 

 

479

Goodwill

 

 

 —

 

 

(7,895)

Other assets

 

 

 —

 

 

303

Accounts payable and accrued liabilities

 

 

 —

 

 

(922)

Advance rents, security deposits and other liabilities

 

 

 —

 

 

(1,102)

Deferred income

 

 

 —

 

 

35

Deferred income taxes

 

 

 —

 

 

(6,045)

Total acquisitions, net of cash acquired

 

$

5,019

 

$

122,981

 

See accompanying notes to financial statements.

 

 

9


 

Table of Contents

 

QUALITYTECH, LP 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

 

 

    

June 30, 2017

    

December 31, 2016

 

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

Real Estate Assets

 

 

 

 

 

 

Land

 

$

86,192

 

$

74,130

Buildings, improvements and equipment

 

 

1,625,254

 

 

1,524,767

Less: Accumulated depreciation

 

 

(354,522)

 

 

(317,834)

 

 

 

1,356,924

 

 

1,281,063

Construction in progress

 

 

363,449

 

 

365,960

Real Estate Assets, net

 

 

1,720,373

 

 

1,647,023

Cash and cash equivalents

 

 

42,604

 

 

9,580

Rents and other receivables, net

 

 

44,033

 

 

41,540

Acquired intangibles, net

 

 

119,384

 

 

129,754

Deferred costs, net

 

 

38,152

 

 

38,507

Prepaid expenses

 

 

8,875

 

 

6,918

Goodwill

 

 

173,843

 

 

173,843

Other assets, net

 

 

59,119

 

 

39,305

TOTAL ASSETS

 

$

2,206,383

 

$

2,086,470

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Unsecured credit facility, net

 

$

744,307

 

$

634,939

Senior notes, net of discount and debt issuance costs

 

 

292,858

 

 

292,179

Capital lease, lease financing obligations and mortgage notes payable

 

 

34,059

 

 

38,708

Accounts payable and accrued liabilities

 

 

84,052

 

 

86,129

Dividends and distributions payable

 

 

21,606

 

 

19,634

Advance rents, security deposits and other liabilities

 

 

31,505

 

 

24,893

Deferred income taxes

 

 

12,207

 

 

15,185

Deferred income

 

 

23,433

 

 

21,993

TOTAL LIABILITIES

 

 

1,244,027

 

 

1,133,660

 

 

 

 

 

 

 

PARTNERS' CAPITAL

 

 

 

 

 

 

Partners' capital

 

 

963,855

 

 

952,810

Accumulated other comprehensive loss

 

 

(1,499)

 

 

 —

TOTAL PARTNERS' CAPITAL

 

 

962,356

 

 

952,810

TOTAL LIABILITIES AND PARTNERS' CAPITAL

 

$

2,206,383

 

$

2,086,470

 

See accompanying notes to financial statements.

 

10


 

Table of Contents

QUALITYTECH, LP 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

    

2017

    

2016

    

2017

    

2016

Revenues:

 

 

 

 

 

 

 

 

Rental

 

$

80,793

 

$

71,670

 

$

159,910

 

$

140,096

Recoveries from customers

 

 

8,774

 

 

6,168

 

 

17,135

 

 

11,603

Cloud and managed services

 

 

16,856

 

 

17,015

 

 

33,821

 

 

35,905

Other

 

 

1,445

 

 

3,834

 

 

2,966

 

 

5,851

Total revenues

 

 

107,868

 

 

98,687

 

 

213,832

 

 

193,455

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Property operating costs

 

 

36,846

 

 

32,646

 

 

72,267

 

 

64,427

Real estate taxes and insurance

 

 

2,946

 

 

2,020

 

 

6,093

 

 

3,760

Depreciation and amortization

 

 

34,527

 

 

30,355

 

 

68,475

 

 

58,994

General and administrative

 

 

22,562

 

 

21,608

 

 

44,759

 

 

41,894

Transaction and integration costs

 

 

161

 

 

3,833

 

 

497

 

 

5,920

Total operating expenses

 

 

97,042

 

 

90,462

 

 

192,091

 

 

174,995

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

10,826

 

 

8,225

 

 

21,741

 

 

18,460

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 —

 

 

 2

 

 

 1

 

 

 2

Interest expense

 

 

(7,647)

 

 

(4,874)

 

 

(14,516)

 

 

(10,855)

Income before taxes

 

 

3,179

 

 

3,353

 

 

7,226

 

 

7,607

Tax benefit of taxable REIT subsidiaries

 

 

1,429

 

 

2,454

 

 

2,950

 

 

5,059

Net income

 

$

4,608

 

$

5,807

 

$

10,176

 

$

12,666

 

See accompanying notes to financial statements.

 

11


 

Table of Contents

QUALITYTECH, LP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

    

2017

    

2016

    

2017

    

2016

Net income

 

$

4,608

 

$

5,807

 

$

10,176

 

$

12,666

Other comprehensive loss: