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Q1 2019 Investor Presentation

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QTS Realty Trust, Inc. Investor Presentation - First Quarter 2019

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Q1 2019 Investor Presentation

  1. 1. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. Investor Presentation First Quarter 2019
  2. 2. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 1 Forward Looking Statements Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to our capital resources, portfolio performance results of operations, anticipated growth in our funds from operations and anticipated market conditions contain forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. The forward-looking statements contained in this presentation reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:  adverse economic or real estate developments in our markets or the technology industry;  obsolescence or reduction in marketability of our infrastructure due to changing industry demands;  global, national and local economic conditions;  risks related to our international operations;  difficulties in identifying properties to acquire and completing acquisitions;  our failure to successfully develop, redevelop and operate acquired properties or lines of business;  significant increases in construction and development costs;  the increasingly competitive environment in which we operate;  defaults on, or termination or non-renewal of, leases by customers;  decreased rental rates or increased vacancy rates;  increased interest rates and operating costs, including increased energy costs;  financing risks, including our failure to obtain necessary outside financing;  dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;  our failure to qualify and maintain our qualification as a REIT;  environmental uncertainties and risks related to natural disasters;  financial market fluctuations;  changes in real estate and zoning laws, revaluations for tax purposes and increases in real property tax rates; and  limitations inherent in our current and any future joint venture investments, such as lack of sole decision-making authority and reliance on our partners’ financial condition. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it was made. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 (“10-K”) and in the other periodic reports we file with the Securities and Exchange Commission. This presentation includes measures not derived in accordance with generally accepted accounting principles (“GAAP”), such as FFO, operating FFO, adjusted Operating FFO, EBITDAre, adjusted EBITDA, NOI, ROIC and MRR. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP, and may also be inconsistent with similar measures presented by other companies. As used herein, “Core” refers to our business that primarily consists of our hyperscale and hybrid colocation leases. Reconciliation of these measures to the most closely comparable GAAP measures are presented in the attached pages. We refer you to the appendix of this presentation for reconciliations of these measures and to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations--Non- GAAP Financial Measures" in our 10-K for further information regarding these measures.
  3. 3. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 2 QTS Key Investment Highlights Strong secular trends support continued growth Sector-leading and de-risked growth outlook for QTS Balanced capital allocation approach Fully funded 2019 capital plan ① ② ③ ④ JV provides incremental lever to fund hyperscale growth⑤
  4. 4. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 3 Driving Success in Both Hyperscale & Hybrid Colocation  Significant Growth Capacity – 1.3M sq. ft. of powered shell capacity in top U.S. markets  Operating and Build Cost Advantage – Low basis & mega scale approach provide permanent cost advantage  New Market Expansion in NoVA, Phoenix and Hillsboro and significant low basis capacity in Fort Worth – Provides future growth capacity in markets where hyperscale customers want to be  Software-Defined Data Center Platform – Provides infrastructure visibility and dynamic control to customers  Enhanced Hybrid Solutions through Integrated Partners – Strategic partnerships expand hybrid colocation opportunity  Seamless Connectivity – SDN-enabled universal connectivity to carriers, service providers and CSP’s  High-End Security and Compliance – Dedicated team to help enterprises mitigate cybersecurity risks  Premium Customer Experience – Portfolio of managed services and industry-leading net promoter scores World-Class Infrastructure & Mega Data Centers Technology-Enabled Colocation Platform Hyperscale Hybrid Colocation 8% 6% 9% 77% $480B Market Size 12% 34% 11% 43% $668B Market Size On-Premise Managed Infrastructure Colocation Hyperscale/Cloud 2017 2022 IT Infrastructure Growing and Moving Off-Premise1 $39 $82 2017 2022 $31 $22 4 2017 2022 49% CAGR 16% CAGR Hyperscale/Cloud Market ($B) Colocation Market ($B) 1.Source: Structure Research
  5. 5. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 4 Sector-Leading and De-risked Growth Outlook in 2019 Record leasing performance in 2018 1 1. 2018 reflects results for the Core business only. 2015-2017 reflects results for consolidated business including Core and Non-Core 2. Represents annualized MRR associated with leases that have been signed but have not yet commenced; may not sum due to rounding Incremental Annualized Rent Signed, Net of Downgrades ($M) Ended 2018 with near-record booked-not-billed backlog,de-risking 2019 continued strong performance $63M Annualized Booked-Not- Billed MRR ($M)2 39.6 48.0 41.7 64.5 2015 2016 2017 2018 43.1M Avg. $62.6 $62.6 $62.6 $62.6 Q4 2018 2019 2020 2021+ $40.3 $10.7 $11.6
  6. 6. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 5 Balanced Approach to Capital Allocation Strong Value Creation Opportunity Focused on delivering consistent OFFO/share growth while continuing to invest in long-term growth Balanced Approach to Funding Operations Perpetual preferred equity Manassas joint venture Balanced capex decisions  Balance both near and long term return horizons  Minimize equity dilution  Bring capital into the business via shareholder- friendly means Convertible preferred equity  QTS ’18 Annualized Core ROIC: 12.3%  Estimated QTS Cost of Capital: 7% - 8%  Value Creation: 4% – 5% Significantly above average return spread vs. cost of capital in other Real Estate sectors
  7. 7. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 6 Disciplined Approach to Development Capital discipline and de-risked entry point  Continued focus on capital discipline to balance long-term growth with near-term results  De-risked approach to new market entry  Infrastructure designed to support multi-tenant environments to enable increased flexibility and drive valuable diversification of product and customer mix Greenfield Development with Visibility on Anchor Tenant Low-Basis, Infrastructure-Rich Development Repurposing Existing Assets Examples Richmond, VA Irving, TX Chicago, IL Atlanta, GA Suwanee, GA Piscataway, NJ Princeton, NJ Fort Worth, TX Ashburn, VA Manassas, VA Hillsboro, OR Phoenix, AZ Data Center Re-Focus Enterprise Sale-Leaseback Pre-Lease Greenfield
  8. 8. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 7 Positioned for Continued Capital Efficient Growth 1.Full Buildout reflects our “Basis of Design” NRSF at full buildout; does not include additional development which could take place on adjacent, owned land.  Ability to double footprint in pre-built powered shell reduces future capital needs  Land available in majority of key hyperscale markets already acquired and pad- ready  Existing capacity in strategic hyperscale markets including Dallas and Ashburn to support capital efficient future growth 1.3M Sq. Ft. Additional Capacity in Existing Powered Shell 2,730 54% currently built out 1,480 Full Capacity As of Q4 ‘18 Full Buildout1 (RaisedFloorNRSFin000s) 2,730 1,250 As of IPO 1,805 41% built out 741 QTS’ powered shell capacity represents 5+ years of growth
  9. 9. © 2019 QTS. All Rights Reserved. 8 Balanced Business Approach Optimizes QTS’ Performance Balanced target of 1-3 deals per year 9 leases signed in ’18 between 500kW- 2MW Hyperscale Hybrid Colocation High Credit Quality Tenants Growth Accelerant Longer Term Contracts Higher ROIC Customer Diversification Enhanced Capital Efficiency 34% of Revenue1 66% of Revenue1 Diversified Customer Base 1,100+ customers across 25 data centers QTS Realty Trust, Inc. Higher Barriers to Entry 1.Based on MRR as of December 31. 2018. Enhanced ROIC 12.3% core ROIC in 2018 Low Churn 3.6% core MRR churn in 2018, among the lowest in the industry
  10. 10. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 9 Balance Sheet and Liquidity Summary  Net Debt to LQA consolidated adjusted EBITDA of 5.7x as of year-end 2018  Raised $308.8M of net equity proceeds in Feb. 2019, reducing pro forma leverage to 4.4x  2019 capital plan fully funded  $63M booked-not-billed backlog of annualized revenue  During 2018, extended $1.52B credit facility with reduced pricing and enhanced covenant flexibility  Including forward swaps and excluding Feb. 2019 equity raise, QTS has effectively fixed the rate on 74% of its debt outstanding as of December 31, 2018 Market Cap $2,151M2 Series A Preferred Stock $107M Series B Convertible Preferred Stock $316M Senior Notes $400M Unsecured Credit Facility $952M1 Capital Leases and Other $5M 1. Includes two term loans ($700 million in aggregate) and $252 million of borrowings on revolving credit facility as of December 31, 2018 2. Market Cap calculated as follows: total Class A and Class B common stock and OP units of 58.1 million, multiplied by the December 31, 2018 stock price of $37.05 per share. 3. May not sum due to rounding $3.9B Enterprise Value $1 $0 $0 $254 $350 $752 2019 2020 2021 2022 2023 2024+ HighlightsCapital Structure Debt Maturities ($M)3
  11. 11. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 10 QTS - Alinda Joint Venture Overview Joint Venture Overview Partner  Alinda Capital Partners (“Alinda”) Data Center  Manassas, VA – 118,000 SF data center under development; 10-year lease with hyperscale SaaS co. Size1  $240 million Effective Date  February 22, 2019 Ownership  QTS: 50%  Alinda: 50% Cap Rate2  6.75% Net Proceeds at Closing/Stabilized3  ~$53 million / ~$87 million Financing  Up to approximately $165 million secured credit facility provided by TD Securities, SunTrust and Regions  LIBOR + 225 bps Additional QTS Fee Streams  Development fee  Management fee Exit Mechanism  Provides opportunity for QTS to retain full ownership of the asset Strategic Partnership Opportunity  Outlines Alinda’s initial capacity to potentially contribute up to $500 million of capital over 5-year period  Establishes programmatic framework under which Alinda will be given the opportunity to partner with QTS and contribute equity capital for specific data center developments at terms comparable to initial JV 1.Fully stabilized 2.Set rate for all development in Manassas in first three years of development 3.Includes QTS’ share of joint venture debt  Reduced capital investment in Manassas development by approximately $120 million  While maintaining 50% ownership of the NOI from the facility, plus management & development fees  Results in increasing QTS’ facility-level ROIC from approximately 9% to approximately 12% and  Drives future accretion of $0.02 - $0.03 of reported annual OFFO/share upon full stabilization
  12. 12. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 11 Benefits of Joint Venture Agreement to QTS Multiple drivers of incremental value Outlines a programmatic framework under which Alinda will be given opportunity to contribute equity capital for specific data center projects in support of QTS’ hyperscale growth strategy Reduces QTS’ reliance on public markets and leverages low cost of capital from sophisticated private investor with large capacity to fund capital development plans Reduces QTS’ capital deployment requirements in Manassas development by approximately $120 million while retaining 50% proportionate share of NOI generated by facility Enhances QTS’ overall ROIC based on cap rates below the ROIC of development projects combined with incremental fee streams (development & management fees) P P P P Highlights strong underlying value of QTS’ strategic data center assets at 6.75% cap rate Manassas joint venture delivers immediate enhanced value by locking in cap rate well below the ROIC of Manassas data center development and accretion upon stabilization P P Joint venture factors in asset valuation of Manassas data center with cap rate value at full stabilization, thereby not sacrificing future value from the joint venture’s expected growth P
  13. 13. © 2019 QTS. All Rights Reserved. Strategic Growth Acceleration Plan Execution Summary
  14. 14. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 13 Strategic Growth Plan Execution Summary – Q4 ‘18 $ Accelerate Growth and Leasing Increase Profitability Enhance Predictability  Highest core adjusted EBITDA margin achieved in QTS history  Represents 250 basis points of core margin expansion Y/Y 12% Q4 Revenue Growth Y/Y* 17% Q4 Adj. EBITDA Growth Y/Y* $65M Annualized Rent Signed in ‘18* * Reflects results for Core business only 52.8% Q4 Adj. EBITDA Margin* 0.6% Q4 Rental Churn*  Among the lowest churn rates in data center industry  YTD core churn of 3.6% at the low end of 2018 churn guidance of 3-5%  2018 core churn less than half the churn QTS experienced in consolidated business in 2017
  15. 15. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 14 Accelerated Performance in 2018 Accelerated Leasing Adjusted EBITDA Margin Expansion MRR Churn Reduction 39.6 48.0 41.7 64.5 2015 2016 2017 2018 43.1M Avg. 45.0% 45.8% 46.6% 51.6% 2015 2016 2017 2018 45.8% Avg. 4.0% 5.6% 8.4% 3.6% 2015 2016 2017 2018 6.0% Avg. 1 1 1 1.2018 reflects results for the Core business only. 2015-2017 reflects results for consolidated business including Core and Non-Core Annualized Rent Signed ($M) Execution on strategic growth plan sets up strong growth in 2019
  16. 16. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 15 Q4 2018 Hybrid Colocation Strength • Signed new/modified leases totaling $12.2M of core incremental annualized rent  Aggregate Q4 ’18 core net leasing represented a 43% increase vs. Q4 ‘17  $65M of core leasing in 2018 represents the highest annual leasing volume in QTS’ history  Represents 55%+ increase over 2017  Booked-not-billed backlog increased to a near record $63M of annualized rent  Provides strong visibility into future growth outlook • Hybrid Colocation:  Hybrid colocation business contributed approximately 75% of core net leasing volume in Q4 and approximately 67% of core net leasing volume in 2018  Continue to see an overall increase in deal size within Enterprise vertical  QTS signed 9 leases of between 500kW – 2MW in 2018, including 5 during Q4; compares to only 2 deals signed in that range during 2017  Positive enterprise demand backdrop  Differentiation enabled by software-defined data center platform
  17. 17. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 16 QTS Service Delivery Platform Remains Key Differentiator Enhancements & Features 872 246 2018 2017 27% annual increase in SDP active user base START FINISH 40% Improvement in implementation of cross connect orders automated through SDP10% $700k+ Annualized Revenue New power upgrades representing 400% 20172018 CUSTOMER-FACINGAPI’S 40 157 INCREASE Service Delivery Platform 2018 Year in Review
  18. 18. © 2019 QTS. All Rights Reserved. QTS Overview
  19. 19. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 18 Broad Footprint Focused On Top Data Center Markets 2.7 million sq.ft.of raised floor capacity1 and 690+ MW of available utility power2 1. Represents basis-of-design floor space as of December 31, 2018. The Company defines basis-of-design floor space as the total data center raised floor potential of its existing data center facilities. 2. Represents installed utility power and transformation capacity that is available for use by the facility as of December 31, 2018. 3. Based on data center raised floor. Does not include data centers subject to capital lease obligations. Includes Santa Clara, CA which is subject to a long-term ground lease. 25 DATA CENTERS MARKETS WHOLLY-OWNED3 14 96%
  20. 20. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 19 Best-in-Class “Mega” Data Centers 205,608 Sq. Ft. 100% Built Out 205,608 Sq. Ft. ROIC: 27.6%2 Occupied: 91.9% 477,986 Sq. Ft. 91% Built Out 527,186 Sq. Ft. ROIC: 17.7%2 Occupied: 99.2% 167,309 Sq. Ft. 30% Built Out 557,309 Sq. Ft. ROIC: 14.9%2 Occupied: 74.0% Atlanta-Suwanee, GA 36MW Atlanta-Metro, GA 120MW1 Richmond, VA 110MW 174,160 Sq. Ft. 63% Built Out 275,701 Sq. Ft. ROIC: 13.1%2 Occupied: 94.7% 98,820 Sq. Ft. 56% Built Out 176,000 Sq. Ft. ROIC: 11.8%2 Occupied: 88.4% 46,000 Sq. Ft. 21% Built Out 215,855 Sq. Ft. ROIC: 6.3%2 Occupied: 77.6% Piscataway, NJ 111MW Chicago, IL 55MW3 Irving, TX 140MW Note: Square footage reflects current Raised Floor Operating Net Rentable Square Feet (“NRSF”) as of December 31, 2018 (red shaded bars) and “Basis of Design” Raised Floor NRSF at full buildout. MW denotes available utility power as of December 31, 2018. Occupied percentage as of December 31, 2018. 1. Atlanta -Metro currently has 72 MW of available utility power based on current agreements with its utility provider but has transformer capacity for 120 MW. 2. ROIC calculated by dividing annualized core NOI for the quarter ended December 31, 2018 by the average total cost, less construction in progress for the quarters ended December 31, 2018 and September 30, 2018. 3. 24MW available utility power as of December 31, 2018, with an additional 31 MW available upon QTS request.
  21. 21. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 20 The QTS Hyperscale Advantage * JLL Global Data Center Outlook 2018
  22. 22. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 21 Service Delivery Platform Differentiates QTS Colocation Over 16,000 SDP Users | 15+ Integrated Partners | 90M Data Points Collected Per Day Service Delivery Platform provides QTS the first true Software Defined Data Center
  23. 23. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 22 QTS Service Delivery Platform - Third Party Feedback On how they leverage SDP Today: “SDP allowed us to review over and under-subscribed cabinets in real-time, enabling us to shift infrastructure or increase our density.” VP of IT (Multi-National Bank) IT Director (Clean Energy Automotive Manufacturer) Product Manager (Communications Service Provider Partner) Customers and Partners Industry Analysts On using SDP for their Customers: “The Power Analytics App is a game-changer. Most of your competitors take 3 weeks to provide this data to our Customers.” On how SDP drove the selection of QTS: “There was not a close 2nd in our evaluation. The innovation of SDP combined with Solution Portability and NPS made this an easy decision.” “ ” You are showing things that have been on my clients’ wish list for quite some time….mostly what they get from your competitors is a really limited subset of what you’ve just shown On QTS’ Power & Sensor Real-Time Analytics Research Vice President, Infrastructure Strategies Group – Industry Leading Research & Advisory Firm “ ” The API and programmatic approach, being able to bridge into the physical world is very attractive…. I see differentiation here On how QTS’ SDP Platform Interacts with Customers Research Director, Cloud Service Provider Group – Industry Leading Research & Advisory Firm “ ” You have cemented yourselves as the provider that is pushing the boundaries in development and service delivery. It’s clear you are more than just a colo provider On QTS’ vision for Hybrid Colocation Research Vice President, Technology Service Provider Group – Industry Leading Research & Advisory Firm
  24. 24. © 2019 QTS. All Rights Reserved. Thank You! ir@qtsdatacenters.com
  25. 25. © 2019 QTS. All Rights Reserved. Appendix
  26. 26. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 25 NOI Reconciliation $ in thousands Net Operating Income (NOI) Net income (loss) $ 10,474 $ (4,072) $ 6,402 $ 7,576 $ (14,468) $ (6,892) $ (11,009) $ (5,104) $ (16,113) Interest income (58) — (58) (66) — (66) (1) — (1) Interest expense 6,050 — 6,050 6,384 2 6,386 8,049 — 8,049 Depreciation and amortization 38,259 — 38,259 36,693 1,206 37,899 34,247 2,893 37,140 Debt restructuring costs 605 — 605 — — — 19,992 — 19,992 Tax expense (benefit) of taxable REIT subsidiaries 38 (161) (123) (409) (571) (980) (3,879) (495) (4,374) Transaction, integration and impairment costs 269 — 269 901 — 901 302 9,147 9,449 General and administrative expenses 17,551 118 17,669 17,732 2,191 19,923 16,762 4,058 20,820 Restructuring 138 4,108 4,246 — 13,737 13,737 — — — NOI $ 73,326 $ (7) $ 73,319 $ 68,811 $ 2,097 $ 70,908 $ 64,463 $ 10,499 $ 74,962 December 31, 2018 September 30, 2018 December 31, 2017 Three Months Ended Total Core Non-Core TotalCore Non-Core Total Core Non-Core $ in thousands Net Operating Income (NOI) Net income (loss) $ 28,530 $ (35,705) $ (7,175) $ (4,611) $ 6,068 $ 1,457 Interest income (150) — (150) (67) — (67) Interest expense 28,736 13 28,749 30,497 26 30,523 Depreciation and amortization 143,525 6,366 149,891 128,823 12,101 140,924 Debt restructuring costs 605 — 605 19,992 — 19,992 Tax benefit of taxable REIT subsidiaries (960) (2,408) (3,368) (9,655) (123) (9,778) Transaction, integration and impairment costs 2,743 — 2,743 1,913 9,147 11,060 General and administrative expenses 71,401 9,456 80,857 67,740 19,491 87,231 Restructuring 138 37,805 37,943 — — — NOI $ 274,568 $ 15,527 $ 290,095 $ 234,632 $ 46,710 $ 281,342 December 31, 2018 December 31, 2017 Core Non-Core Total Year Ended Core Non-Core Total
  27. 27. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 26 EBITDAre & Adjusted EBITDA Reconciliation $ in thousands EBITDAre and Adjusted EBITDA Net income (loss) $ 10,474 $ (4,072) $ 6,402 $ 7,576 $ (14,468) $ (6,892) $ (11,009) $ (5,104) $ (16,113) Interest income (58) — (58) (66) — (66) (1) — (1) Interest expense 6,050 — 6,050 6,384 2 6,386 8,049 — 8,049 Tax expense (benefit) of taxable REIT subsidiaries 38 (161) (123) (409) (571) (980) (3,879) (495) (4,374) Depreciation and amortization 38,259 — 38,259 36,693 1,206 37,899 34,247 2,893 37,140 Loss on disposition of depreciated property and impairment write-downs of depreciated property — 1,288 1,288 — 7,409 7,409 — 4,219 4,219 EBITDAre $ 54,763 $ (2,945) $ 51,818 $ 50,178 $ (6,422) $ 43,756 $ 27,407 $ 1,513 $ 28,920 Debt restructuring costs 605 — 605 — — — 19,992 — 19,992 Equity-based compensation expense 3,531 — 3,531 3,961 — 3,961 2,933 423 3,356 Restructuring costs 138 2,820 2,958 — 6,328 6,328 — — — Transaction, integration and impairment costs 269 — 269 901 — 901 302 4,928 5,230 Adjusted EBITDA $ 59,306 $ (125) $ 59,181 $ 55,040 $ (94) $ 54,946 $ 50,634 $ 6,864 $ 57,498 Three Months Ended Core Non-Core Total Core Non-Core Total December 31, 2017 Core Non-Core Total December 31, 2018 September 30, 2018 $ in thousands EBITDAre and Adjusted EBITDA Net income (loss) $ 28,530 $ (35,705) $ (7,175) $ (4,611) $ 6,068 $ 1,457 Interest income (150) — (150) (67) — (67) Interest expense 28,736 13 28,749 30,497 26 30,523 Tax benefit of taxable REIT subsidiaries (960) (2,408) (3,368) (9,655) (123) (9,778) Depreciation and amortization 143,525 6,366 149,891 128,823 12,101 140,924 Loss on disposition of depreciated property and impairment write-downs of depreciated property — 15,836 15,836 — 4,219 4,219 EBITDAre $ 199,681 $ (15,898) $ 183,783 $ 144,987 $ 22,291 $ 167,278 Debt restructuring costs 605 — 605 19,992 — 19,992 Equity-based compensation expense 14,972 — 14,972 12,191 1,672 13,863 Restructuring costs 138 21,969 22,107 — — — Transaction, integration and impairment costs 2,743 — 2,743 1,913 4,928 6,841 Adjusted EBITDA $ 218,139 $ 6,071 $ 224,210 $ 179,083 $ 28,891 $ 207,974 Year Ended December 31, 2018 December 31, 2017 TotalCore Non-Core Total Core Non-Core
  28. 28. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 27 FFO, Operating FFO and Adjusted Operating FFO Reconciliation *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 $ in thousands FFO Net income (loss) $ 10,474 $ (4,072) $ 6,402 $ 7,576 $ (14,468) $ (6,892) $ (11,009) $ (5,104) $ (16,113) Real estate depreciation and amortization 35,640 — 35,640 34,023 556 34,579 31,676 863 32,539 FFO 46,114 (4,072) 42,042 41,599 (13,912) 27,687 20,667 (4,241) 16,426 Preferred stock dividends (7,045) — (7,045) (7,045) — (7,045) — — — FFO available to common stockholders & OP unit holders 39,069 (4,072) 34,997 34,554 (13,912) 20,642 20,667 (4,241) 16,426 Debt restructuring costs 605 — 605 — — — 19,992 — 19,992 Restructuring costs 138 4,108 4,246 — 13,737 13,737 — — — Transaction, integration and impairment costs 269 — 269 901 — 901 302 9,147 9,449 Tax benefit associated with restructuring, transaction and integration costs — (161) (161) — (571) (571) — — — Operating FFO available to common stockholders & OP unit holders* 40,081 (125) 39,956 35,455 (746) 34,709 40,961 4,906 45,867 Maintenance Capex (1,460) — (1,460) (1,660) — (1,660) (848) — (848) Leasing commissions paid (5,204) — (5,204) (5,212) (249) (5,461) (5,840) (459) (6,299) Amortization of deferred financing costs and bond discount 974 — 974 959 — 959 925 — 925 Non real estate depreciation and amortization 2,619 — 2,619 2,670 650 3,320 2,571 2,030 4,601 Straight line rent revenue and expense and other (1,958) 6 (1,952) (1,013) (54) (1,067) (1,329) (725) (2,054) Tax expense (benefit) from operating results 38 — 38 (409) — (409) (3,879) (495) (4,374) Equity-based compensation expense 3,531 — 3,531 3,961 — 3,961 2,933 423 3,356 Adjusted Operating FFO available to common stockholders & OP unit holders* $ 38,621 $ (119) $ 38,502 $ 34,751 $ (399) $ 34,352 $ 35,494 $ 5,680 $ 41,174 TotalTotal Three Months Ended December 31, 2018 September 30, 2018 December 31, 2017 Core Core Non-CoreNon-CoreNon-Core Total Core $ in thousands FFO Net income (loss) $ 28,530 $ (35,705) $ (7,175) $ (4,611) $ 6,068 $ 1,457 Real estate depreciation and amortization 133,948 2,171 136,119 120,188 3,367 123,555 FFO 162,478 (33,534) 128,944 115,577 9,435 125,012 Preferred stock dividends (16,666) — (16,666) — — — FFO available to common stockholders & OP unit holders 145,812 (33,534) 112,278 115,577 9,435 125,012 Debt restructuring costs 605 — 605 19,992 — 19,992 Restructuring costs 138 37,805 37,943 — — — Transaction, integration and impairment costs 2,743 — 2,743 1,913 9,147 11,060 Tax benefit associated with restructuring, transaction and integration costs — (2,408) (2,408) — — — Operating FFO available to common stockholders & OP unit holders* 149,298 1,863 151,161 137,482 18,582 156,064 Maintenance Capex (6,662) — (6,662) (5,009) — (5,009) Leasing commissions paid (23,855) (391) (24,246) (14,732) (5,383) (20,115) Amortization of deferred financing costs and bond discount 3,856 — 3,856 3,868 — 3,868 Non real estate depreciation and amortization 9,577 4,195 13,772 8,635 8,734 17,369 Straight line rent revenue and expense and other (6,780) 10 (6,770) (3,717) (1,250) (4,967) Tax expense (benefit) from operating results (960) — (960) (9,655) (123) (9,778) Equity-based compensation expense 14,972 — 14,972 12,191 1,672 13,863 Adjusted Operating FFO available to common stockholders & OP unit holders* $ 139,446 $ 5,677 $ 145,123 $ 129,063 $ 22,232 $ 151,295 Year Ended December 31, 2018 December 31, 2017 Core Non-Core Total Core Non-Core Total
  29. 29. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 28 MRR Reconciliation $ in thousands Recognized MRR in the period Total period revenues $ 112,334 $ 3 $ 112,337 $ 107,513 $ 4,700 $ 112,213 $ 100,617 $ 18,294 $ 118,911 Less: Total period recoveries (11,629) — (11,629) (11,800) — (11,800) (11,053) — (11,053) Total period deferred setup fees (3,104) — (3,104) (3,174) (101) (3,275) (2,714) (265) (2,979) Total period straight line rent and other (4,465) (34) (4,499) (1,701) (2,171) (3,872) (7,551) (1,891) (9,442) Recognized MRR in the period 93,136 (31) 93,105 90,838 2,428 93,266 79,299 16,138 95,437 MRR at period end Total period revenues $ 112,334 $ 3 $ 112,337 $ 107,513 $ 4,700 $ 112,213 $ 100,617 $ 18,294 $ 118,911 Less: Total revenues excluding last month (73,852) (2) (73,854) (71,443) (4,416) (75,859) (66,550) (12,196) (78,746) Total revenues for last month of period 38,482 1 38,483 36,070 284 36,354 34,067 6,098 40,165 Less: Last month recoveries (3,822) — (3,822) (3,896) — (3,896) (3,175) — (3,175) Last month deferred setup fees (1,015) — (1,015) (1,095) — (1,095) (1,035) (88) (1,123) Last month straight line rent and other (2,504) (1) (2,505) (979) 356 (623) (2,682) (1,477) (4,159) MRR at period end $ 31,141 $ — $ 31,141 $ 30,100 $ 640 $ 30,740 $ 27,175 $ 4,533 $ 31,708 Three Months Ended December 31, 2017 Core Non-Core TotalTotal December 31, 2018 Total Non-CoreCore September 30, 2018 Core Non-Core $ in thousands Recognized MRR in the period Total period revenues $ 422,786 $ 27,738 $ 450,524 $ 370,392 $ 76,118 $ 446,510 Less: Total period recoveries (45,386) — (45,386) (37,797) (89) (37,886) Total period deferred setup fees (12,239) (236) (12,475) (9,726) (964) (10,690) Total period straight line rent and other (12,087) (5,061) (17,148) (17,358) (5,490) (22,848) Recognized MRR in the period 353,074 22,441 375,515 305,511 69,575 375,086 MRR at period end Total period revenues $ 422,786 $ 27,738 $ 450,524 $ 370,392 $ 76,118 $ 446,510 Less: Total revenues excluding last month (384,304) (27,737) (412,041) (336,325) (70,020) (406,345) Total revenues for last month of period 38,482 1 38,483 34,067 6,098 40,165 Less: Last month recoveries (3,822) — (3,822) (3,175) — (3,175) Last month deferred setup fees (1,015) — (1,015) (1,035) (88) (1,123) Last month straight line rent and other (2,504) (1) (2,505) (2,682) (1,477) (4,159) MRR at period end $ 31,141 $ — $ 31,141 $ 27,175 $ 4,533 $ 31,708 Year Ended December 31, 2017 Core Non-Core Total Core Non-Core Total December 31, 2018
  30. 30. © 2019 QTS. All Rights Reserved. QTS Realty Trust, Inc. 29 Core & Non-Core Reconciliation $ in thousands except per share values Selected Income Statement Data Total Revenues $ 112,334 $ 3 $ 112,337 $ 107,513 $ 4,700 $ 112,213 $ 100,617 $ 18,294 $ 118,911 Less: Operating costs 39,008 10 39,018 38,702 2,603 41,305 36,154 7,795 43,949 Net operating income 73,326 (7) 73,319 68,811 2,097 70,908 64,463 10,499 74,962 Less: General & administrative expenses (excluding equity-based compensation expense) 14,020 118 14,138 13,771 2,191 15,962 13,829 3,635 17,464 Adjusted EBITDA 59,306 (125) 59,181 55,040 (94) 54,946 50,634 6,864 57,498 Less: Equity-based compensation expense 3,531 — 3,531 3,961 — 3,961 2,933 423 3,356 Interest income (58) — (58) (66) — (66) (1) — (1) Interest expense 6,050 — 6,050 6,384 2 6,386 8,049 — 8,049 Tax expense (benefit) from operating results 38 — 38 (409) — (409) (3,879) (495) (4,374) Non real estate depreciation and amortization 2,619 — 2,619 2,670 650 3,320 2,571 2,030 4,601 Preferred stock dividends 7,045 — 7,045 7,045 — 7,045 — — — Operating FFO available to common stockholders & OP unit holders 40,081 (125) 39,956 35,455 (746) 34,709 40,961 4,906 45,867 OFFO per share 0.69 (0.00) 0.69 0.61 (0.01) 0.60 0.71 0.08 0.79 Adjustments: Transaction, integration and impairment costs (269) — (269) (901) — (901) (302) (9,147) (9,449) Restructuring costs (138) (4,108) (4,246) — (13,737) (13,737) — — — Debt restructuring costs (605) — (605) — — — (19,992) — (19,992) Tax benefit associated with restructuring, transaction and integration costs — 161 161 — 571 571 — — — Real estate depreciation and amortization (35,640) — (35,640) (34,023) (556) (34,579) (31,676) (863) (32,539) Preferred stock dividends 7,045 — 7,045 7,045 — 7,045 — — — Net income (loss) $ 10,474 $ (4,072) $ 6,402 $ 7,576 $ (14,468) $ (6,892) $ (11,009) $ (5,104) $ (16,113) Non-Core Total Three Months Ended December 31, 2017 Core Three Months Ended December 31, 2018 TotalCore Non-Core Core Non-CoreTotal Three Months Ended September 30, 2018 $ in thousands except per share values Selected Income Statement Data Total Revenues $ 422,786 $ 27,738 $ 450,524 $ 370,392 $ 76,118 $ 446,510 Less: Operating costs 148,218 12,211 160,429 135,760 29,408 165,168 Net operating income 274,568 15,527 290,095 234,632 46,710 281,342 Less: General & administrative expenses (excluding equity-based compensation expense) 56,429 9,456 65,885 55,549 17,819 73,368 Adjusted EBITDA 218,139 6,071 224,210 179,083 28,891 207,974 Less: Equity-based compensation expense 14,972 — 14,972 12,191 1,672 13,863 Interest income (150) — (150) (67) — (67) Interest expense 28,736 13 28,749 30,497 26 30,523 Tax benefit from operating results (960) — (960) (9,655) (123) (9,778) Non real estate depreciation and amortization 9,577 4,195 13,772 8,635 8,734 17,369 Preferred stock dividends 16,666 — 16,666 — — — Operating FFO available to common stockholders & OP unit holders 149,298 1,863 151,161 137,482 18,582 156,064 OFFO per share 2.57 0.03 2.60 2.43 0.33 2.76 Adjustments: Transaction, integration and impairment costs (2,743) — (2,743) (1,913) (9,147) (11,060) Restructuring costs (138) (37,805) (37,943) — — — Debt restructuring costs (605) — (605) (19,992) — (19,992) Tax benefit associated with restructuring, transaction and integration costs — 2,408 2,408 — — — Real estate depreciation and amortization (133,948) (2,171) (136,119) (120,188) (3,367) (123,555) Preferred stock dividends 16,666 — 16,666 — — — Net income (loss) $ 28,530 $ (35,705) $ (7,175) $ (4,611) $ 6,068 $ 1,457 Year Ended Year Ended December 31, 2018 December 31, 2017 TotalCore Non-Core Total Core Non-Core

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