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, 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 50,300,171 shares of Class A common stock, $0.01 par value per share, and 128,408 shares of Class B common stock, $0.01 par value per share, of QTS Realty Trust, Inc. outstanding on October 31, 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 September 30, 2017, its only material asset consisted of its ownership of approximately 88.5% 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.

2


 

Table of Contents

QTS Realty Trust, Inc.

QualityTech, LP

Form 10-Q

For the Quarterly Period Ended September 30, 2017

 

INDEX

 

 

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

Financial Statements of QTS Realty Trust, Inc.

4

 

 

 

 

Financial Statements of Quality Tech, 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

39

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

62

 

 

 

ITEM 4.

Controls and Procedures

62

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

ITEM 1.

Legal Proceedings

64

 

 

 

ITEM 1A.

Risk Factors

64

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

 

 

 

ITEM 3.

Defaults Upon Senior Securities

65

 

 

 

ITEM 4.

Mine Safety Disclosures

65

 

 

 

ITEM 5.

Other Information

65

 

 

 

ITEM 6.

Exhibits

65

 

 

 

 

Signatures

67

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

    

September 30, 2017

    

December 31, 2016

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Real Estate Assets

 

 

 

 

 

 

Land

 

$

86,192

 

$

74,130

Buildings, improvements and equipment

 

 

1,668,503

 

 

1,524,767

Less: Accumulated depreciation

 

 

(378,883)

 

 

(317,834)

 

 

 

1,375,812

 

 

1,281,063

Construction in progress

 

 

429,390

 

 

365,960

Real Estate Assets, net

 

 

1,805,202

 

 

1,647,023

Cash and cash equivalents

 

 

9,271

 

 

9,580

Rents and other receivables, net

 

 

47,307

 

 

41,540

Acquired intangibles, net

 

 

114,286

 

 

129,754

Deferred costs, net

 

 

38,172

 

 

38,507

Prepaid expenses

 

 

7,209

 

 

6,918

Goodwill

 

 

173,843

 

 

173,843

Other assets, net

 

 

63,156

 

 

39,305

TOTAL ASSETS

 

$

2,258,446

 

$

2,086,470

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Unsecured credit facility, net

 

$

775,398

 

$

634,939

Senior notes, net of discount and debt issuance costs

 

 

293,192

 

 

292,179

Capital lease, lease financing obligations and mortgage notes payable

 

 

30,725

 

 

38,708

Accounts payable and accrued liabilities

 

 

67,232

 

 

86,129

Dividends and distributions payable

 

 

22,230

 

 

19,634

Advance rents, security deposits and other liabilities

 

 

29,210

 

 

24,893

Deferred income taxes

 

 

9,814

 

 

15,185

Deferred income

 

 

22,540

 

 

21,993

TOTAL LIABILITIES

 

 

1,250,341

 

 

1,133,660

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Common stock, $0.01 par value, 450,133,000 shares authorized, 50,424,244 and 47,831,250 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively

 

 

504

 

 

478

Additional paid-in capital

 

 

1,032,912

 

 

931,783

Accumulated other comprehensive loss

 

 

(1,565)

 

 

 —

Accumulated dividends in excess of earnings

 

 

(139,740)

 

 

(97,793)

Total stockholders’ equity

 

 

892,111

 

 

834,468

Noncontrolling interests

 

 

115,994

 

 

118,342

TOTAL EQUITY

 

 

1,008,105

 

 

952,810

TOTAL LIABILITIES AND EQUITY

 

$

2,258,446

 

$

2,086,470

 

See accompanying notes to financial statements.

4


 

Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

    

2017

    

2016

    

2017

    

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

85,831

 

$

77,005

 

$

245,741

 

$

217,101

Recoveries from customers

 

 

9,698

 

 

8,703

 

 

26,833

 

 

20,306

Cloud and managed services

 

 

16,224

 

 

16,243

 

 

50,045

 

 

52,148

Other

 

 

2,014

 

 

1,514

 

 

4,980

 

 

7,365

Total revenues

 

 

113,767

 

 

103,465

 

 

327,599

 

 

296,920

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Property operating costs

 

 

39,743

 

 

36,288

 

 

112,010

 

 

100,715

Real estate taxes and insurance

 

 

3,116

 

 

2,566

 

 

9,209

 

 

6,326

Depreciation and amortization

 

 

35,309

 

 

32,699

 

 

103,784

 

 

91,693

General and administrative

 

 

21,652

 

 

19,942

 

 

66,411

 

 

61,836

Transaction, integration and other costs

 

 

1,114

 

 

3,465

 

 

1,611

 

 

9,385

Total operating expenses

 

 

100,934

 

 

94,960

 

 

293,025

 

 

269,955

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

12,833

 

 

8,505

 

 

34,574

 

 

26,965

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

65

 

 

 1

 

 

66

 

 

 3

Interest expense

 

 

(7,958)

 

 

(6,179)

 

 

(22,474)

 

 

(17,034)

Other income/(expense), net

 

 

 —

 

 

 1

 

 

 —

 

 

 1

Income before taxes

 

 

4,940

 

 

2,328

 

 

12,166

 

 

9,935

Tax benefit of taxable REIT subsidiaries

 

 

2,454

 

 

4,210

 

 

5,404

 

 

9,269

Net income

 

 

7,394

 

 

6,538

 

 

17,570

 

 

19,204

Net income attributable to noncontrolling interests

 

 

(887)

 

 

(808)

 

 

(2,146)

 

 

(2,485)

Net income attributable to QTS Realty Trust, Inc.

 

$

6,507

 

$

5,730

 

$

15,424

 

$

16,719

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

$

0.12

 

$

0.31

 

$

0.37

Diluted

 

 

0.13

 

 

0.12

 

 

0.31

 

 

0.36

 

See accompanying notes to financial statements.

 

5


 

Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

    

2017

    

2016

    

2017

    

2016

Net income

 

$

7,394

 

$

6,538

 

$

17,570

 

$

19,204

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in fair value of interest rate swaps

 

 

(286)

 

 

 —

 

 

(1,785)

 

 

 —

Comprehensive income

 

 

7,108

 

 

6,538

 

 

15,785

 

 

19,204

Comprehensive income attributable to noncontrolling interests

 

 

(850)

 

 

(808)

 

 

(1,926)

 

 

(2,485)

Comprehensive income attributable to QTS Realty Trust, Inc.

 

$

6,258

 

$

5,730

 

$

13,859

 

$

16,719

 

See accompanying notes to financial statements.

 

 

6


 

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

 

dividends in

 

stockholders'

 

Noncontrolling

 

 

 

 

Shares

    

Amount

    

paid-in capital

 

comprehensive 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

590

 

 

 6

 

 

1,428

 

 

 —

 

 

 —

 

 

1,434

 

 

200

 

 

1,634

Reclassification of noncontrolling interest upon conversion of partnership units to common stock

241

 

 

 2

 

 

8,352

 

 

 —

 

 

 —

 

 

8,354

 

 

(8,354)

 

 

 —

Decrease in fair value of interest rate swaps

 —

 

 

 —

 

 

 —

 

 

(1,565)

 

 

 —

 

 

(1,565)

 

 

(220)

 

 

(1,785)

Equity-based compensation expense

 —

 

 

 —

 

 

9,224

 

 

 —

 

 

 —

 

 

9,224

 

 

1,283

 

 

10,507

Net proceeds from equity offerings

1,762

 

 

18

 

 

82,125

 

 

 —

 

 

 —

 

 

82,143

 

 

10,444

 

 

92,587

Dividends to shareholders

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(57,371)

 

 

(57,371)

 

 

 —

 

 

(57,371)

Distributions to noncontrolling interests

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 -

 

 

(7,847)

 

 

(7,847)

Net income

 —

 

 

 —

 

 

 —

 

 

 —

 

 

15,424

 

 

15,424

 

 

2,146

 

 

17,570

Balance September 30, 2017

50,424

 

$

504

 

$

1,032,912

 

$

(1,565)

 

$

(139,740)

 

$

892,111

 

$

115,994

 

$

1,008,105

 

See accompanying notes to financial statements.

 

 

7


 

Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW

(unaudited and in thousands)

For the nine months ended September 30, 2017 and 2016

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

 

 

 

 

(as adjusted)

Cash flow from operating activities:

 

 

 

 

Net income

 

$

17,570

 

$

19,204

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

 

 

 

 

 

 

Depreciation and amortization

 

 

100,455

 

 

88,767

Amortization of above and below market leases

 

 

699

 

 

337

Amortization of deferred loan costs

 

 

2,737

 

 

2,424

Amortization of senior notes discount

 

 

206

 

 

194

Equity-based compensation expense

 

 

10,507

 

 

7,887

Bad debt expense

 

 

1,750

 

 

1,201

Deferred tax benefit

 

 

(5,371)

 

 

(9,298)

Changes in operating assets and liabilities

 

 

 

 

 

 

Rents and other receivables, net

 

 

(7,518)

 

 

(9,191)

Prepaid expenses

 

 

(291)

 

 

(2,854)

Other assets

 

 

(367)

 

 

(967)

Accounts payable and accrued liabilities

 

 

(4,145)

 

 

3,359

Advance rents, security deposits and other liabilities

 

 

3,480

 

 

984

Deferred income

 

 

547

 

 

1,448

Net cash provided by operating activities

 

 

120,259

 

 

103,495

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(47,013)

 

 

(122,981)

Additions to property and equipment

 

 

(236,971)

 

 

(197,751)

Net cash used in investing activities

 

 

(283,984)

 

 

(320,732)

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

Credit facility proceeds

 

 

221,000

 

 

267,000

Debt repayment

 

 

(81,000)

 

 

(259,002)

Debt proceeds

 

 

1,920

 

 

 —

Payment of deferred financing costs

 

 

(200)

 

 

(35)

Payment of cash dividends

 

 

(54,919)

 

 

(45,371)

Distribution to noncontrolling interests

 

 

(7,732)

 

 

(7,189)

Proceeds from exercise of stock options

 

 

4,948

 

 

859

Payment of tax withholdings related to equity based awards

 

 

(3,310)

 

 

(2,111)

Principal payments on capital lease obligations

 

 

(9,865)

 

 

(9,612)

Mortgage principal debt repayments

 

 

(38)

 

 

 —

Equity proceeds, net of issuance costs

 

 

92,612

 

 

275,663

Net cash provided by financing activities

 

 

163,416

 

 

220,202

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

(309)

 

 

2,965

Cash and cash equivalents, beginning of period

 

 

9,580

 

 

8,804

Cash and cash equivalents, end of period

 

$

9,271

 

$

11,769

 

See accompanying notes to financial statements.

8


 

Table of Contents

QTS REALTY TRUST, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOW (continued)

(unaudited and in thousands)

For the nine months ended September 30, 2017 and 2016

 

 

 

 

 

 

 

 

 

    

2017

    

2016

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

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

 

$

22,759

 

$

18,659

Noncash investing and financing activities:

 

 

 

 

 

 

Accrued capital additions

 

$

28,368

 

$

40,344

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

 

$

1,785

 

$

 —

Accrued equity issuance costs

 

$

26

 

$

 —

Accrued deferred financing costs

 

$

 8

 

$

 —

 

 

 

 

 

 

 

Acquisitions, net of cash acquired:

 

 

 

 

 

 

Land

 

$

5,019

 

$

7,440

Buildings, improvements and equipment

 

 

 —

 

 

80,390

Construction in Progress

 

 

41,994

 

 

13,900

Rents and other receivables, net

 

 

 —

 

 

(2,033)

Acquired intangibles

 

 

 —

 

 

34,281

Deferred costs

 

 

 —

 

 

4,391

Prepaid expenses

 

 

 —

 

 

479

Goodwill

 

 

 —

 

 

(7,895)

Other assets

 

 

 —

 

 

303

Accounts payable and accrued liabilities

 

 

 —

 

 

(922)

Advance rents, security deposits and other liabilities

 

 

 —

 

 

(1,343)

Deferred income

 

 

 —

 

 

35

Deferred income taxes

 

 

 —

 

 

(6,045)

Total acquisitions, net of cash acquired

 

$

47,013

 

$

122,981

 

See accompanying notes to financial statements.

 

 

9


 

Table of Contents

 

QUALITYTECH, LP 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

 

 

 

    

September 30, 2017

    

December 31, 2016

 

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

Real Estate Assets

 

 

 

 

 

 

Land

 

$

86,192

 

$

74,130

Buildings, improvements and equipment

 

 

1,668,503

 

 

1,524,767

Less: Accumulated depreciation

 

 

(378,883)

 

 

(317,834)

 

 

 

1,375,812

 

 

1,281,063

Construction in progress

 

 

429,390

 

 

365,960

Real Estate Assets, net

 

 

1,805,202

 

 

1,647,023

Cash and cash equivalents

 

 

9,271

 

 

9,580

Rents and other receivables, net

 

 

47,307

 

 

41,540

Acquired intangibles, net

 

 

114,286

 

 

129,754

Deferred costs, net

 

 

38,172

 

 

38,507

Prepaid expenses

 

 

7,209

 

 

6,918

Goodwill

 

 

173,843

 

 

173,843

Other assets, net

 

 

63,156

 

 

39,305

TOTAL ASSETS

 

$

2,258,446

 

$

2,086,470

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Unsecured credit facility, net

 

$

775,398

 

$

634,939

Senior notes, net of discount and debt issuance costs

 

 

293,192

 

 

292,179

Capital lease, lease financing obligations and mortgage notes payable

 

 

30,725

 

 

38,708

Accounts payable and accrued liabilities

 

 

67,232

 

 

86,129

Dividends and distributions payable

 

 

22,230

 

 

19,634

Advance rents, security deposits and other liabilities

 

 

29,210

 

 

24,893

Deferred income taxes

 

 

9,814

 

 

15,185

Deferred income

 

 

22,540

 

 

21,993

TOTAL LIABILITIES

 

 

1,250,341

 

 

1,133,660

 

 

 

 

 

 

 

PARTNERS' CAPITAL

 

 

 

 

 

 

Partners' capital

 

 

1,009,890

 

 

952,810

Accumulated other comprehensive loss

 

 

(1,785)

 

 

 —

TOTAL PARTNERS' CAPITAL

 

 

1,008,105

 

 

952,810

TOTAL LIABILITIES AND PARTNERS' CAPITAL

 

$

2,258,446

 

$

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 September 30,

 

Nine Months Ended September 30,

 

    

2017

    

2016

    

2017

    

2016

Revenues:

 

 

 

 

 

 

 

 

Rental

 

$

85,831

 

$

77,005

 

$

245,741

 

$

217,101

Recoveries from customers

 

 

9,698

 

 

8,703

 

 

26,833

 

 

20,306

Cloud and managed services

 

 

16,224

 

 

16,243

 

 

50,045

 

 

52,148

Other

 

 

2,014

 

 

1,514

 

 

4,980

 

 

7,365

Total revenues

 

 

113,767

 

 

103,465

 

 

327,599

 

 

296,920

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Property operating costs

 

 

39,743

 

 

36,288

 

 

112,010

 

 

100,715

Real estate taxes and insurance

 

 

3,116

 

 

2,566

 

 

9,209

 

 

6,326

Depreciation and amortization

 

 

35,309

 

 

32,699

 

 

103,784

 

 

91,693

General and administrative

 

 

21,652

 

 

19,942

 

 

66,411

 

 

61,836

Transaction, integration and other costs

 

 

1,114

 

 

3,465

 

 

1,611

 

 

9,385

Total operating expenses

 

 

100,934

 

 

94,960

 

 

293,025

 

 

269,955

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

12,833

 

 

8,505

 

 

34,574

 

 

26,965

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

65

 

 

 1

 

 

66

 

 

 3

Interest expense

 

 

(7,958)

 

 

(6,179)

 

 

(22,474)

 

 

(17,034)

Other income/(expense), net

 

 

 —

 

 

 1

 

 

 —

 

 

 1

Income before taxes

 

 

4,940

 

 

2,328

 

 

12,166

 

 

9,935

Tax benefit of taxable REIT subsidiaries

 

 

2,454

 

 

4,210

 

 

5,404

 

 

9,269

Net income

 

$

7,394

 

$

6,538

 

$

17,570

 

$

19,204

 

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 September 30,

 

Nine Months Ended September 30,

 

    

2017

    

2016

    

2017

    

2016

Net income

 

$

7,394

 

$

6,538

 

$

17,570

 

$

19,204

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in fair value of interest rate swaps

 

 

(286)

 

 

 —

 

 

(1,785)

 

 

 —

Comprehensive income

 

$

7,108

 

$

6,538

 

$

15,785

 

$

19,204

 

See accompanying notes to financial statements.